Property tax system at center of New London's problems

As I witness New London's budgetary struggles it makes me think, "What ever happened to property tax reform?"

For years property tax reform was the big thing in Connecticut's public policy debates. Editorial pages, including this one, demanded it. Lawmakers said they would champion it. But like many big, difficult issues, the discussion never moved much beyond the rhetoric and the reports.

When the Great Recession hit and the state confronted an historic budget crisis, suddenly no one was talking about property tax reform. The state could not pay its own bills, never mind figure out how to assume more of the expenses from towns and cities so they could lower the property tax burden.

I thought about this because New London's fiscal problems are, most fundamentally, the result of Connecticut's property tax system. Though small by city standards, New London has all the expenses that come with being an urban center. It needs a paid fire department to protect its densely developed neighborhoods, many filled with older housing. It needs a paid police force to assure adequate public safety.

New London has a lot of public housing. Like most urban centers, a larger percentage of its populous is low-income as compared with its suburban neighbors, requiring more public services. These same demographics provide an additional challenge for its public school system.

The primary means to pay for these services is the property tax system, which is a lousy choice for New London. With about 5.5-square-miles of land, there is not enough property to tax. The city has no industrial park and no where to develop one. Its commercial real estate is relatively small. Trying to create more commercial property to tax was the motivation for razing an old neighborhood in the Fort Trumbull section to make way for redevelopment. That didn't work out well.

Much of the property New London does have is not taxable - Lawrence & Memorial Hospital, Connecticut College, Mitchell College, the Coast Guard Academy, the public housing. Though the city receives some "payments in lieu of taxes" for these non-profit and government properties, it does not match the tax dollars they would generate.

Little wonder, then, that city property owners pay the highest taxes in the region and this year face the prospects of an 8 percent tax increase and cuts in services.

Recombining Waterford and New London would help, a lot. They were one township until Waterford incorporated as a separate town a few years ago. Ok, it was 1801. With the Millstone Power Station, numerous commercial shopping centers, industrial development along Cross Roads, Waterford has a healthy property tax base, and New London could provide the hip urban center and diversity it lacks.

Of course, that is not going to happen.

But many of the ideas provided by the 2003 Blue Ribbon Commission on Property Tax Burdens and Smart Growth Incentives, headed by New Mayor John DeStefano, would help New London. Unfortunately, the reform push stalled with DeStefano's unsuccessful run for governor in 2006 and died when that recession hit.

The report called for sizeable home and car tax breaks for those struggling to pay property taxes in urban centers. It also sought full reimbursement to cities for tax exempt colleges, hospitals and state properties. It raised the possibility for regional government that would spread the cost of projects with regional benefit among many towns. It proposed special tax relief for the elderly to prevent them from being priced out of their homes by ever higher taxes.

The catch, of course, is the money has to come from somewhere. Shift the burden from a place like New London and someone else has to pay, never a politically popular move.

This is probably why property tax reform never got anywhere and why New London can't escape higher taxes and diminished services.

Paul Choiniere is editorial page editor.

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