Two options for tax relief — a tax deferral program and another lowering the interest on late taxes — will be offered to Ridgefield taxpayers.

The two state-designed programs were approved by the Board of Selectmen Wednesday night, April 22, after a lengthy discussion at a selectmen’s meeting conducted on Zoom, which at times had up to 50 people listening in.

“It really does not matter if they’re a renter or a homeowner, there are people who desperately need this program,” said Stephen Consentino, one of three citizens who offered comment on the selectmen’s deliberations through Zoom.

“I understand the program would cost the town money,” he said. “The town needs to borrow.”

But he saw tax relief as necessary — a way to avoid foreclosures — with many people out of work.

“I don’t think the town wants to own people’s homes,” he said. “If people don’t pay their taxes, that’s what eventually happens.”

The lowered interest rate program will be available to all town taxpayers.

But the tax deferral program is offered to taxpayers who can “demonstrate that they have sustained significant economic impact from COVID-19.”

Ridgefield, like all other town in the state and the state itself, runs a July 1 to June 30 fiscal year. In Ridgefield, town tax payments are due quarterly.

With the town starting a new fiscal year on July 1, both tax relief programs can be applied to taxes due July 1 for the last quarter for the 2019-20 fiscal year (April, May, June), and also for taxes due Oct. 1 for the first quarter of coming the 2020-21 tax year (July, August, September).

The reduced interest rate program would lower the interest rate that people would pay on late taxes from 18 percent a year to 3 percent a year. It applies to each three-month period. But the rate goes back to 18 percent — retroactively, erasing the previous benefit — if the tax bill is not paid by the end of three months.

The deferral program pushes back the date taxes are due by 90 days, so there is no interest charged. Taxpayers seeking the relief need to apply for the program, with applications due “no later than July 1,” according to the tax collector’s office.

“This program is basically an extended grace period for those who can demonstrate that they have sustained significant economic impact from COVID-19,” the tax collector’s office says.

Town finances were discussed Thursday, April 23, at a tri-board meeting of the Board of Selectmen, Board of Finance and Board of Education via Zoom.

All questions were taken at the beginning of the meeting and no votes are expected.

Cost to the town

What will a wave of late tax payments mean for town operations?

Controller Kevin Redmond laid out a “worst case” scenario for the town’s finances if all the “non-escrowed” taxpayers — people who don’t have their taxes rolled into mortgage payments, held in escrow, and then paid by the bank — took advantage of one or the other program and didn’t pay taxes.

“If all of the non-escrowed took advantage of it — we know that won’t happen — we’d see a net cash shortfall of $13 million, worst case scenario,” Redmond said.

Treasurer Molly McGeehin explained the projected shortfall as the town being caught between the continuation of incoming bills and a lag in tax income as perhaps more than half of taxpayers — all the non-escrowed folks — could opt to delay payments.

“The $13 million has to do with the fact we have expenses to pay, if we’re going to defer 55 percent of $21 million,” she said.

The selectman asked how tax collections were in 2009 and 2010, during the recession that followed the stock market and housing crash of 2008.

“We didn’t have significant problems,” said Tax Collector Jane Berendsen-Hill.

Redmond said they had looked at the town’s tax collection rate for the 2009, 2010, 2011 fiscal years.

“They were all about the same: slightly north of 98 percent,” he said.

McGeehin warned the selectmen not to be lulled into a false sense of security by those figures.

“This isn’t 2008,” she said.”Unemployment is approaching 20 percent. That didn’t happen in 2008.”

Teeth

Berendsen-HIll told the selectmen that people would not opt for the tax deferral program lightly.

The state-designed application for tax deferral spelled out numerous requirements that taxpayers of different categories — homeowners, businesses, landlords — would have to meet to qualify.

“It’s a very serious legal document,” she said. “They have to attest they have had a 20 percent reduction in household income due to COVID-19. And in the case of businesses, they have to say they experienced declines of 30 percent in the April to June quarter. And landlords, if they want to do it, have forbearance requirements” — meaning that they pass the benefits of the delay in payment deadlines along to tenants, based on the portion of rents judged to go to cover taxes.

And taxpayers applying for the deferral program have to agree that the municipality can investigate the claims they make to qualify.

“There’s some teeth in this,” she said.

Berendsen-Hill said most municipalities in the state were choosing the tax deferral program.

“As of today, 95 municipalities have made their decision. Two-thirds have gone with deferral and two-thirds of those who are deferring are deferring for everybody,” she said. “...A third are going for the low interest rate program. And there are 11 municipalities that are doing both deferral and low interest.”

Offering both programs was the path the selectmen eventually chose.

Fund balance, borrowing

The potential absence — even if temporary — of up to $13 million in tax receipts could result in the town using up almost all of its surplus fund balance, which is about $15 million.

“It looked like we were using almost all of our fund balance,” Selectwoman Maureen Kozlark said.

“If you decided that you wanted to offer the deferment, we’d be tracking the applications that come in, going up through June, and we’d get a sense for what the cash flow impact would be,” Redmond said.

“Depending on what the number is, we’d look at cash flows and the fund balance to see if we can cover.”

The town might end up having to borrow to pay bills while it awaits the delayed tax payments.

“More than likely we’d go out in the market and borrow — TANs, tax anticipation notes,” Redmond said.

Tax anticipation notes “are not normally something Ridgefield would do,” Redmond said. “But I think all the communities are going to be going down that road.”

Marconi didn’t think the town would need to exhaust it’s $15 million fund balance, which functions as a kind of rainy day fund.

The $15 million in the fund balance may sound like a lot of money, but it is only about a tenth of the $145 million annual town and school budget. So, it couldn’t be counted on to carry the cost of operations for a very long.

“I don’t see us using fund balance. If we had to, we could go to the TAN, to fill the cash flow void,” Marconi said. “It’s like a line of credit, drawing down on line of credit.”

Selectwoman Barbara Manners asked about the interest rate on tax anticipation notes.

“1.5 percent,” Redmond said — but that’s the current rate.

“We wouldn’t be the only ones going out and borrowing,” he said. “There will be a whole bunch of municipalities.”

That could push up the interest rate towns pay to borrow.

How many?

Manners didn’t think that many of Ridgefield taxpayers would be seeking deferments.

“Just looking at this town and its people and its history, if people are able to go back to work by June or July, and if the restaurants are able to open by beginning of July, I think it’s going to take a long time but I don’t think you’re going to find as many people avail themselves,” she said.

“We know 90 percent of taxes for the first quarter have been collected,” said Selectman Bob Hebert. “We’re looking at a shortfall of $13 million for one quarter. What about the next quarter? Everybody’s saying we don’t know what’s going to happen. We have this $13 million shortfall for one quarter. Is that likely to replicate itself for next quarter?”

Hebert offered the motion for the board to enact both tax relief programs, and it was seconded by Selectman Sean Connelly.

Longtime selectmen watcher and taxpayer advocate Ed Tyrrell was among those listening in, and used Zoom to offer an option.

“I support the motion you have in front of you to approve both programs and let the people decide what’s best for them,” Tyrrell said.

The motion to approve both tax relief programs passed unanimously.