Thomas Breen Photo
Department heads at tax-hike budget announcement.
Whether 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
Mayor Harp announcing proposed tax hike at Friday presser.
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.
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.