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Region Agenda, Part 4: Revenue-Sharing Enables Smarter Growth

Hartford Courant

December 30, 2009

The task force that studied smart, or responsible, growth under a 2007 law made a number of recommendations to Gov. M. Jodi Rell in early 2008, including: "Be fair. Promote equitable sharing of the benefits and burdens of development and diminish the competition for revenue that biases land-use decisions."

Did that mean some kind of revenue-sharing among towns?

There has as yet been no proposal for local revenue-sharing in Connecticut. Nor has the idea exactly caught fire across the country, though more regions are beginning to study it. But in a state such as Connecticut that is heavily reliant on property taxes to fund local government, revenue-sharing may help create more cohesive metropolitan regions.

The idea is that each community in a region designates some percentage of a new tax stream or new tax base to a regional pool, where it is divided among all the towns in the pool based on some formula that may involve population or other variables.

Perhaps the best known example is the tax-base sharing program that's been in effect in Minneapolis-St. Paul for more than three decades. It applies only to nonresidential development created after the agreement went into effect. When a development is created in a particular community, that community keeps 60 percent of the added assessed value, and 40 percent is placed in a pool to be shared by the towns in the region.

Different variations of regional revenue-sharing can also be found in Dayton, Ohio; Rochester, N.Y.; the 14-town Hackensack Meadows District in New Jersey; and some other places. Other regions, Cleveland/Northeast Ohio for one, are studying the concept.

The principal advantage of regional revenue-sharing, at least theoretically, is that it reduces the winner-take-all, beggar-thy-neighbor competition for new tax-paying development, something that's been a problem in Connecticut for decades. Towns desperate for property tax revenue to pay for schools and local government have often made poor land-use decisions — given up farms and scenic vistas for strip malls and other developments they otherwise would have passed on.

But if all towns share the added tax revenue, the door is open for more rational regional planning and regional cooperation.

There can be drawbacks as well. Redistribution of tax base or revenue can create winners and losers; a town that just landed a major employer might be reluctant to give up some of the resulting taxes. So revenue-sharing could be a hard sell.

Nonetheless, the nature of regional planning is to put development in some places and not in others. If revenue-sharing helps that process, it should at least be on the table.