Perhaps even the most seasoned politicians — such as eight-term City Hall veteran Mayor John DeStefano Jr. — could learn a lesson from events this past week out of Hartford: don’t assume anything.
A decision by the state legislature’s Democrat-led Appropriation Committee last week — to not include in the state budget $10 million in PILOT, or Payment in Lieu of Taxes, funding to New Haven that DeStefano had been counting on in his proposed $466 million city budget — has some city and state officials scratching their heads.
Although the Democrats’ proposed state budget offered several newfound perks to New Haven, namely $100,000 for prison re-entry and an early-reading program, it did not add PILOT funding as DeStefano had — perhaps presumptuously, based on the recent history of the program — expected it would.
“We made assumptions that may prove to be wrong,” he admitted at a community meeting last week.
In total, state legislators allocated $45.8 million to New Haven this year, $300,000 more than they did last year. While the total quantity of PILOT payments generally increase from year to year, City Hall officials argue that the rate at which the sum is calculated has dipped. But state officials counter that a weakening economy — and Connecticut’s unusually high dependence on taxes from investment income — justify the figure.
Connecticut’s PILOT program, after all, which was established to reimburse municipalities for taxes they lose to tax-exempt properties in their jurisdictions such as Yale, has never provided for 100 percent reimbursement for lost revenue — a fact that officials point to in questioning why DeStefano made the assumption he did.
Yale already gives voluntary payments to the city, which are more than those given by most universities to their communities, Michael Morand ’87 DIV ’93, associate vice president for Yale’s Office of New Haven and State Affairs said.
For his part, DeStefano is insisting state officials — and, by extension, members of his own party — are only hurting Elm City residents: Taxes, he said, may have nowhere to go now but up — if, that is, city services are not cut first.
A ‘mystified’ lawmaker
What is particularly curious about the disconnect between DeStefano’s assumption and the Appropriations Committee’s decision is that Democrats, to whom the mayor is clearly loyal as its gubernatorial candidate in 2006, are behind the latter. Its co-chair, in fact, is New Haven State Sen. Toni Harp — no ally of DeStefano but a liberal Democrat nonetheless.
Pat Dillon, a Democratic member of the state House who represents New Haven, said she was “mystified” by the sums being thrown around.
“I don’t know where they get that number,” she said. “I’m not aware of anyone on the [state] delegation who could tell [City Hall officials] they could rely on that kind of money this year … That’s a very large number to put in [based on] speculation.”
Harp seemed to dismiss the mayor’s criticisms, simply stating in a state capitol press conference that it was “certainly not” what DeStefano “wanted.”
“But,” she said, according to the New Haven Independent, “it’s more than the governor allocated.”
In a statement that reinforces the unusually party-transcendent dynamics at play, Republican Gov. M. Jodi Rell’s spokesman, Adam Liegot ’94, praised Democrats: “[They] appear to be hearing [the governor’s] message of fiscal restraint,” he said.
But despite the preponderance of official confusion over the mayor’s expectation of $10 million more in PILOT funding, the mayor, through his spokeswoman, held his ground.
“We’re hoping the state will step up and get closer to the amount … they are supposed to be paying,” City Hall Spokeswoman Jessica Mayorga said.
She said the assumption was a reasonable one, pointing to the fact that state officials are not paying at the reimbursement rate they had set in fiscal 1999.
Yet state Fiance, Revenue and Bonding Committee co-Chair Cameron Staples, who represents New Haven and Hamden, explained that for several years legislators have consistently declined to fund the PILOT program at the maximum amount allowable under law.
He wishes that would change, he said, but to expect as much would likely be expecting too much.
“I would certainly support a dramatic increase, but that has not been the willingness of a lot of other legislators,” he said. Over the past several years, he added, “the increases have been relatively modest.”
But when Morand, the Yale administrator, also weighed in, he said there may be another side to the debate. He said the PILOT program in Connecticut is unusually “generous” and that Yale is one of the few universities that generate significant payments to its city.
“New Haven’s take of $300 million plus in the last decade make it the envy of cities across the country, who get zilch for PILOT,” he wrote in an e-mail.
And much of New Haven PILOT funds stem from property taxes lost from Yale, a non-profit organization that is not obligated to pay property taxes on non-commercial University-owned lands.
Still, Morand said, “we’re all working hard to keep the envy high.”
No ‘huge ideas’
To fill the gap in the city budget — which will only compound pre-existing budget woes — City Hall officials said they are considering several options, including removing city services.
The city, Mayorga said, is also considering implementing the New Haven Solid Waste Authority, which would reduce the city’s waste-processing costs, or pushing to institute a 1-percent sales tax, which faces uncertain chances of approval in Hartford.
“We will continue to examine a number of choices to meet our budget goals,” she said.
DeStefano said that ultimately the city may have to eliminate services or raise taxes, the Register reported. But several New Haven officials interviewed said they are still holding out hope that the state will come to the rescue.
Board of Aldermen President Carl Goldfield said he is unsure how the city can make up the deficit without state support.
“I haven’t heard any huge ideas,” he said. “At this point, the state legislative session isn’t over, and we’re still hoping to get the sales tax.”
But New Haven may be lucky to have ended up with its $45.8 million. Gov. M. Jodi Rell originally asked the legislature to slash overall PILOT payments by $1.8 million from its fiscal 2008 level and has criticized Democratic lawmakers for proposing a “make-believe” budget that made replaced cuts she requested with other cuts.
At the state level, PILOT payments reimburse cities for uncollected property taxes from state-owned property and private hospitals and universities, all of which are not obligated to pay property taxes to the municipality. Under a similar program, the federal government provides small sums of money to states.
The state rate was set at its highest in 1999, when the state covered about 70 percent of lost taxes. But in 1978, at the program’s start, the net reimbursement rate was a third of next year’s rate.
Harp, the committee co-chair, was unavailable for comment over the weekend. Ward 23 Alderman Yusuf Shah, chair of the New Haven Board of Aldermen’s Finance Committee, was also unavailable for comment because of a family emergency.
A final budget still must be passed by the full legislature.
—Aaron Bray contributed reporting.