New Haven Issues PILOT Plea

Teachers, preachers, politicians, and presidents of local unions sent an urgent plea from New Haven Tuesday to the state legislature: Change how you reimburse us for revenue on property owned by our tax-exempt colleges and hospitals.

At stake is a roughly $50 million potential annual boost to the city budget — and, advocates say, a more equitable means of distributing state aid to poor, historically marginalized communities.

Twenty New Haveners testified at a hearing on Senate Bill No. 873: An Act Mitigating Adverse Tax Consequences Resulting From Employees Working Remotely During Covid-19, And Concerning The Removal Of Liens On The Property Of Public Assistance Beneficiaries And A Three-Tiered Grants in Lieu Of Taxes Program.

On Tuesday starting at 11 a.m., the state legislature’s Joint Committee on Finance, Revenue and Bonding hosted the live-streamed public hearing on the bill.

The remote testifiers from New Haven included the bill’s chief sponsor, New Haven State Sen. and Senate President Pro Tem Martin Looney.

At the core of the proposed bill is one of Looney’s top policy priorities for the state legislature’s current session: To figure out a way to increase state aid for cash-strapped municipalities that have high concentrations of tax-exempt colleges and hospitals. (Like New Haven, where 60 percent of property is tax-exempt.)

The plan laid out in the proposed bill would reshape the state’s current Payment in Lieu of Taxes (PILOT) system into three different tiers based on the relative economic needs of Connecticut’s 169 different towns and cities.

The poorest municipalities with the highest concentrations of tax-exempt colleges and hospitals would receive a higher percentage of PILOT reimbursement, while the wealthiest towns would receive a lower share. (See more below for details on how exactly this would work.)

Looney estimated that the proposal, if ultimately adopted by the state legislature and signed into law by the governor, would see New Haven’s annual PILOT grant jump by more than $49 million — from the current annual state grant of $41.6 million to a new estimated annual state grant of $91.2 million. Click here to see a town-by-town breakdown of how much each municipality should receive under the proposed program.

“The problems with PILOT and the problems with the property tax overall are just symptomatic of the larger problems of how we’re organized,” Looney said, zeroing in on the Connecticut’s overreliance on local property taxes and its lack of regional, county governments that could spread the cost of essential social services across poorer cities and wealthier suburbs alike.

He said his tiered PILOT proposal would take a meaningful step towards addressing the ​“inequities and injustices that have become so great” as the state has provided property tax-related reimbursements to all municipalities at lower and lower levels in recent years.

“This is by far the most important legislation being contemplated” by the Connecticut General Assembly this year, Mayor Justin Elicker (pictured) said during his remote testimony before the committee.

He called reforming PILOT to send more state aid to municipalities like New Haven a question of ​“moral” significance, particularly given New Haven’s projected $66 million local budget deficit next fiscal year as well as the 60 percent of New Haven property value that is currently off the tax rolls, largely because of tax-exempt nonprofits like Yale and Yale New Haven Hospital.

“Think about that,” he said. ​“Forty percent of our city pays 100 percent of real estate taxes.”

“If we truly believe Black and brown residents ought to have the same access to services as white residents,” the mayor continued, ​“then we shouldn’t make it near impossible for struggling communities to survive.”

A Three-Tiered System

Looney explained Tuesday that the proposed bill would create three new tiers based on the relative per capita property value of each town or city in the state.

The first tier would be for municipalities with an equalized net grand list per capita of less than $100,000, the second for municipalities with an equalized net grand list per capita between $100,000 and $200,000, and the third for municipalities with an equalized net grand list per capita of greater than $200,000.

Tier one municipalities (the state’s poorest municipalities, like New Haven) would receive a grant worth 50 percent of the current state PILOT formula.

That doesn’t mean that New Haven would get half of what it would otherwise be owed in property taxes for land owned by colleges and hospitals.

Rather, the city would get half of 77 percent — or 38.5 percent of that total lost property tax revenue. That’s because the new law keeps the current maximum PILOT reimbursement rate at 77 percent.

For decades, Looney said, the state hasn’t come anywhere near that 77 percent goal, which he described as ​“aspirational” and contingent upon how much the state legislature sets aside for PILOT in each biennial budget. Instead, the state is currently reimbursing all cities and towns across the state at closer to 25 percent of relevant lost revenue.

“The underfunding is stark,” he said about PILOT, ​“and gets worse from year to year.”

Tier two municipalities, meanwhile, would get a 40 percent reimbursement on the current formula (or 30.8 percent of all revenue lost through college- and hospital-related tax-exempt properties), and tier three municipalities would get a 30 percent reimbursement on the current formula (or 23.1 percent of all revenue lost through college- and hospital-related properties.)

Looney said that the PILOT reform proposal would cost the state an additional $129 million every year ​“in order to create the greater equity that we have in this three-tiered system.”

Wealthier communities like Greenwich and Darien do not face the same college‑, hospital‑, and state-owned property tax squeeze as cities like New Haven and Hartford, he said. Therefore they should not be reimbursed by the state at the same PILOT rate as those poorer, needier areas with greater concentrations of regional social services.

According to the state Office of Fiscal Analysis, the state budget provided $158 million in funding for PILOT this current fiscal year. If PILOT were fully funded, that number would be closer to $613 million.

“This situation has created a funding crisis for some of our cities and towns,” the senator added in written testimony submitted in support of the bill. ​“While many municipalities are affected, none are more significantly impacted than Hartford and New Haven. …

“It is time we make a more significant commitment to fund PILOT. Given limited resources, this plan concentrates that investment into the communities that can least afford a reduction in revenue and a state mandated shrunken tax base.”

Looney also recognized that his proposed bill does not ​“fully fund” PILOT at the statutorily-stated amount of 77 percent.

“if the committee and the General Assembly want to go even further to correct past wrongs to fund the PILOT at a higher level, I would certainly be a champion of that.” For now, he said, something needs to be done to both boost current PILOT payments and more equitably distribute the money that is allocated for this program. He said his proposal would do just that.

City Supporters: Without More PILOT, ​“Skyrocketing Taxes” Loom

Looney and Elicker were joined by nearly 20 fellow New Haveners, and counting, as the online hearing stretched into the mid-afternoon.

Every New Havener who spoke — including public school teachers, local labor organizers, city union heads, local elected officials, and other city residents — emphasized similar points during their respective testimonies: 

• That New Haven is home to high concentrations of poor, historically marginalized, high needs populations.

• That Yale University and Yale New Haven Hospital are continuing to expand and grow their local tax-exempt real estate holdings.

• That New Haven is currently staring down a local fiscal cliff due to a host of primarily structural financial obligations, related to employee healthcare and pensions; and that the financial collapse of New Haven would be devastating for city residents, the region, and the state as a whole.

“New Haven is a vital city and plays a critical part in the economic and cultural vitality of our state,” said Varick AME Church Rev. Kelcy Steele (pictured above). ​“If New Haven doesn’t receive these funds, we will see a skyrocketing tax hike on some of our poorest residents. Connecticut cannot recover without a strong economic recovery in New Haven.”

Downtown Alder Abby Roth agreed. She said rising structural costs related to pensions, debt and healthcare, and an ever decreasing share of local property on the tax rolls, means that she and her local legislative colleagues will likely have to make a near-impossible choice between ​“raising our already high property taxes significantly to amounts people can’t afford” and that might drive businesses out of town, or ​“dramatically cutting city services that are already stretched thin.” Or, more likely, some combination of the two.

“We are really quite bare-boned,” she said about the current city budget. ​“There’s nothing to cut because healthcare, pensions and debt service make up such a large portion.” That would mean further cuts to other areas that city residents should not have to live without.

“New Haven and other municipalities are trapped, relying on regressive property taxes,” said city clerical workers union President Harold Brooks. As more and more local property falls off the tax rolls, the city becomes that much more reliant on PILOT — which the state has ​“never fully funded,” resulting in higher property taxes and greater service cuts for city residents.

“This bill would begin to bring equity to the PILOT payments so that the communities that need the funding the most would begin to receive it.”

Local public school teacher Jenna McDermit said she has taught in the New Haven Public Schools (NHPS) system for 11 years.

She said she has seen firsthand how ​“students are impacted by poverty, health disparities, gun violence, incarceration, and toxic stress. Classrooms in New Haven have a fraction of the resources that many municipalities with less tax-exempt properties have.” She said a more equitable PILOT distribution would shift some of those much-needed dollars into local public schools in New Haven.

She also said that she has long wanted to buy a house in New Haven, the city where she works. But even after a decade working for NHPS, ​“I cannot afford a home in the city of New Haven due to its prohibitively high property taxes.” She said she instead finds herself looking for homes in towns like East Haven, Ansonia, and Branford that have ​“more reasonable property taxes.”

Reforming PILOT would make ​“New Haven a more feasible place” for people like her to live.

Stephen Staysniak, a ninth-grade English teacher at Metropolitan Business Academy, offered a similar pitch.

He said that New Haven students deserve to have ​“fully staffed schools” with enough nurses, library media specialists, social workers, and classroom teachers.

He said this PILOT reform proposal is not just about fully funding public education and locally-provided wraparound services, ​“it is also about beginning to take steps to repair the harm done over generations due to inequitable funding structures” that fall disproportionately on communities of color.

“New Haven residents are a backbone of support for this state,” said city paraprofessionals union President Hyclis Williams, ​“but they do not receive the benefits they deserve,” largely because of the tax-exempt statuses of large institutions like Yale and YNHH.

Without substantially more funding from PILOT and a fairer calculation on which municipalities receive how much, she said, New Haven will face an even greater local deficit — and subsequently higher taxes and fewer necessary services.

“Our city is reaching a breaking point,” added New Haven Rising local labor organizer Jaime Myers-McPhail. ​“Every year our Board of Alders and mayor are forced to make an impossible decision about funding essential services while maintaining a reasonable property tax on homeowners.”

He said that New Haven Rising, the alders, the mayor, and local labor unions have pressured the university and hospital for years to increase their annual financial contributions to the city budget.

But if those institutions don’t answer that call, he said, then the state needs to step in and reimburse New Haven for local tax revenue it legally cannot collect.

“We can’t put together a budget unless if we can collect taxes,” he said. So the state needs to step up.

Republicans: Don’t Take From The Wealthy Towns

While no one spoke out explicitly against the proposed PILOT redo during the hearing, some expressed skepticism that it would work. And some Republican legislators pushed back on Looney for the need for such an effort at all.

Darien State Rep. Terrie Wood said that the ​“urban districts and Democrats have run the legislature” for the past four decades. ​“Under your leadership, I thought we would have fully funded PILOT” already, she said to Looney. So, what gives? Why are towns and cities only get 25 percent now when they’re due 77 percent per state law?

“Thank you very much for that kind question,” Looney said. ​“There have been many needs over the years. Now it’s time to catch up on this one.”

“I think this new grand list formula is more equitable” than the current PILOT calculation, he continued, ​“because it takes need into account. I think there are some communities that don’t need a 77 percent reimbursement.”

New Haven State Rep. Roland Lemar said that the issue at hand is not so much why PILOT has not been fully funded over the past four decades, but rather all of the structural impediments and peculiarities that keep cities and towns in Connecticut from providing necessary services while also balancing their books.

He said that the reliance in Connecticut upon local property taxes, the absence of any kind of regional or county government, the relatively small size of Connecticut’s few cities, and a state-imposed spending cap all contribute to hard fiscal times for cities that host regional services like colleges and hospitals that they cannot collect taxes on.

“There is something especially regressive about the property tax in the way that it affects people of lower income,” Looney added. While income tax adjusts based on how much money someone is bringing in and sales tax adjusts based on how much money someone spends, ​“the property tax is not sensitive to a change in income status.” Meaning that people going through tough financial times still have to pay their property tax bills at the same levels they’d have to pay if they were fully employed and financially stable.

This PILOT proposal, he said, would alleviate some of that burden.

Darien First Selectman Jayme Stevenson (pictured), who is a Republican and is also the vice president of the Connecticut Conference of Municipalities (CCM), came out in support of the PILOT proposal even though her wealthy suburb does not necessarily stand to directly benefit.

“The health of our state is dependent upon many factors,” she said. ​“One of them is the health of our urban centers.”

But, she continued, she asked the committee to add a key condition of approval if this proposal makes it to the General Assembly for debate and a vote.

“We ask the committee to not implement this proposal unless if it is accompanied by a promise to appropriate” the funds necessary to make this proposal ​“work for all 169 cities and towns.” Looney pegged that necessary annual cost at $129 million to fully fund this tiered proposal.

Stevenson said that new money could come out of revenue generated by legalizing recreational marijuana. It could come from legalizing sports betting.

But it should not come, she said, from the pockets of towns that might stand to lose current PILOT funds that would be redirected elsewhere.

“Meaningful reform should not be limited to select municipalities,” she said.

Hartford Mayor Luke Bronin, a Democrat who is also the president of CCM, said in his support of the bill that a ​“very, very important point” is that ​“this bill would also hold harmless the amount of PILOT funding received by other municipalities.”

That’s a key reason why ​“a wide diversity of communities” that CCM represents have cast their support behind it: They shouldn’t lose any current PILOT money, even as poorer cities like Hartford and New Haven get more.