The rate of interest charged on delinquent taxes is set by state law. At the commissioner’s meeting on Friday the tax rate was said to be 11% or 10%. I just got a fax from the treasurer’s department that shows the actual interest rate for each year. The current amount is considerably lower.  According to Susan Quick the interest is locked in at the current rate when the taxes were due.  So if someone doesn’t pay their 2008 taxes and the rate for 2008 was 11%, all of the interest on those outstanding taxes will be charged at 11%–regardless of what year the taxes are eventually paid.

Below is a chart showing what the tax rate is for each year. (pdf source)

Year	Interest Rate
2000	11%
2001	12%
2002	10%
2003	9%
2004	8%
2005	7%
2006	9%
2007	11%
2008	11%
2009	8%
2010	7%
2011	7%

 

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%.

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The commission meeting this morning heard from many citizens concerned about the payment plan that was being offered for people who couldn’t afford to pay their property taxes.  At the bottom of this page are a list of bullet points covering the facts about how various things are supposed to work.

The payment plan is a bit of a red herring because from a legal standpoint it does not allow anyone on it to do anything that a citizen could not do on their own. Even if you are on the payment plan, your name is required to be published in the paper and you are still responsible for all interest and penalties. The only thing the payment plan can do is help people schedule their payments. If the taxes have not been paid in full within three years, the property still must be sold at the sheriff’s sale. It doesn’t matter if it is on a payment plan or not.

If a payment plan is working as legally provided for, it allows the county to encourage people to make a series of smaller payments where they might put off making a large lump sum payment.

The real issue is whether or not people on the payment plan were given illegal preferential treatment. This would include:

• Not having their names published in the paper.
• Not being charged penalties and interest.
• Not having their property sold at a sheriff’s sale after being delinquent for 3 years.

While there have been allegations that his has occurred, nothing has been proven. Part of the problem seems to be that it is difficult to get records out of the computer system. Some people allege that the records were not kept according to standard accounting practice. It seems like it would take someone savvy with Excel less than an hour to verify that everything has been done correctly once they had access to the data in a reasonable form.

Leaving people off of the list published in the newspaper if they were on the payment plan was illegal, but it could have been due to an oversight. It appears that they were listed in previous years, so it may have been a simple mistake.

The only thing that seems odd about this, is that you’d expect a computer system that dumped out a list of everyone delinquent on their taxes to show everyone delinquent on their taxes and require extra manual work to remove a subset of those citizens. It this occurred, then it would be hard to say that it was just a mistake. On the other hand, it is possible that compiling the list of  delinquent accounts is a very manual process. If so, it could easily have been that the people on a payment plan were in a different file drawer and it was an honest mistake.

The KBI and attorney general’s office have both been contacted and it appears that they are going to be looking into things.  Terry Sercer from Diehl Banwart Bolton has performed a high level audit and said the totals look as would be expected. He recommended that an audit be performed in more detail and giving particular attention to the accounts that were under the payment plan.

When Terry Sercer first started to speak, a white haired man wearing overalls stood up and said:

“Who are you?!”
Terry tried to explain.
“What authority do you have over the commission?!!”
Terry tried to explain that his role was just to offer advice.
“Let me offer you some advice! Zip your pants!”

With that the man stormed out of the room. (This exchange isn’t a word for word quote, but it gives you pretty good idea.) I believe the mans name was Charles, but don’t know his last name.

Toward the end of the meeting the commission voted to authorize Terry to do as he recommended and look into things.  He said he wouldn’t be able to start on it until Wednesday, but was going to try to give it some priority because of the importance.

I asked if the information he was going to be auditing was public record and was told yes. It should be available to anyone and while there might be some fee for making copies, anyone should be able to come in and ask to look at it. It was unclear if the information was available electronically or not.

 

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What follows are some facts that were brought up in the meeting that might be of interest. If you have any corrections please post them in the comments.

Regarding the tax search information available here.

• The website that allows people to go in and research tax histories has been up and down due to some issues and upgrades with the provider. That software isn’t hosted locally and no one has been messing with it to cover stuff up.
• At one point the county would charge $60 per year for access to this information, but they are making the basic tax search available to everyone for free.
• There was a mistake a day or two ago that caused all the amounts to have the decimal place moved two places to the left. This should be fixed now.

As far as the payment plan goes, here is how they are supposed to work legally:

• The law allows the treasurer to create some type of payment plan. It doesn’t need to be a written policy.
• The payment plan does not do anything that you couldn’t do on your own. In other words if you owed $1,200 in taxes, you could come in and pay it $100 per month regardless of whether or not you had a “payment plan”.
• Even if you are on the payment plan, you must be treated just like any other delinquent account. The law only allows for partial payments to be made, but that does not change the status of the delinquent account.
• It is illegal to not charge interest to people on the payment plan.
• If taxes are being paid on a payment plan, it doesn’t change when the house would go to the sheriff sale.
• It would be illegal for the county to not sell a particular house just because it is on the payment plan.
• You have three years to pay your taxes before it is sold–regardless of whether or not you are on the payment plan.
• The commissioner’s do not have the authority to stop the plan or determine what the policy is. They can make recommendations and request information.
• The current payment plan has some type of contract associated with it that people signed agreeing to pay a certain amount every month.
• Any delinquent account should be charged interest. The rate was either 11% or 12%. It is unclear of this is compounding or just simple interest.
• There are fees associated with delinquent accounts as well. This includes the fee to help pay for publishing the list in the paper.

Regarding selling houses at a tax sale:

• Often selling property in a tax sale produces less income than the costs associated with holding the auction.
• Sometimes the county will decide not to hold a tax sale because it wouldn’t be worth the cost.
• Justin Meeks and Susan Quick both recommended that a tax sale not be held last year saying that it would cost more than it brought in.
• Tax liens — where the taxes are paid by an investor in return for a lien that accumulates interest on the property are not available in Kansas.
• Often the only advantage of selling a property at a sheriff’s sale is getting it into the hands of new owners who will pay taxes on it.

Regarding getting rid of an elected official:

• It is possible to do a recall election, but it would be expensive.
• There is a process to oust an elected official. This is legally refereed to as an ouster.
• There are certain crimes that will automatically oust an elected official.