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Cities and Towns Want Part of Sales Tax Revenue

by | Oct 11, 2018 3:00pm () Comments | Log in to Facebook to Post a Comment | Share

HARTFORD, CT — They’ve pitched the idea before, but it’s an Election year so they’re trying again. The Connecticut Conference of Municipalities wants an increase the state sales tax to help fund municipal aid.

Cities and towns want the state to increase the sales tax from 6.35 percent to 6.99 percent. It wants to distribute the difference to cities and towns through the payment-in-lieu-of-taxes or PILOT and the Local Capital Improvement Program or LoCIP.

“We propose that revenue collected from this portion of the sales tax be deposited in a trust, held by the State Treasurer in a separate account that is not commingled with other state funds,” the group said in its latest policy brief.

That’s because the initial experiment involving diverting some of the sales tax to municipalities didn’t go as planned.

As part of the 2013 budget the state created the Municipal Revenue Sharing Account to help provide additional revenue to municipalities, which rely solely on the property tax. The MRSA account was funded through part of the state sales tax and part of the state portion of the real estate conveyance tax.

However, funding was eliminated as part of the 2014 budget and the revenue has since dwindled. The revenue for fiscal year 2017 was initially estimated at $168 million, but the town’s only ended up getting $133 million. In fiscal year 2018, the MRSA distribution totaled $35.2 million and it’s expected to be around $36.8 million in 2019.

“Relying on the property tax to fund local government services in Connecticut is unsustainable,” Joe DeLong, executive director of the Connecticut Conference of Municipalities, said.

The property tax, according to CCM, raised $10.3 billion in 2016. That’s more than the personal income tax, which accounts for about half the revenues to the state budget.

“A property-tax dependent system only works if two conditions exist: (1) the property and income wealth of a community can generate enough revenue at a reasonable cost to taxpayers to meet the need for public services; and (2) state aid is sufficient to fill local revenue gaps,” DeLong said. “For many communities in our state, neither condition exists.  Relying on the property tax to fund local government services in Connecticut is unsustainable.”

According to CCM, 72 percent of municipal revenue comes from property taxes.  Most of the rest, 23 percent, comes from intergovernmental revenue, mostly in the form of state aid. 

CCM also wants to be able to tax nonprofit organizations that are currently exempt.

The Connecticut Community Nonprofit Alliance has been pushing back against that idea. They said they’re tax exempt because they are providing a public service. Every four years they have to ask tax assessors to maintain their tax exemptions and fewer towns are granting those exemptions even if nothing has changed with the status of the nonprofit organization.

The Connecticut Conference of Municipalities recently asked candidates for state office if they would support allow municipalities to collect fees from organizations that have been traditionally tax exempt such as colleges and hospitals.

Senate President Martin Looney, D-New Haven, said he was open to the idea.

“There are models for this type of program already - especially in New Haven - where Yale University pays user fees for municipal services in a number of areas,” Looney said.

But not everyone agrees.

“The issue should be addressed at the statewide level so there is an even-handed approach if there is to be any change in how we view these non-profits from a taxing perspective,” Sen. George Logan, R-Ansonia, said.

The answers from Looney and Logan are just a few of the answers the group received from candidates running for office this year.

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