Car tax cap in doubt

While legislators in Hartford continue to struggle to craft a state budget, local municipalities are left wondering if they will see the money they were promised from the state.

State law capped the mill rate municipalities could tax cars on at 37. A mill equals $1 for every $1,000 in assessed property value. Current law lowered the limit on car taxes to 32 mills on July 1.

Municipalities that have mill rates above the statutory limit are supposed to receive state grants to reimburse them for the lost property taxes.

The state Office of Policy and Management recently advised the leaders of 48 towns and cities subject to the car tax cap that the state government would not be making nearly $80 million payments that were due Aug. 1 because of a lack of funding, the Republican-American reported..

It’s unclear what will happen to the car tax cap as budget deliberations drag on and legislators try to figure out how to close a projected multi-billion dollar budget deficit.

House and Senate Democrats have proposed to maintain the tax break at 37 mills, the Republican-American reported, while the two Republican caucuses and Gov. Dannel Malloy recommended its elimination in their last budget plans.

Locally, Naugatuck and Beacon Falls have a vested interest in what happens to the cap. Prospect’s mill rate of 31.25 means the town won’t be affected no matter how things turn out.

In Naugatuck, where the mill rate is 48.55, car tax bills were sent out at 37 mills rather than the 32-mill cap under the state law.

Naugatuck Tax Collector Jim Goggin said the borough decided to use the 37-mill cap because officials received information that the state was not going to the lower the cap this year from a number of sources, including the Connecticut Conference of Municipalities.

The borough’s budget assumes it will receive about $650,000 from the state as reimbursement for the lost car taxes.

Naugatuck Mayor N. Warren “Pete” Hess said if the state removes the cap the borough would look into sending out an additional bill for motor vehicles. He said no decision will be made until the state puts forth its budget and he can see what is in it.

“Like many towns, Naugatuck is anxiously awaiting the decisions of the state,” Hess said.

Sending out additional tax bills is not an expense the borough budgeted for this year.

Supplemental bills cost about $1 a piece to send out, Goggin said. He estimated it would cost nearly $20,000 to send out the bills.

If the cap actually stays at 32 mills, Goggin said officials will explore how to reimburse taxpayers.

In Beacon Falls, where the mill rate is 35.9, the town decided to follow the original letter of the law and send car tax bills out at 32 mills.

However, town officials prepared in case that changes.

“I included an insert in the tax bills that said the state may not have adopted a budget by the time taxes are due. Therefore, when the fiscal year budget is passed, the mill rate may change. Since the current state law doesn’t allow going above 32 mills, it may be necessary to send out additional tax bills,” Beacon Falls Tax Collector Mary Anne Holloway said.

The town is estimated to receive more than $175,000 for it reimbursement. If the state eliminates the cap or raises it again to 37 mills, Beacon Falls will send out supplemental bills.

Holloway said sending out supplemental bills isn’t the ideal way for a town to run, but that something had to be done since the state still doesn’t have a budget in place.

“We realized it was a major inconvenience, but we thought it was easiest route to take,” Holloway said.

Beacon Falls First Selectman Christopher Bielik said the town would not immediately be in bad shape if the state doesn’t leave the cap at 32 mills because it budgeted to only collect car taxes at that rate.

“We took a conservative approach to begin with,” Bielik said.

Goggin said the only other option municipalities had was to wait until a budget was passed to send out car tax bills. However, bills that are sent out later often lead to a lower tax collection rate, he said.

“It cost a lot more money to delay billing that to rebill,” Goggin said. “If a bill is delayed, everyone who pays interest gets it delayed as well. It is more cost effective to just send the bills out on time.”