Municipal revenue sharing plan draws mixed reviews

While a new revenue-sharing plan ensures municipalities get some of the revenues from sales and real estate tax increases, Republicans charged Wednesday that majority Democrats rigged the system to leave nearly half of all communities — particularly those with GOP representation — on the losing end of the split.

But Democrats and the state’s chief municipal lobbying group countered that the new biennial budget grants cities and towns tens of millions in new revenue and spares the $2.9 billion municipal grant program from any cuts–all while closing a deficit once projected as high as $3.67 billion.

“They are not taking into account the reaction of the taxpayers” who will lose ground under this plan, said Sen. L. Scott Frantz, a Greenwich Republican whose home community will pay $4.3 million more into the redistribution plan than in will receive. “There’s a point of diminishing returns. It starts with people looking outside of Connecticut when they shop and it ends with them living somewhere warmer. That’s what’s already going on in my district.”

Frantz was referring to three adjustments the General Assembly made to the municipal assistance plan Gov. Dannel P. Malloy proposed in February.

The Democratic governor’s plan largely was hailed by city and town leaders, not only for sparing major grants from any reductions but also for offering communities several new revenue-raising options. But a glitch developed after Democratic legislators noted that elimination of a program that reimburses communities for lost revenues tied to property tax-exempt manufacturing equipment would leave 27 communities — including several poor towns — with a modest reduction in overall funding, despite the new revenue-raising options.

To fix that problem, Democratic lawmakers adopted modifications to the Malloy plan by adding a revenue-sharing provison:

  • Besides sharing $56 million raised next fiscal year by 1/10th of 1 percentage point on the new, 6.35 percent sales tax rate, Connecticut also would add 0.25 to the state real estate conveyance tax rate and share the $37 million from that increase with communities as well.
  • The first $50 million of this new $93 million pool of funds would provide “manufacturing transition grants” that effectively restore the grant the governor’s plan eliminated, maintaining funding at the current level.
  • The remaining $43 million in revenue-sharing grants was distributed to cities and towns using a complicated formula that placed an emphasis on larger, poorer communities.

On paper, Greenwich would receive $454,780 in new state funds between its share of the sales and conveyance tax hikes and it manufacturing transition grant. But according to the legislature’s nonpartisan Office of Fiscal Analysis, those same tax increases applied in Greenwich alone will yield an extra $4.77 million for the state.

And according OFA statistics, 78 other communities also will generate more tax revenue than they will share in.

Rep. Pamela Z. Sawyer, R-Bolton, whose community will generate a modest $5,780 more than it receives, said the emphasis on larger communities leaves a number of middle-income, small towns on the losing end, while the more urban centers–which tend to elect Democrats–are protected.

“The partisanship jumps out when you really look at this,” said Sawyer, whose community ranks 93 out of 169 cities and towns in terms of wealth according to the state Department of Education. “It’s another middle-class slam.”

Partisan adjustments to municipal aid “is not something, unfortunately, that is new to this institution,” Frantz added.

But Sen. Gary D. LeBeau, D-East Hartford, whose town stood to lose $2.9 million under the Malloy plan and gains $3.9 million under the revised system, said redistributing wealth to help those most in need, and not partisan politics, was the motive behind the adjustments.

“If you look at any tax, the wealthier towns are going to pay in more than they get back,” LeBeau said, adding his community would have been harmed far more by the loss of nearly $3 million than a $4.3 million hit would affect Greenwich, which ranks first on the education department’s wealth list. “The wealthier, non-commercial, non-industrialized towns are going to lose on this,” he said. “That’s because they can afford to pay more.”

James Finley, executive director of the Connecticut Conference of Municipalities, said lawmakers from both parties should keep the dispute in perspective, noting that the new budget closed one of the largest deficits in state history without reducing the $2.9 billion package of municipal grants.

“The pro-municipal initiatives in this budget are extraordinary against the backdrop of the $3.5 billion deficit,” he said. “We had a governor and a legislature who have been sensitive to the fact that you can’t balance the state budget on the backs of (municipal) property taxpayers.”

Though many of the biggest losers were wealthy communities, Manchester, which ranks 138 out of 169 cities and towns in terms of wealth, also finished near the bottom. Sen. Stephen T. Cassano, whose community would receive $1.3 million less than it generates in taxes, said his community deserves more for hosting one of the largest sales tax generators in the state in the Buckland Hills commercial area.

“I believe we’ve generated hundreds of millions of dollars on an annual basis for the state of Connecticut. Are we ever going to get our fair share of that? No,” the Manchester Democrat said.

But Cassano, a former mayor and CCM president who has pressed for state revenue-sharing for more than decade, said the change is a first step in the right direction. He said state government should use the new revenue-sharing system to encourage communities in future years to expand efforts to regionalize programs and reduce town spending.