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Bill exempting taxes on tribal land would harm Ledyard, Montville, opponents say

Proposed legislation that would keep towns from taxing personal property on tribal land would cost Ledyard and Montville hundreds of thousands of dollars a year and could put one of the region’s casino-owning tribes at a distinct competitive disadvantage, opponents of the bill say.

Passed by the legislature’s Finance, Revenue and Bonding Committee, the measure’s fate is uncertain, at least in its current form.

“As two municipalities that have the greatest impact from the gaming operations at Mashantucket and Mohegan, respectively, this proposed revenue loss will have deep, adverse impacts to both towns,” Ledyard Mayor Fred Allyn III and Montville Mayor Ron McDaniel wrote last month in public-hearing testimony they provided to the committee.

“Annually, Ledyard stands to lose $600,000 and Montville nearly $700,000,” they wrote.

Backed by the Mashantucket Pequot Tribe, which owns Foxwoods Resort Casino, the legislation comes 10 years after a U.S. 2nd Circuit Court of Appeals decision that Ledyard could tax slot machines leased to Foxwoods by a third-party vendor. Ledyard also collects personal property taxes on “furniture, fixtures and equipment” in stores at the Tanger Outlets at Foxwoods mall and in third party-owned casino eateries like Dunkin Donuts and Starbucks, according to Allyn.

“Of course, the big elephant is the $300 million Great Wolf project with the 550-room hotel,” Allyn said, referring to the proposed indoor water park resort scheduled to be built on Mashantucket reservation land adjacent to Foxwoods. “We’re not going to see a dime from that if this legislation gets passed.”

Rodney Butler, the Mashantucket chairman, wrote in an email Friday that the tribe has been working on the “dual taxation” issue for the better part of two decades — ever since municipalities first attempted to "assess" taxes on the tribe’s land.

"It’s an issue that Tribes around the country have been trying to fix with limited success, state by state,” Butler wrote. “Given the mutual level of respect between the Tribes, Governor, and Legislature and a true appreciation for our sovereignty, we felt that this Legislature in particular was willing to address this longstanding injustice that doesn’t exist anywhere else in our country outside of Native lands."

Montville collects taxes on personal property owned by third parties on the Mohegan reservation, including Mohegan Sun restaurants and retail outlets, in accordance with an agreement reached between the town and the Mohegan Tribe and approved by the federal government. It’s unclear whether the state legislation, as written, would supersede the agreement, raising the possibility the proposed tax exemption would apply to property on the Mashantucket reservation but not to property on the Mohegan reservation.

If Foxwoods vendors didn’t face Ledyard taxes but Mohegan Sun vendors were taxed by Montville, Mohegan Sun potentially could be put at a competitive disadvantage, Chuck Bunnell, the Mohegan chief of staff, said Friday.

“We would support the legislation as long as it made sure there was parity between the tribes — and we would also like to see Montville held harmless,” Bunnell said.

The Mohegans offered no public-hearing testimony on the bill. Both the Connecticut Conference of Municipalities and the Connecticut Counil on Small Towns opposed it.

Earlier this month, the Finance, Bonding and Revenue Committee voted 36-15 in favor of the bill. Among southeastern Connecticut lawmakers, Rep. Holly Cheeseman, R-East Lyme, and Sen. Norm Needleman, D-Essex, voted for the measure, while Rep. Devin Carney, R-Old Lyme, and Sen. Paul Formica, R-East Lyme, voted against it. 

Allyn said it’s been suggested that adjustments in the towns’ respective shares of the Mashantucket Pequot-Mohegan Fund or the tribes’ slots revenue payments to the state could offset the impact of the proposed tax exemptions.

In his written public-hearing testimony, Butler wrote that the bill “codifies the State’s recognition of the Tribe’s sovereign status and its territory by acknowledging that a municipality created by the State should not enter the Tribe’s territory to impose a tax ...” He takes issue with the 2nd U.S. Circuit Court decision in the Ledyard slots case and asserts it’s appropriate for the legislature to resolve the issue “holistically ... on a government-to-government basis with the Tribe.”

“Yet by virtue of one case and the general lack of clarity in this area, we are compromised in our ability to fully tax vendors operating on our land for the services they utilize because another government that does not provide these services levies an assessment within our jurisdiction against those vendors,” Butler wrote. “This leaves the Tribe with a choice — impose a second tax on those vendors and discourage business activity within Mashantucket, or forgo those taxes that could otherwise help to fund the governmental services being provided on the Reservation.”

Butler noted the legislation would have no impact on the local real estate taxes the tribe pays on off-reservation property it owns. In 2021, the Mashantuckets paid nearly $800,000 in property taxes to Ledyard, where the tribe’s Two Trees Inn is located, and more than $500,000 to North Stonington, the home of its Lake of Isles golf course. The tribe also owns property in Norwich and Preston.

Allyn, in an unpublished opinion piece, argues that the proposed legislation “will have an enormous impact on the local governments, which must continue to provide services for everyone.” The answer, he wrote, is for the Mashantuckets to engage in “constructive discussions” with municipal leaders to seek a cost-sharing and government services agreement.

Litigation over the taxation of leased slot machines at Foxwoods involved lawsuits filed in state and federal courts and originated in 2006. In April 2021, the Connecticut Supreme Court ruled the town was entitled to the attorneys’ fees and interest it incurred in successfully pursuing the matter. The town offered to accept a payment of $875,000.

Allyn said Friday the Mashantuckets paid the sum.

b.hallenbeck@theday.com

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