Hartford Business Journal

14 Hartford Business Journal • July 8, 2019 • www.HartfordBusiness.com SPECIAL REPORT: CITIES PROJECT Solution: Hartford's largest nonprofits contribute more By Matt Pilon T here are fewer than a dozen U.S. cities that receive more than $1 million a year in vol- untary payments from not- for-profit organizations — like hospi- tals and colleges — that are exempt from paying property taxes, according to the Lincoln Institute of Land Policy. Boston receives the largest amount in so-called "payments in lieu of taxes" from its nonprofits — approximately $34 million in fiscal year 2018 — with some of the largest amounts coming from Harvard and Boston University. New Haven's also high on the list, having received over $100 million from Yale dating back to 1991. Those PILOT payments, a portion of which are dedicated to city fire services, have varied in size over the years, but topped $14 million in 2018, according to city data. There is little dispute that Yale is Connecticut's most prestigious col- porting government services assists in operating a city." Zidelis said that since he started his job in the city, Worcester has seen four bond-rating increases and also fortified its rainy-day reserve. Meanwhile, the Bay State's overall economy has recov- ered from the recession much faster than Connecticut's; Massachusetts' statewide GDP grew nearly three times faster between 2010 and 2017. No one is saying local-option taxes are the reason for that mismatch, but they helped cities and towns weather a tumultuous time and have bolstered local budgets since. There are several reasons Worcester has seen greater growth than Hartford in population and property values, ac- cording to Stephen Eide, senior fellow at the free-market think tank Manhattan Institute. Eide has studied both Worces- ter and Hartford over the past decade, including during his time at the Worces- ter Regional Research Bureau. Worcester has more land area and its population is about 50 percent larger. Its poverty rate also never rose as high as Hartford's over the past 50 years. Worcester also has higher-value residential neighborhoods, and has been able to hang onto its middle class to a greater extent. "One key reason Hartford is lagging Worcester since the recession is that Worcester simply benefits from its proximity to Boston," Eide said. Marc Fitch, an investigative reporter for the conservative Yankee Institute think tank, said a local-option meals tax could be politically palatable if there were a way to guarantee the resulting revenue would go toward reducing Hartford's mill rate. The fear is that future city govern- ments would simply use the extra revenue to increase spending. "That's a deal that could be struck," Fitch said. However, Connecticut state law- makers appear committed to keeping tax revenue, including new monies, flowing into the general fund. For example, the state raises and keeps revenues generated from its 15 percent lodging tax, which is among the nation's highest, and its 6.35 percent sales tax, though a portion of overall tax revenues is sent to municipalities as local aid. In this year's recently passed bud- get, state lawmakers increased the sales tax on meals and beverages to 7.35 percent, which is estimated to raise $114 million in additional rev- enue over the next two fiscal years. Early in the legislative session, there were discussions about sending some of that extra money back to cities and towns, but that was dropped after mu- nicipalities fiercely opposed a separate proposal that would have shifted some teacher pension costs from the state to the local level, said House Speaker Joe Aresimowicz (D-Berlin). House Majority Leader Matt Ritter (D-Hartford) said he still hopes to find a way to funnel such revenues back to local governments. "I've got some terms left, hopefully, and it's a priority for me still to have that money going back to the cities," Ritter said. Diverting some revenues to Hartford would help recognize that, while the city remains a top business hub in the state, many workers commute home to the sub- urbs, which enjoy most of the economic benefits of having them as residents. "Thousands of employees working downtown isn't a bad thing, but a lot of Hartford residents ask 'how does it benefit us?' " Ritter said. Another tax shift Another idea, while it's not a local- option tax per se, is an employment- location tax. It's something Hartford and New Haven landlord Bruce Becker, owner of the 777 Main St. apartment high-rise downtown, said would be a fairer taxation system. It would return a share of the income-tax revenue the state col- lects to municipalities where work- ers earned those wages. That would benefit a city like Hartford, which hosts roughly 100,000 Connecticut residents who work in the city but live in the suburbs. Others have suggested a regional tax to pay for quality-of-life and infrastructure improvements in Greater Hartford. Hartford Hospital, whose various exempt parcels in the city are assessed at approximately $481 million. Massachusetts local-option tax revenues (by fiscal year) *Through Q3 Source: Massachusetts Dept. of Revenue 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* $0 $50 $100 $150 $200 $250 In millions of dollars Meals tax Rooms tax >> Solution Oriented continued PHOTO | HBJ FILE

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