12/13/17 — Tax discount on the table

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Tax discount on the table

By Steve Herring
Published in News on December 13, 2017 5:50 AM

Offsetting an increase in the property tax rate by offering a discount for early payment is the latest option to come before Wayne County commissioners as they search for a way to replace $2 million in lost low wealth school funding.

Property taxes are due Sept. 1, but people have until 5 p.m. Friday, Jan. 5, to pay without being delinquent and having to pay a penalty.

Some counties and municipalities offer discounts if the bill is paid prior to the Sept. 1 deadline.

Wayne County does not offer such a discount, but Commissioner Joe Daughtery recently asked County Manager George Wood to research the process.

Daughtery joked during the board's Tuesday session that Wood works fast and that he had not been expecting to talk about the discount until commissioners hold their budget planning retreat in late January.

"The issue that I was trying to address was really the low wealth funding," he said.

Four years back commissioners lowered the county's property tax rate by about 3.5 cents, Daughtery said.

"We did not know (then) that the state had some formula over here that basically they compute, and if our county being a low wealth county, if our property tax falls below a certain level, then they reduce the funding of the schools," Daughtery said.

The county was recently notified school funding would be reduced by $2 million annually, Daughtery said.

The 3.5 cent reduction equates to about $2 million so now the county is going to have to make up that amount, he said.

"I was trying to find a way where maybe we could in fact meet the requirement of the state by increasing property taxes, but offering a similar reduction if you pay in advance," he said.

Daughtery said he had wanted to know about any limitations of percentages and possibly making the early payment Dec. 1

The county cannot make Dec. 1 the early payment deadline, Wood said.

The law specifies paying prior to the due date, and under state law the due date for property tax is Sept. 1, he said.

"How are you going to pay a bill (early) that has not been submitted?" Daughtery said.

That is what so important about the early payment date that is chosen, County Attorney Borden Parker said.

One of the concerns this past year was that the county delayed setting its tax levy until after the state budget had been adopted, Wood said.

Tax Collector Alan Lumpkin's concern was that he still had to get tax notices out in August because payment is due Sept. 1, Wood said.

"But that is not as critical if you don't offer a discount," Wood said. "It is critical to us from a cash flow, but it doesn't impact the taxpayer. But if you go with a discount for early payment, then by all means you have got to get those tax bills out so that people have that opportunity to make that payment before Sept. 1."

Wood said Lincoln County had a 2 percent discount when he worked there.

By the end of August Lincoln County would take in about 30 percent of the property tax, he said.

Said another way, 70 percent of the taxpayers didn't take the discount, Wood said.

A 2 percent discount would not translate into much of a savings for the average taxpayer so they tend to wait, Wood said.

"For people who do have quite a bit of taxable property, for instance our agricultural folks, it may be worth their while to pay the bill basically four months early," he said. "Property tax bills are due and payable by law Sept. 1.

"As we all know there is no penalty until Jan. 5 or 6 so a lot of people don't pay them until December because it doesn't cost them anything. But most people want to pay them by December because they want the property tax exemption on their federal and state income tax."

The real answer to the funding issue is the military exemption to the low wealth formula, Wood said.

Commissioners plan to lobby the legislature to change the language in the fiscal 2019-2021 state biennial budget to exempt Wayne County from the low-wealth formula like other counties with military bases by setting the threshold at 17,000 students rather than 23,000.

Should the county decide to offer a discount it would have to adopt a resolution no later than the first day of May preceding the due date of the taxes to which it first applies, Wood said.

The resolution would spell out the amounts of the discounts and the period of time they would be applicable.

If adopted, the resolution would have to be presented to the N.C. Department of Revenue for approval.

Once approved by the state, the county would be required to publish the information in a newspaper.

Following final approval, the discount would remain until commissioners voted to repeal it, Wood said.

Wood reviewed a spreadsheet of municipalities and counties offering discounts.

The maximum for most was a 2 percent discount with the exception of the town of Hudson in Caldwell County which offers 5 percent early payment discount.

In most of the cases where municipalities offer a discount, they also collect their own taxes.

The county does not do it for them, Wood said.

Wayne County handles the billing for all of the fire districts and all of the county's municipalities.

"If Wayne County were to offer a discount and the municipalities didn't, and we had to stop doing their billings and collections then we would lose the 1.75 percent we get from them for what we collect," he said.

"I wanted you to be aware of that because otherwise it becomes a very difficult system."

It would be more difficult to program the computer system to take a discount for the county, but not the municipality, he said.

The norm for discounts is between 1 and 2 percent, he said.

Some of the discounts are one percent across the board, Wood said.

However in Burke County taxes paid by the end of July received a 2 percent discount, while taxes paid by the end of August receive a 1 percent discount, he said.