As municipalities across Connecticut continue to cut expenses to accommodate pandemic-related burdens, many are calling on the state legislature to provide much-needed assistance -- assistance they say has been owing for some time.
The state’s Finance, Revenue and Bonding Committee held a public hearing Tuesday for Senate bill 873. The bipartisan bill addresses property liens and tax consequences for employees working remotely. But more important, it also includes a three-tiered grant formula for PILOT, the state’s program that reimburses cities for institutions that don’t pay property taxes.
Tax-exempt properties include universities, hospitals and nonprofit organizations, and under the state’s current system municipalities should receive 77% of the revenue lost to these institutions. But due to a lack of program funding, many don’t. In fact, some report they receive about one-third of the expected reimbursement, according to the Connecticut Examiner.
This leaves many cities struggling to close the financial gap. New London is one of them.
“We host Yale New Haven L&M Hospital here. You’re looking at [a city] that sends out about 8,000 tax bills. That’s it. That small base has to support the complete offset of the property taxes for all of the property Yale holds in New London,” said Mayor Michael Passero, an advocate of PILOT reform.
The underfunding leads to tough decisions, including cutting essential services or hiking taxes. This is unfair when nontaxable institutions like universities continue to grow at the expense of the community and the tax break, said Jaime Myers-McPhail with New Haven Rising.
In New Haven, Yale University makes voluntary payments to offset the lost revenue, but it’s still not enough.
“While New Haven residents battled unemployment, hunger and sickness, Yale University announced that its endowment reached a new high of $31 billion. And yet it is New Haven residents providing over tens of millions of dollars in annual financial support to Yale University and Hospital, not the other way around,” Myers-McPhail added.
The new system, proposed by state Senate President Pro Tem Martin Looney, would be based on need -- and reimburse municipalities according to their net grand list per capita.
Municipalities with a net grand list per capita of less than $100,000 would be reimbursed 50% of the taxes that would otherwise come from nontaxable properties. Towns with a net grand list per capita between $100,000 and $200,000 would receive 40%. And those with a net grand list per capita of more than $200,000 would receive 30%.
This means municipalities with the highest number of tax-exempt properties would receive most of the aid.
Mayor Luke Bronin of Hartford applauded the effort.
Hartford currently receives a reimbursement of about $30 million. The proposed system would generate an additional $22 million, which still would fall short of what the city should receive under the long-standing PILOT formula.
“If the PILOT program were fully funded, the city of Hartford would receive approximately $100 million more than it currently receives,” Bronin added. “If all of the nontaxable property in the city were fully taxed, excluding city-owned property, the city would generate approximately $223 million each year.”
The new system would be the first step in addressing the financial gap and working toward equitable funding, Bronin said.
“In this small state -- 169 towns but 3 1/2 million people -- the fate of all of our communities [is] tied to the success of every community. It’s important that we allow our communities to be successful.”
While a funding mechanism was not included in the bill, under Looney’s proposal the new PILOT system would be covered by a tax on capital gains and a new property tax on homes with a market value of $430,000 or more.