There is some confusion about the meaning of legal tender (and part is actual grey area of fact).
Private businesses may refuse legal tender currency as payment for goods and services, but may not refuse it as payment for debts. In practice the
area between "owing a payment" and a "debt" may be somewhat unclear, but I would imagine that courts would interpret a payment to be for a
"debt" when the business practices involved a clear opening of a line of credit from one party to another.
If a restaurant gives me a meal and presents the check at the end, there was no clear debt instrument or agreement created---if you don't pay that is
fraud or theft, not defaulting on a debt. If you walk out of a store without paying that is shoplifting, a criminal offense. If you put it on your
credit card, and don't pay the credit card (even a store card), that is not a criminal offense, just civil liability.
So, a store could refuse your paying in cash. However, your credit card company cannot refuse payment of your bill in cash.
However, as has been stated, there is US Code which particularly mentions public charges, taxes, and dues, and does not restrict to Federal entities:
United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal
tender for all debts, public charges, taxes and dues. Foreign gold or silver coins are not legal tender for debts.
—31 U.S.C. § 5103
So I believe the town is not following the law.
I also object to the notion that people checking public records are "snipers". Snipers kill people.