After Gov. Ned Lamont ordered municipalities to waive penalties and ease taxpayer deadlines last year during the worst of the pandemic, legislators gave communities the option to continue some breaks this year.
But after decades of being forced to rely on property tax receipts for their fiscal survival, cities and towns aren’t warming to the idea of forfeiting any revenue they’re not forced to give up.
“We wanted to avoid that kind of situation,” said Betsy Gara, executive director of the Connecticut Council of Small Towns, which represents 110 communities with populations below 30,000. “Anything that undermines the ability to collect those property taxes is going to be a problem.”
“All of this goes into [Connecticut’s] absurd over-reliance on property taxes,” said Joe DeLong, executive director of the Connecticut Conference of Municipalities, the chief lobbying group for all 169 cities and towns in the state. “It’s a lot to ask a municipality to give a property tax break, or some type of incentive, when that is primarily their only source of revenue.”
The property tax is by far the largest tax or fee levied by municipalities.
CCM estimates that municipalities collect about $20 billion per year in property taxes, roughly double what the Connecticut income tax — the state’s single-largest revenue engine by a wide margin — generates annually.
But unlike the income tax, the property tax is regressive, meaning owners are charged the same rate, regardless of their earnings or wealth.
Many tax reform advocates long have argued Connecticut’s system traps many low-income households in poverty, while hefty property tax rates are a deterrent to business growth and economic development in general in urban centers.
Lamont took steps last spring — when the coronavirus had closed many businesses and left as many as 292,000 filers receiving weekly unemployment benefits — to ease state and local tax burdens.
The governor pushed the state income tax filing deadline back from mid-April to July 15.
And he ordered municipalities to offer at least one of two forms of relief to property taxpayers: either add 90 days to the deadline for paying July 2020 property tax bills or reduce the penalty for delinquent payments from 18% to 3%. All communities complied, and some offered both forms of relief.
This year the General Assembly passed, and Lamont signed into law, a bill that empowered local legislative bodies to offer the same two options for offering relief in the 2021-22 and 2022-23 fiscal years — but didn’t mandate anything.
Both DeLong and Gara said they weren’t aware of any municipalities that are participating. And neither CCM, COST nor Lamont’s budget office is tracking participation — another sign that the program isn’t being embraced.
The legislature’s Planning and Development Committee raised the optional relief measure and Rep. Cristin McCarthy-Vahey, who co-chairs the panel, said the lack of participation isn’t too surprising.
“Sometimes, with things like this, it can be a hard option to choose,” she said, noting that economic uncertainty has many municipal and state officials concerned.
Even though Connecticut’s economy has regained more than half of the jobs lost in the early months of the pandemic, the Department of Labor says 120,000 filers still are receiving weekly benefits.
And temporary federal relief for the jobless, which boosted typical unemployment benefits in Connecticut from $300 to $600 per week, expired on Sept. 4.
Municipalities received more than $1.5 billion in direct federal aid through the American Rescue Plan Act to help with this fiscal year and next.
And state legislators expanded municipal aid in the new biennial budget they and Lamont approved in June. That plan boosts a major non-education grant program by about $240 million over this fiscal year and next, combined, while increasing education grants by an average of about $70 million per year.
But municipal officials say that aid, while appreciated, was not enough to reverse a trend that has gone on for a decades, a pattern of increasing burdens on cities and towns as long-ignored pension debt has begun to consume more and more of the state’s operating budget.
DeLong said many communities are using the additional federal and state aid simply to close deficits in their local budgets, avoid property tax hikes, and to reverse previous cuts to core services.
Municipal leaders said the pandemic took a heavy toll on cities and towns.
CCM projected back in June 2020 that during the first three months of the coronavirus, municipalities were down about $400 million in tax revenue tied either to delinquent or deferred payments. And though much of those funds eventually was received, the early months of the pandemic also added about $63 million in emergency costs to towns.