Manchester may have to borrow due to tax delays
MANCHESTER — The Manchester Select Board spent much of Tuesday night's meeting dealing with "what-ifs" as it discussed taxes, revenues and how to pay the town's bills.
Like towns across Vermont, Manchester is in a waiting pattern because of delayed information from the state.
The complicated pieces to create a tax rate are largely in place. But key pieces, the homestead declaration and homestead property tax credit won't be known this year until late summer or fall because of delays caused by COVID-19.
The town knows how much money it must raise and it has a grand list figure, providing the pieces for the municipal tax rate. But tax bills also include the educational tax due. Many property owners in Vermont qualify for property tax credits based on income that offsets part of the school tax owed.
Because of COVID-19, the state moved the April tax filing deadline to July 15. Normally, municipalities get the information needed for school tax bills from the state about 2 months after the tax filing deadline, which means that isn't expected until October based on the new deadline, well after when towns have to have their tax bills out and even after first payments are often due.
Tuesday's discussion revolved around the best way to handle tax bills. Should they send the municipal tax and then send school tax bills later? Should they send school tax bills now and then adjust them based on the tax credits?
Michael DeCubellis, town director of accounting and finance, said not getting the answer in time could force the town to borrow money to pay school taxes before tax revenue starts flowing in.
Town Manager John O'Keefe told the board that options considered do far were not good options.
"Sending tax bills without education tax rate would require updated tax bills later," O'Keefe said. "Mike and I decided that would be a disaster."
DeCubellis said the grand list has been "signed, sealed and delivered."
"It's ready to go," DeCubellis said. "What's going to be a real challenge is the homestead. We're looking for homestead in October."
The problem the board considered is how to get residents to pay their taxes in time so the town can pay its bills.
The legislature passed Act 102, which gives towns the option of moving the taxes due dates. This is normally not an option because the due date is passed by voters at town meeting.
The act also gives towns the option of reducing, or not charging interest on late tax payments, all of which the Manchester considered during Tuesday's discussion.
The suggestion of charging interested on nonhomestead taxes due because those property owners do not qualify for tax credits. But DeCubellis said the software assesses interest on every property tax bill that isn't paid by the due date and that would require that he go in and manually correct hundreds of taxpayer accounts.
"It's going to be a real horror show if we charge interest to some people and not others," DeCubellis said.
The Vermont Department of Taxes, in a COVID-19 section on its website, suggests homestead property tax credit information should be ready by Aug. 1, which would give the town time to get it's tax bills out and, after a 30-day period, start collecting tax in early September, which still isn't in time to make the school tax payment, O'Keefe said.
"There's still a good likelihood we're not going to be able to make that payment," O'Keefe said in an interview.
The board decided it didn't have enough information to come up with any answers and charged O'Keefe and DeCubellis to come up with a variety of options for the board to consider at its next meeting.
The board also unanimously passed a resolution to use three reserve funds as capital for a line of credit in case short-term borrowing becomes necessary in anticipation of property tax revenues.
The resolution is that the town will use the balances in the Capital Improvement Reserve Contingency Fund, Water Capital Reserve Fund and the Sewer Capital Reserve Fund — which are invested with Schwab — as collateral in order to provide working capital in Fiscal Year 2021 in an amount to not exceed $500,000.
The three funds have a combined value of a little more than a half-million dollars.
The new fiscal year began July 1.
The line of credit will only be used if necessary and there is no cost to do so.
The only cost would be the interest on the amount borrowed if the town needs to borrow.
Finally, the board passed a bond resolution, which is the last step in the bonding process as the town moves forward on bonds passed by voters on Town Meeting Day.
The bonds will be funding a new fire truck, downtown sidewalks, work at the rec park and other projects.
The next Manchester Select Board meetings will be July 7 and July 14.
Contact Darren Marcy at email@example.com or by cell at 802-681-6534.
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