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Since hospitals, colleges and state-owned buildings do not pay local property taxes, cities like New Haven and Hartford have been struggling for years to make up the difference and balance their budgets.
Now, in the biggest change in years, the state legislature is scheduled to vote this week to change a key state funding formula in a plan that could send as much as an additional $49 million annually to New Haven and $22 million annually to Hartford starting on July 1.
The move is being pushed by the most powerful Democrats in the legislature — Senate President Pro Tem Martin Looney of New Haven and House Speaker Matt Ritter of Hartford. Looney has authored a new, three-tiered system that factors financial need into how much each community should receive from the state in payments in lieu of taxes, known as PILOT, that are meant to partially supplement lost tax revenue from nonprofits and state properties.
The biggest winners would be communities with the most colleges and hospitals. More than 90 small towns would receive increases of less than $25,000 per year under the plan. West Hartford would receive an additional $668,000, while Glastonbury and Avon would receive increases of less than $50,000 each. But no towns would receive less than they currently do, lawmakers said.
Ritter said the legislature wants to send a signal in a vote expected Wednesday in the state House of Representatives.
“We’re putting a marker down, and we are very clearly stating, by law, that we intend to put between $100 million and $150 million of new money into the PILOT formula for the biennium budget,” he said. “The most important thing is to let all mayors and first selectmen know that nobody is losing any money. ... When we talk about progressive taxation, the most regressive tax in the state of Connecticut is the property tax. The idea that a mayor in New Haven or Bridgeport or Hartford would have to raise the mill rate in this pandemic is not something that any of us want to see.”
Both Ritter and New Haven Mayor Justin Elicker said that tax collections in Hartford and New Haven have remained relatively steady during the coronavirus pandemic. While bars have been closed and many restaurants are only partially open, the tax impact has not been as dire as originally projected.
The problem in New Haven, Elicker said, is that the budget has been balanced in past administrations through a patchwork of borrowing, underfunding of pensions and refinancing of debt that have proven to be short-term fixes that allowed officials to breathe a sigh of relief each year when the budget was balanced. Now, he says actuaries are telling the city that they need an infusion of an additional $25 million per year to fix the pensions that are only 34% funded for police and firefighters and only 36.5% funded for other city employees.
Another factor in New Haven, Elicker said, is sharply increased police overtime because of a spike in violent crime during 2020.
New Haven had 20 homicides in 2020, up sharply from 11 in 2019. Also, the city had 121 shootings in 2020, up from 78 in the previous year, according to city records.
While Yale University makes voluntary payments to New Haven of $13 million per year, its annual tax bill would be more than $150 million if the university’s properties were fully taxable, he said.
“Forty percent of the city is paying 100% of the property taxes,” Elicker said.
Elicker also pushed back against the notion of free-spending cities with bloated budgets, inefficient operations, high salaries and large pensions.
“There’s this myth that large municipalities are wasting money or not run efficiently,” he said. “That’s not true.’'
In Hartford, the city currently receives $30 million in PILOT funding. But if the formula was fully funded and state property was treated in the same fiscal fashion as colleges and hospitals, the city would receive nearly $128 million per year, according to Mayor Luke Bronin’s office.
Looney, the measure’s chief sponsor, says it is unfair that the state currently pays the same reimbursement rate for tax-exempt property in all 169 cities and towns. As a result, Greenwich receives the same percentage for Greenwich Hospital property as New Haven receives for Yale New Haven Hospital and Hartford receives for Hartford Hospital.
Gov. Ned Lamont believes the cities and towns should receive more money, but he does not want to impose the so-called mansion tax or hike taxes on the wealthy to pay for it.
“Senator Looney, I think rightfully thinks the PILOT payments should be made more progressive, meaning those richer communities that maybe don’t need the PILOT payment quite as much don’t get as much, or even get less as far as I’m concerned,” he told reporters Tuesday. “And those communities most in distress, in need, we prioritize them, they get … more.”
But Lamont said he and Looney “have very different ways” of how to pay for the increased payments. His two-year budget includes $100 million in anticipated federal funding to make payments to distressed municipalities. In later years, Lamont said he expects revenue from legal marijuana sales to be distributed to cities and towns.
Courant staff writer Kenneth R. Gosselin contributed to this report.
Christopher Keating can be reached at firstname.lastname@example.org.