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HomeMy WebLinkAbout2008-09-16-TDES-min RECEIVED d 2 3 0 J u in, 3 2 6 TOWN CLERK Tuesday, September 16 2008 LEXINGTON MA Meeting of Selectmen's Tax Deferral and Exemption Study Committee Present: Rob Addelson, Assistant Town Manager for Finance Norm Cohen, Selectman Liaison John Bartenstein, Appropriation Committee Liaison Vicki Blier Pat Costello Mary Haskell State changes in 41A (deferral) income limits. Pat reported that new state legislation appears to have increased the statutory income limit for 4 1 A income tax deferrals to equal the annual income limit under the Circuit Breaker for single non-heads of household. This year, the single non-head of household income limit is $49,000. Details will be made clear when the IGR is issued. Lexington's local control for deferral income limits The main purpose of this meeting was to discuss the approach that the town should take in expanding qualifications for our local tax deferrals. John, who authored our new law, clarified that the process by which new limits would be adopted is thus: A Town Meeting Warrant is put forth by any interested party. Adoption requires both approval by the Board of Selectmen and a majority vote of Town Meeting. Rob reported that participation in the deferral program increased from 11 in FY2007 to 20 in FY2008. We speculated that this was due to the new lower interest rate and increased publicity. The total amount deferred was about$100,000, an amount that Rob feels has virtually no impact on the town fiscal picture. It was suggested that this near-doubling of deferrals in a single year underscores our need to proceed cautiously to avoid a fiscally problematic outflow of deferrals. We all agreed that increases in deferral income limits should be instituted incrementally to test the waters and to avoid a sudden large drop in tax receipts. John and others felt that the first increase should at a minimum match the new state increase to $49,000. Discussion ensued of what information would be needed to determine a first step increase. Rob will put some thought into determining the threshold dollar amount of deferrals that would begin to have a problematic impact on town finances. Mary will get whatever information the state can provide to us regarding income by age so that we can see how many seniors might be eligible at various income levels. The sentiment at the meeting was that lowering the eligible age to 60 would be considered in a future year. The Committee resolved that we will put our efforts this year into determining the appropriate first step increase in income limits for those over age 65. In addition, we resolved that expanding deferrals to include those under 65 who are disabled or in crisis would require much work to determine how disability would be defined, who the approval parry would be, and whether the limit on the allowable number of deferral years should be different for that category of deferral. The social services department, the likely agency for assessing disability or crisis status, is undergoing transition at the present time. Presumably the department will be able to participate in designing such an expansion of the deferral program next year. Rob helped us to understand tax bills and their relationship to applying for deferrals. 2008-2009 Example JULY 1, 2008 BILL • First tax bill for FY 2009. It is a Preliminary Bill. • It is based on the actual FY 2008 tax assessment plus increase from any override. • People planning to defer FY 2009 taxes should pay this bill. • No property assessment is shown on this bill OCTOBER 1, 2008 BILL • Second tax bill for FY 2009, also a Preliminary Bill • Same as July 1, 2008 bill. • People planning to defer FY 2009 taxes should also pay this bill • No property assessment is shown on this bill JANUARY 1, 2009 BILL • This bill goes out January 1 if the tax rate has been set on time. • This is the first Actual Bill. • Any difference between the preliminary tax and the actual tax is split between this bill and the next bill. • Seniors wishing to defer have 90 days from issuance of this actual bill to apply for deferral, but should pay this Jan. 1 bill. • The new FY09 property assessment is shown on this bill. By state statute, this assessment is the value of the house as of January 1, 2008. It is determined by an analysis of home sales in 2007. APRIL 1, 2009 BILL • This is the second Actual Bill, and the final bill for FY2009 property taxes. Those whose deferral applications have been accepted receive a refund of their deferred property tax at some point after April 1, 2009. Vicki wondered whether that check could be used to prepay the next year's tax to avoid being in arrears before the next deferral. Rob said that the payment could not be accepted before the July 1 bill went out and the timing might not work out well. Potential deferrers who do not pay their Q1, 2 and 3 taxes accrue a penalty interest of 14%. It is the practice of the town to delete that penalty interest when the deferral is approved. Calendar 2007 income is the income used to qualify for FY2009 deferrals. John wondered if there could be a way to pre-approve deferrals before the Q1 preliminary bill is due, since the 2007 income is already known. Vicki was concerned that having to pay for three quarters or see penalties accrue might be confusing and frightening for seniors, but Pat, who has had conversations with seniors who defer felt that it was not an issue for them. It was decided that the next step is for Norm to submit a placeholder warrant for Spring town meeting so that we will later be able to put in an actual warrant with our proposed new income limit. Our next meeting will be November 12, 13 or 14. ------------------- The only thing in the IGR that struck me as something we haven't been clear on is their definition of"Gross Receipts." According to the IGR for Deferrals, Gross Receipts include gifts, (such as a child giving support money to their parent). So I checked the IGR for Exemptions, and it too includes gifts. In our previous years' brochures, we had a worksheet on page 5 (removed this year)that was written by a former staffer in the Assessor's office. (This is the only page that we didn't write ourselves.) The worksheet listed all kinds of receipts from pensions, wages, business profits, rents, capital gains, etc. But it did not include gifts. I doubt that it is a big problem-- my guess is that most Exemption taxpayers, even with help from their children, are scraping by anyway.