City of Alexandria, Virginia
________________
MEMORANDUM
DATE: NOVEMBER 12, 2013
TO: THE HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL
FROM: RASHAD M. YOUNG, CITY MANAGER/s/
DOCKET TITLE:
TITLE
Consideration of Authorization to Advertise Delinquent Tax Listings Greater Than $1,000, Write Off Balances Less Than Twenty Dollars, and Destroy Records as Required By State Law
.BODY
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ISSUE: Authorization to publish the listings of delinquent taxes greater than $1,000, write off balances less than twenty dollars and to destroy records as required by state law.
RECOMMENDATION: That City Council:
(1) Receive the listings of delinquent local property taxes;
(2) Authorize that those parts of the delinquent real estate and personal property tax listings deemed advisable by the Director of Finance be published in the newspaper and on the City of Alexandria website;
(3) Authorize the Director of Finance to write off uncollected tax balances less than twenty dollars each, totaling $20,002 as of June 30, 2013, for which the Director of Finance has determined that the cost of collecting such balances would exceed the recoverable amount, provided that the Director of Finance will not include any balance for which she has reason to believe the taxpayer has intentionally paid less than the amount due and owed; and
(4) Authorize the Director of Finance to destroy records associated with real estate taxes paid in calendar year 2007 and prior years in accordance with Code of Virginia §58.1-3129(A).
BACKGROUND: Code of Virginia §58.1-3924 provides for the Director of Finance to present City Council with listings of delinquent local property taxes annually. To meet this provision, the Director of Finance compiles the following types of listings of delinquent taxes as of June 30:
1. A list of delinquent real estate taxes;
2. List(s) of delinquent personal property taxes;
3. List(s) of delinquent property taxes amounting to less than twenty dollars for which no bills were sent; and
4. List(s) of the uncollected balances of previously billed property taxes for which the Director of Finance has determined the cost of collecting such balances would exceed the recoverable amount, provided that the Director of Finance will not include any balance for which she has reason to believe the taxpayer has purposely paid less than the amount due and owed.
These lists are also available for public inspection during normal business hours in the Director of Finance's Office, City Hall, Suite 1600.
The City has retained records for real estate taxes for the past 20 years as Code of Virginia §58.1-3940 permits the collection of delinquent real estate taxes for 20 years after the end of the year for which they were assessed. Code of Virginia §58.1-3129 states, "The treasurer may, with the consent of the governing body, destroy all paid tax tickets at any time after five years from the end of the fiscal year during which taxes represented by such tickets were paid, in accordance with retention regulations pursuant to the Virginia Public Records Act (§ 42.1-76 et seq.)." In accordance with this section, the Director of Finance seeks City Council's permission to destroy records pertaining to real estate taxes paid for calendar year 2007 and prior years, excluding records pertaining to any delinquent accounts still outstanding.
DISCUSSION: The Finance Department has compiled seven lists of various categories of delinquent City taxes and associated penalties, interest and fees as required by the Code of Virginia Summary data for lists 1 through 4 can be found in Table I. Summary data for lists 5 through 7 can be found in Table II.
List 1 Listing of Real Estate Taxes for 2008 through 2012 Delinquent as of June 30, 2013.
List 2 Listing of Individual Personal Property Taxes for 2008 through 2012 Delinquent as of June 30, 2013.
List 3 Listing of Personal Property Taxes on Business Vehicles for 2008 through 2012 Delinquent as of June 30, 2013.
List 4 Listing of Business Personal Property Taxes for 2008 through 2012 Delinquent as of June 30, 2013.
List 5 Listing of Uncollected Individual Personal Property Taxes for 2008 through 2012 Amounting to Twenty Dollars or Less as of June 30, 2013.
List 6 Listing of Uncollected Personal Property Taxes on Business Vehicles for 2008 through 2012 Amounting to Twenty Dollars or Less as of June 30, 2013.
List 7 Listing of Uncollected Business Personal Property Taxes for 2008 through 2012 Amounting to Twenty Dollars or Less Each as of June 30, 2013.
Table I
Delinquent Real Estate and Personal Property Taxes for 2008-2012
As of June 30, 2013
(Amounts in millions)
List |
Tax Type |
Tax Levied |
Taxes Collected |
Percentage Collected |
Taxes due |
Total due |
1 |
Real Estate |
$1,554.3 |
$1,553.0 |
99.9% |
$1.2 |
$1.6 |
2 & 3 |
Vehicle Personal Property |
$215.4 |
$212.6 |
98.7% |
$2.8 |
$2.9 |
4 |
Business Personal Property |
$84.3 |
$82.1 |
97.4% |
$2.2 |
$2.9 |
Table II
Delinquent Personal Property Taxes for 2008-2012
As of June 30, 2013
Tax amounts less than $20
|
Total Tax Due |
Number of Taxpayers |
Average Balance Due |
Individual Vehicle Personal Property |
$19,462 |
2,138 |
$9.10 |
Business Vehicles |
$279 |
15 |
$18.60 |
Other Business Personal Property |
$261 |
21 |
$12.43 |
Total |
$20,002 |
2,174 |
$9.20 |
Summary of Real Estate Tax Collection Statistics: As showed in Table I, the Finance Department has collected $1.5 billion, or 99.9 percent, of the real estate taxes levied for tax years 2008 through 2012. The "Top Twenty" delinquent real estate taxpayers comprise $0.6 million or 37 percent of the total delinquency (Attachment I).
The Finance Department uses a variety of tools to monitor and collect delinquent taxes. In FY 2013, these tools included delinquency notifications, field visits to taxpayers' homes and businesses, and summonses issued to delinquent taxpayers as well as rent liens, bank liens, and Circuit Court liens placed against several property owners. The Department works with the City Attorney's Office to initiate formal judicial sale procedures against delinquent taxpayers. The City uses this option cautiously as it has not wanted to have low-income elderly or disabled persons lose their housing due to a judicial sale. At times, merely proceeding with the judicial sale process triggers either the property owner or the mortgage holder to pay the taxes due. Real estate taxes on a property must be delinquent for three years before a Virginia locality can initiate a judicial sale.
Collection efforts resulted in twelve property owners appearing on last year's "Top Twenty" list having sufficiently satisfied their tax obligations to avoid inclusion in this year's "Top Twenty" listing, paying a total of $0.4 million in taxes, penalty and interest for tax years 2006 through 2011. In addition, one taxpayer from this year's "Top Twenty" list has arranged a payment plan for $0.02 million in delinquent real estate taxes, penalty and interest. Of the remaining taxpayers, two are in bankruptcy, one property is actively in the judicial sale process and staff is actively working with the City Attorney's office on the judicial sale notification process for nine other cases ($0.4 million). Virginia law requires that proper notification is made to all legal owners of the properties which are subject to sale. Since this process may take several months, Finance staff work aggressively with taxpayers to pay off the delinquent taxes and remove the property from the subject to sale list.
To preserve the City's interest in the collection of delinquent real estate taxes, Virginia Code §58.1-3930 provides that a lien be automatically placed (by operation of law) on property with outstanding real estate taxes. This tax lien is a claim by the City for payment of the tax debt and begins on the day following the tax payment due date. The lien is recorded against delinquent properties on the City's computerized Real Estate Land Records System and remains in effect until the outstanding taxes, penalties and interest have been paid in full. By recording the lien at the Circuit Court, the City ensures that the City will collect any delinquent real estate taxes when the owner sells the property or applies for a mortgage.
Summary of Vehicle Personal Property Tax Collection Statistics: As shown in Table I, the Finance Department has collected $212.6 million, or 98.7 percent, of the vehicle personal property taxes levied for tax years 2008 through 2012.
Because a relatively large portion of the City's population is very transient, collecting personal property taxes on vehicles is far more challenging than collecting real estate taxes. In July, the City issued over 116,069 annual personal property tax bills for vehicles. On average, approximately 25 percent of the vehicles billed each year are new additions to the tax rolls. A comparable number of vehicles leave the City in that period. In many instances, the City was not notified of the move.
In order to ensure that taxpayers pay any taxes owed, the City retains billing records and sends bills until the City is notified by the taxpayer or by the Department of Motor Vehicles (DMV) that a vehicle is no longer taxable in the City. In accordance with the Code of Virginia, the City must cease collections of vehicle personal property taxes after five years, except in certain limited cases where the taxes have been reduced to judgment or there has been a judgment lien resulting from a suit to collect the taxes.
Summary of Business Personal Property Tax Collection Statistics: As shown in Table I, the Finance Department has collected $82.1 million, or 97.4 percent, of the business personal property taxes levied for tax years 2008 through 2012. Of the $2.9 million total business personal property tax delinquency, approximately 97 percent was derived from statutory billings. Attachment II discusses the statutory billing process used by the City.
Publishing List of Delinquent Taxpayers: The threat of publishing a delinquent taxpayer's name in the newspaper and on the City's website is one of the Finance Department's most effective collection tools. All delinquency listings will be checked prior to publication and adjusted for tax payments made between June 30 and the publication date. If the taxes are paid in full by the time of publication, the property owner's name or the name of the business will not be published in the newspaper or listed on the City's website. Names of individuals or businesses that have received tax adjustments for amounts discharged under bankruptcy, filed tax exemption appeals, appealed the tax assessment or entered into formal payment arrangements with the City will not be published or listed. In addition, names of businesses that received a statutory billing or ceased operations in the City will not be published or listed. Within the framework described above, the Finance Department is requesting that City Council authorize publication of those portions of the real estate tax and personal property tax listings deemed advisable by the Director, specifically for taxpayers who have a delinquent balance of $1,000 or greater.
FISCAL IMPACT: Delinquent tax collection efforts resulted in $3.1 million in revenue in FY 2013. We expect a comparable amount for FY 2014.
ATTACHMENTS:
Attachment I - Top Twenty Delinquent Real Estate Taxpayers for Tax Years 2012 and
prior as of October 23, 2013
Attachment II - Statutory Billing Process
STAFF:
Laura B. Triggs, Chief Financial Officer/Director of Finance
Debbie Kidd, Deputy Finance Director
David Clark, Assistant Director of Finance/Treasury
Martina Alexander, Supervisor, Tax Services & Enforcement