Harp Explores Suing State Over PILOT

Thomas Breen PhotoWhether or not other mayors join her, Mayor Toni Harp has instructed her legal staff to prepare a lawsuit against the state for failing to reimburse New Haven fully for revenue lost on tax-exempt properties.

Harp discussed the plans during her latest appearance on WNHH FM’s “Mayor Monday” program.

The question came up in reference to her proposed $547 million general operating budget for the fiscal year that starts July 1. Harp is seeking to raise taxes 11 percent, in addition to possibly laying off workers if unions don’t agree to $3 million in concessions. (Read about that here.)

Outraged readers have suggested that the city seek state approval to tax Yale, which has a $27 billion endowment, for its exempt properties.

On “Mayor Monday” Harp said she instead agrees with another commenter to the tax-hike article, RobN. He wrote that “Yale’s non tax status is impenetrable” because it’s written into the state constitution. “Focus on the state either meeting 100% PILOT or a ground breaking lawsuit returning billions of lost tax dollars to urban areas economically stranded by late 20th Century white flight.” PILOT refers to the Payments in Lieu of Taxes program, under which the state reimburses cities and towns for some of the tax revenue they lose on state-decreed nontaxable property owned by state government, colleges and universities, hospitals, and other nonprofits.

RobN further wrote: “1) Property tax exemption for large non-profit institution(s) is a creature of the state. They will pay the bill for this law if forced to.  2) The idea that large non-profit institution(s) are for the public benefit and deserve tax exemption is anachronistic. Today the benefits are, to a great extent, delivered statewide, countrywide and internationally; not delivered locally other than employment…something all local businesses deliver.  3) The Connecticut legislature eliminated county government in the mid 20th century and, combined with white flight from de-industrializing urban cores, thoroughly eviscerated the tax base.  4) Points 2 and 3 effectively violate Equal Protection. This is guaranteed by the 14th Amendment of the US Constitution, and Article 1, Section 1 and Section 20 of the Connecticut Constitution.”

RobN “must have been reading my mind,” Harp said.

In a newly published legislative agenda for the current General Assembly session, the Harp administration makes recouping PILOT money the top priority. The loss of state funding — while the state plans to funnel $40 million to Hartford to help it avoid bankruptcy — is a major reason the city needs to raise taxes, Harp said.

By statute, the state is supposed to reimburse cities for 77 percent of the lost revenue. In fact that figure has gradually dropped over the years to below 40 percent, Harp said.

“We’re not going to sue Yale,” she said, agreeing that a lawsuit would not succeed. “Yale’s not the culprit here. The culprit is the state” not living up to obligations under PILOT and school aid under the Education Cost Sharing (ECS) formula.

Limited Alternatives

In preparing her new proposed city budget, Harp directed all city department heads to submit proposed cuts. The prposed budget reflects some of those cost savings, she said. It also included a $5 million increase for the Board of Education, which claims it needs an additional $10 million this coming year just to continue covering current operations without closing schools, laying off people, or finding other cuts. And Harp said she will lay off workers if unions don’t agree to $3 million in concessions (in some cases traded for other contract changes that unions might find beneficial).

But she said the answer to New Haven’s tax pickle doesn’t lie in major cuts. She said that especially under former Mayor John DeStefano, New Haven already severely cut its workforce, learning to do more with less. The parks and public works departments do the same work they did in 2011 with about half the staff, she said. New Haven can’t significantly cut more and still “take care” of the city.

“I don’t believe we can afford to cut public safety,” Harp said. “Once you start cutting your police and fire,” quality of life suffers.

So, Harp said, she has directed her corporation counsel’s office to begin preparing a lawsuit against the state to demand it meet its statutory obligation to fully fund PILOT. She said city lawyers have been meeting with outside legal experts as well.

“We have got to go forward with this. We have got to help the legislature understand we’re not like Sprague or Milford,” she said, noting that New Haven’s average household income in $37,000 but can’t tax more than half its property because nonprofits own it.

Harp said she hasn’t yet convinced other mayors to join the suit.

“Hartford’s not interested,” she said, noting that that city is getting $40 million in extra state help this year. Bridgeport, meanwhile, has less tax-exempt property than New Haven does, she noted. She said she will seek support from other communities that might have more of an interest.

Bridgeport mayoral spokeswoman Rowena White said Mayor Ganim consider PILOT “an important issue” and will “definitely explore the conversation” with Harp.

Looney Skeptical

Harp’s idea met a more skeptical reaction from New Haven State Sen. Martin Looney.

Looney, who presides over the State Senate, predicted such a lawsuit would fail. While the PILOT statute authorizes the state to reimburse municipalities at a rate up to 77 percent, it doesn’t require the state to do so. Each year the legislature comes up with a percentage through the regulator appropriations process, “the way it worked all the years Toni [co-]chaired” the Appropriations Committee as a state senator, Looney said.

He called the state bailout of Hartford good news for New Haven and other cities. If Hartford goes bankrupt, he argued, other Connecticut cities would pay the price in lower bond ratings.

He said Hartford deserves bankruptcy because it’s in far worse shape than New Haven, which is the “envy” of the state because of its building boom and stronger finances. To argue that the state should equal the bailout money it sends to Hartford with extra money for New Haven, Looney said, is like arguing that emergency rooms shouldn’t triage patients. It’s like arguing that a “guy with three bullet wounds to the chest” should not take precedence over “a guy who fell off his bicycle and broke his ribs.”

Looney also defended state aid to cities. New Haven’s annual total state aid rose from $194 million in 2011 to $226 million in 2018, he said — a time when Connecticut otherwise kept cutting other parts of its budget, including eliminating 7,000 government jobs. He also said New Haven has fared better than other cities during that time: It receives 9.4 percent of all municipal aid (including education and PILOT and other grants) this fiscal year compared to 8.9 percent in 2011, its share of total municipal aid rising from 13.6 percent to 16.8 percent. Looney added that the state has sent New Haven $246 million in bond money for school construction since 2011 and another $343 million in bonding for other construction. (Click here to see a chart listings all the projects.)

The Yale Ask

 

Meanwhile, while Harp’s not looking to sue Yale, she is asking the university and other nonprofit “partners” like Yale-New Haven Hospital to pony up an additional $3 million a year to prevent a higher tax increase or deeper service cuts.

She said she has broached the idea with Yale President Peter Salovey with plans to follow up. Yale voluntarily pays the city $6.7 million a year in lieu of taxes plus another $2 million for fire service. Harp said she plans to argue that the opening of two new (tax-exempt) residential colleges creates a basis for upping the voluntary payments.

Yale spokeswoman Eileen O’Connor said the university hasn’t received a request from the city at this point, so it has no comment on its response. She noted that Yale is in among New Haven’s top five taxpayers, paying $4.5 million on its non-exempt property. She said the $6.7 million is based on a calculation of New Haven-based employees and on students living in tax-exempt dorms. She said that formula, which takes into account the Consumer Price Index, is updated every three years; since it was updated this year, Yale doesn’t plan to do so again for another three.

Harp said she has also discussed increased contributions from Yale-New Haven Hospital with its CEO and some board members. Yale-New Haven last year made a $2.7 million voluntary PILOT contribution in connection with the construction of its Smilow Cancer Hospital.

“They would rather help us with our medical costs,” which run $123 million for self-insurance, Harp said. “We’re still going to ask for money.”

Yale-New Haven Vice-President Vin Petrini said the hospital is “open to discussing what we can do to assist the city, but we believe it has to be part of a much broader conversation about the future of New Haven and the state. We need to explore creative ways to sustain existing economic progress for New Haven and build upon the embedded strengths of our local economy by encouraging future investment.”

Yale-New Haven Health System pays more than $200 million in state taxes, more than any other entity, Petrini noted. “Unfortunately, that money never finds its way back to the city from the state, so the mayor is absolutely right when she points to concerns about the inherent fairness of municipal funding.”

 

Click on the above audio file or Facebook Live video below for the full “Mayor Monday” program on WNHH FM.

This episode of “Mayor Monday” was made possible with the support of Gateway Community College and Berchem Moses P.C.

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posted by: robn on March 6, 2018  9:46am

Sen Looney may be correct describing the mechanics of the PILOT legislation but is wrong thinking that this specific legislation is the only target New haven’s argument is that any and all laws contributing to unequal taxation are unconstitutional. PILOT was a false remedy seeking to quiet New Havener’s who nearly sued the state decades ago. The PILOT legislation was written open ended (variable) and the legislature has slowly bled it of effectiveness and meaning.

posted by: wendy1 on March 6, 2018  9:46am

Better late than never, but she should have done this her first year as mayor.  And now shortly after her pay raise she has the gall to raise our taxes.  I cant wait until March 12th to roar my complaint.  I have to come straight from the train station and will miss the 6PM start but I want to be there.  She will not be there.  If she wants cash, go to Yale or save $$ by stopping all city services to Yale—-that’s her leverage and our save.  I dont know any working people or retired people who can afford to pay more.  Every citizen except the rich and we know who they are, is hurting.  And meanwhile train, bus fares, and utilities are insisting on 10% increases NOW.

We need people to defend themselves and push back.

posted by: Noteworthy on March 6, 2018  10:01am

Lies, Damn Lies Notes:

1. PILOT is a red herring, a fig leaf that covers the flacid and puny argument that New Haven is due more money from PILOT. Looney is correct - New Haven has gotten fared far better than most in these years of cost cutting at the state during Harp’s tenure. By the way, New Haven at last calculation got some 35% of all the PILOT money in the state and it fared better under ECS than many because it destroyed the neighborhood schools for new inter-district magnet ones.

2. The city has no money for a lawsuit, an appeal or to pay outside counsel even more money. If you can’t pay your bills, the city shouldn’t be creating new ones.

3.  Lie #1 - the state has to fund PILOT at 77%.

3. Lie #2 - DeStefano cut employment at the city. City employment stayed at 5,000 plus or minus a couple of positions. He did cut public works and parks. This was stupid because those are the departments that affect the most people. But the overall number stayed the same.

4. Lie #3 - The city can’t cut the budget. That’s worse than a lie - it’s utter BS. I’ll be happy to sit with the mayor and show her - start with her personal PR person at $50K plus benefits, the chauffeur etc.

5. Lie #4 - She asked department heads for budget cuts. This may start as truth - but the reality is spending increases; debt increases so who cares if Department X goes down if the total budget goes up.

6. Lie #5 - Can’t cut public safety. New Haven has the largest police force in the state and on a per capita basis, rivals Baltimore and its myriad of crime problems. The per capita rate exceeds the national average for a city our size. Reality check: There has never been a police utilization study and she has no idea how many cops we actually need. As for the fire department - it still answers medical calls in fire trucks and transports nobody. A study would address that too.

Bottom Line: If we’re to have a frank discussion about PILOT and this budget, start with ending the lies.

posted by: THREEFIFTHS on March 6, 2018  10:19am

Snake-Oil and Three card Monte Being sold.This will not happen.Keep your eye on the ace.

Three Card Monte | How to Scam Your Enemies.

https://youtu.be/VVC7bU2bL2U

posted by: robn on March 6, 2018  10:59am

NOTEWORTHY,

You’re correct that we should cut spending but here’s the ultimate truth. The Connecticut and US Constitutions forbid unequal treatment. Its unequal to deny New Haven the ability to tax half of its property and if the Legislature considers it a “public good” priority to exempt non-profits, the Legislature should pay the bill.

Its a non-argument that we already get lots of state funding and therefore should not pursue full 100% PILOT. NHV gets about $215M in state aid, $150M of which is educational aid. Even if NHV’s aid per student dropped to the state average of $3,800, we’d still be entitled to $80M in aid. Add to that $95M if PILOT for Yale property and however much from hospitals and other colleges….we’ll come out ahead.

posted by: newhavenishome on March 6, 2018  11:37am

This is a distraction. Cutting spending should be the focus. Harp has done nothing but increase spending since becoming mayor.
1. Close 2 schools. Consolidate the smaller ones.
2. Decrease staff at city hall and Central education offices. Believe me, we are used to horrible customer service. At least we’ll pay less for it
3. We do not need another free clinic. YNHH primary care clinic serves all low and non paying clients. The providers are top notch. Let them take care of health care as they do now.
4. HOLD YOUR ALDER ACCOUNTABLE IF THEY AGREE TO A TAX INCREASE.
5. Get rid of Harp. Someone else please run. Someone else that is not a career politician, that truly cares about New Haven. This increase will drive out those folks that are able to leave, just like what has happened at the state level.

posted by: 1644 on March 6, 2018  12:16pm

The state is broke, and the Supreme Court knows it, if only because the Judicial Branch has had its own cuts.  New Haven is doing better than many towns, and every other city, including those with less tax-exempt property.  It stands to reason, therefore, the presence of tax-exempt institutions like Yale and YNHH are helping, not hurting New Haven.

posted by: HewNaven on March 6, 2018  12:43pm

She said she has broached the idea with Yale President Peter Salovey with plans to follow up. Yale voluntarily pays the city $6.7 million a year in lieu of taxes plus another $2 million for fire service. Harp said she plans to argue that the opening of two new (tax-exempt) residential colleges creates a basis for upping the voluntary payments.

That’s a very sound argument. You can’t increase the size of the college and not expect to pay more for city services. I would definitely go ask Yale for more $ for fire services. I’m actually very surprised this wasn’t agreed upon long ago. They should re-visit that entire agreement.

posted by: Molly W on March 6, 2018  1:00pm

Yes, by all means, please press on Yale to increase its “contribution”. As a Yale staff member and New Haven resident, I’d love to be part of any effort to keep on this. And to ask for only more.

posted by: robn on March 6, 2018  1:22pm

1644,

Your point is irrelevant. Large institutions would help New Haven whether or not they were non-profits. The relevant point is that the state is treating New Haven unequally by not allowing equal taxation.

posted by: Ct Taxpayer for Reform on March 6, 2018  2:25pm

We (CT residents and taxpayers) don’t need more frivolous lawsuits between greedy governments.

posted by: Noteworthy on March 6, 2018  2:53pm

Robn:

Your argument for equal protection is interesting and a loser. It is not the state that controls the size or the number of non-profits in New Haven. I predict this argument will lose in court and while it’s in the process of losing, New Haven will make many more enemies than we already have for our bully practices of raiding every shared fund including the ECS. DeStefano before Harp and now Harp have financially engineered the city to harvest grant and other funding mechanisms with the state and feds. While that provides short term benefit, when the money dries up, local taxpayers who have been weaned on the public teat are screwed. We are now being screwed royally.

posted by: robn on March 6, 2018  6:41pm

NOTEWORTHY,

Whether or not the Legislature controls the number of non-profits in New Haven is irrelevant. Whats relevant is their legislative construct of tax exemptions for non-profits that in present day practice violates New Havens constitutionally guaranteed right to equal protection.

posted by: 1644 on March 6, 2018  9:03pm

Robn: What is unequal about the way the state treats New Haven?  To channel Anatole France, the law, in its majestic equality, forbids Darien and New Haven alike from taxing non-profits.

posted by: Molly W on March 6, 2018  10:34pm

Mayor Harp, please consider taking this perspective as you move forward. Let’s ask for much more and let’s know it is right: https://yaledailynews.com/blog/2018/03/06/an-ethical-endowment/

posted by: robn on March 6, 2018  10:39pm

1644,

To channel the founders, United States law is not meant to limit liberty; its meant to prevent the limiting of your liberty. If a law applied literally lets one see the light of day and puts the other in handcuffs, the law is erroneous and unconstitutional.

posted by: alphabravocharlie on March 7, 2018  12:02am

As the feds contemplate suing NH over being a sanctuary city.

posted by: JCFremont on March 7, 2018  9:33am

About time! They better get going because the way Connecticut is going the majority of large tracts of property will be owned by Universities and Hospitals. Alderman Mike Stratton began the process to get New Haven’s full share of PILOT funds, and try to dissect the cities bloated budget, unfortunately he was targeted as a racist and worse in this town a “Republican.” Agree with HewHaven, a increase in the voluntary contribution for the two new colleges. Of course New Haven has to ask what was there and what else could be there if not for Yale.

posted by: mikewestpark on March 7, 2018  11:27am

In order it gain outside assistance from some of these very politically powerful non-profits, so that they use their influence to pressure the state to resolve the issue, may I suggest that New Haven place a moratorium on any new nonprofit construction or the conversion of “for-profit” property to nonprofit property.  Stall Yale’s plans to expand and we might get a powerful ally in this fight.

posted by: vpaul on March 7, 2018  1:04pm

Good article, Paul, and great discussions in the Comments!

We should remember, however, that just because Yale acquires real estate that doesn’t mean it’s tax exempt. The use determines whether or not tax exemption applies. Seeking an increase in Yale’s contribution, due to the new colleges, would seem to be the best practical approach. The money is needed now, not 10 years from now even assuming Robn’s equal protection argument eventually wins in the US Supreme Court.

posted by: 1644 on March 7, 2018  2:35pm

Robn:  What founders are you referring to?  In general, the founders were very much in favor of liberty for themselves, but not so enthusiastic about it for others, particularly blacks, but also women and poor people in general.  Adams was opposed to the separation of church and the federal government.  Both he and Roger Sherman were enthusiastic supporters of established religions, so long as their religion, Congregationalism, was established.  In general, states were free to limit the liberties of their inhabitants any way they wished until after the civil war, and really until the 20th century.

posted by: JCFremont on March 7, 2018  4:01pm

Dear New Haven Independent, about your poll. Might a simple NO box be included?

posted by: FacChec on March 7, 2018  5:12pm

What Harp is exposing is nothing less than good ole grandstanding for the home team; she has been around long enough and participated with her affirmative vote, as it relates to pilot and state statutory grants to municipalities. As the attached link will demonstrate, New Haven is far ahead of the curve in receiving cash, even before other cities knew if they had exempt properties or not. So knock off the blame game Harp, after-all you were the culprit you now chastise.

Oh… and all you know it all pilot historians, show up at the hearings and stop hiding behind your computers complaining and writing BS essays about the pilot you don’t know.

Connecticut’s payment in lieu of taxes program is one of a handful in the nation. In almost every other state, there is no state payment to towns for the revenue that would have otherwise come in from tax-exempt institutions. Additionally, it is the only PILOT program that mandates reimbursement at such a high level.

http://www.theccic.org/Customer-Content/WWW/CMS/files/2005oped2.pdf

http://www.ct.gov/opm/cwp/view.asp?A=2985&Q=383162

OCH…....

posted by: FacChec on March 7, 2018  7:43pm

Governors 2017 - 2018- 2019 proposed budget. Start on page 43 to 93 New Haven categories. See particularly page 46, which contains New Havens pilot state owned property and pilot colleges & universities.  Pay particular attention to gov rec. 2018.
Budget must be passed or changed by legislature.

http://www.ct.gov/opm/lib/opm/budget/2018_2019_biennial_budget/may15budget_final.pdf

posted by: 1644 on March 7, 2018  7:50pm

Paul: I am still not sure what point Looney was trying to make about the Hartford bailout.  He says it deserves bankruptcy, yet supports the bailout because it helps other poorly managed towns like Hamden and New Haven.  In battlefield triage,  some injured are untreated because they are beyond saving.  Others are left untreated because, though they could be saved, saving them takes too many resources from others who could otherwise be saved.  Resources are concentrated on those who are in danger of life or limb loss, but can be saved with relatively little effort.  Hartford is probably in the second category: saving it takes too many resources from others.  It would be best to send it into bankruptcy, where it could have its debts reduced to a manageable size.  Like executing an admiral, it would encourage the other towns to behave more responsibly as well.  Meanwhile, well-managed towns would see demand for their debt rise, and their interest rates drop.  As it is, the state is throwing good money after bad, and even transferring debt from Hartford, which can declare bankruptcy, to the state, which cannot, though both are in terrible shape. Moreover, the $40-$60 million this year will be $80 million and more next year.  It’s long past time to pull the plug on Hartford.  Give it a clean slate like Detroit and Central Falls got.