Finance Board Asks Council To Create

Tax Deferral Program For Seniors

By Kaaren Valenta

Senior citizens who are struggling to pay their property taxes may find a solution through a tax deferral program that is being proposed by the Board of Finance.

The board is asking the Legislative Council to enact an ordinance that would allow many senior citizens to defer paying as much as 100 percent of their property taxes for as long as they live in their homes.

“My contention is that [the town is] substantially better off by keeping seniors in their homes,” said Finance Board Chairman John Kortze at the board’s meeting on Monday.

Newtown already has an elderly tax relief program, which reduces property taxes for eligible seniors. The tax deferral program would be another option.

Seniors who qualify for the program would defer paying their taxes until they die, move, or transfer title to the property. At that point all of the deferred taxes, plus a proposed three percent annual interest, would have to be paid.

Tax deferral programs are available in many towns across the country. But First Selectman Herb Rosenthal thinks many Newtown seniors may be reluctant to participate.

“Three or four seniors told me that taxes have blown through whatever we gave them in the tax relief program and they want us to increase the credit. But none wanted a deferment,” he said. “They see [the deferment] as a debt against their house –– the only thing they have to leave to their children.”

But board vice chairman Jim Gaston, who presented the proposed ordinance for discussion, said that when a tax deferral program was implemented in Westport, more than 200 senior citizens signed up to participate.

To participate in the proposed program in Newtown, property owners would have to be 65 years of age and have lived in their houses for at least five consecutive years immediately prior to applying for tax deferral. Household income could be no more than $75,000. The property must not be assessed at more than $500,000, and the total of all deferments, liens, and mortgages cannot exceed 70 percent of the equity in the property.

The house must be the legal residence of the senior citizen, who must occupy it for more than 183 days each year. The town would put a lien against the house for the deferred taxes and interest.

Condominiums would not be eligible for the tax deferral program, although seniors who are already participating in the tax relief program would be allowed to participate, subject to a review by legal counsel. Provisions would be made in the proposed ordinance for surviving spouses.

Seniors would not be permitted to participate in both the tax relief program and the deferral program; they would have to choose one option or the other. They also must have applied for property tax relief first under any state statutes for which they may be eligible.

When the deferred taxes are eventually due, they must be paid immediately or within nine months if the property is in probate, although extensions could be granted if the probate process takes more time. If the homeowner or the heirs fail to pay the lien, there would be a penalty of 1.5 percent per month, 18 percent per year, similar to any local property taxes that are not paid on time.

The proposed ordinance would limit the total amount of deferred taxes that the town will approve to $500,000 or to an amount based on a cap set by the Legislative Council.

Members of the Finance Board and Ben Spragg, the town’s financial director, said the program could be beneficial to both the town and its senior citizens.

Mr Spragg said the amount of taxes that initially are deferred would have to be replaced by revenue from taxpayers in the annual budget. Under the current budget, that would amount to just under two-tenths of one mill if the amount was $500,000, he said.

“There probably would be a saturation point where properties that are sold would offset properties coming into the program,” he said. “The amount of interest [to be paid by the homeowner on the deferred taxes] is around our borrowing rate so it is fair.”

Finance Board member Mike Portnoy said the deferral program would be more beneficial to senior citizens in the long run than the town’s elderly tax relief program because seniors can defer 100 percent of their taxes and have the use of that money to live on. “Their children might not be happy about spending their inheritance, but forget the kids — they can fend for themselves,” he said.

Board members agreed that by keeping seniors in their homes, the homes were less likely to be sold to families with children who would add to the increasing enrollment in the local schools.

The tax deferral proposal will go to the Legislative Council’s ordinance committee for consideration.