Bond error increases Geneseo tax bill
City of Geneseo residents may have noticed their recent tax bill was higher than anticipated because a bond error resulted in $320,050 more being collected than intended.
At the Tuesday, July 11 Geneseo City Council meeting, Mayor Kathy Carroll-Duda gave a 35-minute presentation detailing how the error occurred and what can be done to rectify the situation.
At the heart of the issue is a 2007 general obligation bond the city issued to help pay for the wind turbines.
Bonds are a method of borrowing available to government entities — much like a car loan or mortgage is available to private citizens.
While most bonds are paid for with revenue generated from places other than property tax, the nature of bonds means that should the city be unable to pay, taxpayers are on the hook for the debt.
In Geneseo’s case, the 2007 bond (which had a 20-year repayment schedule) was being paid with funds generated by the electric utility.
The Henry County Clerk’s office maintains a list of all bonds issued by taxing bodies in the county. Unless told otherwise, via an “abatement,” the clerk’s office will charge property owners for the bond payments.
Geneseo traditionally abates all of its bonds, meaning they have the funds to pay what’s owed from other sources and don’t need to rely on property owners.
Last year, the Geneseo City Council was offered the chance to refinance the 2007 wind turbine bond. Via the refinancing, the bond’s 5 percent interest rate dropped to 2.63 percent, saving the city $411,704, said Carroll-Duda.
Refinancing bonds for better rates is a common practice for government entities. However, the city faced an unusual situation with the 2007 bond.
The 2007 bond “was not callable until 2018,” said the mayor. As a result, even though the city had transferred the amount owed to the new 2016 refinanced bond, the 2007 bond technically still existed.
City staff and aldermen, as well as the city’s financial advisers and legal representatives, were unaware that the 2007 bond needed to be abated.
“Normally, when you refinance, the old debt goes away,” said Carroll-Duda.
A citizen attending the council meeting likened the situation to “refinancing a house and then learning you have to pay on your prior mortgage.”
With no abatement ordinance on file, Henry County Clerk Barb Link assumed the city needed the taxpayers to pay the scheduled $320,050 amount and duly added the amount to the tax bill.
In early April, a verification letter was sent from the county clerk’s office to the city detailing the amount to be collected.
The letter was sent to the mayor, an elected official and not a full-time city staff member. When the letter arrived, the mayor was on vacation. The next week, the city’s finance director also was on vacation.
Two weeks after they received the letter, Geneseo officials contacted the clerk to let her know they’d found a discrepancy that needed to be corrected.
Despite no verification deadline being listed on the letter, city officials were told it was too late to correct the error.
Carroll-Duda said city officials met with county representatives and asked to have the property tax bills re-printed before being sent to citizens. The request was denied.
The mayor said the city then asked for a rebate to be sent, but was told by the county that “was too difficult to do.” Instead, state procedure calls for property tax errors to be corrected the following year.
However, a group of citizens attending the July 11 meeting were unhappy with that prospect and requested the money be refunded this year.
“I went door-to-door in every ward collecting signatures for a petition and people are very angry. They want their money back now,” said former Geneseo City Clerk Francie Delp.
Because property tax money collected must go to the fund for which it was levied, the $320,050 has been put to the bond payment.
However, a matching $320,050 still exists in the electric utility fund. The city planned to use those funds for the bond payment.
Delp told the council to use the funds to “send residents a check.”
Aldermen Brenda Johnson said the situation wasn’t that simple. “It’s a complex procedure to find the right taxing formula for each person and to make sure all correct exemptions are adjusted for each parcel.”
Henry County Chief Deputy Treasurer Kelly Vincent, who was attending the council meeting as a Geneseo citizen, said issuing a refund this year would be “a logistical nightmare.”
“There are 29,000-plus parcels in the county and every single person’s exemption is different,” she said. “It’s not as easy as everybody wants it to be. That’s why there are state laws in place to rectify errors the following year.”
Former Geneseo Mayor Nadine Palmgren said the “burden was on the city” to refund the money this year, and said the assessments and exemptions for every parcel were public record and could be used to calculate payment.
“Even though it is public record, to go through each person individually would be a lengthy process,” said Vincent.
Resident Kathy Allen told the council she didn’t want them to spend “$20,000 or $50,000 to figure out how to rebate everybody’s money this year.”
Instead, Allen said she’d rather see citizens involved with the levy process for the next taxing year.
“Come back in September or October when they start the process and talk to the council,” she said.
Mayor Carroll-Duda said there were several options available for the money for the next tax year.
The funds collected can either be used for street and sidewalk repair, as has been requested by some citizens, or can be rebated.
“Either way, we can guarantee the city’s portion of your taxes will be lower next year because that $320,050 came off the bond this year,” she said.
The city is also working with county officials to put procedures in place to ensure a situation like this won’t occur in the future.
“It’s easy to say what should have been done in hindsight,” said alderman Jason Robinson. “The situation is what it is. Nobody had any bad intentions when doing this. In fact, the initial motive in refinancing the bond was to save the citizens $400,000.”
A copy of the mayor’s complete presentation can be viewed online at www.cityofgeneseo.com.