With tax bills in the mail, some Norwalk residents will be pleasantly surprised to see a tax bill a few dollars less than last year. In the macro this makes sense, since valuations of homes reflect the a decline in value. But Norwalk still faces a revenue shortfall, that needs some examination.

The first is interest income from the cash positions that Norwalk holds, often referred to as short term invest funds. The overall economy has contributed to interest rates staying at a fraction of what they were the last few years. That investment income is something that needs to be made up elsewhere, either by operational expense cuts or increases in revenues.�

The next revenue shortfall is in the real estate conveyance tax. With less homes being bought and sold, less revenue is coming from this tax. This has always been an interesting tax. Typically a municipality relies on property taxes to operate, and those property taxes are calculated by a�periodic�tax�assessment. Norwalk just underwent one. The real estate conveyance tax is a sales tax essentially on a property transfer. From the state web site:

The state tax rate is either 0.�5% or 1% of the sale price, depending on the type of property and how much it sells for, and the town tax rate is either 0.�25% or up to a maximum of 0.�5% depending on where the property is located.�The applicable state and local rates are added together to get the total tax rate for a particular transaction.�The seller pays the tax when he conveys the property�(CGS � 12-494-504h).

Another factor in revenues being down is reflected in the motor vehicles registered to residents of Norwalk. There’s the usual amount of people who register cars out of state to avoid the whole property tax on cars, but people are holding onto cars longer instead of replacing them frequently. Over time, since cars are not really assets, they decline in value. So less property tax collection.

Looking ahead, the trend of aging cars is likely to remain. The real estate conveyance tax and interest rates are likely to remain about where they are, and so next years tax revenues are not going to improve from where they are now. Since cost of living, inflation and labor contracts will creating a nearly automatic 4% increase in operating expenses, Norwalk will be facing more challenging budget balancing issues next year.�

Something to think about as the political flunkies all gear up for another municipal election.