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Two Bills Changing System for Tax Exempt Property Move Forward

by Christine Stuart | Mar 25, 2014 1:37pm
(10) Comments | Commenting has expired

CTNJ file photo

House Speaker Brendan Sharkey

A bill that would allow private colleges and hospitals to negotiate property taxes with their respective municipalities cleared its first hurdle Tuesday with a 14-5 vote of the Planning and Development Committee.

The bill proposed by House Speaker Brendan Sharkey would change the payment-in-lieu-of-taxes program, also known as PILOT,  by placing the burden on the institutions to seek reimbursement from the state. Currently, the institutions don’t pay any property tax and the state sends a partial payment to the municipalities. Sharkey’s proposal reverses this process.

But even lawmakers who voted in favor of the bill were skeptical that it would actually solve the problems with the state’s tax structure.

Sen. Cathy Osten, the panel’s co-chairwoman, said she was not in favor of the bill because she didn’t think the bill adequately addressed the issues.

“I am planning on voting to move it forward but I disagree with many pieces of this because I think the unintended consequences are that our students will see increased tuition rates and that there will be more layoffs of nurses and janitors that work in our local hospitals because this doesn’t address what needs to be addressed,” she said.

Osten said the legislature needs to take up “real property tax reform,” and the bill was “only moving money around.”

Sen. Steve Cassano, D-Manchester, said, “I don’t think any of us — the way it’s written — want to support the bill now, but I think we’re all excited about the potential for what it could bring.”

He said that when he was mayor and deputy mayor of Manchester the legislature completed five studies of parts of the state tax structure.

“We have to look at the whole system,” Cassano said. “Evaluate the system and come up with a fair and equitable system, instead of try to piece meal it.”

Rep. Bill Aman, R-South Windsor, said he was very concerned about the proposal.

“This would probably the largest change in the general way of taxing property that we’ve done in many, many years and I’m looking, with only six weeks left in the session… and saying ‘I don’t know if there’s time to look at all the unintended consequences,” Aman said.

Rep. Noreen Kokoruda, R-Madison, said Sharkey’s bill only addresses one part of the PILOT system. She said it ignores the PILOT money cities and towns receive for state property.

She said she voted to move the bill forward, but wants to understand how Connecticut has two sets of standards for its PILOT programs.

Rep. Jason Rojas, D-East Hartford, who co-chairs the committee, recused himself from the vote given the nature of the bill and his employer, Trinity College.

“Even though I was given an opinion by the Office of State Ethics that I have no conflict of interest in any way I’m still going to recuse myself from this vote to do away with an appearance of a conflict,” Rojas said prior to the vote.

Rojas is the director of community relations for Trinity College and responsible for maintaining the school’s relationship with the City of Hartford.

The legislation could create an adversarial relationship between colleges and hospitals and their respective municipalities, according to opponents of the bill. If the two sides were unable to come to an agreement regarding a tax bill, Sharkey testified last week that the institution would be on the hook for the full amount of property tax.

“City and town budgets have become increasingly strained by the cost of providing expensive infrastructure and emergency services to large hospitals and private colleges and universities — entities who pay six and seven figure salaries to their executives, increasingly look and act like corporate profit centers, and yet pay no property taxes,” Sharkey said Tuesday. “Instead, the hard-working families in these communities are forced to subsidize those costs. It’s time these major corporations step up and begin to pay their fair share of taxes toward to their host communities’ budgets.”

Sharkey said he looks forward to a debate on the floor.

CTNJ file photo

Sen. Majority Leader Martin Looney

The Finance, Revenue, and Bonding Committee on Tuesday also approved legislation proposed by Sen. Majority Leader Martin Looney, D-New Haven. The committee voted 32-18 in approving the bill. 

Looney’s proposal would combine the state’s PILOT for colleges and hospitals with the reimbursement for taxes lost from state buildings and property and eliminate the different reimbursement rates.

The bill would create a sliding scale of reimbursement under which the 20 municipalities with the most PILOT-eligible property would be reimbursed at 50 percent, the next 20 would be reimbursed at 45 percent, and all others would be reimbursed at 40 percent.

“Sen. Looney’s proposal is weighted more heavily to benefit New Haven by the way it’s constructed,” Sharkey said last week. “But what he’s getting at by factoring state property PILOT into the conversation is exactly the right way to go . . . In fact, I think that aspect of what he’s proposing makes a lot of sense.”

Sharkey’s bill heads to the House and Looney’s bill heads to the Senate.

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(10) Comments

posted by: art vandelay | March 25, 2014  6:33pm

art vandelay

This bill has disaster written all over it. First it will be a “NEGOTIATION” between the individual towns/cities & the tax exempt institutions. The ultimate goal will be a flat mill rate where the institutions are taxes at the same rate as for profit businesses and residential property.  BIG MISTAKE!

posted by: art vandelay | March 25, 2014  6:36pm

art vandelay

I give credit to these legislators for being so creative.  They can think of every imaginable way to raise revenue, but not one to reduce spending or lower taxes.

posted by: Tessa Marquis | March 26, 2014  7:38am

Skip this. Let’s #TaxTheChurches

posted by: Noteworthy | March 26, 2014  8:54am

It is laughable that budget problems locally are the result to any great degree, of having a primary source of funding residing in the property tax. Cities like New Haven have gross spending problems. The proposed budget by Toni Harp is more than a half billion dollars and it demands a nearly 4% hike in property taxes. Why? Because the city has been running a deficit; has a gross amount of unfunded pensions and has bonded debt that is fast approaching a billion dollars. Debt service consumes more than $70 million a year. Harp wants to escalate borrowing by another $44 million - three times the level recommended by bond counsel; wants to add more high priced city employees that doubles her mayoral budget. Still think we have a revenue problem?

posted by: Dwightstreeter | March 26, 2014  9:00am

Sen. Osten is right about the need for comprehensive tax reform in CT. Instead the legislature continues to tinker on the fringes of the problem.

Wealthy non-profits must pay their fair share of taxes. The poor and the middle class can no longer afford to subsidize hospitals that pay their CEOs $2 million a year or watch as $22 billion endowments fatten annually.

The gas tax and sales tax were supposed to be eliminated or reduced when the income tax went in. The people were betrayed who supported a progressive income tax in lieu of the so-called nuisance taxes.

Towns are collapsing under the pressure to provide quality education and have used real and personal property taxes to the breaking point for their residents.

PILOT never worked and will not work. 50% reimbursement is still a legalized theft.

If Sharkey and Osten can present a comprehensive plan for tax reform, I personally will show up and support them and the plan.

People have pretty much given up on government. Can the Legislature redeem itself?

posted by: robn | March 26, 2014  12:22pm

Looney’s partial reimbursement proposal is BS capitulation!

Sharkey’s reverse PILOT is the logical answer and can be made Constitutional if the Democrats show will. (The Dems are only short 9-of-36 seats in the Senate and 38-of-151 seats in the House for a Constitutional supermajority.)

Bottom line is if the legislature believes universities and hospitals to be for the general public welfare, its time for them to take responsibility and have their own annual argument with those institutions about tax reimbursement.

posted by: Historian | March 26, 2014  1:21pm

Long article that boils down to making “non profits” help pay their proper share for public services - which they do not do at present. This forces the rest of us taxpayers to pay extra taxes.
Their excuses are manifold but illegitimate - one only has to find out the enormous salaries and benefits paid to their administrators, teachers and staff to realize the unfairness of this free ride on the backs of the ordinary Connecticut taxpayers.

posted by: robn | March 26, 2014  4:15pm

HISTORIAN,

Not really. The cost isn’t really borne on the backs of all CT taxpayers. Its mostly borne by the citizens of cities like New Haven who can’t levy property tax on 50% of its property (far outweighing any employment or trickle down benefits). Conversely, many suburbanites are employed at these non-profits, send their kids to the universities,  and seek treatment at the medical facilities.
The Legislature doesn’t have to stop regarding these non-profit entities as being for the public good and doesn’t have to deny them tax breaks. However, the Legislature needs to stop forcing cities like New Haven to bear the burden of the tax breaks.
If the Legislature doesn’t accept its responsibility to pay for these tax breaks (via state taxes), a court will eventually make them do so.

posted by: Dwightstreeter | March 26, 2014  4:36pm

Robn:
PILOT is state funded. Any one who pays a gas tax, income tax or sales tax is part of the tax scheme and thus is subsidizing the wealthy non-profits.

Still, we can baseline exemptions for worthy non-profits, just not the bloated ones.

posted by: robn | March 26, 2014  8:12pm

DS,

Not FULLY funded and even IF then, the statute only calls for 70% because supposedly cities receive 30% of the benefit of a non-profits presence (even though no town on earth forfeits a portion of their private sector property tax income to the state just because they’re lucky enough to have them there). It’s time to end the charade; either our state believes there’s a greater societal value provided by non profits that deserves a tax exemption paid in full by the state; or not.