‘Temporary’ tax to benefit cities and towns extended once again

The General Assembly voted overwhelmingly Monday to continue taxing real estate sales at an elevated rate first employed as a temporary measure seven years ago, a welcome relief to the state’s towns and cities who stand to benefit.

Without action, the 0.25 tax rate would have expired next week, and with it an estimated $25 million in revenue for the state’s 169 towns and cities. The rate would have reverted to 0.11 percent, where it stood for two decades prior to 2003.

Republican Gov. M. Jodi Rell plans to sign the bill, which easily passed the House and Senate, said spokesman Adam Liegeot.

A major supporter of the measure, Connecticut Conference of Municipalities,  said the tax should have been extended for at least two years, if not indefinitely. Instead, the tax hike was continued for just one more fiscal year, through June 30, 2011.

The 0.25 percent rate was first enacted as a temporary, one-year hike during the recession of 2003 to help offset mid-year cuts in state grants to cities and towns. Since then, lawmakers have neither repealed nor approved the hike indefinitely, instead endorsing one- or two-year extensions in 2004, 2005, 2007, 2008 and again on Monday, according to the Office of Legislative Research.

“We’ll have to fight this battle again all over again next year. We all know next session is going to be dominated by the state’s massive deficit, so trying to convince the legislature we need this money will be difficult,” said James Finley, executive director of the Connecticut Conference of Municipalities.

The Connecticut Association of Realtors dropped its opposition to the one-year extension last week, provided foreclosed homes and homes being sold for less than how much was due on the mortgage were exempt from the tax.

These exemptions — which are included in the final package — are estimated to affect 2,040 sales this coming year, reports the legislature budget office. Had they been taxed, it would have netted $1.73 million.

But CCM did not oppose the exemption for this group.

“We did not fight it. We understand people would need relief under those circumstances,” Finley said.

Because town aid has been flat-funded from the state at $2.8 billion for the past couple years–and next year is not looking any more promising with the $3.4 billion deficit– Rep. J. Brendan Sharkey, D-Hamden, co-chairman of the legislature’s Planning and Development Committee, said he would have supported permanently continuing the tax.

“We really need to do this until we find alternative revenues for them. It’s not fair to turn our backs on them,” said Sharkey.

But four state senators and nine representatives voted against the bill.

“This should go away,” said Sen. Toni Boucher, R-Wilton.

A second component of the bill conveys about a dozen parcels of state land to cities and towns – in most cases at little or no cost – despite an ongoing requirement that state government raise $60 million across two fiscal years from the sale of land, building and other assets.

The legislature traditionally adopts an omnibus property conveyance bill each year that transfers or leases dozens of surplus properties to communities, nonprofit agencies and others that are asked only to cover legal expenses. A bill was prepared this year, but died on the Senate calendar when the regular 2010 session ended on May 5.

Senate Majority Leader Martin M. Looney, D-New Haven, said legislative leaders limited this year’s property conveyance package to a relatively small number, and focused on small parcels to assist towns with economic development or other civic purposes.

Looney added that “we still assume that the administration is trying to meet the mandate” of raising $60 million from the sale of assets.

Rell and the legislature are counting on at least $60 million in total sales over this fiscal year and next to help balance the books.

The administration reported last month that while the Department of Public Works hopes to close the sale of three properties in the next two months, it had signed off on just $1.5 million in sales to date.

The $60 million biennial target, which includes $15 million for this fiscal year and $45 million for 2010-11, has been attacked by critics as overly optimistic, and as another method of pushing fiscal problems into the next term.

The bill adopted in special session Monday would provide land for public parking in Bridgeport, a fire station in Portland, and traffic improvements in Manchester and New Haven. It also includes property for unspecified “municipal purposes” in Wallingford, more than 14 acres for recreation in Burlington and returns a dam and surrounding land along Lake Phipps in West Haven to a local service district – even though the property was transferred to the state 20 years ago so it would repair and maintain the dam.

A final component of the measure authorizes a study on possibly dedicating 10 acres of the Newington campus of Cedarcrest Hospital, a state psychiatric care facility slated for closure, for town recreational use.

In other business Monday, the legislature also adopted a bill making a series of technical adjustments in the $19.01 billion budget approved last month for the 2010-11 fiscal year, which begins July 1.

The measure, which passed 103-36 in the House and 24-12 in the Senate in votes largely along party lines, also authorizes a new $40 million mortgage loan program through the Connecticut Housing Finance Authority to borrowers who purchase foreclosed or abandoned properties.