June 6, 2016

Unusual property-tax experiment given new life

PHOTO | Contributed
PHOTO | Contributed
State Sen. John Fonfara (D-Hartford).

After stalling in the legislature, a proposal to expand an unusual property-tax pilot program was given new life in special session last month when lawmakers inserted the bill's language into the budget implementer bill.

Assuming Gov. Dannel P. Malloy signs the budget into law, as many as five municipalities that successfully apply to the Office of Policy and Management will be permitted to assess real and personal property taxes on all commercial parcels within their borders based on the net profits of a building's business occupants, rather than by the fair market value of the property itself.

However, it's unlikely any community will get that far. Property owners and/or tenants and government officials must first agree to the arrangement. The public act doesn't allow local governments to change their property taxation method unilaterally.

The pilot program was first created in 2014, but capped at three the number of parcels each town could tax based on net profits. The latest legislation removes the cap entirely.

Sen. John Fonfara (D-Hartford), co-chair of the Finance, Revenue and Bonding Committee, pushed for the original law two years ago, as well as its expansion this year.

In attempting to open up the program to more properties, Fonfara got a boost from the support of Hartford Mayor Luke Bronin, who told the Hartford Business Journal in March that he saw the program as a potential way for Hartford to incentivize economic development and business formation.

The nonpartisan Office of Fiscal Analysis has said it presumes no municipality would enter into such an arrangement unless it brought in more tax revenue, but it remains to be seen if local governments would use the program as a way to help some companies and property owners pay less taxes.

To date, no town has applied for the pilot program. But that could change come October, when the cap on the number of eligible parcels per town is lifted.

Shipman & Goodwin Managing Partner Alan Lieberman, who represents commercial taxpayers, said several months ago that he was against the expansion of the pilot, which he likened to a municipal income tax.

Meanwhile, a national tax expert, Carl Davis of the nonpartisan Institute on Taxation and Economic Policy, said he was unaware of any similar programs in other states, and warned that if the pilot is expanded beyond five towns, it could pit cities and towns against one another and promote business poaching.

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