You asked us to analyze HB 1337, AAC Support for the United States Submarine Base in New London and Manufacturing and Defense Manufacturing in the State.

SUMMARY

This bill authorizes $ 40 million in bonds in FYs 2006 and 2007 for improvements at Electric Boat (EB) and the United States Naval Submarine Base in New London. EB and the base can use the funds to install fuel cells, build cogeneration plants, or do other things to boost energy efficiency and improve EB’s overall economic competitiveness. The bill allocates $ 19 million for EB and $ 21 million for the base. The economic and community development commissioner must grant the funds to both organizations.

The bill permanently exempts manufacturers from paying property taxes on machinery and equipment they acquire after July 1, 2005 and requires the state to reimburse towns for 80% of the revenue loss. Manufacturers who acquired machinery and equipment before that date must pay taxes on this property after the current five-year exemption expires, and the state must reimburse towns for 80% of the revenue they lost during that period. In both cases, the state must fully reimburse

towns for 80% of the revenue loss after July 1, 2005. (Under current law, the state reimburses towns for a lower, prorated amount when it does not have enough funds to fully reimburse every town. )

Beginning in 2010, the bill gradually increases the corporate business tax rate. It keeps the current rate at 7. 5% until 2009 and then increases it by . 25% per year until 2014, when it reaches 8. 75%.

The bill creates a six-member board to monitor changes in federal military base closing policies and the competitiveness of the state’s defense manufacturing industries. The governor and legislative leaders appoint the members, who must include experts in national defense, manufacturing, and other specified areas.

ELECTRIC BOAT AND SUBMARINE BASE (§§1-4)

The bill authorizes $ 40 million in bonds for Electric Boat (EB) and the United States Naval Submarine Base in New London. It authorizes $ 26 million of this amount for FY 2006 (effective July 1, 2005) and the remaining $ 14 million for FY 2007 (effective July 1, 2006). The bond proceeds must go into the Defense Manufacturing and Submarine Base Fund, which the bill establishes as a separate, nonlapsing fund. The treasurer must administer the fund, carrying forward any fiscal year-end balance into the next fiscal year. Money in the fund can only be used for EB and the base.

The bill authorizes up to $ 19 million and up to $ 21 million, respectively over the two fiscal years for EB and submarine base projects. EB and the base can use the funds to acquire fuel cells; build cogeneration plants, power plants, or transmission facilities; and make energy conservation improvements. They can also use the funds to improve EB’s economic competitiveness.

Both organizations must apply to the economic and community development commissioner for the funds. The bill requires him to adopt grant standards and procedures. He must establish application procedures, specify criteria for approving projects, and set terms and conditions for awarding grants. In doing so, he must consult with the public works commissioner and the quasi-public Connecticut Innovations, Incorporated. The commissioner may grant EB and the base up to $ 13 million each in FY 2006. In the next fiscal year, he may grant them up to $ 6 million and up to $ 8 million, respectively.

The commissioner’s authorization to administer the grants takes effect July 1, 2005

PERMANENT PROPERTY TAX EXEMPTION FOR MANUFACTURING MACHINERY AND EQUIPMENT (§§ 5-6)

The bill permanently exempts property owners from paying property taxes on manufacturing machinery and equipment acquired after July 1, 2005. It requires the state to fully reimburse towns for 80% of the revenue loss and correspondingly eliminates the requirement that it pay them a reduced, prorated amount when it does have enough funds to fully reimburse each town.

The bill continues the five-year exemption for owners who acquired machinery and equipment before July 1, 2005. The state must still reimburse towns for 80% of the revenue loss, but may do so at a lower, prorated rate only until July 1, 2005. After that date, the state must reimburse towns for the full amount. But the exemption and the reimbursement for this property still expire five years after its acquisition date.

CORPORATE BUSINESS TAX RATE INCREASES (§7)

The bill keeps the current corporate business tax rate at 7. 5% until 2009 and then increases it to 7. 75% in 2010, 8. 0% in 2011, 8. 25% in 2012, 8. 50% in 2013, and 8. 75% in 2014.

DEFENSE MANUFACTURING AND SUBMARINE BASE ADVISORY BOARD (§8)

Effective July 1, 2005, the bill creates a six-member board to monitor the competitiveness of the state’s defense manufacturing industries and changes in federal base closing policies. It must report its findings and recommendations to the governor and the Commerce Committee by January 1 annually.

The bill specifies the board’s composition. The Senate president pro tempore, the House speaker, the House minority leader, and the Senate minority leader each appoint one member and the governor appoints two. They must appoint people who are expert in manufacturing, utilities, business, or national defense. And they must insure that the board has at least one expert from each of these fields. The members’ terms are coterminous with those of their respective appointing authorities. The members elect the chairman and vice chairman from among themselves.

The board may meet as frequently as the chairman or a majority of the members deem necessary. A member tacitly resigns from the board if he misses three consecutive board meetings or more than half the meetings held during any calendar year. Members serve without compensation, but must, within available funds, be reimbursed for necessary expenses incurred while serving on the board.

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