Provided by The Hartford Courant
*************
REPORT FROM CCM
Municipal Finance in Connecticut:
Over reliance on the Property Tax
Click Here for Complete Copy of New CCM New Public
Policy Report Assessing The State Of The Property Tax
In Connecticut in 2012 -- CCM News Release, September 24, 2012
*************
September 25, 2012
From: The Federation of
Connecticut Taxpayer Organizations
Contact: Susan Kniep, President
Website: http://ctact.org/
Email: fctopresident@aol.com
Telephone: 860-841-8032
From
the Federation: Yesterday,
the Connecticut Conference of Municipalities (CCM) released the
aforementioned report as highlighted by CTNewsJunkie.com in their article
captioned Municipal Lobby Shines Light On Property Taxes, Gears Up For
Legislative Debate and CTMirror.org
in their article Communities still feeling the property tax
bite, municipal lobby says.
Therein, CCM notes that “Connecticut's
169 cities and towns, along with their boroughs, fire districts and other
political subdivisions, levied about $8.7 billion in property taxes in 2009-10,
the last fiscal year for which CCM has complete records, Finley said, adding
that the total, once updated, likely would clear $9 billion for the current
year. “Property taxes provide about 72
percent of the revenue for municipalities, while state aid -- which stands at
about $3 billion -- represents 24 percent, according to CCM.”
Click
to Compare the Mill Rate in Your Town With
Other Towns .
The
Federation suggests that the Elephant in the Room which many are ignoring as it relates to the issue of
escalating property taxes are State Collective Bargaining and Binding
Arbitration Laws which have put public sector unions in control of cost drivers
such wages, health care, pensions and management related issues. Personnel related costs account for
approximately 80% to 90% of Municipal and Board of Education budgets throughout
the State. These costs are determined by
arbiters if union contracts cannot be settled between management and
labor. In addition, Past Practice has
been upheld by arbiters if a benefit to the employee has continued without
interruption even if the benefit is not referenced within their union contract.
Example: The right of union members to drive town-owned vehicles home versus a
Town Manager or Mayor attempting to end the practice due to budget
constraints. Arbiters have ruled that
current union members can continue the practice while proposing the practice
cease for new hires. I am familiar with
this issue as the former Mayor of East Hartford
from 1989 to 1993. During that time
frame, I attempted to take control of the town’s vehicles,
I lost to arbiters and understand town officials are meeting similar obstacles
today as more management rights issues are lost to the unions at the taxpayers’
expense.
Further, a contract between management and labor is a
legally binding document. As we reflect below on unsustainable State of Connecticut budgets of
the past, we should be concerned for state budgets enacted during the life of
the state employee contract guaranteeing a 9% wage increase in conjunction with a
no layoff clause. The end result could
be a reduction in state aid to municipalities, an increase in property taxes,
and a reduction in municipal staffing and services.
The aforementioned, we suggest, should be at the forefront
of discussions relating to property taxes as homeowners and business owners
throughout the State lease their property from the town in which their property
is located. If the invoice for the
lease, which is in the form of a property tax bill, is not paid, a tax lien is
imposed on the property. Accumulated
tax liens can then be sold by a town rendering homeowners helpless, hopeless
and homeless.
Ironically, the 9% wage increase for state employees matches
the State unemployment rate. One
could speculate that there are many in Connecticut’s unemployment line today who would gladly take
a state job at today’s base pay and forego the 9% wage increase because the
debt accumulated by our State officials over time is as much of a concern as
the growing deficits in Washington where the
U.S. National Debt Exceeds $16 Trillion.
As Congress stands on the edge of the Fiscal Cliff staring
into the abyss of budget cuts and looming tax increases, the State of Connecticut appears to
have taken the plunge over the cliff.
The State’s latest FISCAL ACCOUNTABILITY REPORT FISCAL YEARS 2012 ... - C
notes the “The State faces Significant Long
Term Obligations including debt, unfunded pension liabilities and unfunded post
employment retirement benefits that are estimated to exceed $71 billion in
total.” Connecticut has the highest debt per capita
in the nation at
$5,402.
According to the Tax Foundation in their publication Tax Freedom Day ® | Tax Foundation “Tax Freedom Day is the day when Americans finally have
earned enough money to pay off their total tax bill for the year. “In 2012, Connecticut taxpayers work until May 5 (ranked 1st nationally) to pay their total tax bill. The Tax Freedom Days of neighboring states are: New York, May 1 (ranked 2nd nationally); Massachusetts, April 22 (ranked 8th nationally); and Rhode Island, April 15
(ranked 21st nationally).”
Reuters’ recent article captioned Connecticut budget has $27 mln hole, sales tax rev lags highlights the State’s $20.5 billion budget which, after
just three months in effect, has a gapping hole of $27 million due to reduced
sales tax revenue and gaming receipts.
After reading the
Federal Report: Connecticut Unemployment Spikes To 9 Percent, it’s no surprise that Connecticut residents have little money to
spend after the Governor imposed $1.5 billion in new taxes shortly after taking
office. But the $1.5 billion coupled
with state employee union concessions was not enough to close the $20.14
billion budget for the prior fiscal year of 2011-2012 which closed $143 million
in the red. State officials solved that
problem by taking money from resources initially intended to pay down the debt
from the 2009 state budget. One could
justifiable wonder if the State has embraced a Robbing Peter to Pay Paul form
of economics after reading
Lawmakers question practice of using long-term funds to
provide short-term cash.
The Wall Street Journal recently published Economy Study Says Connecticut Hard-Hit - WSJ.com, noting that
“Connecticut's economy is worse off than economists initially believed, choking
off job creation and threatening the state's long-term fiscal health, a
University of Connecticut study said.
“In sometimes stark and dire terms, the report said revised federal data show that Connecticut's
economy was still shrinking as the rest of the U.S. was beginning to recover.”
An article by Joseph H. DeAvila in the Wall St Journal
captioned Pensions Overhaul Is Urged - WSJ.com notes “Just months
after Connecticut's
underfunded pension system was ranked among the worst in the U.S., a new research group is calling for the state to move to
401(k) retirement accounts for new government employees and to make other
changes. “Connecticut ranks third lowest in terms of funding its pension
system, saving 53% of $44.8 billion worth of obligations, according to a June
report by the Pew
Center on the States, a
nonpartisan research group. It said pension systems are considered healthy if
they are 80% funded. “A new report by the Connecticut Policy Institute, a
public policy group founded by former Republican gubernatorial candidate Tom
Foley, is pushing for a host of changes to reduce the state's pension costs,
such as cuts to cost of living adjustments for workers, higher employee
contributions and changes to the formula that determines the level of pension
benefits for retirees. “The effort faces an uphill battle against Connecticut's powerful
employee unions, which say such measures are
unnecessary and would hurt workers.”
State
Employee Pensions of $100,000 and more can be
viewed at http://www.ctact.org\upload\home\PensionNew.xls.
State employee Salaries, Pensions and More can also be found
at the Connecticut Transparency Website.
In a July, 2012 publication Moody's proposes adjustments to US public sector pension
data noting their
“adjusted fiscal 2010 state and local unfunded pension liabilities total more
than $2 trillion -- about three times the total reported by governments.”
The Federation suggests that the answer to reducing property
taxes is not increased spending as
proposed by CCM but instead a more prudent allocation of our resources as
Connecticut taxpayers are already taxed to the max.
As we appreciate CCM’s efforts prior to the November 6, 2012
election, we also recognize that CCM, a municipal lobbying group, is comprised
of municipal public officials who themselves could effectuate change and lessen
the impact of local property taxes.
Municipalities and the state should not be spending money,
time and manpower collecting union dues, the majority of which are then used to
promote candidates who will acquiesce to union demands. The Federation learned that in 2009 Union
Dues Collected by the State totaled $33.1 Million. We will provide more current figures when
received.
Public employees should not be allowed to factor overtime
into their pensions which have now become unsustainable and are driving
municipalities throughout the country into bankruptcy. Within the article captioned Why U.S. cities are going bankrupt – Global Public Square -
CNN ... by Fareed Zakaria he notes “
For decades now, local governments have doled out patronage by increasing
pension benefits – these costs impact the budget years later, when the
officials who gave the benefits are safely retired themselves.”
Connecticut municipal
officials should refuse to go behind closed doors to negotiate union contracts
and should instead demand that the contracts - which are ultimately paid for by
the homeowners and business owners in their town - be brought out into the
light of public debate.
Property taxes can only be brought under control by dramatic
reforms to Collective Bargaining Laws which should be immediately spearheaded
by the membership of CCM.
As it relates to Intermunicipal and Regional Collaboration
as proposed by CCM, the following captioned
Geographic Scope of
CT Regional Planning - Connecticut River ... is an interesting read and speaks to a requirement by
January 1, 2012 for an analysis of boundaries of “Logical Planning Regions” and
more.
The concern with regionalizing areas is the loss of control
over individual municipal policies, practices, and resources. Consideration should also be given to the
possible negative impact on individual properties within that municipality as
well as property taxes escalating in one municipality while lessening the tax
burden in another.
Homeowners and businesses within the “Capital Region” which
is comprised of The
City of Hartford, Bloomfield,
East Hartford, Newington, South Windsor, West
Hartford, Wethersfield, Windsor should become familiar with the
recently created Quasi Public Agency named The Capital Region Development
Authority. The Bill Analysis reveals
the following: This bill redesignates the quasi-public Capital City Economic
Development Authority (CCEDA) as the Capital Region Development Authority
(CRDA), preserving many of CCEDA's powers, duties, and functions, including the
authority to issue bonds. CCEDA currently oversees several completed and
ongoing development projects in a statutorily designated area in Hartford (i. e. , the Capital City Economic Development District). Its
duties include advising state agencies on development projects proposed in the
district. The bill expands the district and the range of eligible projects and
allows CRDA to plan and implement some of these projects outside the district.
It authorizes CRDA to (1) develop and redevelop property anywhere in Hartford, (2) develop riverfront improvements anywhere in Hartford and East Hartford, (3) demolish and redevelop vacant buildings in East
Hartford, and (4) increases the number of housing units CRDA may
construct or rehabilitate in the district. To plan and implement these
projects, the bill gives CRDA the same powers current law gives CCEDA to plan
and implement specified capital district projects. You can read the full analysis at http://www.cga.ct.gov/2012/BA/2012SB-00022-R01-BA.htm
In conclusion, the ultimate question may be Is
Municipal Bankruptcy a Gateway to Financial Sustainability ... Therein, Elena Farah, Senior Fellow, Government Financial
Sustainability Initiatives Hobby Center for Public Policy, notes “Warren
Buffet’s liquidation of his bullish position on municipal debt last month was
widely interpreted as possible trouble ahead for local and state government
finances. “In a recent report, Moody’s Investors Service also signaled to
investors its concerns regarding the potentially deteriorating credit quality
of bonded debt of many California
cities.[1] “On the heels of a
recent high profile bankruptcy filing by the City of Stockton, CA, Moody’s communicated its view that
bankruptcy may increasingly become a policy tool for cash-stripped municipalities
in California burdened by unsustainable legacy pension contracts at a time of
economic uncertainty amidst a still sluggish regional real estate market.”
With Connecticut having the highest debt per capita in the
nation at $5,402, and Governor Malloy increasing our debt by giving millions to
private companies in the name of job creation as described by Jonathan Pelto in
his article captioned Connecticut: The State of Modern Capitalism: - Wait, What?, taxpayers in our state should be concerned not only for
the State of our State but the impact State finances and mandates will have on
their own individual finances.
When voting on November 6, 2012, chose wisely! Determine where the loyality of your
candidate lies - with you trying to keep your money or the public sector unions
trying to take control of it!
Visit the Federation’s Website for Previous Publications
http://ctact.org/