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Bills to tax hospitals and colleges advance in legislature

By Johanna Somers

Publication: theday.com

Published March 25. 2014 1:00PM   Updated March 26. 2014 12:06AM
Nonprofits would pay towns, get PILOT funds in return

Hartford — Two bills that could affect how much money municipalities receive for tax-exempt properties were approved Tuesday by General Assembly committees.

In addition, the Finance, Revenue and Bonding Committee unanimously passed House Bill 5545, which would allow the committee to convene a panel of experts to review the state’s tax structure.

The Planning and Development Committee approved a bill that would require nonprofit colleges and hospitals to pay property taxes to their host municipalities. The bill, passed by a vote of 14-5, will be sent to the floor of the House of Representatives.

Several Democrats and Republicans on the committee said they didn’t completely agree with the language of the bill — promoted by the Speaker of the House, state Rep. Brendan Sharkey, D-Hamden — but that they were glad the issue was being brought forward for discussion.

“This particular bill is not something that I think addresses all the issues,” said state Sen. Cathy Osten, D-Sprague, who co-chairs the committee. “I am planning to move it forward, but I disagree with many pieces of this. I think the unintended consequence is students will see increased tuition rates and more layoffs of nurses and janitors because this does not address what really needs to be addressed.”

Osten said she wanted “real property tax reform,” and many lawmakers said they wanted to have a comprehensive tax study completed.

Sen. Len Fasano, D-North Haven, who voted against the “reverse PILOT” bill, said the bill would bring one of the largest changes to the state’s tax structure. He said he wasn’t “sure if it is the right answer, but it gives us a vehicle” for more discussion.

The other PILOT-related bill, which was passed 32-18 by the Finance, Revenue and Bonding Committee, would redistribute PILOT funds for state-owned properties and nonprofit colleges and hospitals across municipalities. According to Senate Bill 467, municipalities with large amounts of these tax-exempt properties would receive more PILOT funds from the state than those with fewer tax-exempt properties.

State Rep. Noreen Kokoruda, R-Madison, said it was time for Connecticut to address both the nonprofit and state-owned property PILOTs.

“I think if we are really going to talk about the problems with PILOT, let’s talk about PILOT,” she said.

The state reimburses municipalities for 32 percent of the taxes that exempt nonprofit properties would have otherwise generated. The reimbursement rate for state-owned properties is 23 percent.

If the Sharkey bill, House Bill 5583, were passed by the General Assembly and signed into law by the governor, the nonprofits would be taxed and the state would send a similar amount of PILOT monies to the colleges and hospitals. The bill would also permit the nonprofit to negotiate with the municipality to pay a reduced property tax. But, if no agreement were reached, the nonprofit would be liable for the full tax.

“I am going to say there is not going to be a negotiation with the towns,” Osten said. “And colleges and hospitals will be given the bill. They might sit and talk, but there will be no change in the bill at the end of the day.”

State Rep. Brian Sear, D-Canterbury, said he appreciated the opportunity for municipalities and nonprofits to reach an agreement on property taxes.

“I like what I am hearing in terms of that dialogue happening at the local level,” Sear said. “In the best-case scenario it will make a partnership between institutions and municipalities, so I like that part of the concept going forward.”

Supporters of the bill have said the nonprofits should pay property taxes because they function like for-profit companies, with high executive salaries and increasing expansion. These nonprofits also get city services such as fire and police without paying for them, they said.

Opponents have said they deserve the tax-exemption because they donate to the community and a property tax on nonprofit colleges and hospitals would reduce their ability to provide financial aid to students and provide charity health care.

Tony Sheridan, chief executive of the Chamber of Commerce of Eastern Connecticut, said the chamber’s board decided Tuesday to oppose the reverse PILOT idea.

“In principle, we feel that this is the kind of ... bill that really deserves more study,” Sheridan said.

He agreed that the state’s tax system needs reform, but said that the ongoing M.O.R.E. Commission headed by state Rep. Tim Larson should take all of the municipal funding ideas in play and thoroughly analyze their effects.

“We really need to take a comprehensive look at each property tax system, even if it takes five to 10 years to get to it,” Sheridan said. “There’s no magic bullet.”

New London Mayor Daryl Justin Finizio and state Rep. Ernest Hewett, D-New London, testified in favor of the bill last week during a public hearing and said the taxes would especially help a city such as New London where nearly half the properties are tax exempt.

“While the people of New London appreciate what these institutions provide to our city, few people appreciate or understand what our city provides to these institutions,” Finizio said on Friday.

In New London, if Connecticut College, Mitchell College and Lawrence + Memorial Hospital were taxed the full amount, they would owe about $12.5 million annually to the city. The state provides New London with $4 million to $5 million in PILOT funds annually.

L+M doesn’t contribute any funds to the municipality while Connecticut College contributes $12,500 a year and Mitchell College contributes $30,000.

j.somers@theday.com

Staff Writer Lee Howard contributed to this report.

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