Connecticut Small Town Residents Targeted in New State Budget

July 2, 2015

By Sen. Tony Guglielmo

While the Governor and many in the Majority party say the budget provides property tax relief to cities and towns the truth is the budget does more harm than good. Let’s specifically look at small towns.

In this new state budget small town residents are targeted by big city lawmakers through the car tax proposal, the change in the resident state trooper program, hospital taxes, and water company tax.

As you can imagine, I was surprised to see these items in the budget, as some of them were never discussed in a public hearing. That’s the problem with these implementer bills they should be white as the driven snow. Sadly, that is no longer true. Instead sweeping policy changes are shoved into one massive document. (But that’s a story for another day.)

The resident state trooper program changes will be expensive. There is a new requirement that small towns pay 85% of the compensation, maintenance, and other expenses of the first two troopers assigned to the town; and 100% of such costs for any additional troopers assigned there; and 100% of the overtime costs and the portion of the fringe benefits directly associated with those costs. This will cost towns around the state more than $2 million annually.

Then there is the car tax proposal. Capping the mill rate at which cars are taxed sounds like a good proposal. But it also raises questions of equity if the car tax mill rate is not adjusted for towns that have just completed or will be undertaking revaluations.

And here in eastern Connecticut if state forest land is not valued at market value for the purposes of PILOT (payment in lieu of taxes) calculations then small towns could be short changed. Not to mention that money that will be paid to state government is supposed to be returned to towns and cities as determined by the Office of Policy and Management Secretary.

There are no guarantees you get back what you sent in. A prime example is the current budget hole is being closed by taking promised municipal aid funding to the tune of $12.7 million.

The hospital tax hits small hospitals disproportionately. Already many hospitals around the state have announced layoffs because of cuts in aid reimbursements. The last thing we need is job loss.

The other blow to small town residents comes in the form of a water tax. The budget repeals the existing sales tax exemption for purchases of goods and services by private water companies. The fiscal note estimated the change would generate approximately $4M in additional revenues for the state, but it will cost homeowners.

Simply put Connecticut Water Company and other private water utilities across the state will more than likely pass on the additional cost to customers. They like other businesses in the state are also subject to the Connecticut Corporation Business Tax (CBT), the 20% surcharge on the CBT, as well as local real estate and property taxes, which are not imposed on municipal or regional water authorities. And there’s a change in the budget to limit the water company’s use of tax credits earned from donations of open space land to local communities.

As if those examples weren’t enough the governor’s budget raises questions regarding restrictions on towns due to the municipal spending cap. Beginning in 2018, the governor’s administration will impose a cap on municipal spending. If you go over 2.5% above the previous year or the rate of inflation, whichever is greater your penalty will be 50 cents for every dollar the municipality spends over the cap. Ouch!

And if you think the hard working families in our small towns won’t be hit think again. The budget also reduces the property tax credit from $300 to $200 in 2017 – the credit used to be $500 before the governor took office. The impact will be felt broadly as 81% of those that utilize this property tax credit make less than $100,000 a year and 44% make less than $50,000 a year.

The culmination of all of these tax increases will mean more money out of your pocket. So much for living in a small town. That’s not the Connecticut I grew up in.