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Posted: August 7, 2009 12:30 a.m.

Property taxes raised by glitch

Covington, county, schools receive $3 million less taxes than expected

Covington, Newton County and the county’s school system are going to be collecting a combined $3 million less in property taxes than they originally expected, exacerbating the NCSS’ budget crunch and bringing the county’s budget woes back to the forefront.

Two weeks ago the tax assessor’s office discovered an error in its records caused by the transfer of records to a new software system, which resulted in the county’s taxable property digest being inflated by $85 million.

Because of its higher millage rate, the NCSS will lose the most expected property tax revenue at $1.5 million, adding on to its previous $2.7 million loss in revenue from the state, said Sherri Viniard, NCSS Director of Public Relations. She said the school system is trying to figure out how to balance its FY 2010 budget of $149 million and has not yet set a date to discuss the budget situation with the Board of Education.

"We were already in the process of reviewing the budget in light of the reduction of state revenues when we learned of this issue. After a review of all the final state and local revenues, we will determine an appropriate course of action," Viniard said by e-mail. "We are in the process of reevaluating all of our budgeted positions and projected expenditures."

Similarly, County Administrative Assistant John Middleton said county staff were currently working on a plan to deal with its $929,000 reduction in expected property taxes. He and Chairman Kathy Morgan will present a recommended plan of action to the Board of Commissioners at their Aug. 18 meeting. Morgan did not immediately return a phone call Thursday morning. This spring the BOC trimmed around $8 million and 16.5 jobs from its budget to balance its $48.4 million budget.

Covington is going to receive $650,000 less in property taxes, but it will not have to adjust the budget; city officials had already conservatively budgeted to receive around $1.1 million less in property taxes. City Manager Steve Horton said city officials weren’t comfortable with the projected property tax income, because it was higher than previous years despite the economic downturn and because they thought an increasing number of foreclosures could reduce and delay a significant amount of property tax income.

"I was relieved when heard the news because we were prepared. To be honest when Tommy mentioned it to me, there was some anxiety, because we knew there was a problem but we didn’t know what it was. When we knew the magnitude, we were relieved because it didn’t impact budgeted revenues," Horton said.

Chief Tax Assessor Tommy Knight said the error was the result of his office switching over to a new software system in 2009, a complicated process that involved the transfer of 240,000 records.

A difference between the two software systems caused an error during the conversion process; one of the many exemptions contained in the records, the Freeport exemption, was not counted as a tax exemption and was instead moved to the taxable inventory category. The error affected 50 industries and $85 million of inventory in Newton County.

Freeport exemptions are applied to certain types of inventory, allowing industries to store that inventory without being taxed on it. The eligible inventory includes goods in the process of being manufactured or produced including raw material, finished goods produced within Georgia and held by producer for less than a year, and goods stored finished which are destined to be shipped outside Georgia within a year. Newton County allows 100 percent of this type of inventory to be exempted from taxes.

Other municipalities and taxing authorities’ digests were not affected, because none of 50 industries were located in their jurisdictions.

Because of the vastness of the records, Knight said no one in his office caught the glitch in the software, but an industry noticed its property tax bill was too large and informed the tax assessors’ office.

"Almost every county that I know of that does conversions of this magnitude will find an error when converting data into a new system. It doesn’t read the same. For example in the old system you could leave blank spaces in records, but in the new system you have to put a zero. That’s just one of the many changes," Knight said.

Knight said his first duty was to notify the 50 affected industries and send out corrected bills, which his office did in three days. Then he informed each of the three affected taxing authorities.

Knight said his staff worked with the new software vendor, Governmental Systems Inc., to thoroughly re-check the records and made sure no other errors existed. He said Newton County’s tax assessor’s office has always been one of the most efficient offices in the state, consistently ranking in the top 10 for accuracy and speed in the production of the yearly tax digest. Several counties, like Bibb County, are late in producing their tax digests and therefore receive hundreds of thousands of dollars in fines. Knight said he fully expects Newton County to maintain its high standards.

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