EAST HARTFORD — House Speaker Brendan Sharkey told a group of business executives Friday that he wants to turn the tax system on its head by reversing the way colleges and hospitals are treated under the local property tax system.
Currently, cities and towns get a PILOT grant from the state, which refunds them about 32 percent of the property taxes those entities would be paying if they were on the tax rolls.
Under Sharkey’s proposal, colleges and hospitals could negotiate with the municipality about how much they should be paying in property taxes based on the benefit they bring to the community. Then the colleges and hospitals could apply for a grant from the state to offset some of those taxes.
“At least in this case the towns have the leverage,” Sharkey said.
Sharkey was the keynote speaker at the Hartford Business Journal’s Municipal Collaboration Summit on Friday at Goodwin College.
As far as hospitals are concerned, at least four in the state are looking to transition from nonprofit to for-profit entities, a move that would automatically put them back on the tax rolls.
He pointed out that over the years there has been a blurring of the traditional lines between nonprofit versus for-profit entities. He said there are nonprofits that are paying six and seven figure salaries to their top management.
“That traditional notion of the nonprofit as the do-good agency that runs on a shoestring and everybody’s doing it for the common good has kind of gone away,” Sharkey said. “They are actually recognizing it’s a different world.”
But the Connecticut Hospital Association said that like the rest of the nation, Connecticut enacted property tax exemptions for hospitals in recognition of their critically important role in the community.
“It is our hope that the state will keep the current tax exemption and PILOT funding structure in place,” Michele Sharp, communications director of the Connecticut Hospital Association, said. “We understand municipalities are under financial strain, and we applaud the governor’s efforts to increase funding to the PILOT program, which will provide them with additional needed relief.”
From a public policy standpoint, Sharkey argued it’s not fair that these organizations receive the police and fire services of the town, but don’t contribute to the tax base.
He said the lobbyists for the organizations that would be impacted are expressing concern, but also acknowledge this is the direction things are headed. He said this has been on the horizon for quite some time and the entities should have known this was coming.
The legislation was filed Thursday, but Sharkey has been talking about the concept for years.
In East Hartford, Goodwin College is the only entity that qualifies for PILOT funding and would be impacted by Sharkey’s legislation. Prior to 2004 and the construction of its Riverside Drive campus, Goodwin College was a for-profit entity and as such paid property taxes.
No one from Goodwin College was available for comment Friday, but Judith Greiman, president of the Connecticut Conference of Independent Colleges, said she doesn’t think Sharkey’s proposal makes sense.
“We don’t have drawers of money,” Greiman said Friday. “This would have a profound impact on our institutions at a time of high need for students.”
She said the colleges have a good relationship with their municipalities and many have voluntary payment agreements where they give money to the towns to use public services. She said this proposal would damage the critical partnerships that colleges, which are large employers, have with cities and towns.
But municipalities have largely embraced the proposal.
“The point of the matter is they’re growing their footprint and we’re ecstatic to have them in our town, but the demands on our public safety alone are significant,” East Hartford Mayor Marcia Leclerc said Friday.
In a sense, Leclerc said they are paying taxes because when the community needs a donation or needs something, the college makes its resources available. But these are difficult times and municipalities are struggling to find revenue from the only source they can — the property tax.
She said the state of Connecticut needs to look at itself, too. East Hartford receives PILOT funding for state property in town like Rentschler Field and even though the state promised it $1.2 million a year that money has never arrived. She said the most the town receives is about $300,000.
“There’s a huge gap there and it’s being pushed onto the backs of our taxpayers in East Hartford,” she added.
Asked Friday what he thought about the proposal, Gov. Dannel P. Malloy, a former mayor for 14 years, said he hasn’t spoken with Sharkey and wants to “reserve judgment.”
Pressed further about what he may have thought about such a proposal when he was mayor, Malloy said, “One side of the brain may think it’s a wonderful thing, and one side of the brain may think it’s a difficult thing.”
Sen. Majority Leader Martin Looney, D-New Haven, also has a PILOT proposal which would give a greater percentage of the grant to municipalities with a larger number of these tax exempt entities.
Sharkey is looking forward to a robust debate on the issue of property taxes.
He said prior to the current worldwide economic crisis the state of Connecticut was focused on the property tax. He said there were talks about how it should be capped and taxpayers were angry about the property tax.
“It was really the crisis before the crisis before the great recession hit,” Sharkey said.
At a time when municipalities are focused on finding efficiencies and the state understands that the more it’s able to give municipalities in funding the less they will have to increase the property tax — makes it a good time to look at the tax structure.
“If we don’t utilize the opportunity to address it, it will be the crisis after the crisis,” he said.
Sharkey said reforming more of the tax system and looking at a cap on property taxes will be at the top of his agenda during the next legislative session.