NC Tax & Tag Together Program - Presentation to Local Government Finance Officers

HB1779 for Finance Officers

W.A. (Pete) Rodda, CAE, RESDavid Baker, MPA, PPS

Sharon Edmundson, MPA, CPA

Major Issues:Average of 66% of RMV bills are paid on timeAverage Collection Rates at Fiscal Year End by County Population:

RMV AnnualStatewide Average 87.22%

97.91%100,000+ 88.09%

98.37%50,000 – 99,999 85.37%

96.96%25,000 – 49,999 84.01%

96.61%24,999 and Below 84.08%

95.23%

*Source: LGC Memorandum #2012-14, 4/17/2012

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Why Implement HB1779?

HB 1779 Vehicle Property Tax Collection

3HB 1779 Vehicle Property Tax Collection

Current System: “Billing In Arrears”

Why it doesn’t work:

• Even at 5%, first month interest not much of an incentive to pay timely.

• Many vehicle owners prefer to pay only when the tag needs to be renewed.

• Sheer volume of RMV bills versus local collection resources:

– The older the RMV bill, the harder it is to collect.

– Demographic data (employers, SSNs, banking information) is not in DMV database.

• Staggered System versus Fiscal Year.

Improve the citizens’ experience:

• Reduce the number of government interactions.

• Eliminate the need for delinquent collections.

Reduce/share costs:

• Duplicate mailings (postage, materials, handling, and so on)

Increase Efficiency of an Existing Tax

• Improved collections and revenues.

• Improved compliance.

How HB1779 & NCVTS will Help

HB 1779 Vehicle Property Tax Collection 4

In the new system property taxes will be included with the “invitation to renew” – now called the Combined Notice.

Taxes are collected by DMV/License Plate Agencies (LPAs).

DOT Fiscal will distribute money to the Counties on the 10th of each month.

Counties will distribute money to the municipalities.

Costs will be allocated among the taxing jurisdictions based upon each jurisdiction's contribution to the total bill.

5HB 1779 Vehicle Property Tax Collection

New System: “Simultaneous Billing”

Registered Motor Vehicle Tax Levy includes

• Renewals/Issuances that have actually been paid

• All issued Limited Registration Plates, even if unpaid

No More Billing in Arrears

• Billing is done when the invitation to renew is sent

• Vehicles can not be registered until the taxes are paid

The assessor will need to prepare a tax base estimate for registered motor vehicles in a "similar manner" as in the past.

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Key Differences


Expenses:

• Counties will need to account for:

• Billing costs ($1.69/notice – includes LPA reimbursement)

• Debit & Credit card fees associated with their collections

• 4 months operating/maintenance costs for the old system

• Costs for developing integration between NCVTS and their current financial system.

• Mailing and postage costs will decrease $3 million statewide.


Budgeting for FY2014

Revenue:

• Counties will see increases in revenue based on:

• Higher collection rates (estimated between 9-15 percentage points higher statewide)

• Retention of 3% first-month interest after June 30th, 2013

• Counties will receive a one-time distribution of the remaining $18 million balance (approximate) in the special account.

• FY2014 will have 16 billing cycles

• Four under old system (March 2013 – June 2013 registrations)

• Twelve under new system (July 2013 – June 2014 registrations)


Budgeting for FY2014 (cont.)

Many of the costs involved in billing in collections are already incurred by the counties and are being transferred to DMV:

• Vehicle valuation

• Postage and printing

• Software/hardware maintenance

• Cashiering

• The Assessor’s responsibilities remain the same:

• Determining values and tax situs

• Processing exemptions and appeals


Budgeting for FY2014 (cont.)

A registered motor vehicle is a vehicle with an active NC registration (license plate). Subject to the Tax and Tax Together process.

An unregistered motor vehicle does NOT have an active NC registration. NOT subject to the Tag and Tax Together process.

Owners who renew late but within the same registration year pay interest.

Vehicles without registrations after the registration year are subject to discovery as personal property in the annual levy.

General Rules


For budgetary purposes, the estimated tax value of motor vehicles is included in the total assessed value noted in the budget ordinance.

The assessor prepares a tax base estimate in a similar manner as in the past.

The registered motor vehicle levy is not charged to the tax collector.

The levy consists of “bills for registrations/property taxes actually paid in full through the renewal/issuance process or created through the LRP process.

General Rules

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Financial reports should include net vehicle values, taxes and interest paid by jurisdiction.

A methodology for allocating billing and collection costs, credit card and debit card costs shall be provided.

The financial report will initially be provided by month of collection. A subsequent version will provide collections by registration month. Both reports will include a year-to-date summary page.

Refunds are handled by local governments.

General Rules


DOT fiscal will distribute money by the 10th day of the month following collection. Counties will distribute revenues to the municipalities and

other taxing jurisdictions within the county.

DOT will show gross collections, billing, credit card and debit card costs, and net revenue. Costs will be extracted.

Costs for the initial mailings will be paid from the Special Account as we start the project.

General Rules


Counties will no longer charge municipalities up to 1.5% of collections. Replaced by cost distribution method.

5% first month interest remains in effect after July 1, 2013.

The 3% interest diversion to pay for the system will no longer be diverted to the Special Account after July 1, 2013.

Remaining funds in the Special Account will be distributed back to local governments. Some funding will be withheld for start-up costs, initial

maintenance and enhancements.

A Few Other Points


NCVTS Financial Report

Distribution Reports

Valuations, Exemptions

Refund Reports Proration and “appeal based”

Appeals Reports

Specialty reporting

Reporting


NCVTS Financial Report

• Obtained from VTS on a monthly basis.

• May be imported as a .csv or .xls file or keyed manually into your financial system.

Daily Distribution Report

• Obtained daily from VTS – information from previous day

Other reports

• Values, exemptions, appeals, etc.

Reporting


DOT Fiscal will provide a monthly Remittance Report showing:

• Overall collections for your county

• Billing and collection costs

• Credit card and debit card costs

• Net collections after expenses are deducted

Reporting


The NCVTS Finance Report


Valuations and Levy

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Displays

• The number of vehicles with renewals, issuances or LRPs.

• The net value of registered vehicles, issuances and LRPs

• The net taxes and fees billed/collected through renewals, issuances and LRPs.

• The net taxes billed on vehicles issued an LRP

Collections


Displays

• The total value of taxes paid through renewals and issuances

• The total value of taxes collected through the LRP process

• The aggregate collection rate for LRP and Renewal collections

Cost Allocation


3 Categories of costs

• Billing Costs• Credit Card Costs• Debit Card Costs

Counties should allocate the lump sum costs across their taxing jurisdictions

Total Collections/Uncollected


Provides

• Interest collected for each jurisdiction

• Total collections (Levy + Interest) per jurisdiction

• Total LRP and Levy uncollected

Vehicle Owners may renew their registration 90 days in advance of expiration

• July, 2013 registrations may renew as early as May 1.

• The first local revenue distribution should occur in June, 2013.

• May collections – July renewals

• The second distribution will occur in July, 2013.

• June collections – July and August renewals

• The third distribution will occur in August, 2013

• July collections – July, August and September renewals

Cash Flow


G.S. 105-330.5(d) states that a county must include taxes on vehicles in the levy in the fiscal year in which the taxes are collected. Remember, there is no levy and therefore no legal obligation to pay until the registration is requested (new registration on which taxpayers chooses limited plates), processed (new registration on which taxpayers opts to pay tax at registration) or renewed (existing registration).

Units may choose to track amounts at year end that would have previously been considered pre-paid (generally amounts collected in April – June for registrations not due until July or later) as prepaids. HB 1779 Vehicle Property Tax Collection 35

Cash Flow

Revenues will start small, build each month, then stabilize

About 87% of all renewals are made by the expiration date (with grace period)

About 90% of all renewals are made within 2 months past due

About 92% of all renewals within a July – June fiscal year are made by June 30.

Cash Flow


New Attorney General’s Opinion that vehicle taxes levied under Tag and Tax Together are subject to bankruptcy provisions.

Vehicle Owner under bankruptcy protection must come forward with evidence of the bankruptcy. Tax personnel are not required to identify records in advance.

VTS will utilize an exemption code to release taxes appearing on the combined notice.

DMV registration fee is not subject to bankruptcy provisions.

Bankruptcy


Bad checks will be handled by the DMV. Block is placed on the renewal of all vehicles and drivers

license.

Cash will be distributed to counties initially regardless of the bad debt.

VTS will be flagged that bad debt has occurred. Flag will be removed when bad debt is satisfied

If bad debt is not satisfied after 13 months, the local tax share of the bad debt will be extracted from monthly distributions.

Bad Debt (Bad Checks)


Improve the citizens’ experience:

• Reduce the number of government interactions.

• Eliminate the need for delinquent collections.

Reduce/share costs:

• Duplicate mailings (postage, materials, handling, and so on)

Increase Efficiency of an Existing Tax

• Improved collections and revenues.

• Improved compliance.

How HB1779 & NCVTS will Help


Major Issues:Average of 66% of RMV bills are paid on timeAverage Collection Rates at Fiscal Year End by County Population:

RMV AnnualStatewide Average 87.22%

97.91%100,000+ 88.09%

98.37%50,000 – 99,999 85.37%

96.96%25,000 – 49,999 84.01%

96.61%24,999 and Below 84.08%

95.23%

*Source: LGC Memorandum #2012-14, 4/17/2012

42

Why Implement HB1779?



Questions?

NC Tax & Tag Together Program - Presentation to Local Government Finance Officers

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