NumbersCentral: Danville’s Delinquent Property Taxes

The City of Danville does have a large dollar value of delinquent property taxes, but is that a “real problem” in the big picture? With data provided to SouthsideCentral by Danville’s Finance Director Michael Adkins, let’s look at the numbers and see what we can find out.

(Editor’s Note: Technically, this article could also be an “Ask SouthsideCentral!” because we got this question from one of our readers a few months ago. But it’s got a lot of numbers in it, so it’s a NumbersCentral article. And it’s a BreakDown because we’re going to analyze the numbers. So it’s all three. But I’ve got a new NumbersCentral graphic, so there. Anyway, let’s start digging.)

You can’t have a NumbersCentral article without numbers, you know. And here they are!

Let’s pull out a Big Board to BreakDown what we have…

• First thing, let’s wipe out the 2015 line, because the bulk of that amount isn’t due until June 5th, 2016.
• After that, we have a total tax bill of $1,578,549.27 for the 19 years of 1995-2014. With $223,407.92 of that delinquent property total bill paid since June 2015 (more on that later), that leaves Danville with $1,355,141.35 of delinquent property taxes.
• If you’re wondering why does this go back for 20 years, that’s the statutory limit for the collection of property taxes. There are exceptions to that, like if a judgment has been recorded. And when you get down to as far as the 1990’s, it’s not worth the expense of going to that stage for such a small amount of money.
• The city uses Taxing Authority Collections Services (TACS) as their collection arm for delinquent taxes. TACS is a law firm that works with government on the collection, lien and foreclosure sale process. TACS has also represented the city in court on other things, including the Macerata Wheels case.
• Unlike a standard collection agency, TACS makes their money off of their own penalty charges. If Danville is owed $500 in property taxes and TACS collects it, the city gets their $500. The delinquent taxpayer has to pay more than the original $500 to TACS.
• So, Danville has $1.3 million in delinquent taxes. That looks bad, but it isn’t in the long run. Overall, Danville’s running a 99.9% ultimate collection rate on property taxes before the clock runs out.
• The city’s budget doesn’t assume a 100% instant collection rate on property taxes, because that is never going to happen. Sure, a super large delinquency might cause a revenue shortfall one year. That’s never happened yet, even through the bad recession years. The city’s Finance Department is smart enough to accurately predict what’s going to actually be paid.
• If you’re wondering what that means in plain talk, your neighbor’s failure to pay his property taxes for the last three years has already been factored into the budget numbers. Your neighbor is wrong in doing that, and is picking up penalties and interest because of his failure. But he’s not causing a revenue shortfall that’s going to raise your property taxes next year. Sooner or later, Danville is going to get those property taxes in some way.
• The city is using TACS to do some tax foreclosure sales, but that’s the absolute last resort. It takes a lot of time to get through the court system. It takes a lot of expenses to get to that point, too. TACS doesn’t do that work for free. Some properties in Danville are held in the name of more than 10 people. Each one of those people have to be served with court papers, each have to be given all of the required legal notices. A lot of those people are untraceable. Blah blah blah. The bottom line on the tax foreclosure sales is “Easier said than done.”
• Oh yeah. One other thing about foreclosure tax sales. The city and TACS can spend all that time and money getting somebody to the auction, then the auction is cancelled if the person pays up (even right before the auction starts). All that time? Wasted.
• If you’re blatantly way behind on property taxes, the city’s watching you. But they also know that they’re going to get the money in some way sooner or later. That 99.9% statistical rate says so.
• Back to looking at all those numbers. I’m in the mood for some pie to make my next point…

• Starting at the top of the pie chart, we have 2014’s delinquent tax balance, and we go clockwise to 2013, 2012 and on back to 1995. As you can see, each year’s unpaid taxes decreases almost perfectly proportionally. Delinquent taxes and collections is a game of numbers. That’s why the city staff knows about what’s going to come in every year and they budget for that.
• Also note that the 1995-2009 period (15 years) is all bunched up and is only around 1/4 of the total pie. Most people aren’t five years behind.
• While we’re looking at the chunks of pie, also note that over half of the delinquent taxes are at most 2 years old. Again, that’s normal. Not alarming at all.
• The accounts that are five to 20 years behind? They keep dwindling down to almost nothing. There’s around $5,500 in the 1995 tax book, and that’s probably uncollectable in reality. $5,500 is not a big deal when it comes to the entire city budget.
• If you’re demanding “SELL THOSE PROPERTIES FOR TWO YEARS OF BACK TAXES NOW!”, you’re going to be highly disappointed when that doesn’t happen. First, it’s a stupid idea because the money will eventually come in. Second, property owners can work out agreements with the city to set up a payment plan. Finally, the negative publicity generated by such action would haunt the city for a long time.
• Since the city’s accurately budgeted what will be paid on current and past-due taxes, they can make a little bit of profit on the penalties and interest assessed to the late payments.

“The city has over a million dollars in delinquent property taxes!” Yep, that’s true. But when you take a detailed look at the numbers, you see that it’s just a government version of a business’s accounts receivables. Most people pay on time, some don’t and the business eventually sends them to a collection agency.

The only difference between Danville’s property taxes and a business’s A/R? A business would love to have an almost guaranteed 99.9% collection rate like the city has.

It’s been a BreakDown. It’s been an Ask SouthsideCentral. It’s been a NumbersCentral. Most of all, it’s been a fun ride. I hope you’ve enjoyed this article and learned a lot from it.