Today, members of the State’s Planning and Development Committee discussed two proposed bills that would lower the interest rate on overdue property taxes from 18% per year to 12% per year and lower the interest rate even further to 8% upon assignment to third-party debt collectors. Several committee members argued in support of the bills, which were opposed by various municipal officials and debt collectors.

The proposal to lower the interest rate on property tax payments isn’t the first. Committee Co-Chair, Rep. Tom Delnicki (R-South Windsor), and former Rep. Edwin Vargas (D-Hartford) first proposed a bill that would lower the interest rate back in 2022. In a phone conversation Inside Investigator had with Vargas in September, he explained the intent for the bill, saying that oftentimes, property tax liens are assigned to third-party debt collectors, who make it as hard as possible for homeowners to pay in an effort to accrue as much interest as possible.

Randy Collins, Associate Director of Policy for the Connecticut Conference of Municipalities (CCM), testified in opposition of the bills, saying that interest rates are a necessary instrument to incentivize people to pay their taxes on time. Collins also said that when property taxes go unpaid, it shifts the burden onto municipalities.

“Because municipalities are basically restricted to raising their revenue through the property tax, we need to have a means to kind of get a prompt payment,” said Collins. “Residents have a responsibility to pay those property taxes. As I said, a 1.5% a month [interest rate], non-compounding, is not an onerous burden, but it is enough to encourage that prompt, timely payment.”

Betsy Gara, Executive Director of the Connecticut Council of Small Towns (COST), cited several factors leading to increased cost for municipalities. Gara noted that the end of ARPA funding and recent reduction of car tax have reduced municipal revenue at a time of increased costs due to heightened inflation. She also said that cuts to state PILOT funding, Education and Cost Sharing funding, early voting implementation funding, and reduction in Medicaid reimbursement rates served as additional constraints on municipal budgets.

“Reducing the interest rate on delinquent property taxes to 8% will undermine efforts to collect taxes in a timely manner, creating considerable budget uncertainty at a time when towns are struggling to address significant revenue shortfalls and increased costs which are wreaking havoc on the local level,” read Gara’s testimony.

In response to Collins’ testimony, Delnicki told Collins that the 18% interest rate was implemented during the early 80’s, when inflation caused rates to go “astronomically high.” Delnicki said that it has yet to be revisited and said that the Connecticut Bankers’ Association has since proposed that the interest rate should be lowered to 6%.

“I can tell you from my experience as a local leader, if there’s one thing I’ve heard so much about, it was the 18% interest and the fact that that’s what it stayed at, and it was never addressed,” said Delnicki.

Collins responded by highlighting the same budgetary constraints towns face as Gara did, and said that all of this issue was the result of property taxes being the primary revenue source of municipal governments. 

“We would love to look at, ‘How do we get away from property taxes?,’” said Collins. “We understand that in order to comprehensively look at the current system and all aspects of property tax, we need to be able to collect what we’re allowed to.”

Sen. Tony Hwang (R-Fairfield) said that he acknowledged the struggle both on the municipal and personal ends of the tax rate question and proposed the possibility of a prorated interest rate for late payments. He said the fact that the full 18% interest is applied on a payment the second it is late, regardless of how quickly it is paid off, is “what’s most troubling for me.”

“I just recently had an exchange with a business owner that, for 25 years, she has paid her taxes on time to the towns, and she missed it by a week because of the passing of her husband and co-owner of the business,” said Hwang. “And guess what? She received a delinquent tax bill.”

Hwang asked if CCM ever considered a prorated rate, which would incur a “small penalty” on the day of delay, but a smaller rate for the first month of late payments. He envisioned a rate that would rise gradually, capping out at 18% for those who haven’t made payments in two years or longer.

Collins said he hasn’t had that conversation but would be interested, though he noted that a lack of a uniform rate might make things complicated for tax collectors.

“We would be happy to talk with the collectors and the finance officers to see if there’s some way to provide relief,” said Collins. “As I said, we understand property taxes are brutal and they continue to rise, and the longer we do this we will see more people unfortunately become delinquent. How do we avert that?”

Hwang said that he appreciated Collins’ answer, and said that he thinks “it’s absolutely unjust for an individual to, during difficult economic times as many are experiencing, still have to pay the full freight of that penalty.” He asked if CCM would be happy to work with the legislature to discuss the possibility.

“We’re absolutely happy to sit down and talk and figure out what that would mean, how it would be implemented,” said Collins. “You let me know, we’ll be in the next day.”

Republish This Story

Republish our articles for free, online or in print, under a Creative Commons license.