Malloy favors tax reform talks but doubts 'reverse PILOT' will pass this year

Sean D. Elliot/The Day Gov. Dannel P. Malloy tours New London business Q Discovery with company president Matt McCormack.

New London — Gov. Dannel P. Malloy said Wednesday that he welcomes the legislature opening up discussions about the state's overall tax structure but doubts that an effort to get nonprofits to ante up will go anywhere this session.

In a wide-ranging session with The Day's editorial board, Malloy praised the potential of New London's port and the planned U.S. Coast Guard Museum, promised to release more details soon about a proposed bioscience incubator at a building owned by Pfizer Inc., and gave his support to finding a federal solution for Internet gaming.

Regarding a bill allowing municipalities to tax nonprofit colleges and hospitals that has been promoted by Speaker of the House Brendan Sharkey, D-Hamden, Malloy said he didn't blame him for raising the issue of fair taxation, which has been a hot topic this legislative session. The bill employs an idea that turns around the state's Payment in Lieu of Taxes program, creating what has been called a "reverse PILOT" that would allow municipalities to tax nonprofit colleges and hospitals, which would receive money from the state in return.

"I'm not sure that's where tax reform starts," Malloy said. "I don't see it going anywhere this year, quite frankly."

But Sharkey said Wednesday that he expected the reverse PILOT bill to come up for a House vote later in the legislative session.

Malloy said a better approach would be to look at comprehensive tax reform that addresses a wide range of levies, including business, estate and car taxes.

"We're never going to be a low tax state, but we could be a lower tax state," Malloy said.

Malloy pointed to administration initiatives that rolled back the sales tax on prescription drugs and reinstated a $50 ceiling under which no clothing taxes are collected as an indication that he wants to develop an ongoing process to cut taxes as the state sees revenue improvements.

Sharkey said a comprehensive tax review was needed but could be taken on next year.

"In the meantime, this is a standalone proposition that is about fundamental fairness to our towns that should be done immediately and doesn't require a comprehensive overhaul to make it happen," Sharkey said.

Earlier in the day, Malloy met with about 15 employees at the Ocean Avenue technology firm QDiscovery, which helps attorneys prepare complicated cases by using special software to pore through thousands of documents and identify key pages. QDiscovery has received money from the state's Small Business Express program and used the funding, which the company has paid back, to invest in both technology and people, creating eight to 10 new jobs.

Malloy said the idea behind the program was to free up money for growing companies at a time when little lending was taking place.

"Small Business Express helped us to grow," said Matt McCormack, chief executive of QDiscovery.

In response to a question from The Day's editorial board about the Connecticut Business and Industry Association's campaign to bring the state's business-climate ranking up to the Top 20 by 2017, Malloy downplayed the accuracy of indicators showing Connecticut near the bottom among U.S. states. He pointed, for instance, to corporate tax rates that appear high at first blush but when matched up with various incentives are lower than those in most surrounding states.

"The ratings are not scientific; they are opinion-driven," Malloy said.

Malloy also conceded that the state's deal with ESPN has hit a stumbling block. While he said he expects to cut the ribbon on a new 193,000-square-foot production facility in Bristol this spring, Malloy said ESPN has been seeking changes in the initial First Five agreement that the state has not been willing to make.

"It's not done, and it may never get done," Malloy said.

Under the deal with ESPN, the state had been prepared to invest $18.7 million in loans and grants, and ESPN pledged to add at least 200 and as many as 800 new, full-time jobs over the next five years.

Without a contract, the state has not disbursed any of the funds, but ESPN has reported to the state that it has created 128 jobs.

In other comments, Malloy:

  • said he doesn't support a letter written by Democratic governors Peter Shumlin of Vermont and Margaret Wood Hassan of New Hampshire opposing the Internet Gambling Control Act of 2014. Malloy said that while he agrees with the governors about states retaining control of lotteries, he believes in regard to online gaming that "a fairly drafted solution on the federal side may not be the worst thing in the world."
  • confirmed that the state has been involved in negotiations with Pfizer and the bioscience network Connecticut United for Research Excellence that would bring a business incubator to the region. He added that an incubator program at UConn-Avery Point is "pretty constrained space-wise" and that he would like to free up space for other campus uses that would enhance the possibilities for students and teaching, such as an already announced climate-change center.
  • said New London has "the biggest upside" among the state's three ports, which also include Bridgeport and New Haven. He said the port has the advantage of being well-dredged thanks to the nearby Naval Submarine Base and expected an improving economy would pay dividends with more traffic. Malloy also said he expects that a Coast Guard museum would be built someday, "and it's going to be here."

l.howard@theday.com

Staff Writer Johanna Somers contributed to this report.

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