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Four Things You Can Do to Mitigate Delays in Property Tax Payments Four Things You Can Do to Mitigate Delays in Property Tax Payments

Four Things You Can Do to Mitigate Delays in Property Tax Payments

On March 11, 2020, the World Health Organization officially proclaimed the coronavirus (“COVID-19”) to be a pandemic. Business activities, commerce, and financial markets have all quickly been impacted, which in turn carries the potential to affect revenues and tax collections of all types.

Just last week, Indiana Governor Eric Holcomb issued Executive Order #20-05 (“EO 20-05”), which mandates, among other things, that all counties waive penalties for delinquent non-escrowed property taxes paid within sixty (60) days after the May installment due date of May 11, 2020.  An adjusted effective due date of July 10, 2020 could have ramifications for local governmental units who rely on such payments for everything from debt service to daily operations.

What You Can Do

EO 20-05 also directs the state of Indiana to work with counties that experience cash flow problems because of the waived penalties. Further, the Department of Local Government Finance has provided some guidance and recommendations on how local governmental units can mitigate problems with short-term property tax collection shortfalls. Recommendations include:
 
  1. Contact your local County Auditor to determine the current status of your year-to-date property tax settlement (and compare to prior years at this time);
  2. Contact your County Treasurer for a potential advance draw of up to 95% the lesser of:
    • 95% of the total amount collected at the time of the advance; or
    • 95% of the amount to be distributed at the semiannual distribution
    pursuant to Indiana Code 5-13-6-3. (We note this may not be a practical option in many counties);
  3. For certain local governmental entities, transfer/borrow among internal funds as permitted by state law; and/or
  4. Issue tax anticipation warrants, either through a local bank or investment bank or as part of the Indiana Bond Bank’s next Advance Funding Program.
To the extent you consider transferring/borrowing amoung internal funds or issuing tax anticipation warrants, check with your bond counsel on (i) existing bond covenants; (ii) timing and (iii) properly wording your authorizing resolutions in order to provide maximum flexibility.

Ice Miller has served local governmental clients for over 100 years. We stand ready to advise and serve our public finance clients through the COVID-19 crisis.

For more information, contact any member of Ice Miller’s Public Finance Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.
 
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