Discussion Draft Prepared for the Greater Hartford Chamber of Commerce's Task Force on Tax Exempt Property

This Discussion Draft explains analyzes various approaches for municipalities to obtain revenue from tax-exempt property, and was prepared for the Hartford Chamber of Commerce’s Tax Force on Tax-Exempt Property.It begins by examining the implementation of service charges, such as charges for various municipal services, in lieu of a traditional property tax. Because measuring actual consumption of services like fire and police are impractical, alternative approaches to approximate a user charge are explored. The Discussion Draft then examines state payments to municipalities under a PILOT (payment in lieu of taxes) which Connecticut was using to offset municipal losses due to state-owned property, and evaluates the extension of that program to tax-exempt institutions. A program like this has the advantage of not infringing on the operations of these institutions, however, there are issues arising out of property valuation with this program, and an alternative valuation formula is presented. A third approach to balance the interests of tax-exempts with those of municipalities involves the use of ceilings or other limitations on exemptions. These ceilings or limitations on tax exemptions can be implemented on the total number of acres of land or the fair market value of property exempted from property tax. Another approach involves a time limit, after which the exemptions would phase out. Lastly, the Discussion Draft looks at an approach that would require a municipality’s permission before any taxable property could be acquired for tax-exempt purposes. Three sets of problems with this approach are identified.The Discussion Draft concludes by examining the statutory definition of tax-exempt property, the tension between municipalities and the valuation of tax-exempt property and the legislature’s indifference to whether the law developed by the courts comports with the current views on the policy underlying the granting of exemptions, and the constitutional issue of church and state