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Property Taxes
In my weekly appearance on WCAP yesterday morning, Ted Panos asked me about the recent flap about tax bills in Lowell. After making a concerted, and largely successful, effort to keep the city’s budget for FY13 from rising, some were surprised to receive their quarterly tax bills last week and find an increase in the amount due. After several years of paying quarterly tax bills (the city switched from twice per year bills to four times per year in FY09), I’ve come to expect two of the bills to be significantly higher than the other two. I never worried about it because you’re paying a set annual amount – it’s just the quarterly breakdown that varies. I took a quick look at my records and found that I’ve made the following quarterly payments:
FY09
July 2008 – $2276 (this was the last half year bill)
October 2008 – $1065
January 2009 – $1112
April 2009 – $1112
FY10
July 2009 – $1008
October 2009 – $1088
January 2010 – $1303
April 2010 – $1303
FY11
July 2010 – $1196
October 2010 – $1196
January 2011 – $1202
April 2011 – $1202
FY12
July 2011 – $1259
October 2011 – $1259
January 2012 – $1143
April 2012 – $1143
FY13
July – $1231
From this small data set several conclusions can be drawn: The disparity among quarterly tax payments within the same fiscal year is nothing new and the disparity has historically worked in my favor (i.e., I’ve paid the lower amount in the first half of the fiscal year and the higher amount in the second). Last year and in the first quarter of this year, that was reversed. On the radio, I said that it would probably better if the bills were equal throughout the FY but if they weren’t it was not big deal and that those complaining about it the loudest would be knocking the city manager for something anyway so this was just the latest line on that script. As for those who contend “why should the city take my money before it’s due?” if you are like so many of us who exult in receiving a Federal income tax refund in April, you don’t seem to have a problem with giving the IRS more of your money than is necessary throughout the year in order to pay less (or get a refund) in the end; so how is this different?
I believe the quarterly billing for property taxes in Lowell goes back a lot longer than ’09.
In addition to how the rate is set for both preliminary and final tax, our bills may reflect changes in property valuation. This latter change will typically come into play with the third quarterly bill issued in January of each year. Some people may be more affected than others by such a change,
Please note from your data the quarter-over-quarter increase with the most recent bill is 7.7%. (This is the complaint being heard on the street). However, comparing the year-to-year quarterly bill you will find a decrease of 2.2%. (That is what the City administration should emphasize).
Just to add a note to my previous comment, the estimated bills for last year were inadvertently high by 2.5%. If we factor that into the year-to-year first quarter comparison, the effect would be that your bill would have increased by 0.3% (the minus 2.2% noted earlier, with the 2.5% correction). That is right in line with the final budget number of a 0.2% increase.
I make a single payment on the 1st of each month to Wells Fargo that automatically rolls my principal, interest, mortgage insurance, and property taxes together. It happens automatically via transfer from my checking account to Wells.
If there’s too much, it winds up back in my escrow account and I get a nice little “surprise” check once in a while. If there’s not enough, I put more into the escrow account or the bank adjusts the total amount. I have a pretty good concept of what my annual property taxes are (in other words, I can ballpark it to the nearest hundred dollars) but have no idea what I’m actually paying each quarter…probably beacuse I’m not directly paying it.
Am I alone in saying I don’t pay much more attention beyond that?
I’m with Greg on this one. If you pay into escrow it all balances out by year’s end. Only those who are not paying escrow for a mortgage or pay their taxes directly would notice.
Spot on analysis of the issue Dick.
Thank you, thank you, thank you Mr. Howe. This entire discussion is what makes living in Lowell something of a challenge for anyone who deals with finance, economics and money flows on a daily basis. Not that everyone should have that background, or interest, but surely those who complain most or claim to be the City’s financial guardians or watchdogs surely surely should get some of that education!
So thanks for cooling the conversation.
Changes in assessed values and changes in tax rate both affect the quarterly bill and get reflected in the January (3rd fiscal quarter) bill. There is no way to make the four quarters level funded. It would seem to me that 1) with interest rates so low, there is no real benefit to hanging on to “your own money” (that is, paying lower first and second quarter bill and higher third and fourth quarter bills and 2) most people, like Greg, pay quarterly into a mortgage escrow account. I would much rather have the first two bills higher than the last two, so I know the worst case early in the fiscal year, for planning purposes. Who wants to get a surprise higher tax bill in January?
Thank-you for bringing some light to the issue when some are bringing so much heat to this political discussion.
And I am in the same boat as Greg and Jason. It works well for me and I would assume most people who have mortgages understand the concept.
Ugh! The moving goal posts are killing me. I thought owning our own house was enough. Now, we need to own it outright, no mortgage, and pay our taxes directly in order to get several Councilors to wring their hands for us?
I so want to be a true Lowellian. I wasn’t born here. Ain’t part of a “royal family.” Haven’t ever been elected, never mind got drummed out on an ethics violation. I thought paying my taxes would be a way in? Nope! I didn’t do it the preferred way?
When the list of credentials is finalized, pleased forward it to my youngest daughter. I think she has a fighting chance.