The House approved Saturday a prospective version of Speaker Brendan Sharkey’s proposal to get colleges and hospitals to pay property taxes to towns.
The legislation, which passed in a 91-45 vote, would see tax-exempt institutions paying local property taxes on properties they acquire after July 1 if those properties were on the town’s grand list as of October 1, 2013.
The bill is a scaled back version of the “reverse PILOT” bill Sharkey sought to pass this year. PILOT is an acronym for Payment In Lieu Of Taxes, a grant the state uses to reimburse towns housing non-taxable institutions. The payments represent a fraction of what towns would otherwise tax on the properties, which puts some municipalities in a bind.
“In some towns you literally have universities snapping up private residences, dozens of them on a yearly basis for student housing,” Rep. Mike D’Agostino, D-Hamden, said. “Obviously that removes taxable property from the tax rolls. This bill does a nice job of giving the towns a little bit of leverage in that situation. Frankly, I wish it was retrospective.”
The new prospective bill was a compromise by Sharkey, who received pushback from some members of his caucus on the proposal over concerns about how it would impact colleges and hospitals.
Sharkey said the compromise “still plants the seed for further conversation about property taxes generally, which we’re going to do beginning right after session, actually.” In the meantime, he said the bill focuses “at least on the problem that a lot of communities are facing with regard to properties being taken off the tax rolls by large nonprofits who are expanding.”
However, some lawmakers opposed the legislation during the floor debate over concerns regarding how it will impact some of those nonprofit expansion plans. Rep. Dan Carter, R-Bethel, said the bill will force expanding hospitals to look for property that is currently owned by another nonprofit if they want to avoid paying property taxes.
“This is going to make it difficult for some of the hospitals in our state to expand,” he said. “As you know, our goal now is to create accountable care models and accountable care organizations. And with that, they are buying up some properties around the area near the hospitals. It’s very difficult for an institution . . . to go out and target something owned by another nonprofit.”
Carter said the bill could also stifle attempts by nonprofit hospitals to buy up or merge with for-profit hospitals.
Rep. Craig Miner, R-Litchfield, said the bill acknowledges a failure by the legislature to plan for and fund the policies it enacts. Lawmakers decided that colleges and hospitals should benefit from certain tax breaks, but then failed to adequately reimburse towns, he said. Rather than correct that, the legislature is now seeking to change the rules it previously made for nonprofits, he said.
“I wish we had continued to fund the [PILOT] formula to be quite honest with you,” he said. “. . . Now we’re going to draw a line on a date and say ‘We get what we did before, but if you buy something from this point forward, now you’re going to pay tax.’”
The bill will move to the Senate where it will need to be approved by the end of the legislative session on May 7. Senate President Donald Williams would not speculate Saturday whether the bill would see a floor vote in the coming days.
“I would want to talk to my caucus and my majority leader about that. Haven’t seen it at this point but we want to discuss it with our folks,” he said.