Hartford Business Journal

24 Hartford Business Journal • September 2, 2019 • www.HartfordBusiness.com Opinion & Commentary EDITOR'S TAKE Property taxes a drag on all of CT, not just Hartford H artford Business Journal has spent a lot of time, energy and ink this year spotlighting the city of Hartford's exorbitant and inequitable property tax structure and how to rectify it. But the truth is, property taxes are a statewide problem, hindering economic growth in many cities and towns. The Connecticut Conference of Municipalities highlighted that fact in a new research report, which found that the per-cap- ita property tax burden in Connecticut is $2,847, almost twice the national average of $1,518 and third highest in the nation. CCM also reported that 79 municipalities across the state that didn't go through a revaluation in fiscal 2019-20 in- creased their property-tax rate. So, while state government avoided increases to two of its major taxes — income and sales — many cities and towns increased property taxes. The overall message to businesses and residents is that the cost of operating and living here continues to increase. CCM says the property tax is the highest tax that Connecticut businesses pay, so reforming the way cities and towns fund local government should be a chief concern. In fact, state lawmakers should forget about having a special session on tolls, casinos or sports betting and focus on comprehensive tax reform. What reforms to implement is a harder question to answer. CCM, unsurpris- ingly, has a few ideas. Their research, of course, wasn't purely an academic exer- cise. CCM is a lobbying organization that represents municipalities. CCM Executive Director and CEO Joe DeLong said high property taxes is one of two major issues holding Connecticut back. The other is the state's unfunded pension liabilities. "This is a simple yet complex issue," DeLong said of property-tax reforms. "I don't think solutions are all that difficult to come up with. It gets complex be- cause the issue goes across the political spectrum." The way DeLong views it, reducing Connecticut's reliance on the property tax requires a two-pronged approach — giving cities and towns more options to raise revenues, while also making it easier for them to control or reduce costs. "The whole focus can't be on the funding side or just providing municipalities more revenue," he said. "You need as many reforms on the service-delivery and cost-control side." DeLong has it exactly right. Any property-tax reforms can't simply include new revenue options. In my view, major strings would need to be attached. For example, any new local revenues raised by municipalities must go toward lower- ing mill rates, or paying for current services, not new ones. The risk that new revenues would simply lead to bigger and more expensive town governments is a real and likely one. (Just look at how the income tax has exploded state government spending.) DeLong has several new local revenue options in mind, including a local op- tion tax (say a sales tax on meals) as well as nonprofit service fees. Just as important as new revenue options, in my mind, is lowering local spending. One of the third rails is labor and binding arbitration reforms, De- Long said. "It makes people uncomfortable," he said, particularly in a blue state. One of the biggest reforms DeLong says is needed is with coalition bargain- ing. If a town wants to combine services with other municipalities, there are multiple collective-bargaining units involved in the negotiations, which makes it hard to get deals done. The state should require all parties to bargain as a single unit, DeLong says. The state should also roll back some of its 1,400 unfunded mandates on mu- nicipal governments that add costs, including minimum-budget requirements for education funding and the prevailing wage for public construction projects. DeLong says major property-tax reform isn't likely in 2020, which will be a short legislative session and national election year, but he does think it will happen one day. I'm less bullish because I've not seen, in a very long time, the political will or bipartisanship at the Capitol to take on such a big and thorny issue. Greg Bordonaro Editor RULE OF LAW Philanthropy-government partnerships pose risks, rewards By John Horak G overnment and philanthropy have as much in common as they don't — and an acute understanding of their commonalities and differences is important to the success of any collaboration between the two. There are two high-profile exam- ples in the news and only the first passes the acuity test. Here's the first: In 2017, the CEOs of Aetna, Travel- ers and The Hartford pledged $50 million to the city of Hart- ford — payable in five equal annual instalments. Each is conditioned upon evidence that Hartford's turnaround plan is making forward progress. These corporate donors are being prudent — they are not paying for Hartford's past sins but will make annual payments as positive results are shown. It's a good way to get results, and the deal seems to be working. The second $10 million installment was made in July, and Mayor Luke Bronin noted recently that "the partnership is an important part of Hartford's ef- fort to achieve fiscal sustainability." Here's the second: In April, Green- wich billionaire Ray Dalio pledged $100 million to a "partnership" with the state to improve public-school outcomes — payable in five $20 million annual installments. In this case, unlike Hart- ford, the partnership takes the form of a newly incorporated charitable entity — The Partnership for Connecticut Inc. The state has made a matching $100 million pledge, and the plan is to raise another $100 million from the private sector ($300 million total). The initial governing board has 13 members — and, significantly, a controlling majority are elected officials and/or their appointees. The board gets to decide how the money is disbursed among applicants, so board seats are important. This deal has been mired in public criticism since its birth. People are asking why the new entity is exempt from the Freedom of Information Act (FOIA) and the State Code of Ethics? How did the state's initial contribu- tion bypass the spending cap? And on Aug. 7, Attorney General William Tong issued an opinion advising the public officials on the board that they remain subject to FOIA even though the organization is exempt — such that information they get appears to be disclosable, albeit indirectly. The inconsistency will make gover- nance very difficult until resolved or reconciled in some way. There are other questions. We already have many excellent public foundations in the state that could step in and as- sist with the effort, so why a new one? The Dalio Foundation's 2017 tax return shows over $2 million in gifts to Con- necticut public school systems inde- pendent of this deal, so there's already a giving pattern that could be expanded. Will the new foundation be com- peting for private donors (for the final $100 million) with other chari- table organizations seeking support? Will donors feel political pressure to favor the new organization? I started this column by stating that an understanding of the commonali- ties and differences between philan- thropy and government is important to success when the two work together. They are as follows: Philanthropic dollars are private dollars under pri- vate (not political) control even though the dollars must be used for a public purpose. In contrast, everything gov- ernment does is public in nature, and what it does depends on what happens at the ballot box — so it is political to the core — unlike private philanthropy. In Hartford, the private/public bal- ance was achieved. This is not the case with The Part- nership for Connecticut Inc., which, to me, seems to have been structured in haste without adequate planning. The result is the controversy de- scribed above, which likely will haunt it from this point forward unless and until it is fixed. I support creative philanthropic efforts on this scale, and the schools need help. I hope and suggest that the people in charge take the time to draft appropriate amendments to the statutes creating the Partnership to bring an end to the controversy and to improve its chances for success. John M. Horak is the director of TANGO Nonprofit Education and Consulting. His opinions are his own. John Horak

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