T&G - Worcester could come up short from delay in tax bills

By Nick Kotsopoulos TELEGRAM & GAZETTE STAFF

WORCESTER —  The delay in issuing fourth-quarter property tax bills could leave the city with an insufficient cash flow to meet its financial obligations before fiscal 2012 ends June 30, according to the city’s chief financial officer.

Thomas F. Zidelis told the City Council Tuesday night that in the event the delay in collecting fourth-quarter property taxes adversely affects the city’s cash flow, the city might have to ask the state for an advance on its local aid payment.

Any fourth-quarter taxes not collected by June 30 would negatively impact the city’s year-end fund balance, he said, and that could end up hurting Worcester’s bond rating.

The fourth-quarter tax bills are traditionally sent out April 1 and are due by May 1. But those bills have been delayed this year because the City Council has been unable to set the fiscal 2012 tax rates.

The council traditionally sets the tax rates in November or early December.

But the city is still waiting for the state Department of Revenue to give preliminary certification to Worcester’s new property values as part of the triennial revaluation process. Until that is done, the council cannot set the tax rates, Mr. Zidelis said.

City officials had hoped to have the council set the fiscal 2012 tax rates by mid-March so the fourth-quarter tax bills could be issued by April 1. They later revised that timetable, hoping to have the bills sent out by May 1 and due by June 1.

City Manager Michael V. O’Brien recently told the City Council the fourth-quarter tax bills will be further delayed because the city did not complete its review of all 4,800 commercial properties and submit those new property values to the Department of Revenue until last week.

With the City Council not scheduled to meet again until April 24, the earliest that the tax classification hearing could be held is early May. It then usually takes a couple of weeks from when the council sets the tax rates to when the tax bills are issued.

That means the fourth-quarter bills may not be issued until late May; the bills are then due within 30 days of issuance. In that instance, they would be due just a couple of weeks before the first-quarter fiscal 2013 tax bills go out July 1.

With property owners facing a potential one-two punch of having to pay two quarterly tax bills in such a short timeframe, the City Council Tuesday night asked the city administration to outline options on how the city can soften that blow for taxpayers.

Councilor-at-Large Konstantina B. Lukes asked for the remedies because taxpayers will have to pay out large amounts of money in a short time.

“This is our fault, and we’ve got to remedy it,” Mrs. Lukes said. “I’d like to see the administration come in with some options that we can give our taxpayers.”

Mr. Zidelis said that under state law, tax bills are due 30 days from the date of issuance. He said the city would be willing to work with those taxpayers who might face a financial crunch because of the back-to-back tax bills by establishing installment plans for them.

He estimated that 60 to 70 percent of the homeowners have their tax bills paid through escrow accounts with their mortgage companies or banks. He acknowledged that those without escrow accounts would be the most dramatically affected by the back-to-back tax bills.

“There’s not a heck of a lot we can do, but to entertain installment plans,” Mr. Zidelis said.

He did say, however, that another option that might be considered would be to push back the issuance of the first-quarter fiscal 2013 tax bill, to give taxpayers a little breathing time between tax bills.