As city officials struggle to balance New Haven’s exhausted budget, Mayor John DeStefano Jr. may return to an age-old strategy for procuring revenue: taxes.
The Elm City is considering raising taxes or introducing new forms of city taxation for the 2009 fiscal year in order to counterbalance next year’s expected city budget deficit. But new forms of taxation — especially a municipal sales tax — will require state approval from the state’s General Assembly, whose members have proven reluctant to support new taxes, several New Haven aldermen said.
During an Oct. 22 press conference, DeStefano said he was considering whether to lobby the state legislature to examine the possibility of approving a city sales tax, income tax or hotel occupancy tax. On Wednesday, DeStefano said in an interview that he continues to review a “broader series of choices than just the property tax,” but that the process of passing a new city tax in the state legislature would be “difficult.”
“The state would necessarily view giving the cities and towns the authority to implement sales or personal income taxes as, frankly, infringing on their revenue base,” DeStefano said. “It’s a limited pie.”
Currently, the city only possesses the authority to levy a property tax, which applies to houses, business property, automobiles and boats. No Connecticut city has the authorization from the state legislature to introduce any other type of tax. Ward 9 Alderman Roland Lemar and Ward 20 Alderman Charles Blango introduced an item to the General Assembly’s Finance, Revenue and Bonding Committee in April that would allow municipalities across the state to instate a 1 percent sales tax in each town or city. However, the committee was “reluctant,” as Lemar put it, and never acted upon the item.
New Haven’s depleted fiscal condition is exacerbated by the fact that half of New Haven’s property — owned by churches, hospitals, non-profits and education institutions such as Yale — is exempt from taxes. Under the Payment in Lieu of Taxes program, the state government is responsible for paying 77 percent of the total amount these property holders would have paid if they were not tax-exempt, but this year the state government only paid 52 percent of that amount, Lemar said.
Ward 23 Alderman Yusuf Shah said the responsibility lies with city representatives in the state senate — Democrats Toni Harp and Martin Looney — to rescue the city from the brink of financial disaster by introducing legislation that will allow other forms of local taxation. With the shrinking amount of state funding trickling down to New Haven, the city must find an alternate method of obtaining revenue. If not, he said, city leaders will be forced to make impossible decisions that will involve cutting important social services and making further layoffs. If the city could only have greater control over the money it collects from its residents in the form of a municipal sales tax, he continued, New Haven would be able to dig itself out of its economic hole rather than depending on state assistance.
“They haven’t gone up to Hartford to fight for anything for New Haven,” Shah said of the city’s representatives in the legislature. “We don’t have people fighting for us the way they need to fight for us.”
But Harp said municipal sales taxes are not the most effective answer for New Haven. These taxes would drive out businesses from New Haven, she said, in a time when the city is already experiencing the ill-effects of economic stagnancy.
“Frankly, I don’t think there is a lot of support in the General Assembly for it,” Harp said in a telephone interview.
Instead of local sales taxes, Harp suggested that a possible solution to the municipal revenue shortage may lie with a regional sales tax that would allow cities and towns to redistribute money and services amongst themselves. This system of separate regional taxes might lead to greater efficiency in the dissemination of city-funded social services, she said, and would stand a greater chance of finding approval in the money-strapped General Assembly.
“I am hoping the federal government will provide the state with more money to distribute to municipalities,” Harp said.
Local sales taxes are not the only revenue-raising ideas on the table for the Board of Alderman, Lemar said. City officials are also considering a commuter fee for individuals who must commute to work in New Haven, he said.
But whatever action the city chooses to take in order to gain adequate revenue, it will not be unilateral, Lemar said. Any adequate solution to the city’s fiscal predicament will involve a variety of money-saving measures, Lemar said.
“It’s definitely a challenge,” Lemar said. “If it was just an easy answer, it would have been done already.”
—Zeke Miller contributed reporting.