Returning the $4.3-million refund: All at once? Or across three years?

Written by Macklin Reid, Press Staff
Tuesday, 03 April 2012 04:34

A consensus appears to be building among town officials that the $4.3 million refunded from CL&P should be returned to taxpayers by reducing taxes — or “buying down the mill rate,” they call it.

The Board of Selectmen and Board of Finance discussed returning the $4.3 million last week.

“It was pretty much the consensus of both boards it should be done by mill rate reduction,” Finance Board Chairman Dave Ulmer said Wednesday.

“It’s a question of how much mill rate reduction this year — do we want to keep some of our powder dry for next year?”

First Selectman Rudy Marconi worked with Controller Kevin Redmond to produce projections that show the likely effect on the tax rate over the next three years under three different scenarios. They based the projections on what Mr. Redmond and Mr. Marconi felt were reasonable assumptions about increasing spending, growth of the grand list, and revenue from various non-tax sources.

With no use of the $4.3 million as non-tax revenue that helps cover expenses — like there never was a CL&P refund — the mill rate is projected to go up 1.87% next year, 1.56% in 2013-14, and 1.75% in 2014-15.

Taxes on a $750,000 home would go from $11,020 next year to $11,192 the year after, to $11,388 the third year, 2014-15.

If all of the $4.3 million were used to offset expenses next year, the tax rate would decrease by 1.91% in 2012-13, then go up by 5.47% the following year — playing catch-up for the previous decrease — and in the third year go up the same 1.75% as in the first scenario.

The annual tax payments by the $750,000 homeowner would be $10,611, then up $581 to $11,192, and on to $11,388 the third year.

Troubled by the big increase in the middle catch-up year, Mr. Marconi also had projections done where the $4.3 million was returned over the three-year period: $2,125,000 would be used next year — enough to hold the tax rate flat; then $1,375,000 would be used the second year, holding the tax rate increase to 2.25%; and in the third year the last $800,000 would be used, with the tax rate held to 2.27% increase in 2014-15.

Across the three years, under that plan for graduated use of the $4.3 million, the $750,000 home’s taxes go from $10,818 (0%) to $11,062 (2.26%) to $11,313 (2.27%).

At a special selectmen’s meeting Monday at noon, Mr. Marconi showed the numbers to the board and expressed his concern with the idea of using all $4.3 million to reduce taxes next year — leading to a 1.91% decrease followed by a 5.47% increase.

Town officials’ worry is that rather than a 5.47% increase, that second year could see damaging budget cuts as voters refuse to go along.

“People aren’t going to remember,” Mr. Marconi said. “We’re setting ourselves up for a huge cut.”

“Happy days are here again this year, and then a huge cut,” Selectwoman Di Masters agreed.

Monday at the public hearing on the budget, Mr. Marconi asked the finance board to consider returning the $4.3 million to taxpayers across the three years, to achieve a “leveling out” of the tax rate changes — his third scenario.

“Level it out so we don’t have any peaks and valleys,” he said.

Also interesting are the projections for how much the $750,000 taxpayer pays across all three years.

If the town doesn’t “return” the money and puts it to some other purpose — fatten up the “fund balance,” perhaps — the $750,000 homeowner’s total tax payments over the three years are $33,600.

Under either of the “return the $4.3 million” scenarios — all at once, or over the three years — the taxpayer’s payments total $33,192.

So, returning the $4.3 million would mean $408 more in the pocket of a property owner with a $750,000 home.