On May 21, the town received a letter from the Department of the State Treasurer concerning municipal collection of real estate and personal property taxes. According to Sharon Edmundson, author of the letter and director of the department’s fiscal management section, Dobbins Heights collected only 63.64 percent of the ad valorem taxes that it levied for the 2007-2008 fiscal year. That is significantly less than the statewide average of 97 percent for towns of its size.
According to Town Clerk Mary Magee, this year’s collection rate was even worse — 61 percent.
“We’re just going to have to get more aggressive,” said Magee.
Edmunson’s letter advised town officials on how to do that:
“If you have not yet consolidated your tax billing and collection functions with Richmond County, we urge you to consider the possibility carefully,” wrote the director. “Because the county is required by law to collect the municipality’s motor vehicle property tax levy, they may be receptive to assuming responsibility for the other ad valorem taxes as well.”
Richmond County doesn’t want the new job.
“We don’t do this for any of the municipalities — we just don’t have the personnel to do it,” said County Manager Jim Haynes. “When we’re trying to get taxes, we’re trying to get those taxes that are owed to the county.”
Just because the state suggested that the county take over the job “doesn’t mean that (the county) actually has to do that.”
Haynes pointed out that Richmond County’s own collection rate was approximately 92 percent when he became manager in 1996.
“We had a reputation for not trying to collect late taxes,” said Haynes. “Some of it was internal problems. We didn’t have the people or we didn’t make the effort.”
Haynes added the county upgraded equipment and people to solve the problem.
“We’ve got a little better system now,” said Haynes. “It’s a big difference. You just have to be willing to do that. People aren’t going to pay if they know they can get away with it. I’m not sure I would pay.”
His advice to the town is to use every statute available for them to collect taxes. One of them could be to publish a list of unpaid taxes in the paper — something that is required by law, but something Dobbins Heights hasn’t been doing.
According to Mayor Antonio Blue, the town does not advertise delinquent taxpayer names in the paper for financial reasons.
“It costs money to advertise in the paper, and if you don’t collect any money then you’ve just incurred another cost,” said Blue.
According to Chris McLaughlin, assistant professor of public law and government at the University of North Carolina at Chapel Hill School of Government, state law requires all government taxing authorities to advertise the names of delinquent taxpayers that have liens on their real property.
“We’ll just have to start advertising again,” said Magee.
At present, the town sends out a first notice to delinquent taxpayers. Interest is added if a second notice has to be sent out. Failure to respond to that warrants a notice to be sent to the individual’s employer. Garnishment is the final option.
According to McLaughlin, county/municipality collection contracts are probably the most common arrangement in a situation like that of Dobbins Heights.
“My assumption is because the county has more resources for this process and, in many cases, more experience collecting property taxes,” said McLaughlin.
Garnishment methods such as foreclosures require the service of an attorney, and according to Blue, that means more costs incurred on the town.
“It costs money,” said Haynes. “But the reason you do all that is because those who don’t pay are costing those who do pay.”
By law, Dobbins Heights cannot project for higher ad valorem revenues than it received in the previous fiscal year. They collected $48,280 last year, and that’s all they can officially expect for next year.
According to Haynes, that means that if the town was able to collect more money than this year, they would be over budget projections and, therefore, able to lower the tax rate next year.
“It means if they collected 90 percent, they would lower the tax rate to get that same amount of money because they could collect more taxes for more people,” said Haynes. “Taxes are usually the last thing you can count on when doing your budget because you want to set the tax rates as low as you can.”
Another option outlined in Edmunson’s letter is filing to participate in the N.C. Local Government Debt Setoff Clearinghouse Program. Created and sponsored by the N.C. League of Municipalities and the N.C. Association of County Commissioners, the program allows the state income tax refund and/or Education Lottery winnings of delinquent taxpayers to be used to pay debts owed to the local government — at no cost to that local government. Richmond County is a participant, as are Ellerbe, Hamlet and Rockingham.
“It is our intention to participate; we have to start going to the Clearinghouse meetings,” said Magee.
“By statute, the tax collector is given a bunch of authority,” said Haynes. “The reason you make such an effort to collect taxes is because it makes a difference in what you can plan for next year.”
For now the town has adopted what it calls a “modest budget.”
“This has truly been a good year,” Blue said at the meeting. “We’ve been frugal with our spending. We didn’t go over our budget. In tough economic times like these, we’re still here. And that’s something to be thankful for.”
But the evidence of statewide belt-tightening has trickled down to the small town. According to Blue, the town’s largest source of revenue — sales tax - has been hit the hardest; lately, in any given month, Dobbins Heights gets $3,000 less then it used to get in sales tax revenue. Sales tax appropriations for the coming fiscal year total $160,000.
“It’s going to be a while before we see that increase,” said Blue.
Money-saving suggestions were tossed around throughout the meeting by multiple members of the council. The town is approaching its 25th anniversary celebration with a 25.5 percent decrease in revenues and expenditures.
According to Town Clerk Mary Magee, the solution to balancing his year’s budget was easy to explain.
“We just looked at what we didn’t use last year,” she said, adding that there was one personnel cut, but the town still provides benefits and retirement to its employees.