Competing PILOT Proposals in Connecticut Engender Nonprofit Opposition

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March 16, 2014; New Haven Register


A report in the New Haven Register says that leaders of the Connecticut House and Senate have competing visions for how to fix PILOTs (payments in lieu of taxes) to ease the tax burden on communities with lots of tax-exempt property. But both proposals face opposition from nonprofits.

State Senate Majority Leader Martin Looney and Hartford State Sen. John Fontara have proposed changes that would combine the state’s PILOT for colleges and hospitals with a reimbursement for taxes lost from state facilities in a town, eliminating the different reimbursement rates, reports the paper.

But House Speaker Brendan Sharkey has proposed a reverse PILOT, which would eliminate the tax exemptions for colleges and hospitals, charging them the full tax bill, with the ability to apply to the state for reimbursement for a portion of it. The Register reports that both concepts would be phased in over a number of years. Both are in the mix as the legislature debates major tax reform.

The Senate version would rank the towns based on how much in tax revenues they have lost due to tax-exempt property within their borders, with a descending formula of guaranteed rates, phased in over five years. Presently, the reimbursements fluctuate, depending on annual allocations by lawmakers.

Gov. Dannel P. Malloy has proposed increasing the PILOTs by some $8 million, but lawmakers are inclined to increase the governor’s proposal. Under the current PILOT statutes, the state can reimburse municipalities for up to 77 percent of the taxes they would have received from colleges and hospitals, and up to 45 percent for state properties. The paper says that, “in reality, it has rarely gotten close to those benchmarks, but over the last decade it has declined precipitously.”

Local governments dependent on PILOTs have been complaining about the dropping reimbursements and the uncertainty of funding. New Haven’s council has asked for full reimbursement. Yale University is already exempt as part of the Connecticut Constitution.

Nonprofit hospitals have been complaining about being subject to a state tax for the past two years, in addition to declining federal reimbursements. But legislators acknowledged that the public’s sentiment is toward taxing hospitals and creating a more level playing field. Many nonprofits with property holdings have been critical of the reverse PILOT proposal, and have expressed their concerns over potentially increased costs at public hearings.

“Private institutions need to provide quality service at a competitive cost to remain in business,” George Synodi, vice president for finance and administration at the University of New Haven wrote in a letter to legislators, adding that reverse PILOTs would not only put private colleges at a “further competitive disadvantage,” but also hurt the benefits they provide to local communities.

He told the paper that his university not only pays tax revenues and voluntary payments, but also is helping to revitalize the neighborhoods adjacent to the campus, while its students are the base to attract private development and is “the primary economic engine in West Haven.”—Larry Kaplan