Request By:
Mr. James G. Hodge
Hodge, Hurley, Howland,
Yater, Strepey & Bartley
606 Kentucky Home Life Building
Louisville, Kentucky 40202
Opinion
Opinion By: David L. Armstrong, Attorney General; By: Susan G. Leavenworth, Assistant Attorney General
You have requested an opinion concerning property tax assessment and collection for cities. In particular, you have inquired whether it is permissible for a city to assess taxes based on an equal valuation for all properties so that all property owners pay the same tax regardless of the size or age of their home. Such an approach would be in violation of Kentucky's constitutional requirement that all property be assessed at its fair cash value. While a uniform standard of assessment is required for property taxation purposes, individual characteristics of the property must be taken into account in the ultimate valuation.
Parrent v. Fannin, Ky., 616 S.W.2d 501 (1981).
Secondly, you inquired what is the maximum permissible penalty and interest chargeable per month against tax bills which are due. Thirdly, you asked whether a greater interest rate may be charged in the first months after a tax bill becomes due with a lesser penalty or interest rate charged in the later months after the bill is due as long as the annual rate does not exceed the permissible maximum.
In your letter you mentioned that your inquiries are for a sixth class city. Therefore, this reply will be directed to cities of that class. Basically, there are two approaches to delinquent tax collection available to a city of the sixth class. Such a city may elect to have the county sheriff handle its tax collections. KRS 91A.070. If this approach is adopted, the penalties and interest set out in KRS 134.020 and KRS 134.370 apply (10% penalty on February 1 and 12% annual interest) . There is no provision for using a higher interest rate at the beginning of the year and a lower interest rate at the end of the year.
If a city does not elect to have city ad valorem taxes collected by the sheriff:
"City ad valorem taxes shall be due and payable at the same time as state and county ad valorem taxes are due and payable, unless otherwise prescribed by statute. The city shall establish by ordinance procedures for the collection of ad valorem taxes which shall specify the manner of billing, the place of payment, discounts, if any, for early payment, penalties and interest for late payment, and other necessary procedures related to ad valorem tax administration." KRS 91A.070(2). (Emphasis added)
Clearly, the above provision gives a city considerable flexibility in terms of penalties and interest for late payment. If your city should choose to set its own interest rates and penalties under the foregoing provision, it may wish to consider adopting a system similar to that provided for in Chapter 134 for counties. There an annual interest rate of 12% is utilized with a 10% penalty coming into play 30 days after the taxes become delinquent.