Budget compromise retains funds for cities that host manufacturers

By Ken Dixon, Staff Writer

HARTFORD - Municipalities that host manufacturers will retain funds given by the state under a budget compromise that emerged in the Democrat-controlled General Assembly this week.

The compromise drastically revised two of Gov. Dannel P. Malloy major initiatives, one regarding manufacturing equipment that is exempt from taxes and another on a new statewide sales tax.

Malloy had asked for the outright elimination of a $50 million state program for cities and towns that host major manufacturers within their borders whose equipment is tax-exempt.

But the deal between the Democratic governor and majority lawmakers aimed at retaining current levels of municipal aid means Stratford would retain its $2.8 million annual payment for hosting Sikorsky Aircraft.

Milford would still get $1.1 million a year, while Bridgeport would retain its $840,000 and Shelton, $484,000 in a revamped Payment in Lieu of Taxes (PILOT) program.

While details will be worked out over the next few weeks, legislative leaders believe the revenue will come in the form of added grants through the conveyance tax on real estate transactions.

Malloy had also proposed a new statewide 6.25 percent sales tax, up from the current 6 percent, with retail sales taxes rising to 6.35 percent, giving cities and towns where the sales occurred the added tenth-of-a-percent revenue for their local budgets.

Instead, the deal announced Wednesday by Malloy and Democratic leaders would raise the statewide transaction tax for all sales and most services to 6.35 percent, with an as-yet-to-be-decided formula for returning extra funding to municipalities.

"We're maintaining the governor's proposal to give back that additional point-one percent of the sales tax ... either by region or per capita throughout this state so we avoid the push to create more urban sprawl, when small towns want to start opening up big-box stores in order to capture money," said Rep. Bob Godfrey, D-Danbury.

"It's a good idea as a policy," said Godfrey, noting that Malloy's plan could have forced urban centers and suburbs to compete against each other for future development.

House Majority Leader Brendan Sharkey, D-Hamden, said lawmakers realized that having cities and towns battling would be against the goals of the so-called Smart Growth legislation that he and other leaders have proposed in recent years.

"You're encouraging every town in the state to do big-box development and plow over green fields, and also it's unfair for those that already have a lot of that revenue source already," Sharkey said. "So what has changed is that it is no longer the addition point-one percent on retail; it's on all sales. Then also it will be redistributed out in either a regional context or a statewide context and we haven't quite gotten that formula decided upon yet."

Sharkey said the rewritten manufacturing PILOT program would keep current levels.

"We're freezing this year as a moment in time," he said. "It no longer will be tied directly to the PILOT program for manufacturing, because essentially what the governor's theory is, and I tend to agree with him, is that we don't want to be taxing manufacturing equipment. So we want to phase out even the towns' counting it as part of their grand list, because we really just want to eliminate entirely any scenario where we're going to be taxing that kind of equipment."

The two-year $40 billion state budget proposal was approved in two key legislative committees on Thursday and is pending before the House and Senate.

But it depends on unions representing 43,000 state workers to make $2 billion in concessions. If not, thousands of layoffs and further budget revisions could result.

Ken Dixon covers the state Capitol, where you may reach him at 860-549-4670 or kdixon@ctpost.com. On Twitter, he is KenDixonCT. His Facebook address is here. Dixon's Web log, Connecticut Blog-o-rama, can be seen here.