$13.4M in delinquent taxes, penalties
City works to cleanup backlog, admits to system flaws
Linda Nadeau got a letter last week from the city saying she owed $42 in unpaid taxes.
She was mystified. How could she owe anything in taxes when her bank holds her taxes in escrow and makes the payments?
Nadeau isn’t the only taxpayer to get a letter saying that unless payment is made she could face interest penalties starting May 31. She is one of 23,500 who received letters.
And if all those taxes and interest penalties were paid, the city would reap $13,379,025, City Treasurer David Olsen said Friday.
Olsen said the notices are an effort to straighten out unpaid taxes and, as it turns out, the city’s accounting system.
“There are a lot of issues there,” he said. “We’re trying to clean them up. I’m confident we’re doing the job the way it’s supposed to be done.”
That hasn’t always been the case, and while many people have always paid their taxes on time they are being hit with notices because of flaws in the system and a new policy eliminating a payment grace period. Olsen says the city is ready to make everything right.
People who question whether they were delinquent on their payments should contact the tax collector’s office and bring along copies of their cancelled checks. And even if it is found they were late in making their payment, thereby triggering interest penalties, they will be eligible for a waiver if they have a record of paying taxes on time for the past five years.
But if payments were mailed or made online before the due date, why are they all of a sudden being recorded as being late? And, especially, how could this happen when the city contracted with Citizens Bank last year to operate a “lock box” designed to eliminate the delay in depositing and posting tax and utility payments? Checks sent to the Boston address – Fidelity has been subcontracted to operate the lock box – are to be deposited within one or two days of receipt.
Olsen had an explanation. He said the lock box has sped up the deposit of payments, but when it was initiated only those payments that matched the amount due were recorded. Many taxpayers combine their tax payments with water and sewer payments rather than writing multiple checks. They could also be combining motor vehicle and property tax bills.
These payments needed to be reconciled, but rather than doing that in a timely fashion they sat for more than a month last summer untouched until Olsen questioned what was happening. As these payments were late in being applied, at no fault of the taxpayer, the system calculated an interest penalty.
Another common mistake is the assumption that account numbers are unique to the taxpayer when they’re unique to the property. Therefore, even in situations where taxpayers write multiple checks, if they use the same number the payments would be applied only to that account. That would leave an overpayment in one account while the others are delinquent.
Account numbers are equally important in making online bank payments. Furthermore, Olsen said, many people who do their banking online failed to change the address of where their payments should be mailed. In that case, they went to a city post office box, where they were then forwarded to the lock box. Days were lost, and by the time they reached the lock box they were recorded as being late.
Olsen is redesigning tax bills to make it clear where payments should be sent.
“The bill is ambiguous. It should specify the control number that should go on the check,” he said.
There was yet another snafu.
Olsen estimates about 15 percent of motor vehicle tax bills from last June were incorrectly credited. This resulted from a system of identifying the vehicle by the registration number. Under the city’s Munis bookkeeping system, tax payments were applied to the plate number, not the account number. That flaw has been corrected, but in its path it failed to record many payments as actually being made on time.
The volume of delinquent tax letters has been met with an outcry from taxpayers and a call for an explanation from Council Finance Committee Chairwoman Camille Vella-Wilkinson.
“This shakes people’s confidence in government,” she said Thursday.
She is concerned for seniors who she says are particularly anxious about staying on top of their bills, and assuming the city must be right will pay the amounts cited without questioning. She pointed out that these same people may be eligible for a waiver but don’t know to request it.
“We have to have a presentation before the council,” she said.
Olsen said he purposely ran a report prior to the upcoming tax cycle so as “to clean up everything out there” and let people know the city was showing them as delinquent.
“We need to let them know so they can clean this up,” he said.
When he learned the system was showing 23,500 delinquent accounts – about 25 percent of the city’s tax accounts – he found the number high. He notified Chief of Staff Mark Carruolo and Finance Director Ernest Zmyslinski before issuing the letters.
But it seems the system came apart even with mailing the letters at no fault of the city. Olsen said the letters, which are mailed at a bulk rate, started going out about a month ago in lots of about 3,000. He expected there would be calls, but nothing out of the ordinary happened until last week when they were hit with a deluge. Olsen believes the separate mailings were bundled by the post office. The mailing was processed by the city. He said about 19,000 letters representing the 23,500 accounts were mailed at a cost of 46 cents each.
Olsen could not say how much of the total $13.4 million represented by the letters is principal and how much is interest penalties. In addition to the calls, he did say the letters provoked a “flood” of payments.
Olsen made it clear there is no grace period on tax payments even though this was an undocumented policy that has been practiced for years.
As for Nadeau, she still doesn’t understand why she owes taxes and hasn’t paid the $42. Olsen was equally mystified. He suggested the bank was late in paying the payment. If that’s the case, he said, he feels it’s the bank’s responsibility to pay the interest.