2008OFA-0066

February 21, 2008

TO:

 
   

FROM:

Kerry Kelley

   
   

SUBJECT:

Overview of State Owned PILOT, Private College & Hospital PILOT, Mashantucket Pequot & Mohegan Grant and how these grants have changed in FY 09 for East Lyme, Montville and New London.

You asked: 1. ) How the State Owned PILOT; Private College and Hospital PILOT and Mashantucket Pequot and Mohegan Grant are calculated; and 2). What factors caused these grants to change from FY 08 to FY 09 for the towns of East Lyme, Montville and New London.

1) Below is a description of each grant and how it is calculated:

STATE-OWNED REAL PROPERTY PAYMENT-IN-LIEU

OF TAXES (PILOT)

The Office of Policy and Management administers this PILOT program pursuant to CGS 12-19a, 12-19b, 12-19c, 4b-39 and 32-666. This program provides payments for real property tax losses due to exemptions applicable to state-owned real property, certain real property that is the subject of a state lease or long-term financing contract, municipally-owned airports and certain land held in trust by the federal government.

A property's use and the amount of state-owned real property in a town determine PILOT percentages, which are:

(1) 100% for state prison facilities used for purposes of incarceration in the prior fiscal year, that portion of the John Dempsey Hospital used as a permanent medical ward for prisoners, the Connecticut Juvenile Training School, land designated under the 1983 settlement boundary and taken into trust by the federal government for the Mashantucket Pequot Tribal Nation on or after June 8, 1999, and all state-owned property in a town in which the State of Connecticut owns more than 50% of the property within the town's boundaries;

(2) 65% for the Connecticut Valley Hospital; and

(3) 45% for all other state-owned real property, certain real property leased by the state as described in 4b-39, and municipally-owned airports.

A grantee's payment in any year may reflect a modification due to an audit of an amount previously paid. There is also a proportionate reduction of PILOT totals to the amount of the appropriation in any year in which funding is insufficient. During each fiscal year, there is a transfer of moneys from the Bradley Airport Enterprise Fund in the amount necessary to pay a portion of the PILOT for certain Bradley International Airport property.

PRIVATE COLLEGES AND GENERAL AND FREE

STANDING CHRONIC DISEASE HOSPITALS PILOT

The Office of Policy and Management administers this PILOT program pursuant to CGS 12-19b, 12-20a and 12-20b. This program provides payments for real property tax losses due to exemptions applicable to eligible private colleges and general and free standing chronic disease hospitals.

The calculation of the PILOT for towns and certain fire districts reflects 77% of their tax losses for the appropriate grand list. Exceptions to this calculation include the campuses of the Connecticut Healthcare Systems located in Newington and West Haven and owned by the United States Department of Veterans' Affairs, which are eligible for a PILOT for the appropriate grand list year's tax loss calculated at 15. 4% in FY 06-07, 30. 8% in FY 08-07 and 46. 2% in FY 08-09. Additionally, CGS 12-20b and 12-19b specify the following payments: $ 100,000 for the Connecticut Hospice in Branford; $ 1,000,000 for the United States Coast Guard Academy in New London; and $ 60,000 for the state-owned forest in Voluntown.

A grantee's payment in any year may reflect a modification due to an audit of an amount previously paid. There is also a proportionate reduction of PILOT totals to the amount of the appropriation in any year in which funding is insufficient.

MASHANTUCKET PEQUOT AND MOHEGAN FUND GRANT

The Office of Policy and Management administers this program under which payments from the proceeds of the Mashantucket Pequot and Mohegan Fund are determined pursuant to CGS 3-55i, 3-55j, and 3-55k, Section 96 of Public Act 06-187 and Section 81 of Public Act 07-1 (June Special Session). A total of $ 93 million is available for grants in FY 07-08 and FY 08-09. The total for each year includes $ 6. 7 million from the FY 06-07 surplus.

There is an allocation to the statutory amount cited for each formula, calculations for which are:

(1) $ 20 million on the basis of the PILOT for State-owned Real Property – the amount for each town is calculated at one-third of the difference between what the town receives as a PILOT (excluding prior year adjustments), and what it would have received if the PILOT program had been funded at $ 85,205,085. After required minimum payments are reflected, town-specific amounts are prorated to $ 20 million;

(2) $ 20. 1 million on the basis of the PILOT for Private Colleges and General and Free Standing Chronic Disease Hospitals – the percent of each town's PILOT (excluding prior year adjustments) to the total PILOT for all towns is calculated and the result is multiplied by the $ 20,123,916 allocated for this portion of the formula;

(3) $ 35 million on the basis of CGS 3-55j(e) – a modification of the Property Tax Relief Fund formula in CGS 7-528;

(4) $ 5. 475 million allocated to certain designated municipalities on the basis of said Property Tax Relief Fund formula; and

(5) An additional $ 47. 5 million for all towns, distributed pro rata on the basis of each town's grant determined under (1) through (4) above, to the total of all such grants, pursuant to CGS 3-55j(j).

Regardless of the formulas described in (1) through (4) above, the amounts allocated to 28 towns are specifically set forth in CGS 3-55j(g). In addition, Ledyard, Montville, North Stonington, Norwich and Preston each receive an additional $ 750,000, annually. The provisions of Public Act 06-187 and Public Act 07-1 (June Special Session) provide 21 towns with a proportionate share of additional funding equal to $ 1. 6 million in FY 06-07, and $ 3. 3 million in FY 08 and in FY 09. These towns are members of the Southeastern Connecticut Council of Governments, or Distressed Municipalities that are members of either the Northeastern Connecticut Council of Governments or the Windham Region Council of Governments.

A town's grant is its total formula-derived amount reduced proportionately to the program's annual appropriation, although the additional amounts payable to the towns described in the preceding paragraph are not subject to this provision. When a town owes an amount to the Environmental Quality Fund, the first grant payment in a year reflects a deduction in the amount owed (up to $ 4,000).

2) Below is a description of how the grants changed between FY 08 and FY 09 for East Lyme, Montville and New London.

East Lyme

 

State Owned PILOT

College & Hospital PILOT

Mashantucket Pequot and Mohegan Fund Grant

FY 08

1,205,237

62,358

547,989

FY 09

956,013

63,221

551,035

Diff

(249,224)

863

3,046

East Lyme: State Owned PILOT

The anticipated FY 09 grant declined over FY 08 due to the impact of property tax revaluation that occurred beginning with the 2006 Grand List year in East Lyme. The FY 08 State Owned PILOT is paid in arrears for the 2005 Grand List year, and similarly the FY 09 grant is paid for the 2006 Grand List year. Whereas assessed values for eligible properties increased1 from FY 08 to FY 09 due to revaluation, these increases were not significant enough to offset a reduction in mill rates from 28. 39 mills in FY 08 to 18. 55 mills in FY 09. The effect of revaluation reduced East Lyme's overall share of the grant from 1. 45% in FY 08 to 1. 15% in FY 09.

East Lyme: Mashantucket Pequot & Mohegan Grant

Regardless of the formulas described (1) through (4) above, the amounts allocated to 28 towns are specifically set forth in CGS 3-55j(g), and it is this figure which is used in the 5th step of the calculation The amount set for East Lyme is $ 488,160. If the amount were not set by CGS 3-55j(g) and it were otherwise calculated, it would have been greater by $ 609,909 in FY 08 and $ 267,329 in FY 09. Because the grant amount is set, the amount of fluctuation between FY 08 and FY 09 is very low and attributable to the effect of changes in other towns' grants, and a $ 1,000 penalty in FY 08 for an amount owed by East Lyme to the Environmental Quality Fund.

Montville

 

State Owned PILOT

College & Hospital PILOT

Mashantucket Pequot and Mohegan Fund Grant

FY 08

1,282,867

-

2,895,931

FY 09

806,911

-

2,325,247

Diff

(475,956)

-

(570,684)

Montville: State Owned PILOT

The anticipated FY 09 grant declined over FY 08 due to the impact of property tax revaluation that occurred beginning with the 2006 Grand List year in Montville. The FY 08 State Owned PILOT is paid in arrears for the 2005 Grand List year, and similarly the FY 09 grant is paid for the 2006 Grand List year. Typically, after revaluation the assessed value for a property will increase and the mill rate decreases. However in the case of Montville the assessed value for prison related property decreased from FY 08 to FY 09 by nearly $ 7 million, or 12%, despite increases in the assessed value of other non-prison properties. This effect coupled with a reduction in mill rates from 29. 86 mills in FY 08 to 21. 0 mills in FY 09, has resulted in significant decreases in the grant. The effect of revaluation has reduced Montville's overall share of the grant from 1. 54% in FY 08 to 0. 97% in FY 09.

Montville: Mashantucket Pequot & Mohegan Grant

Because one of the primary formulas used to calculate the Pequot grant is the State Owned PILOT, a significant decrease in the PILOT will cause a decrease in the overall Pequot grant. The portion of the grant relying on State Owned PILOT declined 39. 34% from FY 08 to FY 09. There was a slight decrease of 1. 97% in the Property Tax Relief component, also due to property tax revaluation, as it relies on adjusted equalized net grand list per capita.

New London

 

State Owned PILOT

College & Hospital PILOT

Mashantucket Pequot and Mohegan Fund Grant

FY 08

427,360

6,128,629

2,975,873

FY 09

424,354

6,084,823

2,992,407

Diff

(3,006)

(43,806)

16,534

New London: State Owned PILOT & Private College and Hospital PILOT

The anticipated FY 09 grant declined slightly from FY 08 for both State Owned PILOT and Private College and Hospital PILOT due primarily to changes in other towns either because of acquisitions of eligible properties, improvements to eligible properties, increases in mill rates, or property tax revaluations in other towns. Because the grants are not fully funded and are prorated to available appropriations, changes in other towns will impact a grant to a particular town even when assessments and mill rates remain the same, and overall funding for the grant remains constant, as there are small fluctuations between towns.

New London: Mashantucket Pequot & Mohegan Grant

Regardless of the formulas described (1) through (4) above, the amounts allocated to 28 towns are specifically set forth in CGS 3-55j(g), and it is this figure which is used in the 5th step of the calculation The amount set for New London $ 2,649,363. If the amount were not set by CGS 3-55j(g) and it were otherwise calculated, New London would receive far less. In FY 08, this provision increased New London's grant by $ 1,034,217 in FY 08, and $ 1,090,616. Because the grant amount is set, the amount of fluctuation between FY 08 and FY 09 is very low and attributable to the effect of changes in other towns' grants.

Please contact me at 240-0200 if you have any further questions.

1 There are significant increases in the assessed value for most state property reimbursed at 45% between FY 08 and FY 09, which increased by 58%. There increase in the assessed value for prison related property, which is reimbursed at 100% was more modest, and increased by 6. 2%.