Of all the property tax reform ideas being kicked around in the state legislature, one of the most intriguing is creating a regional property tax system for new developments.
The concept is broadly outlined in Senate Bill 1, which has been introduced by Senate President Pro Temp Martin Looney (D-New Haven) and Senate Majority Leader Bob Duff (D-Norwalk).
While it’s not fully fleshed out, the underlying proposal would force cities and towns to share property tax revenues generated from a new development like a retail center or minor league ballpark.
Although the concept of sharing is foreign to Connecticut, it may be one of the answers to ensuring greater economic prosperity for the state as a whole. A key issue Connecticut faces is cities and towns always competing for new developments so they can fortify their grand lists and, in turn, reduce the property tax burden on their own residents and businesses.
The Rock Cats’ minor ballpark situation is a perfect example. The team’s move from New Britain to Hartford creates a potential win-lose scenario. Once the Rock Cats officially move to Hartford in 2016, New Britain will lose a taxpayer and a community draw.
Meanwhile, Hartford is not only getting the ballpark but a potential mixed-use residential-retail-office development valued at around $350 million. While the project is no sure bet for the Capital City, such a large-scale development would have likely never been considered in New Britain if the Rock Cats stayed in the Hardware City.
If the Downtown North project works out, the state will be better off as a whole with the team in Hartford because it creates a larger economic impact. Right now, New Britain is the loser in the deal, but a regional tax system could change that, or at least soften the blow.
A regional tax system would encourage municipal planners to focus on generating the greatest amount of economic activity from a single project, rather than simply making sure the development ends up in their own backyard. It’s a fundamentally different way of thinking and it could minimize the need for cities and towns to offer developers copious amounts of tax breaks or incentives simply to lure away a project from a neighboring municipality.
Of course, the devil is always in the details, and we’d need to see a fully developed proposal before we can offer our stamp of approval. There are plenty of potential landmines and pitfalls that need to be considered.
For example, a regional property tax could encourage certain municipalities to let other cities or towns do the heavy lifting on economic development while still sharing in the tax revenue spoils. Communities that make smart infrastructure investments to encourage development within their borders could be punished if they have to share tax revenues generated from future projects.
Conjuring up bipartisan, or even partisan support for any meaningful regionalism/property tax reform will be no easy task. It’s unclear whether state legislators have the intellectual heft or political savvy to get anything done.
Any proposed changes to the current system will never satisfy everyone.
But if Connecticut doesn’t figure out ways to lessen its property tax burden, and grow its tax base, the state will not be able to maximize its jobs and economic opportunities, and investment dollars will continue to flow elsewhere.
