Selectmen unanimously approve Tax Deferment Program
The Darien Board of Selectmen voted unanimously on Tuesday, April 21, to approve the adoption of a Tax Deferment Program as detailed in the Governor’s Executive Order for eligible taxpayers.
The Board will now forward its recommendation to the Representative Town Meeting for its consideration and approval. The RTM is meeting on April 27.
Due to the impact of COVID-19, the State of Connecticut has made it possible for municipalities to offer some relief to property taxpayers.
There are two programs from which they can choose: a Tax Deferment Program and a Low Interest Rate Program.
The Tax Deferment Program allows municipalities to extend the payment deadline until 90 days from the due date.
Currently, taxes due on July 1 must be paid no later than Aug. 3, or interest begins to accrue. Adoption of this program would extend the deadline for payment without interest to Oct. 1. A taxpayer wishing to take advantage of the deferment program must certify the loss of income. A residential property taxpayer would have to certify a reduction in income of at least 20 percent.
A landlord taxpayer must provide documentation that they have, or will, suffer a significant revenue decline, or provide documentation proving that they have provided commensurate forbearance to tenants or lessees - which for this program means a deferral of 25 percent of rent for the 90 days after its due date, a deferral of one month’s rent to be paid over the 90 days or a similar level of forbearance. The Tax Collector must sign off on the residential and landlord requests.
The Low Rate Interest Program would allow the municipality to reduce the rate of interest on delinquent taxes from 1.5 percent per month (18 percent per annum) to 0.25 percent (3 percent per annum). This lower interest rate would be applicable for 90 days only. There is no qualification process for residential taxpayers - it would be provided to all.
“Cash flow pressure”
At the Board of Selectmen meeting, Darien First Selectman Jayme Stevenson was the only member who attended in person.
Town Finance Director Jennifer Charnesky said after a lengthy discussion of the two program options, the Board of Finance recommendation was to go with a tax deferral option only, and only with the RTM eligibility guidelines.
The main concern when making the decision was cash flow pressure, according to Charnesky.
“We need cash in July, August and September,” Charnesky said. “The concern was if we open it up to everyone, people in this town are very financially savvy and will not necessarily pay early if they don’t need to. If they can wait until October, many probably would. It would be an incentive for people who do have the ability to pay, to delay and put pressure on our cash flow.”
There’s a portion of residents’ taxpayer base that has their property taxes escrowed, and under the Governor’s orders, those escrow payments must be made, according to Darien First Selectman Jayme Stevenson.
“There is no option for that, if the homeowner or the business mortgagee is current on their mortgage,” Stevenson said.
About 34 to 35 percent of Darien taxpayers escrow their taxes.
Charnesky said she analyzed Darien’s typical other Board of Education and town expenditures in July, August and September.
“We typically spend about 10 million dollars. It goes down in August to just under 6 million dollars, and it then back up to about 10 million dollars in September. We have a lot of cash that goes out the door early in the year,” she said. “We really do rely on that first July tax collection period to fund our early expenditures.”
In the event that Darien should need cash reserves, it has them.
“Our fund balance is about 23 million, so we do have cash reserves,” Charneski said. “This can be used if the tax revenue wasn’t coming in or if it was coming in very slowly.”
According to Stevenson, there may be some revenues that may not be coming to the town this year. Those decisions that have not yet been made.
Tax anticipation notes
If tax revenues are not coming in, the town has the option to issue tax anticipation notes. Tax anticipation notes are notes issued by states or municipalities to finance current operations before tax revenues are received in the United States.
“It’s a fairly quick turnaround,” Charnesky said.
Most towns don’t do them competitively. They would do private placements, so the town might look to banks to raise the funds that are needed.
To be eligible for tax anticipation notes, “We would have to provide a cash flow analysis [and] information about what the funds would be used for.”
Certifying loss of income
In regard to the process a taxpayer needs to go through to certify a loss of income, Darien Town Administrator Kate Buch said the OPM (Office of Policy and Management) has a few guidelines.
The eligible residential property taxpayers will have to provide documentation showing that they suffered a 20 percent or greater loss in income since March 10 — either because they were furloughed, had reduced hours or they became unemployed.
The guidance does not specify what kind of documentation, according to Buch.
They also have to provide proof of residency.
Businesses would need to show a loss of 30 percent loss of income from the prior year, from the same period. “Landlords will have to show that they have provided relief that is commensurate with the relief that we are going to be giving,” Buch added.