Hartford Business Journal

16 Hartford Business Journal • March 14, 2016 www.HartfordBusiness.com profit-based property tax systems aren't used in the U.S., local and national experts say. But Fonfara said he's not giving up on the idea, particularly now that Hartford — specifically Mayor Luke Bronin — has expressed interest in it. The senator, who co-chairs the powerful Finance, Revenue and Bonding Committee, intends to tweak the program this legislative session by removing a provision in the 2014 law that limits participating municipalities to using the profit-based assessment method on just three commercial properties each. The provision was inserted into the bill after business and municipal groups, includ- ing the Connecticut Business & Industry Association and Connecticut Council of Small Towns, expressed concerns that the program could have unintended conse- quences, possibly leading to the erosion of municipal revenues, the subsidizing of some businesses' property taxes by others, or even a future mandate that taxes be assessed by the profit-based method. Officials from both groups say they are still cool to the idea and would oppose any proposal to expand the program. In interviews last week, tax experts also pointed to other complexities of imple- menting the program, including questions surrounding how a town would verify a pri- vate company's net income and whether the Department of Revenue Services would be permitted to share that information. "There are a lot of practical concerns over how this is ultimately going to work," said Alan Lieberman, managing partner of Shipman & Goodwin and a member of the law firm's state and local tax practice group. Lieberman, who mainly represents com- mercial taxpayers, opposes the existing pilot program and its proposed expansion. He views the program as a type of municipal income tax that could increase revenue vol- atility for cities and towns and complicate compliance requirements for businesses. Lieberman also wonders how net income would be defined and calculated. The Hartford lawyer said he was unaware of any similar tax program in other states, and Fonfara said the bill wasn't based on any particular example. Carl Davis, research director for the Institute on Taxation and Economic Policy, a nonpartisan think tank, said he too was unaware of other states using the profit- based assessment method. The program appears to be a tax incen- tive for businesses, Davis said, but he won- dered why it would be expanded if no munic- ipalities applied for the pilot. Testing out the profit-based method on a small number of parcels could provide some data on whether a broader program might work, he said. He warned, however, that the tax pro- gram, if expanded, could pit municipalities against each other, similar to the way states try to poach businesses from each other through incentive packages. Fonfara pushes back Despite opposition, Fonfara said he remains committed to expanding the pro- gram, which he stressed merely provides an option for voluntary arrangements between local governments and property owners. "Nothing I'm talking about is mandated on any town," said Fonfara, who hopes expand- ing the pilot will spur more interest from local governments, including Hartford's. He said the state's oversight of local taxation policies is overly paternalistic and that local governments need more help growing their grand lists. The Land of Steady Habits should take some chances on new ideas, he said. Several months into his first term, Bro- nin has expressed interest in the program, should it be expanded. He said he sees the profit-based property tax program as a potential arrow in the city's economic- development quiver. "Obviously a mill rate as high as ours is an obstacle to growth," said Bronin, a Democrat, referring to the capital city's 74.29 mill rate, by far the highest in the state. "[The program] gives us a tool, and we have very few tools to try to promote economic development." Bronin said he hopes the legislature allows municipalities to apply the assess- ment method to an unlimited number of commercial properties, as long as the own- ers agree to it. He said he doesn't yet have any particular section of the city or types of businesses in mind for the program. Is he worried about ceding tax revenue, at a time when the city is facing major bud- get deficits over the next few years, to abate taxes for unprofitable businesses? "It's really case-specific because if a busi- ness is not able to survive under the current structure, then you lose all the revenue that they would provide to the city," he said. Other tax changes The pilot program is just one of many property tax reform proposals that have come up in recent legislative sessions. Some have passed, while others failed to gain traction. Last year, lawmakers passed a law that capped motor vehicle tax rates at 32 mills, which will have the greatest impact on motorists in cities with high tax rates like Hartford and Bridgeport. This year, Senate Bill 424 aims to allow municipalities to abate 80 percent of prop- erty taxes for cyber security and data busi- nesses, incubators and startups. In his budget proposal, Gov. Dannel Malloy has also taken a cue from the State Tax Panel's recent final report, which rec- ommended exempting from taxes the first $10,000 of businesses' personal property. Bronin, who was Malloy's general coun- sel before departing early last year to run for Hartford mayor, has testified against the pro- posal, which he said would deprive the city of $530,000 in revenue and require significant assessor resources to track exemptions each year. Hartford is facing a $32 million budget deficit next fiscal year, and last week Bronin revealed he may ask for state help to re-open negotiations with labor unions. n LET'S TALK ABOUT HOW WE CAN HELP YOUR BUSINESS MAKE IT BUILD IT BUY IT LEASE IT MOVE IT GROW IT EDUCATIONAL PLAYCARE Financed the expansion of day care centers across the state CADCO, LTD Financed acquisition of major equipment DOYLE'S MEDICAL SUPPLY Maintaining a long-standing business relationship www.nwcommunitybank.com Member FDIC Equal Housing Lender Contact Steve Zarrella Senior Vice President & Chief Lending Officer 860-379-7561 zarrella@nwcommunitybank.com YOUR COMMUNITY – YOUR COMMUNITY BANK FOR OVER 150 YEARS Move your plans from the drawing board into action. You know your business— and we know ours. Together we can make things happen. NCB COMMERCIAL HBJ 1-4pV_Layout 1 3/2/16 1:23 from page 1 Hfd. seeks economic tools Hartford Mayor Luke Bronin chats with Ramon Flores, owner of El Mercado market. P H O T O | H B J F I L E CT Mill Rate Comparisons A mill is equal to $1 of tax for each $1,000 of assessment. To calculate the property tax, multiply the assessment of the property by the mill rate and divide by 1,000. For example, a property with an assessed value of $50,000 located in a municipality with a mill rate of 20 mills would have a property tax bill of $1,000 per year. CT's Highest Mill Rates CT's Smallest Mill Rates Municipality FY 2016 Mill Rates Municipality FY 2016 Mill Rates Hartford 74.29 Salisbury 10.70 Waterbury 58.22 Greenwich 11.271 New Britain 49.00 Roxbury 13.70 East Hartford 45.86 Sharon 13.70 Torrington 45.75 Washington 13.75 Naugatuck 45.57 Warren 14.20 Bridgeport 42.198 Cornwall 15.13 New Haven 41.55 Darien 15.35 Norwich 40.90 New Canaan 15.985 Hamden 40.87 Putnam 16.42 S O U R C E : S T A T E O F F I C E O F P O L I C Y A N D M A N A G E M E N T

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