MURRAY — Last week, the Personnel and Finance Committee of the Murray City Council began addressing a problem that has been in place for several years.
City Director of Finance Kim Wyatt said that, in 2020 alone, about $200,000 in delinquent property taxes remained unpaid. That includes penalties and interest and involves about 200 individuals and 80 businesses for taxes on some real property, as well as tangible property.
Wyatt also told the committee that, from 2003-20, a total of $670,000 in delinquent taxes were noted.
“One thing I think you’ll notice really quickly is that this is not just about the city’s tax,” said Mayor Bob Rogers. “It’s school tax for the Murray Independent School District. They cannot get the money if it’s not collected. You’ve also got the city’s police and fire pension fund that receives money from this, so all of those things are affected by this when we’re not able to collect all of the taxes.”
Wyatt said that, in 2020, her office billed more than $7 million in real and tangible taxes. She broke that into categories, specifying that $3.2 million was for the city’s general fund, while $178,000 was for the pension fund and the remaining $3.6 million was for MISD.
And she said that, for the property owners who are charged with paying these taxes, the cost rises with each year they go unpaid.
“I like to use the example of a 2003 bill we have,” Wyatt said in discussing how interest multiplies with time. “The original tax balance on it was $61. That bill is now, after accrued penalties and interest over the years, almost $150, so that bill, which was unpaid in 2003, has unpaid bills on it through 2020.
“So that’s considered uncollectible during that audit at the end of the fiscal year. We do book bad debt or property debt, but do also keep those properties on the tax roll with (the Calloway County Property Valuation Administrator) office because, if that property was to sell, then someone would have to pay those taxes.”
It is a tedious process both to track how many delinquent tax cases there are in the city’s system, as well as to try to collect those taxes. Wyatt said many property owners do not update their addresses, making it difficult to maintain contact with them. This means that if a tax bill is returned, it is undeliverable.
Wyatt said her office does its best to try and maintain contact, constantly sending notices in the mail, and with a schedule.
“Typically, bills go out by the middle and end of October and are due by Dec. 1,” she said, adding that the 2020 bills were altered by the COVID-19 pandemic. “This year, we waived the penalty until Jan. 1 and so a 10% penalty is applied on the face value of that tax. On Jan. 1, we started adding 6% interest, so it’s half a percent per year.
“Following that, we sent out the delinquent notice, typically, in February or March. This year, we did a little bit later because of the late deadline and we have to research all taxes that are returned to us and it’s really unbelievable how many tax bills we have returned to us that are undeliverable.”
Kentucky law also gives cities a lien on a property that is assessed for 11 years following the delinquent date. Wyatt said that if the property sells, the taxes for it have to be paid and that lien is supposed to surpass all other liens, with the exception of state taxes.
“We can go back and collect outstanding taxes for 11 years past the delinquent date. If we decided to put a lien on a property, that’s as far as we could go,” Wyatt said, her comment immediately drawing a question from Councilwoman Pat Seiber.
“So what happens after the 11 years have elapsed? Does it go away?” she asked. City Attorney Warren Hopkins then answered.
“Once you get past 11 years, we can’t collect them through litigation,” Hopkins said. ”Now, if they are willing to pay, we can still get it and, usually, when they call for a payoff, we give them all of the time they want.
“It’s just those 11 is what we can legally enforce. What we’ve done on numerous occasions in the past is to try to get them to give us the full amount and see if they will pay it off because most people want (the tax) off of there. A lot of times, we can get them to pay most, if not all of it.”
Hopkins said estate matters, where someone has died, are not the issues that give the city its most trouble.
“Usually, with an estate, somebody handles that, from what we’ve seen. Those are usually paid,” he said. “When we have problems, it’s usually with people who just refuse to pay their taxes.”
Wyatt said that, in 2019, her office filed liens on 95 properties and that 45 of those remain open. She said 50 of the properties were paid in full and that there are five payment plans that are still active and are current with their payments.
“So we allow them to pay their past taxes at the time they enter into a payment plan. Then, we cease accruing interest,” she said. “So it is to the benefit of the property owner to enter into a payment plan with us because we can stop accruing interest at the time.”
But she also said that there is a payment plan that has not had a payment made on it since September. She also said there is another payment plan in which only one payment has been made, and that was in August 2019.
The committee is expected to continue looking at this issue in future meetings.