July 20,2007Dear Citizens of Milton:
The City of Milton's insurance premium tax collection has been a topic of interest in the last several days.As your City Manager, I want to take this opportunity to provide you with all of the important facts related to this issue to ensure that any questiom you have are answered.
What is the insurance premium tax?
Every insurance company is required to pay tax on premiums collected for policies written in the State of Georgia. fis tax is called the Insurance Premium Tax. Life insurance companies are taxed at 1% of gross premiums received, whiIe all other insurance companies are taxed at 2.5%of gross premium received.
What happens to the tax monies collected?
The insurance premium tax is collected by the insurance companies throughout the calendar year and remitted to the State Insurance Commissioner's Office in the subsequent year. On or about October 15th of the year following collection, a distribution of the tax is made to all participating counties and municipalities. The distribution is based on the ratio of each county's or municipality's population relative to the overall state population. As an example, taxes calculated during calendar year 2006 would be distributed on or before October 15,2007 to each local government.
How were these taxes collected and distributedprior ta the City of Milton's incorporation?
Insurance premium taxes collected prior to the City's incorporationon December 1,2006 were remitted to Fulton County.Taxes collected in2005 and slated for distribution in 2006, approximating $850,000, were deposited into the Fulton County special service district fund for Northwest FuIton County.The City of MiIton could not receive these funds in 2006 because the City had not yet achieved incorporation. However, City of Milton residents received full benefit from these funds due tor equirements surrounding the Fulton County special service district fund.
What happened in the City of Milton in regard to this tax?
The City anticipated filingfor this revenue source in December 2006, making our jurisdiction eligible for a distribution of the 2007 tax in October 2008. Due to a filing error, the deadline to file the appropriate ordinance was not met. The ordinance was filed on March 18,2007,which delays our distribution of these funds until October 2009.
Has the City of Milton lost this money?
The City has gut into motion a three-part pIan to recover our portion of the 2008 revenue from the Insurance Commissioner's Office. We anticipate that an agreement will be worked out between the City and the State and that these funds wilI be received as if the filing occurred on time. The worst case scenario is that we wilf ask the State to assist us in writing legislation - - -
during the 2008 General Session which will allow us to recover the revenue. We are confident
that these plans will result in Milton receiving our portion of the Insurance Premium Tax that
wiIl be distributed in 2008.
Will services be affected?
The delay of the receipt of these will have no operational impact on services provided by the City of Milton. The City was not eligible for these funds for its first fiscal year,and therefore we have not relied on this revenue source to fund operations.
What steps has the City taken to ensure this error won't happen again?
Because this ordinance is only required to be filed with the State one time, there is no possibility of the same error occuring twice. The City met its filing requirement in March 21, 07 for all future years' distribution of this tax.
I understand and share your concern about this revenue being delayed;it means we have
postponed our ability toprovide you with an increased level of service over our initial year of
incorporation. I take responsibility for this fact. The staff and I will continue to provide
services and establish an operational government which is both effective and efficient in
delivering services to our constituents.
As we near our eight-month anniversary as a newly incorporated City, we are enthusiastic
about the progress and success that is happening every day. From the launch of the City's
public safety department,which provides our citizens with local Fire and Police services, to the
upcoming development of the City's Comprehensive Plan, which outlines the future for the
City of Milton, we see exciting developments happening every day. We will continue to work
diligently to build a City that you can be proud to call home. You have my commitment on
that.
I hope this document answers any questions you may have about the insurance premium tax
and gives you a better understanding of this matter. As always, your thoughts and comments are welcome.
Sincerely,
Aaron J. Bovos City Manager
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