Connecticut should boost its payments to cities and towns that lose money because of tax exemptions given to universities and hospitals, a state commission recommended this week.
The commission, chaired by New Haven Mayor John DeStefano Jr., issued a series of proposals designed to simultaneously reduce the state’s reliance on the property tax while encouraging “smart growth” throughout Connecticut. In its final recommendations, the commission unanimously proposed increasing state aid for education while enabling cities and towns to find new ways to fund local programs.
The report also recommended that Connecticut reimburse cities for all of the revenues lost because of state-mandated exemptions granted to institutions such as Yale University and Yale-New Haven Hospital. Currently, the state partially reimburses cities through its Payment-in-Lieu-of-Taxes (PILOT) program, which covered about 69 percent of property tax revenues lost from colleges and hospitals last year.
“Connecticut has been a leader in reimbursing municipalities for property tax losses due to state-mandated property tax exemptions,” the report said. “However, such PILOTs compensate municipalities for only a portion of the revenue that towns and cities lose to these exemptions.”
In New Haven, the issue of lost property taxes has served as a political flashpoint, as Yale and its critics have sparred over whether the University pays its fair share to the community. The Board of Aldermen passed a resolution in July that called for the city’s tax assessor to send Yale a statement “detailing all City tax revenues lost due to Yale’s tax-exempt status.”
The resolution, sponsored by former Ward 17 Alderman Matthew Naclerio, also directed the tax collector to send Yale an annual statement detailing the gap between reimbursements under the PILOT program and the amount of taxes Yale would pay if it did not have an exemption. The resolution “strongly urged” the University to make up the difference.
But if the Blue Ribbon Commission’s recommendations were enacted, the state would cover the entire property tax loss, projected at $156 million for the current fiscal year. Current state law directs Connecticut to pay about 77 percent of the lost property tax revenues to local municipalities, but the report said this year’s payment may only cover 65 percent.
Yale Associate Vice President of New Haven and State Affairs Michael Morand ’87 DIV ’93 said he had not read the commission’s final report, but he said the University was a strong supporter of the PILOT program.
“PILOT could be a stimulus for economic development and therefore a stimulus for job creation and revenue growth for the state itself,” Morand said.
Peter Rosa, an administrator for the Connecticut State University system and a member of the commission, said the panel was largely in agreement that cities were not appropriately compensated for lost revenues.
“The sense is that institutions of higher education are positive elements in the community on the one hand,” said Rosa, who was the only college administrator on the commission. “On the other hand, the state is not recognizing and supporting their presence and is in fact penalizing communities for having those institutions.”
But Woodbury First Selectman Richard Crane, a Republican whom Gov. John Rowland appointed to the commission, said the report was designed to stimulate public discussion rather than lead to specific legislation.
“We do not plan to say that this is a legislative roadmap — because frankly, I think every one of the members has one portion of it they objected to,” Crane said.
But Rob Smuts ’01, a policy analyst in DeStefano’s office who helped staff the commission, said the panel’s report reflects a widespread desire for changes. DeStefano, who is attending a conference in Indiana, was unavailable for comment.
“I think that we are pretty certain that these recommendations or something similar will eventually be implemented,” Smuts said. “There’s really a growing consensus that the property tax system is broken.”