I hope this letter finds you well and coping the best we all can during this truly life changing time. As I write this, there have been six of our fellow residents confirmed to have tested positive for COVID-19. The disruption to our lives, whether it be to the closing of the schools and offices, the loss or furloughing of a job, the loss of a loved one, and the uncomfortable feeling that life as we have known it may be permanently altered, make for a feeling uncertain apprehension. The bright side is that we live in an extraordinary caring community and look out for one another the best we can. We will get through this together and come out stronger on the other side.
As you may know, on Tuesday, April 28, Governor Murphy signed Executive Order #130 giving local municipalities the ability to extend the grace period for Property Tax payments (which are due on May 1, 2020) from May 11, 2020 to June 1, 2020. The Mayor and Council held a properly noticed Emergency Meeting last evening utilizing the Zoom platform. All members of the Council, the Borough Administrator, Attorney and CFO and the Borough Auditor from Nisivoccia LLP participated.
I feel it is important for you to know a couple of important facts that informed the decision as to whether or not we would grant the extension.
- The Borough is the collection agent for taxes owed by Borough taxpayers to the West Morris Regional School District and the Chester School District. The Borough is required, under Title 54 of the NJ Statute, to pay the school taxes, regardless whether or not all of the taxes were collected by the Borough. If there is a shortfall, it is the Borough who has to cover the shortfall. For the month of May, the Borough will write a check to the West Morris Regional School District for $154,396.00, and the Chester School District for $288,000.00.
- The Borough, likewise, is the collection agent for the County taxes due by Borough taxpayers. In May, the Borough will write a check to Morris County for $252,000.00
Executive Order #130 did not take into consideration that the municipality, if it was to decide to extend the grace period and collections come up short, would bear the burden of potentially reaching into its reserves to cover these payments. No grace period was given to municipalities regarding their legal requirement to send payment to the schools or county.
It is also important to know how the majority of the property tax payments are made to the Borough. For the second quarter (due May 1), the Borough is anticipating tax revenues of 2,639,663.00. That figure includes the payments for the schools and county taxes. The Borough has a total of 657 taxable parcels, 462 of which, or roughly 70%, are residential and the remaining commercial. Just under 40% of the residential payments come to the Borough via a mortgage company or a representative agent of several mortgage companies. As of 4/29, tax payments totaling $641,389.00 have been received from mortgage companies and individual residential and commercial taxpayers. We are anticipating a payment from the largest representative agent for mortgage companies totaling approximately $639,000.00 by early next week, bringing the Borough’s current total payments to $1,280,389.00 or a collection rate of 48%. Historically, the Borough has had a 97% collection rate. We anticipate that by the end of the May 11 grace period to be close to that number, but there is no way to know for sure. If there is a significant decrease in the rate of collection, knowing that the Borough has to pay the schools and the county, and considering that the Borough has its own payroll and liability obligations, the Council unanimously agreed not to extend the grace period to June 1. Yes, the Borough financially could cover the May payments, but what happens if the payments don’t come June 1? How do we cover the June payments? Would we need to tap our reserves or issue tax anticipation notes and borrow the funds? We need time to plan how we could best cover a major shortfall should it occur.
Had the Governor made provisions for the delay in the obligation of a municipality to pay the Boards of Education and the County, the decision might have been different. But as that was not the case, and since the Council is the steward of the finances of the Borough, the Council felt this decision is the best decision for the financial health of the Borough, especially since we all anticipate a potentially much worse third quarter. The Council relied on the advice of the CFO and the auditor to inform this decision. It was not a decision taken lightly as we understand that some may be impacted the decision.
Payments for the Solid Waste Utility and, if applicable, the Sewer Utility, are still due May 1. Should you have questions regarding this decision, feel free to reach out to me at firstname.lastname@example.org. As always, on behalf of the Council and myself, it is a privilege to serve the Borough of Chester. Thank you.
My best to each of you,