Harp: Guv’s Budget “Pretty Good” For New Haven
| Feb 6, 2014 9:34 am
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Posted to: State, City Budget
When the governor opens the new legislative session Thursday, he will propose millions of new dollars for New Haven—and, according to one person familiar with the plans, an $8 million statewide boost in “PILOT” reimbursements.
“It looks like a pretty good budget,” New Haven Mayor Toni Harp said Wednesday.
On Tuesday afternoon, Harp joined other Connecticut mayors at a state Capitol budget briefing by Benjamin Barnes, the governor’s budget director.
Harp said she couldn’t share specific numbers from the budget. She agreed to abide by an embargo on budget information until the governor reveals it in his State of the State address on Thursday at noon. “It’s certainly better than it has been,” Mayor Harp said of the proposed PILOT increase.
Another person familiar with the plans said Malloy is proposing upping the amount the state reimburses local communities for tax-exempt colleges and hospitals under the Payments In Lieu Of Taxes (PILOT) program from $115 million to $123 million. New Haven currently gets a little less than a third of that money.
Harp did say the governor’s plans include new money to New Haven for bridges and Urban Action grant program dollars for other economic development, mass-transit, and housing projects.
Connecticut operates on two-year budget and is currently mid-cycle. On even years, the governor and legislature can make adjustments to the budget. This is an election year, and the state’s running a predicted surplus, so budget-strapped cities like New Haven will be pushing for additional money.
“it’s something,” Prospect Hill/Newhallville Alder Michael Stratton said of the governor’s proposed PILOT increase, which if approved could send a bit more than $2 million to New Haven.
The state is required by law to send money to cities like New Haven that have a significant amount of untaxable property, including colleges and hospitals. The state hasn’t fully funded PILOT for over a decade. Some 45 percent of New Haven’s property is untaxable.
Stratton authored a non-binding resolution unanimously passed by the Board of Alders Monday night calling on the state for full PILOT funding. By state law, the state is supposed to reimburse the city at a rate of 77 percent of the property taxes the city would receive from land belonging to university and hospital properties, and 45 percent for state-owned buildings.In recent years, however, the state has not even come close to hitting the 77 percent mark. Most recently, according to Stratton, the state paid only 32 percent for college and hospital properties and 23 percent for state properties.
Stratton said what’s really needed is a long-term “culture shift” toward predictable and complete PILOT funding.
Apart from the proposed “slight increase” in PILOT, the governor’s proposal will maintain (rather than cut) education cost sharing funding along with the bridge and urban action money, Harp said.
She said the budget adjustment includes more money for bridges and more “urban action” capital funds, special funds for Connecticut cities.
“It’s a positive budget for cities,” she said.
Harp said she nevertheless would like to see more for New Haven. “It would be a poor dog who didn’t want another bone,” she joked.
She said she’ll be working to secure funding for a new garage at Union Station, as well as Hill-to-Downtown development. She said she’s also looking for money for jobs for young people, and funds for rebuilding the Q House.
If state ends the year with a surplus, Harp said, she’ll look for help with storm expenses. The city “badly needs” new public works vehicles, Harp said.
Stratton: Don’t “Get Reasonable”
Overall, Harp said she’s “feeling really good about” the governor’s proposed budget adjustments. She said she supports the alders’ bill calling for full PILOT funding. “I will sign it,” she said. “I think we should keep saying it should be full funded.” Still, she said, full PILOT from the state is probably not going to happen. “I don’t think it is. But we should still ask.”
As part of her new 2014 state legislative agenda, Harp set a goal of a $5 million increase in PILOT money for New Haven. With an $8 million increase planned statewide, it appears unlikely that New Haven would see that $5 million increase.
Alder Stratton said he learned a lesson early on in his career as a trial lawyer: “The first guy to get reasonable in negotiations loses.”
After the proposed $8 million increase is divided between Connecticut cities, the governor is “basically giving the mayor about half of what she asked for. Maybe less,” Stratton said.
Stratton said the city is owed about $50 million in PILOT. “Asking for less than we’re actually due sends a message that it’s OK” to not fund PILOT, he argued. “I’m less interested in sort of random dollars that get sent our way,. I’m more interested in how do we create a stable and predictable revenue stream.
“The point of the [alders’ PILOT] proclamation is to get what we’re actually due, and to make it mandatory so that we don’t have to worry whether or not that money’s coming. We need a culture shift that’s put in place in this legislative session.”
As the 2014 legislative session opens, the PILOT target is one of dozens of items on the mayor’s state legislative agenda, which her administration has distributed to the members of New Haven’s Capitol delegation.
The agenda includes a number of proposals that have been longstanding New Haven requests, such as permission for cities to levy hotel and restaurant taxes. Harp also asks for a tax on sugary drinks to combat childhood obesity.
And to deal with empty storefronts, Harp seeks state permission to look into imposing a tax or fee on landlords who leave commercial properties vacant.
Harp also wants the city to receive more of the take when it issues traffic tickets. Currently, most of the money for speeding tickets goes to the state.
The agenda includes a host of proposals aimed at problem bars and nightclubs in New Haven. Harp wants to require bars to pay for policing, license bouncers and nightclub promoters, and make permanent a law that allows the chief of police to have a say in liquor permit renewals.
Click here to read the full agenda.
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posted by: FacChec on February 5, 2014 5:51pm
It appears Harp is not changing her decades long tax, spend, debt service ways of doing business at the taxpayers’ expense. She is now proposing 10M in new spending for the 2014/15 budget.
This year New Haven received in excess of 6.6M from Harp and the state. Harp is now asking for 10M, but according to Stratton she will receive less than 2M.
Why is it so difficult to understand that in order to fund New Haven at 77% for pilot including education and at 45% for state owned property, the state will have to allocate millions more in new taxes into the pilot program. Something Harp did not do when she was at the helm.
What New Haven needs to do is verify that the current 45% of properties are truly exempt and start taxing those who are verified.
Let’s hope that Harp’s budget does not anticipate 10M in new funds and receive only 2M. The result will be another over estimated revenue budget, resulting in another deficit.
posted by: ELMCITYPROF on February 5, 2014 6:56pm
Is a tax on sugary drinks REALLY the optimal way to combat childhood obesity? Do our schools have a comprehensive plan for integrating health and wellness? No. Does the health department provide workshops to parents? No. Does the city partner with community groups to offer healthy cooking/eating classes year round? No. Do all schools have adequate athletic facilities to facilitate this? No. Are our schools equipped to address how childhood obesity is linked to emotional wellbeing and self esteem? No. Does the Parks and Recreation department offer a comprehensive set of programs/classes/teams/etc that are affordable and well rounded like Hamden? No. Let’s address the root cause rather than taxing a symptom
posted by: THREEFIFTHS on February 5, 2014 6:58pm
This say it all.
posted by: McKitt on February 5, 2014 8:57pm
While it’s true that millions in new taxes will be necessary to fully fund PILOT, if these taxes were apportioned equally across Connecticut, New Haven would disproportionately benefit from such an action because of the substantial combined value of its tax exempt properties.
With the increased PILOT revenue, the mill rate could theoretically be significantly reduced, as the city won’t be as dependent on property taxes. This means that New Haven residents can begin to pay more reasonable taxes, as compared to present situation of subsidizing the suburbs.
Pie in the sky perhaps, but it would certainly not be at the expense of New Haven taxpayers.
posted by: robn on February 6, 2014 12:24pm
PILOT may be increased from $115 million to $123 million? If the state currently meets less than half of the statutory requirement, then the proper ask would be to increase the PILOT payment from $115M to $230M.
posted by: Brian R on February 6, 2014 1:49pm
Any numbers people out there know what the REAL effect on the mill rate would be if PILOT were fully funded? I’m curious to know how this effort by Stratton would actually affect my property taxes.
posted by: McKitt on February 6, 2014 2:30pm
The city budget predicts $250 million revenue from property taxes, and Stratton estimates the state “owes” New Haven $50 million. If that’s correct, then the mill rate could be lowered to 80% of its present value, or about 33 mills. This assumes PILOT being fully funded and all expenses held flat (yeah right).
posted by: robn on February 6, 2014 3:07pm
Good question. The current mill rate is 40.8. A mill is a tenth of a percent tax so that means you’re paying 4.08% tax annually on your home (I’ll pretend your home is assessed at $200,000; and you currently pay $8,160 in property tax.)
If the BOA doesn’t try to just spend a potential PILOT increase and if full PILOT funding doesn’t affect other state aid (currently the state gives us 30% of our budget for Education plus another 12% for other stuff) we could put additional PILOT funding toward the budget amount currently paid for by property taxes; that number is $245M (49% of our budget). If we suddenly had an extra $115M, that’s 47% of the current budget amount paid for by property taxes; so your property taxes would go down from $8,160 to $4,325. If the state only increased PILOT by $50M (don’t know where he got it but it’s Stratton’s figure) , that’s 20% of the current budget amount paid for by property taxes; so your property taxes would go down from $8,160 to $6,528.
To put this in other terms, if we got $50M more, our mill rate would be on a par with surrounding towns. If we got $115M more, our mill rate would be close to the state average.
Sounds good no?
Budget_July 1, 2013-June 30, 2014
posted by: Brian R on February 6, 2014 3:25pm
Thanks, Robn. It sounds like Stratton’s efforts are definitely worth pursuing - especially considering that many complaints from residents is that the tax burden on homeowners is too high. If more reasonable property taxes (without cuts to existing services) were implemented, it might stave off middle-class flight to neighboring towns, and perhaps even encourage home ownership in New Haven (thus increasing the mill rate even more).
posted by: mstratton on February 6, 2014 3:51pm
Last year the state passed a 2 year budget. We are now in second year of that budget. The budget badly underfunded PILOT. We were supposed to by statute get 77% on hospitals and universities. The rationale is that the region gets 77% of the benefit of these institutions and New Haven enjoys 23% of the benefit. This makes sense when you look at statistical analysis done by data haven. For example, one data point shows that of the 50,000 livable wage jobs (defined as 45k plus) generated within the New Haven economy, 81% go to suburbanites, 19% to New Haveners, and only 4% to inner city!
Without PILOT reimbursement, the region pays nothing for the benefits we provide and pay for. When state doesn’t pay full PILOT, New Haveners are stuck holding the tab for benefits received by people outside New Haven. This is like a daily carpool where only the driver contributes to gas. Its called ‘free riding” and its just wrong.
The region would be in serious trouble without the hospital and the suburbs are very dependent on the cultural, educational, and job pops.What happens to demand for homes and quality of life in Guilford without Yale?
If we were allowed to tax Yale which is now illegal by state law and many court decisions reinforcing their exemption, my own calculations shows them paying 70 million a year (40 mills on 1.3 Billion in prop). The PILOT is supposed to pay us 77% of that 70 million or about 56 million just for Yale university and hospital. Add to that Albertus, Gateway, Hopkins, and the many churches, galleries, museums and we should be getting about 85 million total. Last year we got about 35m-50 million worth of free riding. Malloys 2 million add on to the biennial budget should not be disregarded as a pittance but it is wholly inadequate,48 million still owed. So we take care of most of states homeless, prison reentry pop,special needs folks, and families in poverty. In return the region says “thank you for the free lunch,gotta get back to Madison!”
posted by: mstratton on February 6, 2014 4:08pm
My biggest surprise when I began closely examining the city budget was that there is much less waste and mismanagement than one would assume. There are many ways to use our resources more optimally but its not like we are losing 15% of our revenue out the back door due to fraud corruption etc. The problem is on the revenue side. The region is living off our backs and not paying. They get 80% of the benefit of our non profits (this is well documented—jobs, usage, prop value impact) but pay absolutely nothing. State law says we cannot tax anything other than property (car and real estate) within the city. For example, we can’t do income tax, commuter tax. We also are prevented from taxing non profits. This is a state law. It could be changed but until then we are stuck. It has been challenged many many times and it is established no taxing Yale till state changes law.
So what did state do to remedy this injustice? In 1991 or so, they passed a state income tax in order to among other things fund PILOT at 77% . This balanced the unfairness. The region was now paying for their benefits provided by New Haven. And up till 2001, we received that amount. Then it began falling to 32% this year. The region is paying well less than half of the benefit it receives. They are getting a free lunch 4 days a week from city taxpayers. They are also leaving city leaders in an impossible budgeting dilemma: How do we anticipate what we have in revenue if the number from state wildly swings? So thats why the alders look like incompetents when we get to budgeting: residents and region says “how do these numbskulls end up with a 10-15m deficit every year or two, throw the bums out”. The reality is the region is throwing us into disarray and there are no numbskulls, rather there are some very shrewd folks seeing how much they can take without paying for it, and these folks do not live in New Haven. It is time to get what we are due-not by aggression, but rather advocacy and fact NOW.
posted by: TheMadcap on February 6, 2014 5:07pm
Nice comments alder Stratton
posted by: FacChec on February 6, 2014 5:23pm
@mstratton on February 6, 2014 2:51pm
@mstratton on February 6, 2014 3:08pm
Slow your roll Stratton, you’re shooting from the lip, again, without even spending 10 minutes on the finance committee.
I disagree with 85% of the comments you posted back to back.
First:” You said “Without PILOT reimbursement, the region pays nothing for the benefits we provide and pay for. When state doesn’t pay full PILOT, New Heavener’s are stuck holding the tab for benefits received by people outside New Haven”.
Response: People in the region pay more in taxes per capita towards pilot than those in New Haven.
New Haven created this tax exempt network of people services in order to attract federal, state and private grants and tax breaks, in order to pay the CEO’s six figure salaries and allowing them to live outside the city.
That line about having a “revenue problem” is straight out of the DeStefano’s twenty year play book. The city receives 49% of its operating budget from state and federal governments, the mayor annually over estimates income, loaded with gimmicks, such as employee reductions, vacancy savings, increased building permits, and increased meter collections, balanced BOE budgets. At the same time the mayors expends every dime of that revenue, producing a deficit in 3 of the last 4 years. At best you only raise 51% of your own money,
The Mayor is proposing increasing spending by $10M, with not ability to raise your new money locally. The problem is and has been spending.
You said you have discovered that fraud and corruption does not exist; that’s good, but the administration has never been accused of fraud and corruption.
You said the aldermen are not numskulls, I agree, they’re just skulls (talking heads), as you will shortly find out.
You claim that “the region is throwing us in disarray”, on the contrary, the region trying to prevent you from bankrupcy and killing yourselves in the aftermath. This must stop.
posted by: alex on February 6, 2014 6:00pm
Do you really think the effective way to persuade people living in the suburbs to pay more in taxes for services in New Haven is to lambast them as “free riders,” or is that just what the lobbyist said?
I think a much more fruitful line of argumentation might consider how underfunding New Haven services doesn’t actually help Guilford and Madison and may in fact be harming them.
Truth be told, despite all the adversarial rhetoric—as you point out—New Haven is in a strong economic alliance with surrounding communities. It’s time to build coalitions for regionalization—not cracking heads.
posted by: FacChec on February 6, 2014 6:27pm
Allow me to put this issue in its correct dollar perspective with subsequent tax implications for New Haven.
Pilot for colleges and hospitals for 169 towns and cities in the state are allocated $115.4M.
The city of New Haven currently receives $38,569M.
Pilot for state owned property for 169 towns and cities in the state are currently allocated $73.6M. The city of New Haven currently receives $5.338M. Therefore doubling the current $115.4M state wide allocation will cost you a considerably increase in state income or excise taxes. This is no bargain.
New Haven’s current mill rate is 40.80 up from 38.88 - 12/13 budget. If you look at your tax bill, for your home, auto or personal property (bottom right) it tells you; if New Haven did not receive state assistance, your mill rate would be 76.15 x 70% of assessment.
The majority of state received pilot for New Haven goes to pay salaries and benefits to 65% of city employees who live outside of New Haven where they pay lower mill rates, but have higher assessments due to larger land lots and other amenities not found in the city.
In conclusion, the state is only obligated by the same statue which allocates 77% and 45% pilot to cities and towns, to pay only what has been allocated to the line item by the appropriation committees and evenly divided by the assessed property exemptions per town.
Be careful what you ask for if the city receives more, the state will tax you even more than that.
posted by: cedarhillresident! on February 6, 2014 7:53pm
Well said Stratton!
Alex I get where you are coming from…but question..the suburbans call new haven free loaders ect. And at the end of the day they run from our city. But yet they have no issue working here, dumping there homeless here, When residents from there citys get out of jail they drop them off here. I think strattons statement is a fair one.
posted by: SteveOnAnderson on February 6, 2014 8:23pm
This is a lot of beating around the bush. Look, I understand that we’re never going to change the state constitution that grants Yale non-profit status. However, Yale University has obviously transformed over the past 40 years into a financial & patent-profiting giant. As it uses its resources to expand throughout the city, it pushes up property values. But since it does not pay taxes on any of its non-commercial development, the rise in property values falls on other tax-paying entities in the city. People who dismiss this perspective as a simplistic “tax Yale for New Haven’s problems” argument are missing the structural role Yale plays in this city driving Brian R’s and robn’s property tax complaints (among other problems).
It’s important to realize the magnitude of Yale’s financial transformation. From 1980 to the present day, Yale’s endowment has increased from under $1 billion to over $22 billion (http://investments.yale.edu/images/documents/Yale_Endowment_12.pdf). Revenues from patent licenses grew from just over $5 million in 1996 to over $45 million in 2000. I am sure that number is well over $100 million today. I do not believe that Yale’s educational facilities should be taxed. However, I believe that the commercial profits it makes from patents and its financialized endowment are not tax-exempt.
In Princeton, there is a lawsuit against the university challenging the tax-exempt status of its patents. New Haven would be wise to look into it:
“In 2011, Princeton University received $118 million in patent royalties and distributed $30 million from the profits to faculty members. Under the law they are not even entitled to a tax exemption because they are engaged in commercial patent licensing, and the school give out a percentage of profits to faculty. Under the law in New Jersey, if a nonprofit gives out profits, it is not entitled to an exemption at all.”
posted by: robn on February 7, 2014 10:14am
Princeton was overly bold and exposed themselves to this lawsuit because they distributed the profits directly to instructional staff as opposed to putting it into the endowment (from which investment interest support’s the school’s mission). No that Yale staff need it; currently Yale’s average compensation for instructional staff is $145k/yr; $192K avg for full professor.
However much I would like to think its a matter of degrees, you can’t harvest tax dollars from a rich or a poor non-profit institutions unless you successfully dispose of the concept that the wealth they accrue is for a greater societal purpose. Personally I don’t think churches should get tax exemptions but society and the law says otherwise.
The law being what it is penalizes New Haven for hosting such institutions. PILOT is supposed to eliminate that penalty by compensating our loss of tax base. We either get PILOT back up to its logical statutory level or prove that Yale isn’t really a non-profit, or we eliminate non-profit tax breaks entirely (I don’t think the latter two are going to happen).
posted by: robn on February 7, 2014 11:45am
I’ve looked but can’t find it. Can you point out the state statute that allows PILOT payments to be arbitrary depending upon the whim of the legislature?
I did dig up an interesting paper prepared for the town of Windham explaining in some part, the chronology of PILOT in CT.
posted by: FacChec on February 7, 2014 12:06pm
@robn: In response to your request,
robn on February 7, 2014 10:45am
Here it is, see section (B) particularily.
From the heading, Stratton calls for full pilot.
posted by: FacChec on January 31, 2014 4:56pm
The reason the city’s request for full 77% pilot payment is repeatedly denied is due to the conditions tied to the law outlined in:
STATE AND LOCAL REVENUE SERVICES.
DEPARTMENT OF REVENUE SERVICES
Sec. 12-20a. Grants in lieu of taxes on real property of private colleges, general hospitals, chronic disease hospitals and certain urgent care facilities. (a) On or before January first, annually, the Secretary of the Office of Policy and Management shall determine the amount due to each municipality
But Sec (B) provides the following restricting related to the amount of money approved by the state legislature:
(b) The grant payable to any municipality under the provisions of this section in the state fiscal year commencing July 1, 1999, and in each fiscal year thereafter, shall be equal to seventy-seven per cent of the property taxes which, except for any exemption applicable to any such institution of higher education or general hospital facility under the provisions of section 12-81, would have been paid with respect to such exempt real property on the assessment list in such municipality for the assessment date two years prior to the commencement of the state fiscal year in which such grant is payable. The amount of the grant payable to each municipality in any year in accordance with this section shall be reduced proportionately in the event that the total of such grants in such year exceeds the amount appropriated for the purposes of this section with respect to such year.
Section B will be your hurtle Stratton.
With respect to Yale, who along with Trinity College in Hartford, they have a State super exemption against taxing education institutions, going back to the 1880’s.
posted by: robn on February 7, 2014 2:13pm
What kind of bUll$#!T law says the legislature will pay a very specific amount to towns unless the legislature decides not to? This one apparently.
Since there’s a very long history of PILOT (back to the 1930s), I’d like to know when the BS “amount appropriated” language got in there and who wrote it.
posted by: Serf of New Haven on February 7, 2014 2:37pm
The current socioeconomic/political structures in CT is why we lead the nation in income inequality. The suburban towns will never allow regionalization without the bully pulpit of the Governor and the full force of his executive apparatus pushing to make it happen. Despite having a Democratic Mayor, a logical party choice for addressing these massive disparities between poor and rich, we have Malloy, another Democratic crony capitalist for sale to highest bidder. Unfortunately, he’s joined at the hip with business as usual Tony Harp, also towing the crony line for small crumbs.
New Haven needs to take part in its’ own destiny and no longer be the beggar. By luck we have Yale and Yale Medical which has allowed the city to thrive despite of itself. I have to say I’m astonished at how much pay Yale professors get, more then triple the national average, a doubling in ten years. If it is true that Yale has sealed its non-profit status for eternity then creative solutions should be proposed, including some type of commuter taxes, student taxes, and progressive income taxes derived from those working in New Haven. In the meantime, New Haven needs to live within its’ means. Property taxes can not go up anymore when median household income has been going down since 1999.
Make no mistake, if you can’t get a fully funded PILOT with a Democratic Governor and Legislature you will never get it. The Democrats in this state delivered the middle class an income tax hike as soon as Malloy was elected. They could have taxed just the 1% who took in 90% of the gains with a bigger percentage but no, Malloy wanted it to be shared equally by all. This is the Democratic Party in CT.
I hate to see the Stratton and the BofA use up time and energy on regionalization type legislation the current Governor has no intention of ever supporting. We should be originating and pursuing other revenue streams while trimming city services and payroll whenever possible.