Title
Resolution to Approve a Waiver of Late Penalty Charge for Late Tax Payments in Response to the COVID-19 Novel Coronavirus Pandemic
Memorandum
The crisis associated with the COVID-19 Novel Coronavirus Pandemic has resulted in extreme financial hardship for many businesses and difficult economic circumstances for many Ann Arbor residents. City Staff has researched actions that the Council can take to assist businesses and residents in navigating this crisis.
One such action is the waiver of the late penalty charge (interest) for tax payments. MCL Chapter 211 (General Property Tax Act) establishes the basis for taxation of real and personal property, as well as the due dates and penalties related to tax collection. MCL Chapter 117 (Home Rule City Act) establishes the authority to adjust some of these parameters by the adoption of a City Charter. The Charter of the City of Ann Arbor adjusts the statutory dates and interest rates in Section 9.21. As the Charter currently reads, Summer tax is due July 31 and Winter tax is due December 31. Interest accrues as follows (all amounts are non-compounding):
Summer Winter
August 1 1%
September 1 5%
January 1 6% 1%
February 1 7% 2%
A waiver of only the August 1 late penalty charge (interest) on Summer tax would result in a loss of approximately $50,000.00 to the City's General Fund. Additionally, City Staff estimates that investment income will be reduced by approximately $87,000.00.
A subsequent waiver of half (2.5%) of the September 1 late penalty charge (interest) on Summer tax would result in a loss of approximately $110,000.00 to the City's General Fund. This would likely provide sufficient incentive to pay by August 31, and significantly reduce the penalty for those who cannot pay at that time. Although it is difficult to predict payment behavior, City Staff estimates that inve...
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