Three municipal officials told the legislature’s Finance, Revenue, and Bonding Committee on Monday that they would like to use more than just the property tax as a way of raising local revenue.
As the state’s payment in lieu of local property taxes grant to cities and towns for non-taxable properties like colleges, hospitals, and prisons continues to dwindle, local officials said it was even more important that lawmakers help create new local and regional revenue streams.
“We’re reacting to the inability of the state to finance these programs,“ New Haven Mayor John DeStefano said.
Some of the ideas discussed Monday included a regional hotel tax, a local sales tax, and the extension of the municipal conveyance tax.
Cheshire Town Manager Michael Malone said many of these ideas are not new. He said the state should seriously consider these local tax options and include a sunset provision, if they’re concerned about how the tax may impact residents.
Rep. Brendan Sharkey, D-Hamden, said the state is facing a “tsunami in 18 months,” and is looking at a $3 to $4 billion budget deficit. He said the state has to move away from the property tax structure in the long-term and in the short-term severe cuts in municipal aid just as the tsunami hits will increase the impact on the property tax, instead of lessening it.
“What can we do right now?” Sharkey asked.
East Hartford Mayor Melody Currey estimated that a regional hotel tax, raised from mostly those who don’t live in the state, could raise $5 to $7 million. She said this sounds like a reasonable tax for a group of towns to share.
She said anything the state can do to diversify the ability a municipality has to raise revenue will help.
“We’ve never been able to count on PILOT funds,” Currey said.
And Malone and DeStefano both said they would love to get rid of the car tax because it creates more headaches than revenue. Gov. M. Jodi Rell proposed getting rid of the car tax three years ago, but municipal officials didn’t believe they would receive the money from the state to offset the lost revenues.
Malone said the Tax Collector’s office in Cheshire expends 70 percent of its efforts colleting the car tax, which brings in only about 7 percent of the towns revenue. “It’s not something we like to do, but we’re fearful of giving it up,” he said.
Local officials also advocated for keeping and raising the municipal conveyance tax.
Traditionally the real estate agents are against the tax and say it impacts the sale of homes, especially during a time when a number of homes are being sold at a loss. The conveyance tax is a tax levied on the seller of the home.
Malone said if the municipal conveyance tax was raised it would only add $412 to the cost of a $294,000 home in his community. Annually the tax generated $200,000 to $350,000 for Cheshire.
A regional sales tax could piggyback off the state sales tax, Currey said. The tax would then be distributed by a Regional Planning Organization to the member towns. It’s unclear how much money the revenue the tax is expected to generated.
