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03/26/2019 04:30 PMLocal first selectmen are alarmed by a proposed state tax reform bill that would reduce municipal tax revenue. According to an analysis by the Lower Connecticut River Valley Council of Governments (RiverCOG), which represents the governments of 17 towns—including Old Saybrook, Westbrook, and Clinton—in the absence of cuts to services and programs, towns across the region would have to raise mill rates by 15 percent to 42 percent.
Senate Bill 431, introduced by State Senator Martin M. Looney (D-11), who represents parts of New Haven, Hamden, and North Haven, would establish a $50,000 real estate tax exemption for owner-occupied residences as well as a $25,000 exemption for business personal property; impose a statewide 1 mill real estate tax; and place parameters on car taxes and shift that revenue to the state.
The state revenue resulting from these changes would increase payment in lieu of taxes (PILOT) funding to municipalities with tax-exempt properties such as universities, hospitals, and places of worship; increase special education funding; and, with the remainder, increase education and alliance district grants, which are provided to struggling school districts.
SB 431 was referred to the Committee on Finance, Revenue, and Bonding, which held a public hearing on the proposed bill on March 15. RiverCOG Executive Director Samuel S. Gold submitted testimony opposing it.
“RiverCOG has estimated that this bill would reduce the 17 municipality Lower Connecticut River Valley Region’s aggregate grand list by at least 21 percent, not including the business personal property exemption,” Gold’s testimony reads. “On average municipalities in the region will have to raise their mill rates by more than 28 percent to make up for the grand list shrinkage...This is coming soon after revaluations that also shrank municipal grand lists. If municipalities cannot recoup the loss of revenues brought about by SB 431, they will have no choice but to cut services, including services to the neediest.”
The analysis was conducted by RiverCOG Regional Planner Jon Curtis, who explained that his calculations did not include the $25,000 business personal property exemption, which refers to “virtually everything but the property”—because it was too complicated to ascertain which businesses would qualify for that exemption and because residential property taxes are the largest portion of town tax revenue.
“In seven of the municipalities in the Lower Connecticut River Valley Region, business taxes assessed were less than a tenth of the residential portion,” Curtis said by email.
Why the huge variance in impact to these 17 towns?
The “biggest determining factor,” Curtis explained, “is the number of owner-occupied housing units.”
East Hampton, for instance, with 4,388 owner-occupied residential properties, was determined in RiverCOG’s analysis to require a 42 percent increase to its 31.32 mill rate, resulting in a 44.37 mill rate. The impact on Lyme, with a mere 891 owner-occupied units, was much smaller, requiring a 15 percent increase to its 18.25 mill rate, for a new mill rate of 20.99.
The RiverCOG analysis projects that Westbrook’s 24.37 mill rate would increase 16 percent to 28.35; Clinton’s 29.91 mill rate would increase 26 percent to 37.66; and Old Saybrook is projected to require a 15 percent increase from 19.66 to 22.58. (Old Saybrook’s mill rate is currently 19.6.)
Westbrook Assessor Pam Fogarty’s own analysis put the reduction in tax revenue to her town at around 20 percent (in contrast with RiverCOG’s 14 percent).
Forgarty called the loss in revenue “astronomical. I can’t believe they would think we could really survive on a 20 percent decrease [in tax revenue] without it impacting every single resident,” she said.
The RiverCOG analysis is not a policy recommendation; it does not take budget cuts into consideration. And First Selectman Noel Bishop said cuts in services would be necessary, as expecting taxpayers to shoulder the burden of a large tax increase would be neither fair nor feasible.
“For us to go back to our taxpayers and say you have to make up a 20 percent loss of revenue,” Bishop said. “You can imagine the outrage. We can’t do it.
“We have worked hard over the years to put forth the most conservative, prudent budget we can,” Bishop continued, noting that for the past 11 years, “every single budget passed on the first vote.”
If SB 431 were to pass, “[i]t would be a desperate situation,” Bishop said. The town government would have to ask, “‘Where can we make cuts?’ We’d have to go back and take a serious look at all of our expenses. It would be a crisis.”
For the bill to be put to a vote in the Connecticut General Assembly, the finance committee must take action by April 15, by having it drafted as a committee bill. As the committee is supposed to take public testimony into account, such a committee bill could look different than the current draft bill.
Should the committee opt to have it drafted as a committee bill, it will then have until May 2 to vote it out of committee. Sometimes bills are then sent to other committees for consideration; sometimes bills are sent to the floor of the Senate for debate and/or for a vote.
Sometimes, however, pieces of bills that don’t make it out of committee can be incorporated into revenue packages. That language can be difficult to trace.
Towns are taking this “very, very seriously,” said Old Saybrook First Selectman Carl P. Fortuna, Jr. “I’ve been all over it. I wrote an op-ed piece in the [Hartford] Courant about it and I’ve been voicing my concern at any meetings I’m at with any other public officials.
“I think there’s unquestionably inequity in the car tax system,” Fortuna continued. “I think that’s a fair statement. But I don’t think this is the way to get there.
“Before any town spent its next dollar, you’re talking about a rather large tax increase,” he said.
Budget cuts alone will not solve the problems created by SB 431 should it pass, according to Fortuna.
“Can I cut over 10 percent of my budget? Probably not. Maybe I could and the town would have no reserves for capital projects and we’d impact our rainy day fund. It would be not prudent to cut your way out of this,” he said. “The bottom line is it would be a tax increase.”
Bishop acknowledged that the state’s budget woes need to be addressed somehow.
“The state is in a financial crisis,” he said. “They’re looking at a $2- to 3 billion deficit. You have to think of a way that we can get out of that deficit. But balancing that burden on our backs: That’s what we cannot tolerate. Shifting that burden of deficit onto our towns.”
Bishop said the outrage and worry could have been avoided had legislators consulted with the leaders of small towns before the bill was drafted.
“Before you do that, sit down and talk with us,” he said. “As leaders of municipalities, get our opinions so that we’re not in a reactive situation. Now we have to react to it. But maybe some of this could have been prevented if there had been more collaboration.
“There has to be a more collaborative approach if we’re going to solve the problems of our state,” Bishop said.