Link: Cold math of tax leniency chills a tiny N.H. town - The Boston Globe, 3/28/08

The town of Windsor, NH, population 250 (some seasonal), has learned that its long-time tax collector has been permitting some of its property owners to defer, informally, a portion of their property tax, sometimes for years, without interest and without penalty.

The article says, in part,

To the tiny group of taxpayers who combed through stacks of handwritten ledgers to find the discrepancies, the findings mean the town must change the way it does business. But many more in Windsor do not agree. They are little concerned about the missing payments, and expect an ongoing review of town records to find bookkeeping errors, not corruption. Those residents are troubled by what they say is an unnecessarily personal attack against Beverly Hines, the former tax collector who resigned over the controversy, whose family tree goes back in town for generations.

Underlying the tax controversy is a philosophical divide, between a small group of people who think the town must follow the letter of the law, and the majority, who feel their traditional, small-town way of life, embodied by the informal approach to tax collection, is under threat.

“People have always been behind on their taxes in Windsor, and the selectmen have always worked with them to let them get caught up when they can,” said Ron Houghton, a Windsor native. “People say they want to move here because they love it, but then they want to change it. They don’t like it because it’s not big-town, by-the-book, but that’s Windsor - we could do things unorthodox and make it work.” …

Since the controversy erupted, a bookkeeper hired by the town to examine its records has found about $175,000 in uncollected taxes since 2000. …

The concerned Windsor taxpayers then spent hours at Town Hall, combing through the old-fashioned ledgers and copying them by hand. They reconstructed the town’s records in a computer spreadsheet, tallied and re-tallied the numbers, and found startling results: Between 2001 and 2006, they say, $213,000 in property taxes owed by 58 residents on 85 properties went uncollected, not including the interest that should have been added to overdue payments.

One third of the unpaid taxes, $72,000, was owed by just nine people, according to the coalition - relatives, friends, and neighbors of the tax collector. The town did not place liens on properties with unpaid taxes, as is standard practice in municipalities.

Among those with unpaid taxes was the tax collector’s son, Pat Hines, who has served as town moderator for decades. In an interview, he dismissed the idea he was getting special treatment and said his mother had empathy for people struggling, whether they were close to her or not.

“As long as you were paying something, and you were going to get paid up, she let you do it that way, and I think she did it for everybody,” he said. “Over the years, she collected a lot more by being decent to people. But I guess that’s not the way it’s done anymore.”

Some residents remember a less sympathetic approach. Don Palmer, one of the concerned taxpayers, said he was late paying taxes once in the 1980s while he was between jobs, and the tax collector demanded he pay anyway.

The real problem, Palmer and others say, is that uncollected taxes forced the town to borrow money to balance its budget, burdening all taxpayers. They say they were stunned to discover that the state Department of Revenue Administration, alerted by a former selectman, had been asking the town to clean up its act for years. In letters dating back to 2002, state officials implored the tax collector to attend training sessions, hire an accountant, and begin placing liens on properties.

Since the controversy, Windsor has appointed a new tax collector and moved to computerize records and place liens, said the town’s attorney, Paul Apple. But change has not come quickly or easily.

“One selectman says the town is run like it’s the 1850s, so we have 150 years of ground to cover,” Apple said.

Every community should have a mechanism in place via which property owners who cannot pay their property tax on time can defer some or all of it, with interest, as a lien against the property. It might be limited to taxpayers over a certain age, or be available to all. It might be limited to, say, 25% or 50% of the amount due, or be based on income in some way. The interest rate should cover the community’s costs and fees, and adjust as borrowing costs change; the risk should not be on the community.

For seniors, this sort of deferral can make all the difference between a senior needing an expensive reverse mortgage, and being able to borrow from one’s community. But it should not be a gift to the senior – or to their heirs – from all the neighbors, including those who struggle financially themselves.

The town, after all, has a lien on real property, which, if things are going well, should be appreciating. (The building depreciates, at 1.5% pa, but the land’s appreciation may more than offset that.)

The state can facilitate this in two ways:

  1. By providing the enabling legislation for property tax deferrals, with interest, as a lien against the property; and either

  2. By permitting municipalities to issue revenue anticipation bonds;

or

  1. By providing a few years’ worth of start-up funding, they might be able to relieve municipalities to the need to issue revenue anticipation bonds, particularly if the local programs are limited to seniors; within 5 or 10 years, the funds, with interest, will start to be returned to the local treasury.