Topic:
HIGHER EDUCATION; MUNICIPAL FINANCE; PAYMENT IN LIEU OF TAXES; GRANTS; TAXATION (GENERAL); HOSPITALS; LEGISLATION; STATE PROPERTY;
Location:
MUNICIPAL FINANCE; TAXATION;

OLR Research Report


May 17, 2006

 

2006-R-0340

FORMULAS FOR PAYMENTS IN LIEU OF TAXES AND PROPERTY RELIEF GRANTS

By: Judith Lohman, Chief Analyst

You asked for a description of the statutory formulas for calculating payments in lieu of taxes (PILOT) to towns to reimburse them for lost revenue from tax-exempt state-owned property and private colleges and hospitals. You also asked what the formula is for distributing the 2006 appropriation for property tax relief grants to towns.

SUMMARY

PILOT payments for state-owned property and private colleges and hospitals are based on a percentage of the taxes that the town would otherwise collect on the property and on the overall state appropriation for the grant payments. The law sets a percentage reimbursement for each type of property but requires the payments to be proportionately reduced if the state appropriation for the grants is not enough to pay the full amount to every town.

The 2006 state budget appropriates $33 million from the state budget surplus to pay for a one-time property tax relief grant to towns for FY 07. The amount each town will receive is listed in the statutory formula grants, published by the Office of Fiscal Analysis. According to Kerry Kelley of the Office of Fiscal Analysis, there is no statutory formula for these grants. Instead, each town will receive the amount listed.

PILOT PAYMENTS

State-Owned Property

State law requires the Office of Policy and Management (OPM) to pay towns annual grants, as determined by the OPM secretary based on town certifications, to reimburse them for part of the property tax revenue they lose because they are not able to tax state-owned real property, Indian reservation land, and municipally owned airports (CGS 12-19a). The law establishes various reimbursement rates depending on the type of property. The statutory reimbursement rates are shown in Table 1.

Table 1: Statutory PILOT Reimbursement Rates for State-Owned and Other Specified Types of Property

Type of Property

PILOT (% of lost revenue)

Correctional facility or juvenile detention center

100%

Dempsey Hospital permanent medical ward for prisoners

100%

Mashantucket Pequot reservation land designated in 1983 settlement

100%

Connecticut Valley Hospital

65%

Land in any town in which more than 50% of the land is state-owned

100%

All other state-owned real property

45%

Municipally owned airport

45%

Bradley International Airport

20%

The law provides that, if the budget appropriation in any fiscal year is insufficient to fund the full PILOTs listed above, the grants to towns for that year must be proportionately reduced.

Private Colleges and Nonprofit Hospitals

The law also establishes state PILOTs for tax-exempt property owned by private colleges and nonprofit hospitals. The statutory percentage reimbursement for most such property is 77% of the lost revenue ( 12-20a). But as is the case with the state-owned property PILOTs, the law also provides for proportional reductions if the state's annual appropriation is not enough to fund the full grants.

The law also makes special allocations for certain specific institutions. For Veterans Administration hospitals, the law phases in the full 77% PILOT payment over five years according to the following schedule:

20% for FY 07

40% for FY 08

60% for FY 09

80% for FY 10

100% for FY 11 and after.

The law also establishes the following PILOT payments for the institutions shown in Table 2:

Table 2: Annual PILOT Payments for Specified Colleges and Hospitals

Property

Town

PILOT Payment

Statute

Connecticut Hospice

Branford

$100,000

12-20b

State-owned forest

Voluntown

An additional $60,000

2006 HB 5846, as amended

U.S. Coast Guard Academy

New London

$1,000,000

2006 HB 5846, as amended

JL:ts