Hartford Business Journal

www.HartfordBusiness.com November 14, 2016 • Hartford Business Journal 3 Can higher PILOT payments save Hartford? By Matt Pilon mpilon@HartfordBusiness.com A long-standing state program that reim- burses cities and towns for tax-exempt properties could help solve the Capital City's fiscal crisis if lawmakers would fund it to statutory levels, according to Hartford Mayor Luke Bronin. In a recent interview with the Hartford Business Journal, Bronin said he plans to push the legislature in the upcoming session to fully fund the payment in lieu of taxes (PILOT) pro- gram, which would add approximately $50 million to Hartford's budget, helping to close projected deficits of $30 million and $50 million in 2018 and 2019, respectively. "I think there's no question we'll be advocat- ing for a full funding of PILOT," Bronin said. Municipal officials have long griped about underfunded PILOT payouts, which are meant to partially reimburse cities and towns for tax-exempt properties such as hospitals, colleges and state-owned buildings. But calls for higher reimbursements have largely been ignored in recent years, particu- larly as state legislators face their own budget pressures. Fully funding the PILOT program could cost the state an additional $100 million annually, on top of the $181.7 million paid out across the state this year, according to the Office of Policy and Management (OPM) and the Office of Fiscal Analysis (OFA). A proposal to increase PILOT payments would be part of a larger legislative pack- age — and not the only answer — to help put Hartford on a sustainable fiscal path, Bronin said. "It's essential that we get a solution at the state level this year," said Bronin, an attor- ney and former chief legal adviser to Gov. Dannel P. Malloy. "This is a fiscal crisis that's been building for years, it's structural and it's rooted in the fact that the city doesn't have enough taxable property." Generating more property tax revenue, the main source of funds for Connecticut's local governments, is difficult for Hartford because over half of the city's grand list is tax exempt. Hartford plays host to many tax-exempt properties including state and federal buildings along with hospitals, colleges and other nonprofits. At the same time, Hartford has highest commercial mill rate (74.29) in the state — limiting its abil- ity to raise taxes — while its debt service and other costs continue to rise. "We need revenue that comes from outside of the city," Bronin said. MetroHartford Alliance CEO Oz Griebel said Bronin has "brought candor and integri- ty to the discussion" about the city's future. "An appropriate sense of urgency is impor- tant," Griebel said. PILOT payments lower PILOT is a major piece of non-educa- tion state aid to cit- ies and towns that has faced funding pressures of late. Last summer, the legislature cut state- wide fiscal year 2017 PILOT funding by more than $18 mil- lion, or 9 percent. Hartford received its annual state and hospital PILOT pay- ments in September, which amounted to $36.3 million. That was down from $37.3 million in fiscal 2016. The amount fluctuates annually, depending on property revalu- ations or legislative decisions. Hartford's annual average payment was approximately $38.6 million between 2011 and 2015, accord- ing to OPM and OFA data. If lawmakers fully funded the PILOT program, Hartford would have received $87.7 million in fiscal 2015, according to OFA. Instead, the city received less than half that amount, or $40.2 million. Mean- time, if Hartford's untaxed properties were on the tax rolls, they would have gen- erated nearly $138 million in tax rev- enues that year, OFA calculated. Under state law, municipalities are supposed to receive 77 percent of lost property tax value for hospital and private college properties and 44 percent for state- owned property. For example, if a hospital in Hart- ford is assessed at $10 million, it would owe $742,900 in property taxes, if it weren't exempt. The PILOT program says the state should owe the city $572,033 for that property. But OPM is permitted to pay a lower amount when its state appropriation is insufficient to fully fund the program. In some recent years, cities and towns have received between 45 and 55 percent of the statutory amount owed. In should be noted, however, that lawmak- ers did increase Hartford's overall state aid this year — from $253.5 million to $276.6 million — by adjusting other grant programs. A broader strategy Bronin's PILOT push could be part of a broader proposal, formed in collaboration with other municipal leaders and organiza- tions, to be put before the legislature. He's hoping the consistent message he has spread this year about Hartford's fiscal trou- bles will have a bigger impact on lawmakers this coming session. The city has received several debt-rating downgrades this year and failed to achieve budgeted labor savings thus far, prompting Continued Cybersecurity is hard. Defend Forward is easy. One monthly subscription puts the technology, training and expertise in place to defend your company's information, reputation, and future. Your Allies Against Crippling Cyber Attacks www.kelsercorp.com/DefendForward www.kelsercorp.com 111 Roberts St, Suite D East Hartford, CT 06108 860 610 2200 Hartford PILOT Grants S O U R C E : S T A T E O F F I C E O F F I S C A L A N A L Y S I S A N D 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 34,000 35,000 36,000 37,000 38,000 39,000 40,000 41,000 PILOT revenues (in 000.s) 2011 2012 2013 2014 2015 2016 2017 Year Hartford Mayor Luke Bronin says full PILOT payments from the state would be "a significant first step" in putting the city's finances on a sustainable path. H B J P H O T O | M A T T P I L O N

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