Reviving property tax reform debate

It has been a few years since Connecticut talked seriously about property tax reform. It has always been a difficult subject to broach. True reform requires wholesale changes in the way this state raises revenues for governance.

In the good times, when state revenues are rolling in and the economy strong, elected leaders have little incentive to tackle a challenge that will involve making choices sure to annoy and alienate some constituencies.

Apparently, bad times are not the right time for reform, either. When the patient is in critical condition, the doctor does what he can to revive the stricken. Decisions about major surgery must wait until the patient stabilizes. Such was the case when Gov. Dannel P. Malloy faced a massive deficit following his 2010 election, in the midst of a still poor economy, to boot.

Dr. Malloy called for a prescription of various tax increases and lowered spending fever a couple of notches with a mixture of agency consolidations, labor concessions and staff reductions through attrition.

Now may offer the perfect opportunity - with the state occupying that place between good and bad times - to renew the property tax reform discussion. Connecticut needs fundamental change to shake it out of its economic malaise and get moving. Reforming its tax systems, helping reinvigorate its cities, could be the right medicine.

If the debate is reengaged, much of the credit should go to House Speaker J. Brendan Sharkey, D-Hamden. Rep. Sharkey jolted Hartford - and hospital and college board rooms - with his proposal last month to start assessing property taxes on nonprofit hospitals and private colleges.

Having gained some attention, the speaker followed up with a call for major tax reform.

"This requires an overhaul on a grand scale," Rep. Sharkey told a forum on municipal policy at Goodwin College in East Hartford last week.

The time to do this, suggested the speaker, is 2015, the next long session of the legislature, when it will be setting a fiscal course with a new two-year spending plan. In making his proposals, Rep. Sharkey has introduced property tax reform into the gubernatorial and state legislative elections. Voters should welcome that debate.

Connecticut's dependence on property taxes to pay for so many services creates a regressive system that places a particularly heavy burden on the middle-class. It penalizes improving property. It discourages businesses from locating in the urban areas where revitalization and job growth are needed the most desperately. Cities demand more services and so charge higher property taxes to pay for them. At the same time, urban centers have the largest share of non-taxable nonprofit and public institutions.

Among the proposals floated by Rep. Sharkey is shifting the full cost of special education - currently about $1.8 billion - to the state. Yet that would mean higher state taxes. That would be worth the trade-off, but only if municipalities use some of the savings to provide property tax relief. The legislature would have to consider property tax caps. It's complicated.

As for nonprofit hospitals and colleges, Rep. Sharkey suggests creating a "Reverse PILOT" (Payment in Lieu of Taxes) program. Currently, these institutions pay no property tax, with the state helping cities by issuing them PILOT money. Yet the $115 million in annual PILOT allocations represents only one-third of what the institutions would raise for towns and cities if taxed.

Under the Reverse PILOT, the nonprofits would pay the property tax to their host towns, then seek a state reimbursement for some portion of those taxes. As of now, it is a concept, not a plan. Rep. Sharkey suggests the tax change include giving municipalities the ability to negotiate with these institutions a lower tax payment that reflects the services the nonprofits provide to the community.

It is far too soon to support or reject these or any abstract tax reform proposals, but the 2014 election is a good time to engage the discussion, leaving 2015 - as the speaker suggests - a time for action.

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