In presenting his two-year budget proposal, Gov. Dannel Malloy said that, “we have no desire to shift the burden to our towns and cities. This budget holds them harmless.”
Indeed, even though Malloy stripped municipalities of several traditional grants, he made up the difference with a new grant, calling it the “Hold Harmless Grant.” In the proposed budget, West Hartford gets a greater amount of ECS funding, other grants have been reduced. On an overall basis, the dollar amount is unchanged, Town Manager Ron Van Winkle said.
But West Hartford officials and state legislators are saying that towns will not only suffer harm but disaster should Malloy’s plan to do away with one of their largest sources of revenue – the car tax – take effect.
In his address, Malloy proposed exempting more than 90 percent of vehicles from the tax, which the Connecticut Conference of Municipalities estimates raises more than $560 million for Connecticut communities.
"We have $400 million worth of automobiles in West Hartford," said Van Winkle.
“Owners of vehicles with market values under $28,500 would pay no property taxes at all on those vehicles,” Malloy explained, calling the plan tax relief for middle class and poor families.
In West Hartford, Van Winkle estimates $21 million would continue to be taxable after the exemption is put into place.
Towns would have the option of phasing in the exemption in 2013 but would have to forfeit it in July 2014.
Local officials see a number of problems resulting from the loss.
“To make up revenue you need to cut certain services or raise taxes on real estate,” summarized state Rep. Brian Becker, who represents Farmington, Avon and West Hartford.
"We're still working through the figures," said Van Winkle, but he said it appears the town would either have to increase the mill rate or cut $2.5 million from the budget to make up for the lost revenue from automobile taxes. "If we say we're not going to increase taxes, we will have to do significant cuts to balance," he said.
Farmington Town Council Chairman Jeff Hogan said he was “shocked and appalled” when he read the governor’s budget and that cutting the car tax was amounted to an attack on those cities and towns that had been worked hard to be financially responsible and maintain low mill rates.
“I feel … that the loss of PILOT and the loss of the car tax to Farmington specifically would be devastating. On the car tax — why? We run a great town here. We’ve done it right. … Farmington has been governed well for many, many years and we’re being punished,” he said. “It’s ludicrous that we should raise taxes on our residents to finance the ills of the state.”
Farmington Town Councilor John Vibert had another concern: leaving the majority of residents with no tax responsibility to keep them invested in local government.
“As far as I can tell this will just shift the tax burden from car owners to property owners. In most cases that will remove all property tax burden from renters in town and disconnect people from town government,” Vibert said.
Though the inevitable increase in real estate taxes might be passed along to renters in the form of higher rent, Vibert worried that renters wouldn’t associate that with supporting town government.
“Nobody likes the taxes but it provides them a feeling that …’my kids go to school here. I pay taxes and support this,’” he said.
Malloy’s rationale for removing the tax was that it’s “unfair” because “residents in different communities pay very different amounts on the same property value.”
Sen. Beth Bye (D-West Hartford) said Malloy is just trying to keep “the balls in the air while waiting and hoping for the economy to come back.”
"When you sit down and talk to residents, its one of the most unpopular taxes. So [eliminating the car tax] is a popular thing to do and that’s why governors propose it... you can say it’s unfair but mostly the governor is looking for a way to provide relief... I do think it takes one of the very few ways communities have to raise revenue away from them, so unless you replace that with something else, you've given them a difficult task," Bye said.
She advised that Malloy’s budget will be subject to a public comment period when residents and officials may voice concerns. Public hearings and bills are listed on the www.cga.ct.gov. Budget information will be listed under Appropriations.