HomeMy WebLinkAboutIR 6966 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 6966
0',TI RFTo the Mayor and Members of the City Council September 4, 1984
Subject: SPLIT PAYMENT OPTION FOR AD VALOREM TAXES
The City of Fart Worth currently offers taxpayers the option of paying
their property taxes in equal installments, half by November 30th and
the second half by June 30th. The City has been offering this split-
payment approach since the Charter was amended in 1928. City staff is
now questioning whether this alternative continues to serve those tax-
payers it was intended to protect.
The split-payment option was added in the 1928 amendments to the
Charter, presumably to offer relief to those taxpayers whose incomes
were impaired for one reason or another. However, in recent years the
option has been exercised by a relatively small percentage of tax-
payers. Fbr the 1983 tax year, a total of 6,719 taxpayers chose this
option, and this figure has been fairly stable in the past few years:
7,036 in 1981 and 6,448 in 1982. Individual property owners represent
roughly half of these split-pay accounts, but only 7% of the split-
payment taxes due in 1983. Businesses, including mortgage ccnpanies,
represent the other half of the accounts but 93% of the split-payment
tax dollars in 1983.
In recent years, a number of changes in State law have provided other
forms of relief to certain categories of taxpayers. F+or instance,
beginning in 1973, the State permitted municipalities and school dis-
tricts to provide an exemption for taxpayers over the age of 65, those
receiving social security disability payments, disabled veterans, and
the surviving spouse of a member of the armed forces who died on active
duty. Beginning in 1979, the State required that school districts pro-
vide these exemptions and permitted municipalities to provide these same
exemptions. Fbrt Worth currently offers each of these exemptions.
Other exemptions offered include deferred tax status for open space land
and agricultural land, the school homestead exemption by the School Dis-
trict, and the general household exemption fran the State tax collected
by the County.
The split payment option serves as an additional form of relief by pro-
viding the taxpayer a total of nine months to pay, without interest. To
discontinue the split-payment option would provide all taxpayers four
months to pay, and accounts outstanding after January 31st would be
assessed the 7% late penalty.
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 6966 - p.2
CD,,P if qT 14To the Mayor and Members of the City Council September 4, 1984
Subject: SPLIT PAYMENT OPTION FOR AD VALOREM TAXES
Among the advantages of discontinuing the split-payment option is a
decrease in paperwork. Under the split-payment option, the Tax Division
must prepare and mail out two sets of bills and process two sets of
receipts. While a relatively small number of taxpayers make use of this
option, each one takes at least twice the amount of time required for
other accounts. Another advantage would be simplified procedures for
taxpayers. Taxpayers would still have the option of making partial pay-
ments on their tax bill, with no interest charged until after the
January 31st deadline. However, the single deadline would simplify the
tax procedures and eliminate the public relations problem of payments
which total less than fifty percent of the tax bill and payments
received after the first split-payment deadline. Many taxpayers con-
tinue to pay only the school district taxes by November 30th, even
though this amount no longer represents fifty percent of the taxes due.
An even larger number of taxpayers fail to mail their split-payment in
time for the mandatory November 30th postmark. The staff spends a great
deal of time on the accounts explaining that payment in full must be
received by January 31st to avoid the 7% penalty.
A third advantage would be increased interest revenue. Even though only
3.3% of the City's 1983 tax accounts used the split-payment option,
these accounts represented $9,500,000 or 14% of the City's -total tax
levy. This disparity is due to the large number of business accounts
taking advantage of this option. Assuming a ten percent interest rate
for investments, the City sacrificed approximately $279,000 of interest
revenues in the 1981 tax year, $122,113 in the 1982 tax year, and
$245,775 in the 1983 tax year. Beginning with the 1982 tax year, the
State mandated a June 30th second payment deadline for any entity which
offers the split-payment option. Prior to this time, municipalities had
set their own deadline for the second payment, and Fort Worth had
enforced a May 31st deadline. Therefore, the City has recently sacri-
ficed an additional month of interest revenues under the split-payment
option.
The disadvantages of discontinuing the half-payment option would include
a shortened time period for taxpayers. The elimination of the split-
payment option will reduce the time period for payment without interest
penalty from a total of nine months to four months. This shortened per-
iod might present problems for certain taxpayers, although they could
make partial payment toward their tax bills at any time during the
four-month period.
A statement of the City Council's interest in exploring this option is
requested. It has been suggested the City offer the split-payment
option only to individual property owners and not to businesses.
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS --
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 6966 - p.3
~ foRr September 4, 1984
of fORT�A To the Mayor and Members of the City Council p
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rExA�� Subject: SPLIT PAYMENT OPTION FOR AD VAIAREM TAXES
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However, the Texas Property Tax Code requires that the split-payment
option must be offered to all classes of taxpayers or to none of them.
For practical reasons, if the City chooses to abandon the split-payment
option, the Fbrt Worth Independent School District must also be willing
to withdraw this option. If the City Council should direct the staff to
discontinue the split-payment option the School District will be
requested to take similar action.
A survey of other taxing entities in Tarrant County reflects that other
than the City of Fbrt Worth and Fbrt Worth Independent School District,
only Tarrant County offers a split-payment option. Both the City of
Dallas and Dallas County discontinued such an option effective for the
1984 tax year.
It is the opinion of the City Attorney that the present Charter
provision authorizing the split-payment option is superceded by the
State Property Tax Law which allows such option subject to a taxing
entity's governing body acting specifically to establish the option
after the effective date (January 1, 1982) of the new Law.
Should additional information be desired, it will furnished upon
request.
_C
Bert L. Herchert
6 City Manager
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ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS -