New London — For years, city- and state-level elected officials have pointed to New London’s limited tax base — nearly half of the city’s land is not on its tax rolls — as a major challenge that forces the city to rely too heavily on the taxes paid on half of the city’s property.

The desired solution for many has been to revamp to the state Payments in Lieu of Taxes (PILOT) program, which reimburses municipalities a portion of the tax dollars not collected from tax-exempt entities like hospitals and colleges.

On Wednesday, the state General Assembly approved PILOT reform as part of a two-year, $40.3 billion state budget, and urban centers like New London are expected to receive additional PILOT funding under the new system beginning in fiscal year 2017.

Citing the PILOT reforms that will yield additional state funding for the Whaling City and changes to the car tax, Mayor Daryl Justin Finizio on Thursday called the legislative session that ended Wednesday in Hartford “a home run for New London.”

“I’ve lobbied repeatedly in Hartford for these reforms because New London taxpayers have been unfairly penalized for hosting Connecticut College, Mitchell College and L+M Hospital,” Finizio said in a statement. House and Senate leaders “deserve enormous credit for pushing through reforms which will finally give us some relief.”

The budget created a tiered system whereby municipalities with a higher percentage of tax-exempt property will be reimbursed at higher levels than municipalities with few tax-exempt properties.

For colleges and hospitals, municipalities will be reimbursed at either the 42, 37 or the current 32 percent levels, based on the percentage of tax-exempt property. For state-owned property, municipalities will be reimbursed at the 32, 28 or the current 24 percent levels.

The nonpartisan Office of Fiscal Analysis said it is too soon to know exactly how much additional funding New London can expect to receive from the PILOT program, but Finizio said he is confident the reforms will put an end to large tax increases for city residents.

“With these additional funds and with the stabilization of our own budget, New London taxpayers are now going to be entering an era of tax stability,” Finizio said. “As long as we can come through the city budget process this year in an acceptable way, with what the state has done and what we have done to get our financial house in order, the era of big tax increases in New London is over.”

Members of the New London delegation to Hartford also praised the passage of PILOT reform.

“It wasn’t everything we wanted, but for the municipalities we got some tax relief and more money in PILOT funding,” Rep. Ernest Hewett, D-New London, said Wednesday. “That’s what I’ve been fighting for all these years, and we finally got that.”

Rep. Aundre Bumgardner, R-Groton, whose district also includes part of New London, voted against the budget but said he is pleased some good will come of it.

“Taxpayers in all 169 towns need property tax relief, but especially in New London,” Bumgardner said Wednesday at the Capitol. “I’m glad this session was cognizant of some of the needs of our cities.”

Also included in the budget is a change to the car tax, the effects of which taxpayers will likely feel most directly.

Beginning with Fiscal Year 2017 — which starts July 1, 2016 — cities and towns can set a different mill rate for cars than for other property. The municipalities must cap the mill rate for motor vehicles at 32 mills and then reduce the rate to 29.36 mills for each following year.

Currently, a car is taxed at the mill rate of the municipality in which it is registered. So a car with an assessed value of $15,000 would be taxed at different rates based on which town it is registered in.

Once the new car tax system is implemented, and if New London’s grand list and budget remain stable, New London residents could see a 25 percent decrease in the amount they must pay in car taxes, the mayor’s office said.

“The motor vehicle tax has been a grossly unfair tax which falls disproportionately on the urban poor,” Finizio said. “I thank our Democratic leaders for recognizing that a uniform, statewide cap on this tax removes this inequity.”

The money the city loses as a result of the drop in car tax revenue will be offset by a newly established “Municipal Revenue Sharing Account” into which a portion of state sales tax revenue will be diverted.

New London may be eligible for as much as about $917,000 in other state funding from that account annually, but only if the city does not increase municipal spending by more than 2.5 percent in a single fiscal year beginning with fiscal year 2018, a provision the Office of Fiscal Analysis said is intended to encourage property tax relief.

Finizio said he supports such an incentive to limit municipal spending and thinks New London could comply with the cap to maximize its state funding.

“I believe the city can keep to a 2.5 percent increase or less for the next 4 years and if I am re-elected I would commit to that,” he said. “This year and last year we’ve been at this critical point, too close to the red line, and we’re still moving back up and making up for years of level funding and no tax increases and deficits, and as long as we get it right this year, 2.5 percent should be very doable after that.”

c.young@theday.com

Twitter: @ColinAYoung