The Derby Board of Aldermen is considering switching to a twice-a-year payment system for motor vehicle taxes.
The idea originated with Alderman Ron Sill, according to city treasurer Keith McLiverty.
Silll told the Valley Indy Derby residents need some breathing room, especially given the economy.
“Car taxes have just gone through the roof. People with more than one car are getting tax bills for well over $1,000,” Sill said. “People are at the point when taxes are due, they’re giving up things to make those payments. Some people are cutting back on food. It’s true,” he said.
On Wednesday, McLiverty presented data to an Aldermen subcommittee which shed light on how Derby residents pay their car taxes, which are due July 1 each year, with Aug. 1 being the last day to pay before being hit with interest.
The data showed that over the last four years only 55 percent of city residents paid their car taxes by Aug. 1.
The percentage was especially low between July 1, 2012 and June 30, 2013 when the city went a state-mandated revaluation escalated the mill rate, the full brunt of which was reflected on car tax bills. In addition, used cars are retaining their values, something that didn’t happen in years past.
That year 51 percent of the city paid their car taxes on time.
But the data also showed that Derby residents aren’t deadbeats.
The city still averages a 94 percent collection rate on car taxes, with roughly half the city paying after the due date.
A large chunk of the city is being hit with interest on late payments. It was especially bad during 2012, the reval year. That year the city city collected $45,275 in interest from people who paid late.
Anywhere from 6 to 8 percent of motor vehicle owners aren’t paying their car taxes within a given fiscal year.
Allowing residents to pay twice a year will cut residents some slack, especially in terms of penalties for being late.
“We’ll still have interest penalties, but it’s is definitely not going to be $45,000. It will be much lower than that,” McLiverty said.
The city treasurer said the data indicates people are paying their property taxes, as evidenced by a 95 percent collection rate, but their pockets are empty when it comes to car taxes.
“They are paying their property tax, they are paying living expenses and they are paying their mortgages. The car tax is the last thing (to be paid),” McLiverty said.
While the city will lose some revenue in terms of interest payments, Derby government can afford it, McLiverty said.
“I’m all for this,” he said. “I think it’s a good decision. I think it’s a prudent decision given the economy and we’re keeping some money in our taxpayers’ pockets. We’re affording them the opportunity to pay their taxes without interest payments accrued against them.”
The city should not incur any additional costs from mass mailing tax bills, if the idea is adopted by the full Board of Aldermen. Car tax bills will still go out once a year, but people will receive an additional payment stub within that bill.
The new system would not eliminate late penalties as a whole.
Example — a person with a $200 car tax bill would be asked to pay $100 in July and another $100 in January. If that person made both payments on time, they could avoid a penalty. If that person paid less than the $100 due in July, interest from July would be tacked into the bill due in January.
The Aldermen’s Community Relations Subcommittee Operations & Procedures Subcommittee recommended the full board adopt the new system.
The Derby Board of Aldermen could vote on the proposal Sept. 26.
The new system, if approved, would go into effect with the bill due in July 2014.
PLEASE NOTE: An earlier version of this story misidentified the name of the subcommittee which discussed the proposal.
