MERIDEN — Residents who are unable to pay their municipal tax and utility bills on time due to the coronavirus pandemic will be charged at a lower interest rate under a program approved by the City Council.
Residents who are delinquent on any tax and utility bills issued between April 1 and July 1, including the April and July quarterly real estate tax bills, will be charged at a monthly interest rate of .25 percent, or 3 percent annually, lower than the current interest rate of 1.5 percent, or 18 percent annually, set by the state. The lower interest rate would apply for a period of 90 days after the due date, after which the normal interest rates would begin to apply. Residents do not need to apply to receive the lower rate.
In adopting the low-interest rate program, the council opted against starting a tax deferment program that would have allowed eligible taxpayers to defer payments on their tax and utility bills by 90 days. In an executive order last week, Gov. Ned Lamont required all municipalities to adopt at least one of two tax relief programs by April 25.
The City Council voted 11-1 Thursday night to pass the low-interest rate program following a lengthy discussion. Democrat Sonya Jelks, the lone nay vote, said she wanted more information before making a decision.
While a handful of councilors supported adopting both tax relief programs because they believed the deferment program would be more helpful for taxpayers, other councilors feared the deferment program could lead to a large number deferring their payments by months, which could create cash flow issues for the city.
Finance Director Kevin McNabola, who recommended against adopting the deferment program, said the city is projected to collect $27 million in property taxes between now and June 30. Of that $27 million, about $14 million would be able to be deferred by taxpayers until July 1, under the plan. If a large number of taxpayers opt to defer payment and wait until the last minute to pay, the city would end the fiscal year on June 30 without the necessary revenue to balance its books.
“If they (wait until the last minute), then that $15 million could be an impact to the city in respect to cash flow,” McNabola said. While the city maintains a rainy day fund, McNabola said he’d rather not dip into it because depleting that fund will affect the city’s bond rating.
The deferment program would also apply to July real estate tax bills. Those bills are normally due by Aug. 1, but the program would have given residents until Oct. 1 to pay. Between July 1 and Sept. 30, McNabola said the city projects to collect about $46.5 million in property taxes and $31 million of that would be eligible for deferment in the first quarter of the 2020-21 fiscal year.
Implementing the deferment program would be especially difficult for Meriden because the city is one of only 10 municipalities in the state that bill property taxes quarterly. While other municipalities have three months to plot out a deferment program before billing taxes July 1, Meriden just sent out its April tax bills which are due May 1. Under the executive order, the deferment program must apply to both the April and July tax bills. Some councilors, including Council Majority Leader David Lowell, wanted to apply the low-interest rate program for April tax bills and the deferment program for July tax bills, but city staff said any program adopted must apply to both rounds of billing.
While councilors felt a sense of urgency to get at least one of the two programs approved this week to meet the governor’s deadline of April 25, Lowell said the vote doesn’t prevent the council from passing more financial relief in the coming weeks.
Democrat Bruce Fontanella pushed to hold off on passing either tax relief program. Fontanella argued taxpayers and businesses “have already been protected” from the pandemic’s financial impact by other relief measures, including unemployment payments and aid included in the federal government’s recently-passed stimulus package.
“I think that anybody that is unable to pay their taxes, at least in the short term, it’s not because the coronavirus crisis but because of other reasons that may be involved in their own personal finances,” Fontanella said.
Republican Michael Carabetta, who is out of work due to the pandemic, disagreed.
“There’s a time to be conservative and argue that we shouldn’t pay for rubber grass at the high schools, and there’s times when people are faced with the unknown, and I think people look to city councils and government to give them a break,” Carabetta said. “We’re not over here arguing which job we should do or which roads we should pave. We’re arguing how do we take profit off of somebody who’s struggling.”