Ladouceur targets interest penalty of late tax payments
Interest on delinquent taxes pumps about $1.3 million into city coffers annually.
Ward 5 Councilman Ed Ladouceur finds that amount high and he thinks the system of charging interest on delinquent taxes needs reform. In an interview Monday, Ladouceur said high interest costs on late taxes were a complaint he heard while campaigning and an issue he promised to address.
Unless otherwise delayed, the first quarterly property tax payment is due July 15 with successive payments due on Oct. 15, Jan. 15 and April 15. Payments in full can be made on Sept. 15 without incurring an interest penalty.
However, according to city ordinances, once a quarterly payment is missed, the full amount of the tax becomes due. When that happens, interest of 12 percent is applied to the outstanding balance. This happens even though future quarterly payments wouldn’t be due until later had the plan been followed.
“I think it is wrong; if someone is late on taxes, they should be charged on the amount due [the quarterly payment], not the full amount,” Ladouceur said.
The councilman is looking to introduce legislation to expand on a measure introduced by Ward 9 Councilman Steve Merolla. Merolla’s bill provides for a one-time waiver of interest, provided the taxpayer made payments on time for the last five years.
Ladouceur said he hasn’t defined what his ordinance would do, but his intent is to have something to bring before the council next month, or in March. He said he is looking to reach a fair interest system that motivates people to pay on time, yet is not so generous as to have them abuse it.
“I want to have something on the books before the new fiscal year [which starts July 1],” he said.
Ladouceur met Tuesday with City Treasurer David Olsen, Finance Director Ernest Zmyslinski and the mayor’s chief of staff Mark Carruolo to discuss how the current law could be changed.
Carruolo said the city will look at different scenarios to see how they would impact tax payments and what it might mean to the flow of tax revenues.
“If they’re late on taxes, they should pay the interest, but I don’t think they should be clobbered,” Ladouceur said.
As for the $1.3 million generated in interest, Ladouceur said the objective should not be to use delinquent fees to generate revenues. He suggested budget cuts would be needed to offset any loss in interest payments.
Carruolo said the intent of the interest has never been to generate revenues.
“We would like to take that number right out of the budget and have it balance all the time,” he said.
Carruolo explained that cash flow is critical to the city’s operation and, if everyone paid their taxes on time, things would run smoothly.
While the current tax plan is arguably harsh once a quarterly payment is late, it is also interest free for those who make their payments on time. There is no incentive to pay the full amount by the Sept. 15 deadline. Conversely, once one is paying the interest on the outstanding balance, and not just the missed quarterly payment, it seems there’s little incentive to go back to quarterly payments.
Finding something less punitive, yet painful enough to avert massive delays in tax payments, is the balance Ladouceur aims to achieve.