Friday, May 20, 2005
Town Meeting Article 22:
Quarterly Tax Billing
This spring, at the Annual Town Meeting, the town will be asked to consider changing from the current semi-annual tax billing system to a quarterly tax billing system.
What does this mean to you as a property taxpayer?
Currently, the property tax rate is set in the early fall and the first installment of the annual property tax is billed on or about October l, being due November 1 of each year. The second half of the bill is sent on or about April 1, and is due May 1 of each year.
A quarterly tax billing system provides for an initial preliminary bill equal to 25% of the prior year's net property tax, plus some possible adjustments, to be mailed by July 1, with payment due August l. The second preliminary bill, equal to an additional 25% of the prior year's net property tax, as adjusted, would be mailed by October 1, with payment due November 1. The town's tax rate for the fiscal year would be set by the State by mid-December. With that rate in hand, the assessors would calculate the total property tax obligation for the year. By January 1, the tax collector will mail tax bills for an amount equal to the total tax, less the amounts paid from the two preliminary bills, divided by two. The final quarterly bill would be mailed by April 1 st for the balance of the annual taxes due, and be due by May l't
Why consider a quarterly tax billing system?
Twice each year the town's available cash to support annual appropriations runs dangerously lower. For a number of years, the town has found it necessary to borrow money to meet its obligations. In the summer, the town typically borrows $2,000,000 for a three-month period until the November taxes have been collected. In the winter, the town borrows an additional $1,000,000 for up to three months in anticipation of the May tax receipts. Changing to a quarterly tax billing system will significantly reduce, if not eliminate, the need for short-term borrowing.
Each time the town borrows money there are interest and transaction costs. These costs have amounted to about $1 0,000 per year, and are likely to increase as interest rates rise. Further, our limited cash balances prevent the town from earning additional investment income. It is estimated that the town could enjoy an additional $15,000 of investment income by moving to a quarterly billing system. On an annual basis, a savings of $1 0,000 in interest expense combined with additional investment income of $15,000 represents $25,000 in possible annual tax savings town-wide.
© 2005 The