City leaders breathed a sigh of relief Wednesday after a state legislative panel passed a new economic aid package that would provide $102.7 million for Connecticut in the form of PILOT, or Payment in Lieu of Taxes, funds.
If approved, the additional money in the package — which still has to be approved by the full legislature and the governor — would take some of the heat off of city legislators, who have been scrambling to fill an almost $10 million hole left in Mayor John DeStefano Jr.’s proposed budget after the state Appropriations Committee last week declined to provide DeStefano’s requested level of PILOT money. Under Wednesday’s package, approved by the state Finance, Revenue and Bonding Committee, revenue for the new funding would come from a new sales tax on parcel deliveries by companies like Federal Express.
The PILOT program reimburses Connecticut’s cities and towns for revenue they cannot collect from tax-exempt non-profit organizations, including universities like Yale.
While the Appropriations Committee cited recent declines in the funding provided by the program in order to justify its decision not to provide the full amount of money New Haven requested, the finance committee on Wednesday decided to provide money at the rate prescribed by the state: compensation of state-owned property by 45 percent and of college- or hospital-owned property by 77 percent.
DeStefano said Thursday that he thinks Hartford is under an obligation to provide compensation at the levels required by the statute, especially given the state’s mandates to municipalities to fund certain social programs.
“You can’t really have it both ways and say that cities need to be providing all of these services without the help of state revenues,” DeStefano said. “And it’s not that someone doesn’t pay a tax here. Middle-income tax payers are greatly overburdened on residential property taxes.”
This year, DeStefano requested over $55 million in PILOT funds, an increase from last year’s $45.5 million, a number that some state leaders — including Democrats — thought was too high.
Among the services DeStefano pointed to were greater shelter services than all other cities in Connecticut combined, a regional airport and tax-exempt hospitals that serve the entire region.
Ward 23 Alderman Yusuf Shah, chairman of the Board of Alderman Finance Committee said “any money from the state is welcome,” but he added that he thinks some of the burden of helping New Haven balance its budget should be placed on its largest property owner: Yale.
“If Yale would give more voluntary payments to the city of New Haven in lieu of all the property that is untaxed, we could fill some of the budget gaps that we have,” Shah said.
But Republican Sen. William Nickerson said Thursday that such logic overlooks the large quantities of money Yale provides to the city. Nickerson said he supports the mission of the PILOT program but is opposed to increasing taxes to pay for the program.
“Both Republican and Democratic leaders have made the observation that we are in or near a depression,” he said. “[We] agreed that this session would be about giving incentives to businesses, not taxing them.”
Nickerson said he would rather cut other services in the state budget to be able to pay for the PILOT program without increasing taxes.
DeStefano said that at this point, it is still unclear how the final budget will look. One idea the mayor has floated for closing the gap — lobbying the state to allow cities to implement a 1-percent increase in the sales tax — died this week in the Finance, Revenue and Bonding Committee.
“As of now, if I would choose anything, it would be a complete overhaul and review of the state tax structure,” DeStefano said. “I think there’s something to be said for driving your revenues from several sources instead of one to insulate against economic downturns disproportionately effecting any revenue streams. But that might only happen in a perfect world.”
The municipal aid package would also amend the Hotel Occupancy Tax, allowing a city in which a hotel is located to retain half of the income from the tax. Currently, occupancy revenues are taxed at 12 percent.