Sr Tax Relief Report

The Town Council's Budget and Ordinance Review Committees will meet next Monday, January 27 at 7pm in Town Hall to discuss the report & recommendations of the Elderly Tax Relief Study Committee. The two committees (Budget - Ecke, Esty, White; Ord Rev - Ecke, Esty, Orsini) will make a recommendation to the Council. If you're available, please attend the meeting. The text is as follows:

The Elderly Tax Relief Study Committee was formed by the Cheshire Town Council through the approval of Resolution 102606-1. The Town Council formed this Committee after over 1,760 residents of the Town of Cheshire supported a petition for a tax freeze for eligible residents.

The sole purpose of the study Committee is to review the current elderly tax relief ordinance and to make recommendations for changes, if any, to the existing ordinance along with making recommendations for the adoption of new or additional ordinance.

The Town of Cheshire has offered an elderly tax relief program since 1989. The current program consists of a tax credit program along with a separate tax deferment program. Applicants of the local credit and deferment programs may also be eligible to apply for the State of Connecticut Elderly Tax Circuit Breaker Program which is available to residents who are at least 70 years of age and that meet qualifying income requirements.

Applicants of the local tax credit program must be age sixty-five (65) or over, or under age 65 and be eligible for disability benefits under Social Security. The amount of the local tax credit is dependent upon their qualifying income of the applicant along with their period of residency in the Town. The qualifying income levels are adjusted annually to equal the qualifying income levels of the State circuit breaker program. The Town has also added two additional income levels, which are greater than the State qualifying levels for single and married applicants. The additional two income brackets have actually allowed an additional 125 applicants into the program. The local tax credits are normally adjusted annually but that is left to the discretion of the Town Council.

Qualifying residents may also choose to defer up to 75% of the payment of their real estate taxes until their home is sold or the death of the applicant. The applicant’s home is subject to a lien by the Town and interest accrues monthly at a rate of ½ percent per month on the balance of the taxes that are deferred.

The tax relief programs that are presently in place have become base for which this study group has developed its recommendations. The study group over a very short period of time has had to analyze the present programs and develop recommendations and form a consensus about those recommendations. This group has worked very hard to accomplish a difficult task in a short time frame and we are proud to present the following recommendations:

Local Tax Credit Program:

A.) Adjust the local qualifying income categories to conform to, the recently adopted State circuit breaker qualifying income revisions, along with proportionately increasing the local upper qualifying income categories.

B.) Increase the tax credits for all income categories for each of the next three fiscal years by 8% to 12%.

C.) Establish new residency criteria for new applicants to the program:

1.) 1 to 5 years 20% of the available credit.
2.) 6 to 10 years 40% of the available credit.
3.) 11 to 15 years 60% of the available credit.
4.) 16 to 20 years 80% of the available credit.
5.) 21 years or more 100% of the available credit.

Current participants of the program would be grandfathered in under the current residency criteria.

D.) Consider a bonus tax credit for residents of 25 years or more.

E.) Consider re-evaluating the upper qualifying income limits of the program.

Tax Deferment Program:

A.) Revise the current tax deferment program ordinance to allow qualifying residents the ability to defer any amount of the net real estate taxes that are owed after the application of all local and state tax credits, 75% of the total tax bill may be deferred. (Recommendation is to offer dual programs – tax credit and deferment.)

B.) Consider lowering the rate of interest charged.

C.) Retain the tax lien provisions of the present ordinance.

Tax Freeze Program:

A.) Adopt the State age, income and residency guidelines.

B.) Establish an asset limit:

1.) Asset limit of which does not include applicant’s principal residence.
2.) Assets to be included would be the values of all bank and credit union accounts, stocks, bonds, mutual funds, individual retirement accounts (including ROTH IRA accounts), 401(k) plan accounts, tax deferred annuities, second residences and any other asset category that the Town Council might consider.

C.) Consider a tax lien provision.

Medical Hardship Waiver:

A medical hardship waiver should be established that would help applicants who may be excluded, upon reapplication, from the tax relief programs due to an increase in their income which was the direct result of the applicant drawing upon their retirement savings to pay for medical expenses.

The waiver would be granted to an applicant whose qualifying income has increased to a level which now excludes them from the State tax circuit breaker program. If the applicant can sufficiently prove to the Town Assessor that the reason for the increase in their income was related to the payment of medical expenses, the additional income associated with this medical expense can be deducted from their qualifying income (e.g. liquidation of an IRA, sale of stock, etc.). An increase in an applicants income which results in moving up into a higher qualifying income category, would not be considered a hardship if the applicant was still receiving State tax circuit breaker benefits.

The medical hardship waiver would only apply to the local tax credit; due to the fact that the State does not presently have a medical hardship waiver.

Sunset Provision:

The Town Council should establish a sunset provision for the adopted tax relief programs, after a three year duration, so that a program re-evaluation can be conducted in conjunction with the upcoming property revaluation. The sunset provision that would be adopted should also address future property revaluations, so that the Town Council can have an opportunity evaluate future costs of the programs and allow for realignment of benefits.

Cap on Program Costs:

The Town Council should develop a formula for the establishment of an annual cap on the overall cost of the tax relief programs. The establishment of an annual cap on the cost of the programs is also fiscally responsible and is needed to protect the Town residents and businesses who are not involved with the tax relief programs.

Public Information Efforts:

During the period that this study group has met it has become apparent that there continues to exist confusion or a lack of awareness about the tax relief programs. The Town has made a concerted effort to inform the public, but we recommend that the Town expand its public information efforts.

Establish a Tax Relief Study Group During Future Revaluation Periods:

The general consensus of the members of the Study Group is that the Town Council should establish a Tax Relief Study Group during future revaluations to re-evaluate the program.

State Legislative Initiatives:

The study group feels strongly that the Town Council along with the Town Manager’s office should pursue the following legislative initiatives:

A.) Complete funding of the tax circuit breaker program by the State.
The Town presently receives reimbursement of approximately 89% from the State for benefits provided under the circuit breaker program, which equates to a shortfall of roughly $30,000. The State should fully fund its programs as the annual shortfall to the Town could be used to help provide additional benefits to residents who need them.

B.) Increase the tax circuit breaker credits
The State of Connecticut has not increased the tax credits offered under the circuit breaker program since 1991. An increase in the credits is needed so that the State will begin to share more of the burden in providing property tax relief to the residents of Connecticut.

C.) Establish a medical hardship waiver
The State of Connecticut presently does not offer any type of medical hardship waiver in conjunction with the circuit breaker program, we feel that this waiver is not only needed at the local level but also at the state level. Applicants that qualify for circuit breaker benefits are at low income levels, and should not be penalized when a medical emergency occurs.

D.) 50/50 Sharing in the cost of the tax freeze program
The State of Connecticut with the passage of the recent tax freeze legislation has saddled the municipalities of the state with an unfunded program which will be funded by the residents and businesses who do not qualify for benefits under the legislation. We feel that it is the obligation of the State to initially reimburse municipalities at least fifty percent of the tax revenue lost related to a tax freeze, this reimbursement rate should increase over time until full funding is achieved.

Property Tax Reform Proposal developed by State Representative Timothy O’Brien:

State Representative Timothy O’Brien of New Britain has developed a property tax reform proposal which we feel the Town Council should review and consider supporting. The proposal is available on Representative O’Brien’s website.

Items Requiring Further Research:

A.) Re-evaluate possible inequities that may exist in qualifying income categories and tax credit benefits.

B.) Re-evaluate the definition of “Adjusted Gross Income” in determining an applicant’s income category.

C.) Consider developing a catastrophic hardship waiver.

And a special thanks to the members of the committee: Beth Tannenbaum, Rebecca Simpson, Dave Pelletier, Derf Kleist, Ed Hines, Wayne Winters and Paul Bowman.

Comments? I don't have time to comment on this right now... gotta get to bed and still want to do something on tonight's lifestyle center meeting.

Tim White
Town Council, Budget Committee