Hartford — New London Mayor Daryl Justin Finizio and state Rep. Ernest Hewett, D-New London, told members of the state legislature's Planning and Development Committee Friday that New London's tax revenue gap must be fixed — either by taxing nonprofit colleges and hospitals, reducing services or raising taxes on everyone else.

"New London is about 6 square miles and probably has more PILOTs (Payment in Lieu of Taxes) than American Airlines," Hewett said. "I think 50 to 55 percent is off the tax roll, so that makes it very difficult to balance the budget in New London."

Local supporters of House Bill 5583, which would phase in a property tax on nonprofit colleges and hospitals over five years, said residents and small businesses had been paying property taxes during tough economic times, and so should the nonprofits that perform similarly to for-profit corporations.

Opponents of the bill said taxing colleges and hospitals would reduce their ability to provide philanthropic work such as student aid and community development programs.

If the bill were passed and nonprofit hospitals and colleges were taxed, the state would provide PILOT funds to the nonprofits rather than to the municipalities.

Currently, the state provides PILOT funds to municipalities for the tax-exempt nonprofit college and hospital properties. However, the state's funds only make up 32 percent of the property taxes the nonprofits would pay if subject to tax.

Judith Greiman, president of Connecticut Conference of Independent Colleges, which represents 16 nonprofit colleges and universities, said the solution is to fully fund the PILOT for nonprofit colleges and hospitals at 77 percent, which is what state law dictates.

State Rep. Jason Rojas, D-East Hartford, who is co-chairman of the committee and works for the nonprofit Trinity College, said he makes sure that Trinity is a good partner in the community. He also pointed out that Goodwin College in East Hartford has revitalized a neighborhood ignored by others.

The problem, Rojas said, may not be the tax-exempt nonprofits, but rather the fact that each of Connecticut's 169 towns and cities provides its own services. "My concern is these very same cities will be back to us in seven years from now saying we don't have enough revenue because we haven't changed the fundamental structure of taxing," he said.

Finizio said New London has regionalized transportation and water and is working to regionalize emergency dispatch services. "We're regionalizing everything we can," he said. "If we accomplish that and this PILOT were worked out, I think we could see tax stabilization for a long time."

Mitchell College President Mary Ellen Jukoski said the college, which lacks substantial resources, is opposed to the bill. Its endowment is $7 million and the college budget is $23 million, she said. Mitchell College contributes nearly $30,000 a year to New London. If taxed, it would owe the city $1.1 million.

"I would share on behalf of my colleagues (that) Connecticut College, Mitchell College and L+M Hospital, all three entities go out of our way to be a good neighbor and to provide other opportunities to help the city out," Jukoski said.

Paul Maroni, vice president of finance at Connecticut College, also spoke in opposition to the bill.

Finizio said he recently asked each of the three nonprofits to make a one-time contribution to the city equivalent to 1 mill, but all said they were not in the position to do so. The contribution would have totaled about $500,000, according to the mayor's office.

Connecticut College contributes about $12,500 to the city annually, while Lawrence + Memorial Hospital does not contribute any amount directly to the city. If taxed, Connecticut College would owe $5.8 million and L+M $5.4 million.

Hamden Town Council President James Pascarella, who wrote the letter to House Speaker Brendan Sharkey, D-Hamden, that initiated the bill this session, said the fundamental fairness issue had to be addressed. "Zero is not an option in year 2014," he said.

In his letter, Pascarella said he was frustrated that Quinnipiac University in Hamden did not contribute to the town but benefited from town services.

Committee Ranking Member state Sen. Len Fasano, R-North Haven, said he didn't agree with the bill as written but added that the state legislature could be more prudent in what it determines is tax-exempt.

Perhaps university gyms shouldn't be considered educational and should be taxed the same way for-profit gyms such as LA Fitness and Planet Fitness are, said state Rep. Bill Aman, R-South Windsor.

Carl Schiessl, director of regulatory advocacy for the Connecticut Hospital Association, said all of the state's 28 nonprofit hospitals are opposed to the bill. Hospitals treat everyone who comes through their doors, regardless of their ability to pay, he said. In 2012, he added, Connecticut's nonprofit hospitals provided $225 million in free services to those who couldn't pay and incurred $868.3 million in losses because Medicare and Medicaid reimbursements didn't cover the full cost of care.

William Stanley, vice president of development and community relations at L+M, said the New London hospital provides more than $50 million annually in community benefits. "The money we'd have to pay in taxes has to come from somewhere, and it would come from salaries and benefits," he said. "It would come from community programs, services, the sponsorship support, which were drastically reduced after the Medicaid reimbursement cuts imposed by the state last year."

Another provision in the bill would allow nonprofits to negotiate with the municipality to pay a reduced property tax. But several committee members said they were concerned that if an agreement weren't reached, the nonprofits would have to pay 100 percent of the property taxes even if they couldn't afford them.

Another bill in play this legislative session and sponsored by Senate Majority Leader Martin Looney, D-New Haven, is Senate Bill 467, which would redistribute PILOT funds for state-owned properties and nonprofit colleges and hospitals across municipalities.

The bill would rank municipalities by how many state-owned properties, colleges and hospitals they had and provide PILOT funds on a sliding scale, with 50 percent being the highest for municipalities with the most tax-exempt properties.

j.somers@theday.com

Editor's note: This version corrects an earlier version that misstated the amount Finizio requested as a one-time contribution from L+M and the two colleges.