New London works to compile new list of tax-exempt properties
New London — The city is taking stock of its extensive list of tax-exempt properties.
Because 2017 is a quadrennial reporting year, Tax Assessor Paige S. Walton said her office, along with all others across the state, will be reviewing all tax-exempt applications and making determinations on tax-exempt status. The work is expected to be done by the end of January in conjunction with the completion of the 2017 grand list. By state statute, charitable organizations seeking tax-exempt status must file an updated tax-exempt application every four years with the assessor’s office by Nov. 1.
Slightly more than 44 percent of the city’s real property is tax exempt. It’s a fact that has long been the source of anguish for city leaders trying to balance a budget with a stagnant grand list, a small commercial base and yearly increases in costs for things like fire, trash pick-up and police services.
The 2016 gross total of all real property in the city was $1.95 billion and the exempt real property total was $860,661,301 — more than $350 million of that attributed to the two colleges and hospital. The list of tax-exempt properties includes everything from property owned by charitable organizations and churches to municipally owned property and cemeteries. By state statute, entities that can apply for tax-exempt status include those being used for “scientific, educational, literary, historical, charitable or open space land preservation purposes.”
Groton is not much better off, with more than 40 percent of its $3.2 billion gross assessment of real property being tax exempt, including the Naval Submarine Base and Avery Point Campus of the University of Connecticut. Nearly 27 percent of Norwich's property is tax exempt.
Mayor Michael Passero said that with the city being classified as a distressed municipality, coupled with the fact it is the hub of social services for southeastern Connecticut, makes the burden on taxpayers even worse whenever another property comes off the tax rolls. The city is at the point where he said it will no longer be able to afford to maintain the level of services without some relief.
“The reasons cities are failing in this state is the suburban towns that surround the urban centers are allowed to benefit off of the services provided by the urban centers,” Passero said. “They drive to New London for their employment, their medical needs — people who need to be fed, the homeless. We’re forced to carry it on the property tax base. Taxpayers end up subsidizing services. They’re not feeding the hungry or housing the homeless in Waterford.”
Passero said a future solution night be to ask tax-exempt organizations to voluntarily donate toward municipal services.
“We’ve gotten to the point where they either start paying for the service or they will lose the services along with everyone else,” Passero said.
Passero is in negotiations with Connecticut College for a voluntary annual payment from the college. The college had provided a total of $100,000 over the past 10 years as a voluntary payment in lieu of taxes, an agreement that stemmed from a tax-exempt dispute over a portion of the college campus. Passero declined to speak publicly about whether he had a dollar amount in mind when going to the negotiating table.
Several measures presented as solutions to the tax-exempt problem at the legislative level this year gained support but not enough to become law. State Rep. Chris Soto, D-New London, introduced a bill that would have allowed municipalities’ local legislative bodies — the City Council in New London, for instance — to make the decision on whether a property should come off the property tax rolls. It would have only applied to new applications.
Soto said the measure was introduced early in the session and before the start of what turned out to be a painful budget process. By the end of that process, Soto said there was a better realization that things need to change. He said he planned to reintroduce that bill or a version of it and plans to make an overall argument for equitable distribution of funding for municipalities.
Soto said the distressed municipality ranking, which is an indication of the city’s ability to raise revenue, should have more meaning when it comes to state funding.
“We should be tying municipal funding — PILOT funds and everything else — to an equity score,” Soto said.
Legislative measures that would deny tax-exempt status were panned by nonprofit groups, who argued that many organizations that provide valuable community services would not exist if they had to pay taxes.
“The benefits of serving the most at-risk individuals in our state, creating jobs, revitalizing neighborhoods and encouraging vibrant growth in host communities outweigh the foregone revenue lost by local governments,” said Jeff Shaw, the director of public policy of The Alliance, in reaction to the bill’s introduction in March.
New London Homeless Hospitality Center Executive Director Cathy Zall, whose organization owns five multifamily homes for rent to low-income tenants and formerly homeless, said her organization is providing a public service without compensation.
“I understand the argument. It costs New London money. We use the roads, the police, the fire department,” Zall said. “But we also provide back in turn a lot of services and support the city doesn’t pay us for. How does that balance out? We’re providing things valuable to the city and its residents. We’re not a profit-making entity. Part of the reason we’re able to do that is we’re not paying taxes on our properties.”
The Homeless Hospitality Center is paying taxes on two of its five rental properties after it decided to forego its tax-exempt application because the homes were subsidized by state or federal funds.
The total assessed value of all of the tax-exempt properties listed by the city as charitable organizations is $18.6 million, which translates into about $803,000 lost in taxes.
That number is dwarfed, however, by other categories that include the $38.1 million assessed value of church properties, $54.8 million in state properties, $139.5 million in hospital properties and the $218.9 million in college properties, split between the $34.2 million in assessed property value at Mitchell College and $184.7 million at Connecticut College.
Connecticut College alone would be taxed nearly $8 million a year base on its assessment. Lawrence + Memorial Hospital could owe the city more than $6 million if it weren't exempt.
The state reimburses the city a portion of the tax revenue lost from state-owned, college and hospital properties in the form of payment in lieu of taxes. Municipalities are supposed to be reimbursed 45 percent of lost tax revenue from most state-owned properties and 77 percent from colleges and hospitals. However, the Connecticut Conference of Municipalities this year said the state severely was underfunding the program, paying less than 20 percent for state-owned property and 30 percent for colleges and hospitals.
The most up-to-date numbers provided by the city’s finance department indicate the state is providing $4.9 million in PILOT funds for colleges and hospitals and another $380,000 for state-owned property. That translates to less than 33 percent of the assessed value.
Editor's Note: The previous version of the story miscalculated the total for Mitchell College. Previous versions of the data graphics also miscalculated totals for Mitchell College and for state-owned properties.
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