Lyme, Old Lyme approve low-interest rate on delinquent property taxes
Both the boards of selectmen in Lyme and Old Lyme opted in separate meetings Monday to offer property taxpayers a low interest rate on any delinquent tax bills, one of two relief options Gov. Ned Lamont called for in an executive order in response to the COVID-19 pandemic.
Both towns cited similar reasons for choosing the low-interest rate option instead of a 90-day tax deferral option, citing that taxes lost from deferring bills could lead to significant cash-flow problems during the first quarter as towns are still obligated to meet spending obligations.
Town leaders also said providing the low-interest rate option would give their town governments more stability moving forward, incentivize those who can pay the full amount to do so, and still offer some relief for those who need it without forcing them to rack up higher interest charges.
The governor ordered cities and towns to offer either full tax payment deferrals for 90 days or reduce the interest rate on delinquent taxes from the usual annual rate of 18% to no more than 3%. Property taxes for the next fiscal year are due July 1, with delinquent interest charges starting Aug. 1. The tax payment deferral would have made bills due by Oct. 1 before interest could be charged, while the reduced interest rate will apply only until Oct. 1.
Old Lyme First Selectman Tim Griswold said his town received about $19.3 million, or about 55%, of the total amount of taxes it expected to collect during its first quarter of the current fiscal year, but also spent nearly $13 million in that same period — approximately $8 million of which was owed to the Region 18 school district.
“If you have to pay out close to $13 million, and you gave people the ability not to pay during the first quarter, you could run into a little bit of a bind looking to find surplus to pay obligations,” Griswold said by phone Wednesday. "That’s why we thought, ‘Hmm, it’s probably not wise not to give everyone, regardless of need, that kind of accommodation.' ... We figured it (the reduced interest rate) would be more prudent for the town while still providing pretty decent relief for those who would need it.”
The town holds around $9 million in its surplus, making up approximately 25% of the town’s total $38.9 million budget.
While Griswold said dipping into the surplus to help with potential cash flow issues was possible, it was not as easy as “withdrawing money from a checking account,” he said. “Some of it is kept in (certificate of deposit) savings accounts.”
“The property tax is by far and away the largest piece of our $30 million in the budget,” Griswold said. “It’s certainly a major, major part of it and we don’t get a lot of state aid compared to taxes. We are tax-dependent, and we don’t have a lot of commercial taxes we rely on. It is mostly residential taxes we rely on.”
Because Lyme has two months' worth of operating expenses in its reserves — about $1.6 million, or about 16% of the town’s total $10 million budget — First Selectman Steve Mattson said it could be risky to allow what is still an unknown number of taxpayers to defer payments until Oct. 1.
Approximately 22% of taxes owed to the town are escrowed, he said, and the town does not stagger its tax collection throughout the year as is the case in many other towns. Lyme typically collects 98% of its taxes in its first quarter, Mattson said.
Though Mattson said he believes most taxpayers still will pay their taxes on time this summer, “without the replenishment, it’s hard to keep the government functioning. ... The Board of Finance and Selectmen agreed this was the prudent financial thing to do."
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