Tuesday, May 19, 2009

Marion County Property Taxes Explained

News out of the Marion County Treasurer's office is that property owners in Indianapolis will be receiving a property tax bill come June. Because there is a great deal of confusion about what is going on, I figured an explanation was in order.

Tax bills in Indiana are paid in arrears. For example, taxes on a property for 2006 are paid the following year, in 2007. That is one fact that you always have to keep in mind when sorting through Indiana's complicated property tax system.

The way I like to keep things straight is to categorize the taxes as 2006 Pay 2007, for example. That way you never forget that you're talking about taxes paid in arrears.

You pay property taxes in two installments. The Spring installment is supposed to be due on 5/10 and the Fall installment is supposed to be due on 11/10. That's the way it is supposed to work. Here's what's going on with Marion County property taxes though:

When the first 2006 Pay 2007 tax bills came out in Marion County out (a few months late) in the summer of 2007, people started screaming over how high their taxes had risen. Governor Daniels threw out the Marion County assessments on the basis that business property in the county had been undervalued. Governor Daniels said that instead of paying the 2006 Pay 2007 bill that the Marion County Treasurer had sent, homeowners could pay 2005 Pay 2006 bill pending the new assessment.

In November of 2007, the 2006 Pay 2007 fall tax installment was due. The Marion County Treasurer had issued a bill that reflected the balance that you would have to pay if you were paying the 2005 Pay 2006 taxes. Many people, like me, just paid the balance...again pending reassessment.

The first property tax bill you received in 2008 was the 2006 Pay 2007 reconciliation bill which was the difference between what you had paid on the 2006 Pay 2007 taxes and what the 2006 Pay 2007 taxes were after the properties were reassessed. That reconciliation bill came due in the Summer of 2008. Marion County taxpayers did not receive the 2007 Pay 2008 Spring Installment tax bill until December of 2008.

In other words, you really only paid one property tax installment in 2008.

The first tax installment we are getting in June of 2009 is the 2007 Pay 2008 Fall installment. You might still get the 2008 Pay 2009 Spring and Fall installments this year. In other words, you might end up paying three regular property tax bills this year. Most likely though the 2008 Pay 2009 Fall installment will be pushed back until 2010.

People who have their property taxes escrowed find they are about a year behind "real time" when it comes to property taxes. If you have your property taxes escrowed, I would not even bother trying to wade through your mortgage company's bureaucracy to get them to make sense of what's going on and make adjustments. Just shrug your shoulders and expect a wildly fluctuating escrow account.

If your property taxes are not escrowed, you should be putting aside some money in case you have to make that extra property tax installment this year.

What happens when local governments are late collecting property taxes? They engage in short term tax anticipation borrowing. In other words, taxpayers pay more when the property tax bills are late.

For an excellent explanation of borrowing to cover property taxes and the reason why tax bills are late, see Andrea Neal's column on the subject.

FYI, if you think Marion County is bad, you should have tried figuring out Brown County's property taxes a few years ago. That county was about 2 years behind.


Leslie Sourwine said...

Paul posted: What happens when local governments are late collecting property taxes? They engage in short term tax anticipation borrowing. In other words, taxpayers pay more when the property tax bills are late.

Does that mean that the city receives more money? If so do you think the city is purposely being late sending the bills out so that they will collect more taxes?

Paul K. Ogden said...

I don't think they get more money. I think we taxpayers pay more though because we also have to pick up the interest on the borrowing.

guy77money said...

This is also happening with most of the school districts in the township. They have been borrowing money from the bond bank and it's not cheap. In the end we will all end up paying more taxes. The major problem will be employment will lag the rather slow recovery that will eventually take place starting in possibly 2010. The state and the city governments along with the school districts will be doing some massive cost cutting. Things will get worse before they get better. My guess is we won't dig out of this mess till 2012 or later. Check out http://www.calculatedriskblog.com/ for some great charts and some truthful analysis of the economy.

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