Date: Fri 14-Nov-1997

Publication: Bee

Author: KAAREN

Quick Words:

credit-card-tax-payments

Full Text:

Many Earn Air Miles For Tax Payments, But Not In Newtown

BY KAAREN VALENTA

Stand in any supermarket checkout line and you are likely to see someone

buying groceries with a credit card. An increasing number of colleges and

universities have begun accepting tuition payments by credit card. And in many

Connecticut communities, residents can even use plastic to pay their property

tax bills.

But not in Newtown, Ridgefield, New Milford, or New Fairfield -- although New

Fairfield Tax Collector Kerri Greening says Finance Officer Gail Redenz is

"working on it."

In Danbury, where the use of credit cards for paying taxes began about 1988,

hundreds of thousands of dollars in taxes are paid that way every year, said

Kim Redenz, the assistant finance director, who is Gail Redenz's

sister-in-law.

"It's particularly good for delinquent motor vehicle taxes because we wouldn't

take a check but we will take credit cards," she said.

Danbury even allows sewer and water bills and sewer assessments to be paid by

credit cards, something many people take advantage of, she said. "People love

to get the frequent flier miles and other bonuses."

In October, Danbury also began accepting credit cards for permits and fees

collected by the building department and planning and zoning. "We just put in

two extra terminals," Ms Redenz said.

Because Danbury, a city of 66,000, does most of its business with one bank,

Fleet, there is nearly always enough money in what is called the compensatory

balance to pay for bank services including credit card fees, Ms Redenz said.

"There's no charge to the taxpayer or the city," she said. "If we have money

in our accounts at the end of the day they are invested overnight and our

investments fund each other. They seem to earn a lot of interest."

Other Towns

In Brookfield, Tax Collector Georgia Lawrence said the town has been accepting

credit cards for at least five years.

"I think the (taxpayers) like it very much," she said. "It saves running

around."

Brookfield's treasurer, Raymond Bolek, agrees. "I think (that) whether we like

it or not, we are a society of plastic," he said. "It's no secret that people

use credit cards to rack up sky miles or credits."

Mr Bolek said the ability to use a credit card is an incentive for people to

pay. "They are more apt to pay us than someone they have to write a check to,"

he said.

Brookfield negotiates the credit card fee with the banks it is using for town

business and it probably has offset the cost by the rate of tax collection, he

said. "If you chart our tax collection, there's a nice yearly growth. Plus we

just had a credit upgrade to AA2 which means there are only 17 towns in

Connecticut with a better rating."

During the past two years, Brookfield's tax collection rate has been more than

100 percent. It hit 104 percent both years because of the payment of

delinquent taxes, Mr Bolek explained.

In Bethel, Tax Collector Regina Whitlock said the town accepts MasterCard and

Visa, but taxpayers have to come into the tax office to complete the

transaction.

"We've had this method of payment for more than five years," she said. "People

come in earlier to pay because a lot of them want the (air) miles -- and, boy,

are they going places!"

Bethel Comptroller Sharon Jarr said the cost of the credit card fees are

rolled into the compensating balances. "Whether it costs, depends upon your

fund balance. There are a lot of other (charges) that can also hit the

analysis each month," she said.

But both Cheshire and Norwalk ended the practice of accepting credit cards for

everything except delinquent accounts because they found it too expensive.

"We were probably the first town in Connecticut to accept credit cards in the

mid-1980s and we did it because of delinquent automobile taxes," said Norwalk

Comptroller John Smith.

"If you want to register a car, you can't get a release until your motor

vehicle taxes are paid up and being able to use a credit card made it much

easier for people. Then people who were paying current motor vehicle taxes

asked why they couldn't use a credit card too.

"About five or six years ago we began allowing credit cards for the payment of

real estate taxes and that grew quickly by word of mouth until we realized

that it was costing the town $100,000 a year and benefiting only a small group

of taxpayers."

"One taxpayer went to his bank and made arrangements so he could pay a

$100,000 tax bill (for a commercial/industrial property) using a credit card.

I'm sure he got many air miles," Mr Smith said. "It cost the town a few

thousand dollars."

Mr Smith said that even though the town uses the compensating balances method

to purchase services from the bank, "it still was a cost to us because we

could have had that money invested."

After about three years, Norwalk went back to only allowing delinquent

taxpayers to use credit cards. There were complaints, Mr Smith said, and some

taxpayers have opted to let their bill become delinquent by a day so they can

use the credit card instead.

That was the experience also in Cheshire, a town of 27,000 residents in New

Haven County. There Tax Collector Don Holley said using credit cards ended up

being very expensive.

"About eight to ten years ago we started allowing all tax bills to be paid by

credit card," he said. "We loved it (in the tax collector's office) because we

had our money in the bank immediately, but it was costing a 1.45 percent

merchant fee -- about $26,000 the last year we did it. To me, that's an

overhead expense."

But residents who didn't use credit cards began to complain that they should

get a discount on their tax bills, he said. In response, the town council

decided to only allow delinquent taxpayers to use credit cards and they have

to come in to the tax collector's office to do it.

"MasterCard and Visa charge more if you do the transaction by phone," he

explained.

Credit Cards In Newtown?

Newtown Finance Officer Ben Spragg said he would like to offer residents the

convenience of using credit cards, but the town does not have anything in its

budget to pay the fee.

"There has been legislation introduced at the federal level twice to allow

towns to pass that fee on to the taxpayer, but it failed to get approved," he

said. "I've sent letters to our congressmen -- first (Gary) Franks then

(James) Maloney -- and haven't gotten a response.

"I see it as a pay-for-service fee -- if you use credit cards to pay your

taxes, you pay the fee," he said. "If your bill is $200, for example, and you

pay with a credit card, you might have to pay $204. But we don't have any

mechanism that allows us to collect the $4."

"And if we as a town (accept credit cards), then everyone pays for it," he

said. "You'd have the entire town paying for a few people who are using credit

cards."

Mr Spragg said the fee may be one of many bank services charged in a

compensating balance, but "you have to leave money in the bank so it is

costing you. The bank collects the interest, the town doesn't."

If interest rates drop, the amount of money the bank earns on the town's money

may not be sufficient to pay for the services, he said. In that case, the town

would have to cash in other investments to put money in the bank, and the bank

would wind up getting that interest, too.

"I've heard so many horror stories of people coming in (to pay tax bills with

credit cards) and abusing the system that I'm being very cautious," Mr Spragg

said. "But I will be looking into the matter again. That's why I'm pressing

for legislation to allow the fees to be passed on to the user.

"It's incredible that you can get a cash advance from an ATM at a casino for

gambling -- and pay the fee yourself on your credit card bill -- but you can't

pay taxes that way," said Mr Spragg. "The credit card companies must have a

very strong lobby in Washington."