Plan to share sales tax with towns gets hearing

Despite the fiscal crisis confronting the state, a legislative committee has decided to hold a public hearing on a bill that would share the state’s sales tax with municipalities that participate in regional cooperation.

“The state right now does not give towns many options for revenue and this is something they have been asking for years for,” said Senate Majority Leader Martin M. Looney, the bill’s sponsor.

The New Haven Democrat’s proposal would allow those communities to keep one quarter of a percentage point of the 6 percent sales tax levied in the town. Currently the state’s $3.1 billion in annual sales tax revenue all goes to the General Fund

The Planning and Development Committee unanimously voted Wednesday to hear testimony on Looney’s proposal as early as March 1. Committee Co-chairman Rep. J. Brendan Sharkey, D-Hamden, said testimony on several other proposals that will help local municipalities also will be heard by the committee on the same day. The other proposals include those made by Republican Gov. M. Jodi Rell and also by the Democratic Blue Ribbon Commission on Municipal Opportunities and Regional Efficiencies.

Although similar sales-tax sharing measures have been proposed in the past, Committee Co-chairman Sen. Eric D. Coleman said this is the first time he can recall one involving regional cooperation making it to a public hearing. Last year a public hearing was held on a proposal that would allow each municipality to add 1 percent to the sales tax, but it failed to become law.

Sharkey and other committee members said any bill that takes money away from the state will be difficult to pass since the state is facing a $515 million deficit for the current fiscal year ending June 30.

“Personally, I’m not sure if we are going to be in a position to make the broader sweeping recommendations about how we want to restructure our tax system,” said Sharkey. “I think that’s more of a phase two of what’s going to happen after the session is over.”

Rep. Bill Aman, House minority leader of the committee, said while he supports giving towns a portion of the sales tax he is not sure he can support the proposal because of the budget problems.

“This may not be the year that we can afford to do this quarter-point raise to municipalities,” the Republican from South Windsor said. “But there has got to be a way of getting additional money to the towns.”

Coleman, D-Bloomfield, says he is “concerned at a time when we’re in fiscal crisis, should we even be talking about this? We plan to find out how and if we can do this.”

Looney said he hopes towns collaborating on regional efforts will ultimately save the state money, and the bill rewards those towns with a guaranteed revenue sources rather than unpredictable state grants.

“This would allow them to determine for themselves what to do,” he said, who supports making the change as early as next fiscal year beginning July 1.

With towns facing the loss of millions in state aid as the legislature tackles the projected deficits, the idea of sales tax sharing is a welcome one to municipal officials.

“That’s significant funding these towns could really use right now,” said James J. Finley, Jr., executive director of Connecticut Conference of Municipalities. He estimated the bill could provide $100 million a year for participating communities.

But Bart Russell, executive director of Connecticut Conference of Small Towns, said he’s not confident that this is the year for the tax-sharing plan. Raising the sales tax and giving the difference to the towns might be more feasible than taking a share away from the state, he said.

The fact that the Senate majority leader supports sales tax going to towns is enough to give Russell some hope help is on the way.

“We’re all looking at the same hole and trying to figure out ways to fill it. The idea of sharing the tax sales tax to fill this gap would be a welcome change,” he said.