Municipal leaders in Connecticut are intimately familiar with the state’s own PILOT program, which reimburses cities and towns, at least partially, for state-owned and other tax-exempt properties.
The program, which is part of the overall state aid cities and towns receive, has become the subject of much griping over the years as state lawmakers have significantly underfunded it.
By law, the state is supposed to reimburse municipalities 45 percent of lost tax revenues from state-owned property and 77 percent of lost revenues from properties owned by colleges and hospitals.
However, local officials have learned that the state’s PILOT program is also voluntary, in a sense, with lawmakers able to override it when finances are tight.
This is the fourth story in a series examining various ways Hartford might reduce its high property tax rates. Here are the first, second, and third.
In Hartford, where 59 percent of assessed real estate is tax exempt due to government or nonprofit ownership, the impact of that shortchanging has been outsized. In fiscal 2018, the city received $30 million in state PILOT payments, about $60 million short of what it was supposed to get.
While the state doesn’t publicize, or in some years even appear to track what’s technically owed vs. what it pays, Hartford’s assessor, John Philip, has kept records.
From 2011 to 2018, Hartford was shorted by more than $376 million in state PILOT payments, according to his math.
When viewed in context of Hartford’s recent debt bailout, the state is now effectively reimbursing Hartford on the back end for years of PILOT program underfunding.
What if the state had just paid Hartford the full PILOT amounts over the years? Would the city still have been driven to the brink of bankruptcy?
“Maybe the city would have been fine with all that PILOT,” Ritter said. “I don’t know what they would have done with that money.”
Hartford isn’t alone, he added. The state has underreimbused municipalities across the board.
And Hartford isn’t the only city with significant untaxable property. The exempt portion of New Haven’s grand list is very similar, largely thanks to Yale-owned properties.
However, according to Mark Fitch, an investigative reporter for the free-market think tank Yankee Institute, Yale is also a key economic driver and difference maker between the two cities, which have a similar geographic footprint, though New Haven’s grand list is more valuable, it has a higher homeownership rate and the region it anchors is doing better retaining population.
“New Haven’s got plenty of problems, but because they have that major asset there, they’re kind of able to squeak by,” Fitch said. “Of course [Yale] is going to be a major asset for the city.”
State Rep. Jason Rojas, an East Hartford Democrat who co-chairs the powerful Finance, Revenue and Bonding Committee, noted the state-level PILOT program is a rarity in the U.S. For example, Massachusetts doesn’t have a similar program.
“No, [the state] hasn’t always fulfilled its [PILOT] obligation, but it’s certainly doing more than many others are doing,” Rojas said.
The Cities Project, a collaboration between CT Mirror, Connecticut Public Radio, Hearst Connecticut Media, Hartford Courant, Republican-American of Waterbury, Hartford Business Journal, and Purple States, will publish periodic articles exploring challenges and solutions related to revitalizing Connecticut’s cities. Send comments or suggestions to ehamilton@ctmirror.org.
If the State fully funds the PILOT program; can they put the strings on where the funds are to be applied? For example: can it be required that the towns fully fund their own pension funds or pay down debt only; rather than frittering it away to pals and donors?
The state of CT has underfunded the PILOT program for decades. Our distressed cities are too small to be economically competitive and need all the help they can get from the state. Hopefully the governor and the state legislature can find a way to fully fund this needed program in the next three years.
How the total amount going from the state to the city governments is allocated doesn’t matter much. The only number that’s significant is the total.
So I suggest that this article might have included the annual totals for context.
Hi Philidor, not sure I am quite following your suggestion. Which annual totals are you referring to? The article says the state gave Hartford $30 million in PILOT funding for FY18. The formula stipulates that the city should have received about $90 million, so it was shortchanged by about $60 million. Are you looking for additional data on the actual amount of funding given by the state each year (rather than the amount it was shortchanged)?
Yes, if the total is increasing, the short-changing of PILOT is of less concern.
As I recall, PILOT was set up by the Weicker administration to distribute casino proceeds. If so, that connection may or may not be significant because the casino proceeds have been declining for years.
State aid to cities is complicated.
Hi Philidor, per reporting from the Hartford Business Journal in 2016, Hartford’s PILOT funding has declined in recent years:
https://www.hartfordbusiness.com/article/can-higher-pilot-payments-save-hartford
“Hartford received its annual state and hospital PILOT payments in September, which amounted to $36.3 million. That was down from $37.3 million in fiscal 2016. The amount fluctuates annually, depending on property revaluations or legislative decisions. Hartford’s annual average payment was approximately $38.6 million between 2011 and 2015, according to OPM and OFA data.”
As the article above states, it is now down to about $30 million.
The Pilot program is hardly the only aid to Hartford. The total would be a lot higher than $30 million, especially considering the state’s assumption of Hartford’s debt.
So a chart showing total aid to Hartford over the past decade, say, would report a large dollar amount with an upward trend. That’s more significant than the comparatively small PILOT program.
Philidor, PILOT is only comparatively small because it is not fully funded. If PILOT were fully funded, it would cover 15.5% of the city’s current spending levels instead of the 5.2% it accounts for now.