Marconi braces for federal tax law in state of the town address
Something happened this past December that First Selectman Rudy Marconi had never seen before as the town’s top official.
“We had about an additional $10 million that came in that people were just so happy to be able to pay their taxes,” Marconi said during his state of the town address at the Chamber of Commerce’s annual breakfast
The audience —a few hundred town business elders and newcomers alike — murmured with laughter over their breakfasts in the dining hall of Silver Spring Country Club.
But the joke underscored a new reality for the town’s finances that seemed to draw a line through every item Marconi touched on in his speech before the Chamber of Commerce.
In reality, Marconi said, the additional revenue came ahead of new federal tax legislation, which caps the amount of SALT (state and local taxes) contributions residents can deduct from their federal income tax returns at $10,000. Because the law didn’t affect taxes billed in 2017, taxpayers flocked to pay as much of their taxes as possible before year’s end.
“That’s the good news — the bad news is, What is going to be the impact on our taxes moving forward?” Marconi said. He said the town financiers are concerned that people will be upset with their home values, as they’ll no longer be able to deduct above the federal cap of $10,000.
The average Ridgefield resident pays about $12,000 in local taxes before state income taxes. “You’re not even going to be close to the write-off you used to have,” Marconi said. So to make the new tax laws easier to stomach, more and more residents will likely try to contest their home value and reduce their taxes.
“How we handle that is going to be critical, and we don’t have the answers at this point,” said Marconi.
A previous suggestion, that the town establish a non-profit entity to give residents a “quid pro quo,” as Marconi called it, for donations to the town, wouldn’t offer relief under tax laws, thanks to something called “donative intent.” Essentially, write-offs allowed from donations to a charity or non-profit have any service given to the donor subtracted back. So if a donor gave $100 to the Chamber of Commerce to have breakfast that morning, Marconi said, the cost of the breakfast would be subtracted from the $100 tax write-off the donor received.
Marconi said the selectmen are working on a more traditional solution: streamlining local government in the hope it brings down tax bills from the town.
“We’re looking at a consolidation, creating a multitude of efficiencies through normal attrition, not through a layoff process — skinnying down government,” Marconi said. Much of the discussion has been in executive session, he said, because the process will involve cutting people from the town side of the ledger.
While Marconi acknowledged this wouldn’t bring people’s tax bills down to where they were before the federal tax plan rolled out, “it will demonstrate to you that we are making every effort we can to run as efficiently as we possibly can, keeping in mind the impact it has on your own pocketbooks.”
The days of high-end real estate sales seem to be gone.
“In the earlier part of this century, up until 2007, we saw a lot of million-dollar homes being turned over, and the activity was great. Today, it’s totally different — most of our sales, about 75%, are at that $500,000 level or below,” Marconi said.
He emphasized that there was a real need for more sales activity in the high-end market.
“We’re hoping that we see that change, and we’ve been hoping for a number of years now,” he said.
Marconi devoted most the second half of his speech to talking about the town and school budget processes, both of which are currently gathering steam ahead of the town budget referendum in May.
Among the big-ticket items in the town budget are capital improvements — large upgrades to facilities and infrastructure, which this year add up to $3.7 million, Marconi said, well above the town’s original target of $2.75 million.
The extra spending includes a new pumper truck for the town fire department. It also includes about $475,000 in spending on security and computer network upgrades throughout the school district.
“We all know what school security’s about today,” Marconi said, speaking about the mass shooting at a high school in Parkland, Fla. “We don’t want to sacrifice anything that has to do with security, and today, technology really is tied to everything.”
The most hotly debated decision the selectmen made was their suggestion to the Board of Finance that the proposed $96.6-million school budget be cut back to a 2.5% increase over this year’s budget, or by about $1.6 million, Marconi said. That would put the town’s total budget increases under a state-mandated 2.5% cap.
“We were told that [the budget] minus the carve-out for special ed — because they do allow the carve-out of special ed-associated costs — was [2.5%], but we had difficulty in identifying those costs. There wasn’t real clarity,” Marconi said.