How can a municipality calculate the current year reserve for uncollected taxes?

To understand how a municipality calculates the current year reserve for uncollected taxes, it's essential to recognize the role of the prior year’s certified tax levy and any adjustments made to it. The correct approach involves reducing the prior year certified tax levy by any tax levy adjustments. This method accounts for the fact that not all taxes from previous years may have been collected, and adjustments may reflect changes due to various factors, such as tax cancellations or reassessments. This calculation helps provide a more accurate estimate of what portion of the levy may remain uncollected, allowing the municipality to prepare a reserve that reflects the risk of uncollected taxes in their current budget.

In contrast, other choices do not directly align with the standard practice of calculating reserves for uncollected taxes. For example, simply adding the current year's tax levy does not take into account the historical context from the previous year. Estimating future taxes can be speculative and might not provide a concrete basis for establishing reserves. Dividing total tax collections by the number of properties does not yield relevant data about uncollected taxes and instead provides average tax liability, which is not useful for calculating reserves. Hence, reducing the prior year's certified tax levy by applicable adjustments offers a more precise and procedure-oriented