Topic:
PROPERTY TAX; ZONING;
Location:
PLANNING AND ZONING; TAXES - PROPERTY;

OLR Research Report


October 20, 2003

 

2003-R-0722

BLUE RIBBON COMMISSION REPORT ON PROPERTY TAXES AND SMART GROWTH

By: Kevin E. McCarthy, Principal Analyst

You asked for a brief summary of the report of the Blue Ribbon Commission on Property Tax Burdens and Smart Growth Incentives.

SUMMARY

The commission addressed the issue of how the state can have growth and be competitive with other states while maintaining its identity. To address this and related issues, the commission set up committees on the property tax and smart growth. The commission believes these issues are linked, and that current laws lead to land use decisions that are aimed at increasing grand lists.

The Property Tax Committee sought to find ways to reduce Connecticut's reliance on the property tax to fund local public services. It noted that particular attention must be paid to public education financing to achieve this objective, as it accounts for a substantial part of local budgets. The Smart Growth Committee sought ways in which growth management measures could address the negative impacts associated with current land use practices in Connecticut.

Each committee prepared a report on their respective topics. The commission then reviewed, modified, and approved the recommendations as its report to the legislature.

The commission recommends that the state increase its funding to local governments to reduce their reliance on the property tax to fund public services. The commission also recommends the establishment of additional regional and local revenue sources for this purpose. The commission also recommends that the legislature adopt measures to increase municipal fiscal accountability and ensure that property taxes are reduced if new state revenues are provided to supplant property tax revenues.

With regard to smart growth, the commission recommends that the state (1) generate information needed to make effective growth management decisions; (2) develop meaningful state, regional, and municipal plans, containing specific goals; (3) provide for stronger regional planning; and (4) provide education for decision makers and youth on the need for and benefits of smart growth measures.

PROBLEM STATEMENT

The report begins with a statement of the problems associated with current land use and tax policies. It asserts that sprawl is a significant threat to the quality of life in the state. In particular, it argues that sprawl is causing, among other things:

1. the loss of farms, forests, and open space;

2. decline of urban areas and resulting economic and racial segregation;

3. increased traffic congestion;

4. unused infrastructure in metropolitan areas;

5. potentially overtaxed water supplies and delivery systems; and

6. an inadequate supply of affordable housing.

The report argues that while existing planning laws and programs contain elements that promote smart growth, e.g., the state plan of conservation and development, they have been inadequate to contain sprawl.

Another key issue is the state's reliance on property taxes, which the report claims is a significant contributor to sprawl. It asserts that the reliance on the property tax encourages municipalities to (1) limit residential developments because they lead to increased public school enrollments and (2) compete with each other for commercial and industrial projects. The report notes that the property tax burden in Connecticut is the third highest in the nation and tenth highest as a percentage of personal income. It asserts that the property tax is not an accurate measure of wealth and does not reflect a taxpayer's ability to pay.

The report claims that land use policies are designed principally to expand grand lists. This leads to continued outward growth of population, and rising effective tax rates further sprawl. The report also asserts that the reliance on the property tax increases the cost of doing business in the state.

PROPERTY TAX RECOMMENDATIONS

The commission recommends that the state take the following measures to decrease reliance on the property tax:

1. fully fund a modified Educational Cost Sharing (ECS) grant;

2. modify the ECS formula to reflect differences in the costs of living within the state;

3. fund at least 50% of the municipal education requirement and the costs of special education for public schools;

4. fully reimburse municipalities for property tax losses under major state-mandated tax exemptions; and

5. allow municipalities to collect and retain or receive certain revenues other than property taxes, including part of the sales and lodging taxes.

The commission also recommends that the legislature adopt measures to increase municipal fiscal accountability and ensure that property taxes are reduced if new state revenues are provided to supplant property tax revenues. The measures include a temporary spending cap on municipalities to force a reduction in property taxes, more rigorous financial reporting requirements, the creation of mechanisms for state financial oversight if one or more financial “triggers” are exceeded, and the provision of technical assistance by the state.

The commission also recommends that the state implement efficiency measures, particularly to reduce the costs of public education. It recommended that councils of governments be given new and expanded roles and that the state develop better data and tools to improve the quality of its tax policy decisions.

SMART GROWTH RECOMMENDATIONS

The commission recommends that the state generate information needed to make effective growth management decisions. These include (1) a geographical information system that shows existing land uses, infrastructure, and natural resources; (2) a statewide build-out analysis under current regulations; and (3) a statewide evaluation of public costs associated with sprawl.

Next, the commission recommends that the state develop meaningful state, regional, and municipal plans, containing specific goals. It argues for (1) integrating these plans to promote consistency and having them incorporate smart growth principles, (2) targeting growth on a regional basis; (3) coordinating transportation, other infrastructure, and land use planning; (4) promoting diversity in housing; and (5) providing financial incentives for smart growth.

The commission recommends that the state provide for stronger regional planning by (1) strengthening regional planning organizations, (2) providing for stronger regional plans of conservation and development, and (3) providing funding and effective land use tools to ensure that regional plans are used. Finally, the commission calls for more education for decision makers and youth on the need for and benefits of smart growth measures.

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