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Malloy's Budget Plan Draws Mixed Reactions From Greater Hartford Municipal Leaders

Jesse Leavenworth

February 22, 2011

Municipal leaders' reactions to the governor's proposed budget correspond not only with their political affiliations, but also with the amount of tax-exempt property and the number of retail stores in their communities.

In recent interviews, officials in several towns and cities said they were happy that Malloy did not hack into state education aid and other municipal grants, but still worried about losing revenue from payment in lieu of taxes, or PILOT, programs.

"We got killed. The cities really didn't win," New Britain Mayor Timothy Stewart said Monday.

Stewart was among Republican municipal leaders who condemned Malloy's two-year, approximately $40 billion spending plan as soon as the governor finished his budget address last week. By ending state payments to offset tax exemptions for factory equipment, Malloy's proposal would cost New Britain $2 million, Stewart said. Also, he said, New Britain and other cities are losing state aid for hosting tax-exempt hospitals and colleges.

But Manchester Mayor Louis Spadaccini, also a Republican, said the biggest change for his town would be on the revenue side. Malloy would allow towns to charge 0.10 percent on top of Malloy's proposed 6.25 percent sales tax on store purchases, which Spaddacini said would help retail-heavy Manchester.

"Since the Governor's proposal allocates the sales tax revenue according to where it is generated, Manchester does much better than other communities because of the large amount of retail businesses in the Buckland area," Spadaccini wrote in an e-mail.

The revenue picture, however, is still murky, he wrote, because retailers with more than one location often report all sales activity in the state from a primary location, "thus making some of the projections unreliable." Also, Spadaccini wrote, the added revenue from the retail tax would be offset by the loss of about $1 million in state aid for the manufacturers' equipment tax credit.

Overall, Malloy would eliminate $48 million that the state pays to towns for revenue lost through tax breaks for manufacturing machinery and equipment. The proposal cuts deep in communities such as East Hartford, home to jet engine giant Pratt & Whitney. In a recent letter to the governor, Mayor Marcia Leclerc said losing $3.6 million in PILOT aid would "prove catastrophic."

"While new types of local taxation like rental cars, hotel receipts, sales tax … total $700,000 in new revenue, it creates a $3 million net loss to the Town of East Hartford," Leclerc, a Democrat, wrote in a letter dated Feb. 17.

The impact would increase the local tax burden by 3 percent, Leclerc wrote. She asked Malloy if the town would be able to tax the now-exempt machinery and equipment owned by Pratt's parent, United Technologies Corp., the town's largest taxpayer. If so, the town could tax UTC for $6 million on machinery, Leclerc wrote, while questioning how company leaders would react to such a bill.

"Will East Hartford residents be forced to bear the additional burden?" she wrote. "The cost of opening our town and state for business should not be placed on the backs of our residents."

West Hartford Town Manager Ronald Van Winkle said Malloy's budget proposal is what he expected and actually helps the town more than it hurts. Van Winkle noted the revenue-generating opportunities in the proposal. West Hartford received $19.1 million in state aid this fiscal year and is slated to get $18.8 million next fiscal year under the governor's proposal. That is relatively good news, Van Winkle said, considering drastic cuts in state aid in past recessions.

Hartford Mayor Pedro Segarra praised Malloy for his support of the state's earned income tax credit, a highly controversial proposal that would provide a maximum of about $1,700 for poor families making less than $21,500 a year. Segarra also lauded Malloy for affordable housing and homeless prevention efforts.

"I am also pleased by his willingness to provide municipalities with optional local revenue generators. It clearly demonstrates that, as a former mayor, he understands our present limitations, needs and challenges," Segarra said.

The mayor said that although the governor's tax increases are "not ideal," Malloy is proposing long-term solutions that will ultimately benefit urban areas.

"It starts generating some needed revenue for the state and the city," Segarra said.

Segarra's focus on the positive was not typical.

In Bloomfield, which stands to lose about $1.4 million in PILOT money, officials were scrambling to arrange a meeting with their legislative delegates. Town Finance Director William J. Hogan said Malloy's municipal revenue proposals would add about $200,000 to Bloomfield's coffers, far short of the loss in state aid for manufacturers' equipment tax credits.

Town Manager Louie Chapman said the governor's proposal would allow towns to make up the loss by seeking tax payments directly from manufacturers. But Chapman said he didn't expect Bloomfield companies that have benefited from the PILOT program to pay more willingly.

"They'll say, 'Sue us,' " Chapman said.

Glastonbury Town Manager Richard J. Johnson said that although he was pleased that Malloy held the line on education cost-sharing grants, he was concerned about the loss of $210,000 from the manufacturers equipment PILOT program.

"It's a revenue loss," Johnson said. "And you are asking other taxpayers to pick up that extra burden."

Spadaccini, Manchester's mayor, wrote in an e-mail that although his town budget "fares pretty well in the Governor's proposals, it is still very important to tightly control spending and property taxes." He noted that Malloy's plan would eliminate the $500 state income tax credit for people who pay property taxes.

"The loss of this tax credit significantly increases the tax burden for property owners," Spadaccini wrote. "Adding a municipal property tax increase on top of the elimination of this tax credit could prove too much for property owners."

Courant staff writers Jenna Carlesso, Amanda Falcone, Steve Goode, Peter Marteka, Melissa Pionzio, Mark Spencer, Don Stacom, Julie Stagis and Melissa Traynor contributed to this story.