'Calamity Of Errors' Led To Town Meeting Request To Pay Back Taxes

By: Tim Wood

Topics: Town Meeting , Property taxes , Municipal Finance

Municipal finance.

CHATHAM – For eight years, Karolyn McClelland has lived with the possibility of losing her home due to what officials acknowledge was a “perfect storm” of mistakes and miscommunications.

Next week, special town meeting voters will be asked to fix the situation by transferring funds to cover back taxes on McClelland's Beach Plum Road property, taxes that would have already been paid in full had the property been assessed correctly.

“It's been a huge burden on me,” McClelland said of the $7,197 tax debt.

Town officials acknowledge that a “calamity of errors” led to the situation and have labeled the special town meeting article to address it a “moral obligation tax abatement.”

McClelland's home was the first to be built in town by Habitat for Humanity. Like all Habitat homes, its resale value is restricted. That restriction appears on the first page of the deed, but for some reason it was not initially recorded by the assessing department. Instead of just the value of the house, as stated in the deed restriction, the property was assessed and taxed on the full market value.

From 2002 to 2007, McClelland and Habitat – which held the mortgage and collected escrow for the taxes – received an initial tax bill, which was paid, but no bill for the second payment. McClelland repeatedly visited the tax collectors office and asked why she had not received a bill, and was told that the taxes had been paid in full. No one would tell her who had paid the taxes, even though that information is public record.

“We definitely noticed it,” said Victoria Goldsmith, executive director of Habitat for Humanity of Cape Cod. “We were repeatedly told it had been paid.” The agency's office manager tried to track down who had paid the bill, but could get nothing out of the tax office except that it was paid in full. “We had no more power to track it down,” Goldsmith said.

Meanwhile, the first half of the annual tax bill continued to be paid, at full market value rather than the deed restricted rate. In 2008, TD Bank discovered that it had been paying the taxes on McClelland's property in error; it was supposed to be paying taxes on 3 Beach Plum Lane, not 3 Beach Plum Road. Because the payment included McClelland's parcel ID and address, the tax collector's office had been applying the payments to her property, thus covering the second half tax bills.

When the error was discovered, the TD Bank payments were applied to the correct property. The taxes on that property had been paid all along by the property owner, said Finance Director Alix Heilala, so no back tax bill had been generated, which she said would have raised red flags.

In 2008 the assessment on McClelland's property was corrected, but because she had not applied for an abatement on the taxes assessed from 2002 to 2007 – abatements must be sought within 30 days of paying a property tax bill – she was charged back taxes and interest. This was done even though the assessment had been more than twice what it should have been. Based on the first half taxes she did pay at the higher rate, McClelland actually overpaid the corrected amount – based on the property's deed restriction – by $164.

Even though she has never received any notification that her taxes were in arrears, she was still on the hook for the back taxes and interest.

“We tried to go through the Massachusetts Department of Revenue, doing what is known as an 8 of 58,” a way to obtain a retroactive abatement, said Heilala. “They denied us.”

The only option left, she said, was to obtain town meeting approval to use existing funds in the overlay surplus – money set aside to cover abatements – to cover the back taxes, which only exist because the town failed to assess the property at the correct amount in the first place.

“It was a big mess,” Heilala said.

The finance committee agreed, voting unanimously to support the article, but the selectmen's vote to support it was split 3-2.

Selectman Seth Taylor, who voted not to support the article, said both the taxpayer and Habitat accepted the fact that payments were being made “on face value” and provided no documentation that they had tried to determine who was paying.

“If there's a bank error in my favor, I want someone to tell me who paid my taxes, otherwise I assume the worst,” he said. He said he didn't see sufficient evidence that McClelland didn't have responsibility for the taxes. It was “unrealistic,” he added, to expect the tax collector to research every payment to make certain it was for the right parcel and paid by the responsible party.

Selectman Amanda Love, who used to work in the tax collector's office and also voted against support, said McClelland had years to file for an abatement and didn't do so.

But Chairman of Selectmen Jeffrey Dykens supported the measure, calling the situation a “comedy of errors.”

“There's plenty of culpability to go around,” he said, noting that the article seeks an internal transfer of existing funds, basically the town paying itself.

“This was a case where the town screwed up,” said Selectman Dean Nicastro. It would benefit no one for the property to go into tax title and foreclosure, he added. Selectman Corey Metters voted to support the article as well, although he had doubts that it would pass town meeting.

“It's a calamity of errors,” Assessing Director Ardelle Kelley told selectmen. “I don't think it's setting a precedent.”

Taxes are often paid by third parties – banks, family members, trusts – so the tax collector would have had no reason to suspect something was amiss, Heilala said. But she agreed that a series of errors on the part of several different parties contributed to the situation. “If one of those things didn't happen, I think this would have come to light earlier,” she said.

McClelland is “a real giver” who had remained active with Habitat, said Goldsmith. She is also vice chairman of the town's affordable housing committee, and holds down two jobs. She's also been under a lot of stress due to the situation, which is compounded by having the details aired in public.

“I am not asking anyone to pay my taxes,” McClelland said. “I'm asking the citizens to allow the town to pay what's owed due to a clerical error.”