Smithfield writing off $2.2 million in uncollected taxes

Smithfield writing off $2.2 million in uncollected taxes

SMITHFIELD - Accepting the reality that no community ever collects 100 percent of the taxes it assesses, the Town Council has agreed to write off $2.2 million in uncollected revenue for the years 1981-2002.

The council was also bound by another reality - state law prohibits municipalities from enforcing collection of taxes on assessments more than 10 years old.

The outstanding taxes were for tangibles - business equipment and furniture - and for motor vehicles.

Town Manager Dennis Finlay said that unlike with property taxes, for which the town can sell delinquent property, no such leverage exists for other forms of taxation.

He said it has even been possible for motor vehicle owners to sidestep a regulation that prohibits registration unless taxes have been paid.

The tax write-off approved by the council Sept. 17 involves $1.8 million in tangibles and $420,000 for vehicles.

Finlay said that many of the tangibles delinquencies were linked to businesses that failed and whose owners are no longer living in Rhode Island.

The tangibles situation is improving, he said, because a town ordinance now requires all businesses to register annually, for a $5 fee. Any business owner who has not registered cannot operate, and a condition of registration is being current on tax payments.

One complication with that system is that no state legislation exists to back up the municipal ordinance.

A bill filed in the last session to remedy that, which died in a House committee, did not win the support of state Rep. Thomas Winfield, a Smithfield Democrat.

He said he considers the registration requirement one more hindrance for the small-business community here, not just because of the fee, but because of the paperwork involved.

He said of the bill, "I didn't oppose it, but I didn't push for it, either."

Winfield added, however, that he realizes registration is a useful tool for tax collection and that he is studying all the regulations involving local businesses with an eye toward seeing some of them rescinded.

If that happens, he said, "We'll proceed with the legislation." Meanwhile, the town has continued to operate under the registration program despite the added strength a state law would provide.

Finlay said he expects that new computers planned for the state Division of Motor Vehicles, but considerably behind schedule for installation, will help eliminate the ease with which residents can register their vehicles even though they are tax delinquents.

He said simple measures such as adding a middle initial to previous application data, or re-applying in the name of a spouse, can result in gaining a renewal.

Finlay said the town is aggressive in attempting to collect delinquent taxes, using both its own resources and then a collection agency.

He said the town, during the 21-year write-off period ending in 2002, was actually owed some $4 million in delinquent taxes, much of which was collected.

Not counting current outstanding single-year tax revenues of $665,000 expected to come in over the next three months, the town is still owed $1.1 million from delinquent accounts dating to 2003, according to Finance Director Randy R. Rossi.

He said tax officials send three or four delinquency notices, and make telephone calls, before turning to a collection agency that takes 18 percent of the payments it generates.

Finlay estimates that in general, the town collects between 98 and 98.5 percent of its assessed taxes.