Fact check: Hartford's city budget and tax-exempt property
Hartford, Connecticut
November 2, 2017
By Taylor Kempema
The City of Hartford, Connecticut, is facing a $49.6 million budget deficit for fiscal year 2018. Regarding this shortfall, Hartford Mayor Luke Bronin claimed: "[T]he much bigger reason for Hartford’s budget crisis is this: … More than half of our property is non-taxable."[1]
In response, Journal Inquirer managing editor Chris Powell wrote, "The mayor argues that the city is hobbled financially because half its land is occupied by government or nonprofit institutions and thus exempt from city property taxes. But state government already compensates for that by reimbursing half the city's budget."[2]
Is more than half of the property in Hartford non-taxable, as Mayor Bronin claimed?[3] Does the state compensate for the untaxed property in Hartford by providing half of the city’s budget revenue, as Powell claimed?[4]
According to the Hartford assessor's latest valuation (October 2016), 49.9 percent of the value of all parcels in the city is exempt from property taxes.[5][6][7][8]
In FY 2017, the state provided nearly 49 percent of the city's general fund revenue ($266.4 million). In terms of the entire FY 2017 budget, the state provided about 32 percent of Hartford's total revenue ($834.5 million).[9][10]
Of the $266.4 million in general fund revenue from the state, 25 percent ($67.7 million) was actual reimbursement for state-owned tax-exempt properties and for private college and hospital properties. That revenue is designated as Payment in Lieu of Taxes (PILOT), and the state’s payment to Hartford for fiscal year 2018 appears to be $21.8 million short of its total obligation.[5][11]
Background
Hartford Mayor Luke Bronin, Treasurer Adam Cloud, and City Council President Thomas Clarke II sent a letter on September 7 to Connecticut Gov. Dannel Malloy and state legislative leaders, warning of "the greatest fiscal crisis in our city's history." City officials said that if no additional state funding was in place within 60 days, Hartford will be “unable to meet its financial obligations" and would file for bankruptcy.[12]
Moody's Investors Service announced on October 19 that Hartford will likely default on its $604 million debt as early as November without additional concessions from the state, bondholders, and labor unions. Moody's also projects that the city will face operating deficits of between $60 million and $80 million per year until 2036. The service downgraded Hartford's bond rating from Caa3 to Caa1 in September.[13][14]
Hartford’s enacted fiscal year 2018 budget includes $612.9 million in general fund expenditures and a projected $563.3 million in general fund revenues, thus leaving a deficit of $49.6 million.[9] The city had a deficit of $8.4 million in FY 2017, a deficit of $7.6 million in FY 2016 and FY 2015, and a deficit of $13.6 million in FY 2014.[15][16][17][18]
Hartford's total revenue from all sources in FY 2018 is $848.8 million, and its total expenditures in all categories is $898.4 million.[19][20]
Tax-exempt property in Hartford
Connecticut law exempts federal, state, and municipal properties, as well as nonprofit colleges and hospitals, from local property taxes.[21][22][23]
Hartford’s property tax rate of $74.29 is levied on every $1,000 of assessed property value.[24][25] In its fiscal year 2018 budget, Hartford calculated $266.7 million in property tax from $4.07 billion in taxable property.[26][9][27][28]
As noted above, the city assessor’s latest valuation determined that 49.9 percent of the value of all parcels in Hartford was tax-exempt, and the value of this property totaled $4.05 billion.[9][29]
This tax-exempt real estate, if taxed, would generate $300.7 million in revenue, according to the city assessor’s office.[5][7]
City of Hartford budget
Hartford’s mayor and city council are asking the legislature to fully fund the state’s PILOT obligations.[9][30]
By law, PILOT payments are supposed to equal 45 percent of the property taxes that would be paid if the state's parcels were privately held, and 77 percent of the property taxes that would otherwise be paid if the nonprofit colleges and hospitals were not subsidized.[31] However, actual payments are dependent on appropriations by the legislature. In the event lawmakers do not fully fund the state’s PILOT obligations, payments are rationed proportionally to cities statewide.[32][33][34][35]
Hartford officials estimate that the city would receive an additional $52.3 million if the state fully funded its PILOT obligations—enough to more than offset the city’s FY 2018 budget deficit. However, that estimate does not account for the $25.7 million in additional PILOT-related funding that Hartford is slated to receive in fiscal year 2018 and 2019 and the $4.4 million in other PILOT-related funding that Hartford is slated to receive in fiscal year 2018.[9][36] Including that funding in the calculation would mean that the state’s PILOT funding would be $22.2 million short of its full obligation in FY 2018, not $52.3 million, as Hartford officials claim. The chart below shows the difference between what the city received in PILOT for FY 2017 compared to what it would have received in FY 2017 if the state fully funded its PILOT obligations, a difference of $21.4 million.
| FY 2017 state PILOT payments to Hartford (in millions of dollars) | ||||||
|---|---|---|---|---|---|---|
| Payment type | FY 2017 PILOT (received) | FY 2017 PILOT (fully funded) | ||||
| State-owned property PILOT | $13.5 | $29.1 | ||||
| Private college/hospital PILOT | $23.7 | $60.4 | ||||
| PILOT (other) | $4.8 | - | ||||
| Supplemental PILOT funding | $25.7 | - | ||||
| Total | $67.7 | $89.5 | ||||
| Sources: Taylor Kempema, "Email communication with Melissa McCaw, Management, Budget & Grants Director for Hartford," October 11, 2017 Taylor Kempema, "Email communication with David Kalafa, Policy Development Coordinator, Connecticut Office of Policy and Management," October 10, 2017 City of Hartford, "City of Hartford Adopted Budget for Fiscal Year 2018," June 1, 2017 | ||||||
In fiscal year 2017, Hartford collected $544.5 million in general fund revenue and spent $552.9 million in general fund expenditures. The two largest sources of general fund revenue were property taxes and state and federal funds, which accounted for 47.8 percent and 48.9 percent, respectively ($260.3 million and $266.5 million). The remainder came from licenses and permits, fines and penalties, charges for services, and other sources.[9]
Of state aid to the general fund, nearly 71 percent ($188 million) was education funding.[9][37][38][39][40][41][42][43][44][45][46]
| Hartford General Fund revenue, expenditures, and state PILOT payments (in millions of dollars) | |||||||
|---|---|---|---|---|---|---|---|
| Fiscal year | General Fund revenue | General Fund expenditures | State-owned property PILOT | Private college/hospital PILOT | PILOT (other) | Total | Percentage of revenue |
| 2017 | $544.5 | $552.9 | $13.6 | $23.7 | $4.8 | $67.7† | 12.4% |
| 2016 | $532.1 | $539.7 | $13.9 | $23.4 | $5 | $42.3 | 8% |
| 2015 | $548 | $540.4 | $14.8 | $25.3 | $5.7 | $45.8 | 8.4% |
| 2014 | $533.9 | $547.5 | $13.8 | $24.2 | $6.4 | $44.4 | 8.3% |
| 2013 | $534.3 | $534.9 | $13.6 | $25.7 | $7.4 | $46.7 | 8.7% |
| 2012 | $551.1 | $545.5 | $12.7 | $25.1 | $9.2 | $47 | 8.5% |
| Sources: See footnotes 39-46 Note: FY 2017 figures are from the enacted budget; all other figures represent end-of-fiscal-year totals, which are unavailable for FY 2017. | |||||||
Fazit
Hartford Mayor Luke Bronin has claimed that the city has a looming budget deficit because ”[m]ore than half of our property is non-taxable."[1]
In response to Bronin’s claim, Journal Inquirer managing editor Chris Powell wrote that “state government already compensates for the tax-exempt properties by reimbursing half the city's budget."[2]
Some 49.9 percent of the value of all parcels in Hartford is tax-exempt, according to the Hartford assessor's latest valuation (October 2016).[9]
In FY 2017, nearly 49 percent of the city's general fund ($266.4 million) came from the state. Of that revenue, nearly 25 percent ($67.7 million) was reimbursement for state-owned tax-exempt properties and for private college and hospital properties in Hartford.[9]
See also
Sources and Notes
- ↑ 1.0 1.1 City of Hartford, "City of Hartford FY2018 Recommended Budget," accessed August 31, 2017
- ↑ 2.0 2.1 Journal Inquirer, "Fraud verdict should cinch bankruptcy for Hartford," July 10, 2017
- ↑ Ballotpedia contacted the mayor's office for clarification of Bronin's claim. A Bronin spokesman said that the mayor was referring to half the value of the city’s Grand List (the list of all taxable property) as being tax-exempt. Taylor Kempema, "Email communication with Vasishth Srivastava, Office of Mayor Luke A. Bronin," October 23, 2017
- ↑ Connecticut began its 2018 fiscal year on July 1, 2017, without an enacted budget. On June 30, Gov. Dannel Malloy signed an executive order authorizing reduced amounts of government spending in the absence of a FY 2018 budget. The order allowed Connecticut to avoid a shutdown of government services on July 1. As the above claims were made, the state legislature and governor were negotiating the biennium FY 2018-2019 budget. The legislature passed a budget deal on October 26, and Malloy signed portions of the budget on October 31. Hartford Courant, "Malloy Signs Portions Of Budget Bill But Rejects Hospital Tax," October 31, 2017
- ↑ 5.0 5.1 5.2 Tax-exempt property in Hartford includes city-owned, state-owned, and federally-owned property, property owned by private colleges and hospitals, and property owned by other nonprofit organizations.
- ↑ According to the Hartford assessor's October 2016 valuation, the total value of tax-exempt property in Hartford was $4.05 billion. Of that total, nearly 30 percent ($1.2 billion) was city property, 21 percent ($864 million) was state property, and nearly 2 percent ($65 million) was federal property. Nearly 30 percent ($1.2 billion) was private college and hospital property. Various nonprofit properties accounted for the remainder.
- ↑ 7.0 7.1 Taylor Kempema, "Phone communication with John S. Philip, Hartford City Assessor," September 27, 2017
- ↑ State law requires municipalities to revalue all property for assessment and taxing purposes every five years and submit their revaluations to the state Office of Policy and Management (Hartford's latest revaluation was in October 2016). Assessed values submitted to the state are audited against the previous year's submission. The state audit of Hartford's October 2016 valuation is ongoing and has yet to be completed. Taylor Kempema, "Email communication with David A. Kalafa, Policy Development Coordinator for the Connecticut Office of Policy and Management," October 25, 2017
- ↑ 9.0 9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8 9.9 City of Hartford, "City of Hartford Adopted Budget for Fiscal Year 2018," June 1, 2017
- ↑ City of Hartford, "City of Hartford Adopted Budget for Fiscal Year 2017," July 1 2016 (Page 5-6)
- ↑ Of the $67.7 million, $37.2 million are in payments for state properties, and private college and hospital property. The remainder includes $4.8 million in "other" PILOT funding and $25.7 million in additional state grants in FY 2017 as part of supplemental PILOT funding and the Municipal Revenue Sharing Program (enacted by the legislature in 2015 for municipalities). Connecticut General Assembly, "Municipal Revenue Sharing Program," August 24, 2016
- ↑ City of Hartford, "RE: City of Hartford’s Finances," September 7, 2017
- ↑ Moody's Investors Service, "Moody's: Hartford default likely as annual deficits of $60 million -$80 million projected until 2036," October 19, 2017
- ↑ For more on the credit rating downgrade, see Hartford Courant, "Moody's Warns of 'Likely' Hartford Default, Decades of Deficits Ahead," October 19, 2017
- ↑ City of Hartford, "City of Hartford Adopted Budget for Fiscal Year 2018," June 1, 2017 (Page 5-1)
- ↑ City of Hartford, "City of Hartford FY 2017 Adopted Budget," June 1, 2016
- ↑ City of Hartford, "General Fund Revenue and Expenditures Summary (FY 2016)," accessed September 1, 2017 (Page 5-1)
- ↑ City of Hartford, "General Fund Revenue and Expenditures Summary (FY 2015)," accessed September 1, 2017 (Page 5-1)
- ↑ City of Hartford, "City of Hartford Adopted Budget for Fiscal Year 2018," June 1, 2017 (Page 5-6)
- ↑ City of Hartford, "City of Hartford Adopted Budget for Fiscal Year 2018," June 1, 2017 (Page 5-7)
- ↑ Connecticut State Legislature, "Connecticut General Statutes, Chapter 203: Property Tax Assessment," accessed September 2, 2017
- ↑ City of Hartford, "Exemption & Benefit Programs," accessed September 16, 2017
- ↑ Nonprofit properties used for scientific, educational, literary, historical, or charitable purposes must file and request a tax exemption based on the use of the property. Churches and associated properties of religious organizations are exempt from taxation if properties are used for their prescribed purpose. Other exemptions are provided to veterans, individuals receiving Social Security disability payments, blind individuals, and handicapped-equipped vehicles.
- ↑ Connecticut Office of Policy and Management, "Mill Rates," accessed September 21, 2017
- ↑ Connecticut State Legislature, "Connecticut General Statutes, Chapter 204: Local Levy and Collection of Taxes," accessed September 2, 2017
- ↑ Hartford makes adjustments to its property tax revenue calculation to reflect legal additions and deletions, decisions by the Board of Assessment Appeals, abatements for elderly tax relief, adjustments approved by the Committee on Tax Abatement, and adjustments from tax appeal settlements.
- ↑ Taxable property is divided into real property (real estate), business-owned personal property, and motor vehicles. Connecticut Office of Policy and Management, "Statutes Governing Property Assessment and Taxation - Connecticut's Property Tax Framework," accessed October 24, 2017
- ↑ The Hartford City Assessor is responsible for estimating the fair market value of all taxable property in the city, known as the Grand List. The latest property evaluation in Hartford was on October 1, 2016.
- ↑ Tax-exempt property includes only real estate property. Taylor Kempema, "Phone communication with John S. Philip, Hartford City Assessor," September 27, 2017
- ↑ The PILOT payments for state property were last fully funded in FY 2000 and were prorated through FY 2017. The PILOT payments for private college and hospital property were last fully funded in FY 1999 and were prorated through FY 2017. Taylor Kempema, "Email communication with David A. Kalafa, Policy Development Coordinator for the Connecticut Office of Policy and Management," October 6, 2017
- ↑ The PILOT payment percentages for state-owned land are equal to 100 percent for facilities used as a correctional facility, 100 percent for Mashantucket Pequot Tribal land taken into trust by federal government since June 1999, 100 percent for any town in which more than 50 percent of all property is state-owned real property, and 45 percent for all other property.
- ↑ Connecticut State Legislature, "Connecticut General Statutes, Chapter 201 - State and Local Revenue Services. Department of Revenue Services," accessed September 18, 2017
- ↑ Connecticut Office of Policy and Management, "State-Owned Property - Payment in Lieu of Taxes," accessed September 1, 2017
- ↑ Connecticut Office of Policy and Management, "Colleges (Private) and General/Free Standing Chronic Disease Hospitals - Payment in Lieu of Taxes," accessed September 3, 2017
- ↑ Connecticut Office of Fiscal Analysis, "PILOT grants," October 9, 2014
- ↑ Taylor Kempema, "Email communication with David A. Kalafa, Policy Development Coordinator for the Connecticut Office of Policy and Management," October 10, 2017
- ↑ In addition to the general fund, Hartford maintains a Special Revenue Fund comprised of revenues for dedicated purposes. This funding includes the federal Section 8 Voucher Program for housing assistance, the Community Development Block Grants, the HOME Investment Partnerships Program, and the Ryan White Part A grants for assistance in treating HIV and AIDS. City of Hartford, "City of Hartford Adopted Budget for Fiscal Year 2018," June 1, 2017 (Page 35-1)
- ↑ City officials were unable to tell Ballotpedia how much of the general fund revenue, if any, originated as federal funds passed to cities by the state.
- ↑ City of Hartford, "City of Hartford Adopted Budget for Fiscal Year 2018," June 1, 2017
- ↑ City of Hartford, "City of Hartford FY 2017 Adopted Budget," June 1, 2016
- ↑ City of Hartford, "General Fund Revenue and Expenditures Summary (FY 2016)," accessed September 1, 2017
- ↑ City of Hartford, "General Fund Revenue by Category (FY 2016)," accessed September 1, 2017
- ↑ City of Hartford, "General Fund Revenue and Expenditures Summary (FY 2015)," accessed September 1, 2017
- ↑ City of Hartford, "General Fund Revenue by Category (FY 2015)," accessed September 1, 2017
- ↑ City of Hartford, "General Fund Revenue and Expenditures Summary (FY 2014)," accessed September 1, 2017
- ↑ City of Hartford, "General Fund Revenue by Category (FY 2014)," accessed September 1, 2017
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