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Hartford — The General Assembly's Planning and Development Committee passed a bill Monday that would send more state money to municipalities with extensive numbers of tax-exempt properties while approving two other bills that would provide property tax exemptions to businesses. All three bills were sent to the floor of the Senate.
"We are doing - how many bills today? - that say this property can be tax-exempt, that property can be tax-exempt," said state Rep. Bill Aman, R-South Windsor. "And then we are turning around in this bill and saying the 20 communities who have the most tax-exempt property will receive money from the state. It seems to be set up to reward cities to make more and more of their property tax exempt and then turn to the state and say 'Fund us.'"
During this year's legislative session municipal leaders expressed dismay about the small amount of Payment in Lieu of Taxes (PILOT) funds they received for the state-owned properties and nonprofit colleges and hospitals in their town or city. So lawmakers proposed a couple of bills that aimed at providing municipalities with more revenue. But passing legislation that would increase the amount of tax-exempt properties and therefore reduce municipalities' revenues is counterproductive, said several Republicans on the Planning and Development Committee on Monday.
Municipalities that host nonprofit colleges and hospitals are supposed to receive 77 percent of the associated lost tax revenue but received only 32 percent last year. Municipalities that host state-owned properties are supposed to receive 45 percent of the lost tax revenue but received only about 23 percent last year. The state spent $189 million on the state-owned property PILOT and the nonprofit college and hospital PILOT last year.
Senate Majority Leader Martin Looney, D-New Haven, sponsored the PILOT bill that was approved Monday. Senate Bill 467 would restructure the PILOT formula and provide more PILOT funds to municipalities that have more tax-exempt state-owned properties and nonprofit colleges and hospitals. The state would reimburse the 20 municipalities with the largest number of tax-exempt properties with 50 percent of the lost tax revenue, the next 20 municipalities with 45 percent and the remaining municipalities with 40 percent, according to the legislation. It would be phased in over five years.
The Finance, Revenue and Bonding Committee passed the bill last month and the Planning and Development Committee passed it Monday.
"I do think we have to look at the entire issue," said the committee co-chairwoman, state Sen. Cathy Osten, D-Sprague. "I am going to vote to support the bill out of committee, but I have some concerns."
House Speaker Brendan Sharkey, D-Hamden, has also proposed a separate bill, House Bill 5583, which would have required nonprofit colleges and hospitals to pay property taxes to municipalities and would have reimbursed the colleges and hospitals for a portion of the tax. Although Democrats and Republicans in the Planning and Development Committee expressed reservations about the bill, the committee passed it last month and sent it to the floor of the House of Representatives.
The state would spend $213 million in fiscal year 2016 on the state-owned property PILOT and the nonprofit PILOT and $343 million by the final year of implementation, fiscal year 2020.
There a possibility that Looney's bill and Sharkey's bill could be combined in order to provide more revenue for towns and cities. Earlier this month Looney said he was considering having the state collect a fee from nonprofits and then redistributing it back to municipalities. It would be similar to how some municipalities charge nonprofits fees for services such as sewage and fire services, he said.
On Monday, Sharkey's spokesman, Larry Perosino, said that staff members continue to meet about the PILOT bills.
One of the business tax-reduction bills that the committee passed on Monday was Senate Bill 419. It would establish up to two hospital and wellness enterprise zones that would allow businesses located in the zone to receive benefits such as tax exemptions and tax credits. There are already 17 enterprise zones in Connecticut including ones in Groton, New London and Norwich.
"I am going to vote no on this only because I don't think this is the right direction," said state Sen. Len Fasano, R-North Haven. "We have got a lot of issues in particular in the New Haven area with the hospital growing at leaps and bounds. I don't think it needs any particular help. I think businesses will come up around it without the state getting involved. And once again this is encouraging a reduction in the tax base probably in those cities that can least afford a reduction in tax base."
The other bill, Senate Bill 447, would create a new Payment in Lieu of Taxes (PILOT) program for commercial businesses. Municipalities that apply to the state's Office of Policy and Management to participate in the program would be allowed to offer commercial businesses the opportunity to be taxed based on their net profits instead of the fair market value of their buildings.
"It's seems like these are the same cities that come to us and say they don't have any money; their tax base is shrinking," Fasano said. "And now we are passing a bill which continues to shrink their tax base."