At the commission meeting last Friday, there were all kinds of accusations flying around directed at the treasurer. Some of what had people upset was legal issues that are decided at the state level.

It seemed like it might be worth asking the treasurer herself about how property taxes work and about some of the accusations. So, Tuesday afternoon I headed down to the court house.

Susan Quick was very gracious and answered my questions. This article is an attempt to clarify some of how taxes work in Bourbon county and get Susan’s response to some of the accusations leveled against her office.

One thing that struck me is that they seem to be struggling with an inadequate computer system that is making their work much harder than it needs to be. There are three systems being used, but not one of them does everything they need. To get information it often involves looking in three systems and manually combining the data.

Another thing that I noticed is that Susan seems to have a very kind heart and genuinely wants to keep people in their homes if there is any way she can help them. In fact, I’ve talked to several people who said that when they got behind on their taxes, Susan helped get them on a schedule to get it paid off and they were very grateful for her willingness to help. Her job would be a lot less work if she simply didn’t care who lost their homes, but someone who doesn’t care probably isn’t the type of person citizens really want in this position.

Still the position must stay within the bounds of the law, but not everything that is illegal is actually criminal. For example, it appears that it is a legal requirement that all the names of delinquent tax payers be published in the paper. This wasn’t done, but the situation has been fixed for this year going forward. If only people in good standing on their payment plan were left off the list, this could have been caused a simple misunderstanding of what was legally required.

Below is a list of questions and answers from my meeting. It isn’t a verbatim transcript, but hopefully it will shed some light on how things work. I have emailed a link to Susan and asked her to let me know if I mis-represented anything so I can fix any errors I may have made.

Did the payment plan let people pay less than if they had of just made partial payments on their own?

No. The only difference was that people on the payment plan got a book of coupons that showed how much they needed to send in each month. They still pay the same fees and interest as those not on the plan and their house goes on the sheriff sale if they don’t pay just like everyone else.

However, in cases where property was eventually sold, the payment plan was sometimes able to collect some funds before they stopped paying again, so the net effect to the county was more money coming in than without the payment plan.

Why were people on the payment plan left off of the delinquent list in the paper?

Susan said that she didn’t realize they had to be on it, if they were making regular payments to cover what they owe. She said they will be included going forward and the delinquents from this year will all be published in the paper three times.

Are partial payments applied to interest or taxes first?

Partial payments go toward the interest and fees before they are applied to the tax amount owed.

What are the fees associated with delinquent tax bills beyond the interest?

State law allows a $15 per listing advertisement fee along with another $2 fee. The total fees are $17 per year.

How long does it take for property that is delinquent to be part of a sheriff’s sale?

It takes three years for a homestead to be listed and two years for a non-homestead to be listed.

Why was there going to be a charge of $140 to get a list of people on the payment plan?

Compiling that information comes from several different computer systems and required 14 hours worth of work at $10 per hour. The commission decided to waive the charge.

Why isn’t there a sheriff’s sale every year?

The sheriff acts as the auctioneer, so that part doesn’t cost the county, but there are many other costs involved. The costs of running the sale are great enough that it is in the best financial interest of the county to occasionally skip a year.  For example, some (but not all) of the approximate fees associated with the last sale for each property:

• $5.25 – cost of advertisements
• $80.00 – attorney fees
• $7.74 – certified mail
• $25.00 – abstract work

For 100 pieces of property the total cost of an auction is well over $10,000. In cases where most of the property is likely to sell for only a few dollars, a sale can result in a large loss for the county. By waiting to sell more pieces of property together, some of the costs are lower which increases the chances of the county breaking even.

These fees are paid by the county and, depending on the selling price, may not be recovered.

What is the interest rate on delinquent taxes?

The interest rate is 11% and it compounds annually.

When are taxes due?

Taxes are divided into two payments. The first is due at the end of the tax year, the second half is due in June of the following year. So for 2010, the first half was due at the end of the year and the second half was due in June of 2011.

Someone accused the treasurer’s office of taking lower payments and just “making it work”. Has that ever happened?

Susan said that they often get payments for amounts that are a little bit below the actual amounted owed. This could happen if someone had been told they owed one amount and by the time the check got to the court house additional interest had accrued. She said that in some cases they would take a slightly lower payment to keep from spending time going after “pennies”.   She said there were also situations where there was a discrepancy between the amount calculated by hand for someone who was making regular payments and the amount the computer calculated when they made their last payment. Her office would try to work with people in those situations as well to only hold them to the amount they had had been told when they signed the contract for monthly payments.

The 2006 taxes listed for Susan’s house were paid on 6/22/2011. The interest and fees were $183.30 on an original tax of $941.70. This doesn’t appear to be 11% interest. Why is that?

Susan showed me the receipt for an additional payment she had made for $200.00 8/23/2011. She said that in the transition between computer systems it was calculated incorrectly. She said the $200 paid the difference and a bit more once she noticed the error. She said that since the system had already showed her taxes as closed, she couldn’t pay in a way that would update the online records, so her payment went straight to the general fund–where it would have ended up anyway. The total paid in interest and fees was $383.30 for 2006.

Note: My calculations are that the interest should have been $486.80 if 11% was charged on 6/7 of 2008, 2009, 2010, and 2011. There should have been an additional $68 in fees ($17 x 4 years) as well for a total of $554.80. However, it is entirely possible that I didn’t understand how the interest is calculated or when it starts accruing. I have emailed Susan Quick for clarification and will update with her reply. (Update: this method of calculation did not include 12 months of interest on the first half payment that would have been acrued in 2007 nor on the 6 months of interest that would have been accrued on the second half for the last half of 2007. The corrected calculations are below.)

Update (9/7/11): It turns out that the interest rate charged on outstanding taxes for 2006 was only 9%. At 9% the balance would have been $1369.32. (This is based on a more detailed calculation than above, where I calculated the tax due based on when that particular part of the payment because due and compounding every 6 months. See table below.) An additional $68 in fees would bring the balance to $1,437.32 for a total interest and fees of $495.62. I used the dates of 1/1 and 7/1 to keep it simple to understand.  The actual amounts will be off slightly because I don’t believe they are exactly 6 months apart.  Also if interest is compounded daily or monthly instead of twice a year, this would change the totals.

Update (9/8/11): I was told today that the interest is actually just simple interest and it is not compounded. See this article for more information.

Date	Taxes Due	Taxes with Interest
01/01/07	$470.85	$470.85
07/01/07	$470.85	$962.89
01/01/08		$1,006.22
07/01/08		$1,051.50
01/01/09		$1,098.82
07/01/09		$1,148.26
01/01/10		$1,199.93
07/01/10		$1,253.93
01/01/11		$1,310.36
07/01/11		$1,369.32

The 2005 taxes listed for Susan’s house were paid on 4/16/2008 with $15.35 interest and fees on a tax of $939.06. This appears to be below the standard 11% as well.

Susan said she hadn’t noticed that one, but it was probably the same issue as the 2006 taxes.

Update (9/7/11): The tax rate for 2005 was only 7%–not 11%.