City bills lower property tax amount, will add remaining balance to 2019 bill
Published 12:00 am Thursday, November 22, 2018
SALISBURY — City Manager Lane Bailey announced at Tuesday’s City Council meeting that the city made a clerical mistake in the amount billed for property taxes.
The city reported to Rowan County that the property tax rate was 0.7169 cents per $100 of property valuation. The budget ordinance passed in June had a property tax rate of 0.7196 cents per $100.
A couple of weeks ago, city Finance Director Shannon Moore caught the mistake. Bailey and City Attorney Graham Corriher discussed a potential solution.
“We started looking at options,” Bailey said. “The first option was let’s just reduce the tax rate. That overall $70,000 on a $44 million budget, could we do that? Now one concern I had, though, was we had already gone to council a couple of times this year to add things to the budget that wasn’t in there. We’ve done it in the tune of about $809,000. …”
Corriher said there are some liability issues with just lowering the property tax rate.
“The city has an obligation to collect the taxes that it passes into ordinances,” Corriher said. “It’s not something that we can just decide, ‘Oh, we’re not going to do that anymore.’ We passed a budget ordinance with a tax rate, and that’s the tax rate. And there’s very limited circumstances when you can get out from under that.”
Another option they contemplated was sending another bill for the 0.27 cents per $100 balance. For many property owners, this would be a couple of dollars or less.
“We looked at sending out a supplemental bill, but the first numbers we got from the county was it would cost $25,000 to 30,000,” Bailey said. “I think that number is a little down now. To collect $70,000, that just doesn’t make any sense.”
Corriher said the city may be able to waive the tax rate, but he was unsure about the legality of it.
“Graham had a different option that we could just waive, not reduce the tax rate, but waive it,” Bailey said. “But there’s not clear legal authority to do that, and if there’s not clear legal authority then the individual council members could have some liability there. That’s certainly not fair to them.”
Mayor Pro Tem David Post spoke in favor of this option at the council meeting. He said the city is only halfway through the fiscal year so it may not need the $70,000. Other council members disagreed, saying they approved the property tax rate to be 0.7196 cents per $100.
Corriher said there is some urgency about a decision so the county can begin working.
“It was important to get a resolution to bill it passed as quickly as possible because that allows us to report to the county (that) this is what we’re going to do,” Corriher said. “The county can start putting that into their systems.”
The council approved adding the remaining balance to next year’s tax bill and waived the interest and penalties.
“We think the most practical solution — if our fund balance is solid even though we’re appropriating money — is to acknowledge the mistake, adopt the resolution that we did last night and that will waive interest and penalties until it’s actually billed. And if it’s not paid on time next year, obviously the penalty, interest would all kick in,” Bailey said. “That way, people aren’t getting their tax bill for two, three dollars. I think that would upset folks.”
In July 2019, property owners, including vacant lot owners, will see an item that will have the amount that will make up the difference. This will affect about 22,000 Salisbury residents.
Bailey, Moore and Wade Furches, the city’s finance manager, came up with a way to prevent this error in the future.
“Going forward, we’ll have both Shannon and Wade looking at it and we’ll also attach the budget ordinance to it, which we’ve never done that before. And having that budget ordinance back there, the folks in the tax office can compare the budget ordinance to the number that’s on the report as well,” Bailey said.
He said the city will have to reach out to the bar association and real estate community to be aware for any property transactions. This will allow them to bill the seller and owner if the property was sold in the year span.
Bailey said Salisbury is not the only municipality to have made this mistake.
“In our conversations with the School of Government, this isn’t the first time this has happened,” he said.