What Impact Will the Pandemic Have on Township Property Tax Revenue?

The accounting firm of C.L. Coonrod & Company has agreed to provide financial guidance & solutions to us related to shortfalls and temporary cash-flow issues on a weekly basis for the next several weeks.  Here is the third installment.

The pandemic will probably have less effect on township property tax revenue than many  people think.

Most property tax revenue is based on a statutory “maximum levy” formula, which is based on a six-year average of statewide income.  Any single recession year is offset by the other five years. 

Also, generally, it does not matter if assessments are depressed.  The “maximum levy” depends on statewide income, not assessments.

Lower assessments may lead to higher property tax rates for taxpayers, but not necessarily lower levies for townships.

Also, assessments change slowly.  The assessments for budget year 2021 will be determined as of the assessment date January 1, 2020.  That is, of course, before the pandemic.  The January 1, 2020, assessments were based on studies by assessors that spanned a two-year period from 2018 through 2019.  In other words, it takes two to four years for changes in property values to affect tax rates.

But three possible problems may remain for townships:    

  1. If low assessments cause rates to rise, then taxpayers may receive larger rate cap credits (circuit breaker credits).  That could cut directly into the amount of property tax revenue the counties can distribute to townships.  However, the pandemic effect on assessments and rate cap credits will not be felt until 2022 at the earliest.
  1. An executive order by the Governor allows many property taxpayers an additional 60 days grace period for the 2020 spring installment. The normal due-date is May 10, and townships usually receive their spring installments by June 30.  If some taxpayers wait until July 10 to pay, part of the township share will be delayed.  However, we expect most counties will catch up on their spring tax collections and distributions by the end of August. 
  1. In severe cases, some taxpayers may be short the cash to pay taxes due in 2020. If the taxpayers don’t pay, the counties won’t have the cash to distribute to townships.  However, we believe few townships will experience a high percentage of such delinquencies.  The underlying property is forfeited if taxes are not paid. Even in a bankruptcy, it is likely that a bankruptcy trustee or a buyer will step in and pay the tax to redeem the property.

C.L. Coonrod & Company
3850 Priority Way South Dr, Indianapolis, IN 46240
(317) 844-4450
coonrod@coonrodcpa.com