OLR Bill Analysis

sSB 379 (File 240, as amended by Senate “A”)*

AN ACT ESTABLISHING A LAND VALUE TAXATION PILOT PROGRAM.

SUMMARY:

This bill establishes a pilot program under which a municipality may prepare a plan to tax land at a higher rate than buildings (i. e. , land value tax). A municipality qualifies for the pilot if it meets the bill's narrow criteria and applies to the Office of Policy and Management (OPM) secretary for approval. It must prepare the plan according to the bill's criteria and submit it to the legislature by December 31, 2009. The bill does not authorize the municipality to implement the land value tax.

*Senate Amendment “A” changes the purpose of the pilot program from implementing the land value tax to planning for its implementation and makes conforming changes.

EFFECTIVE DATE: Upon passage

LAND VALUE TAX

Under current law, municipalities must tax land and any improvements made to the land (e. g. , buildings) at the same rate. The bill allows a municipality to prepare a plan for taxing land at a higher rate than buildings. The plan must divide taxable property into two classes: (1) land or land exclusive of buildings and (2) buildings on the land. It must set a different tax rate for each class, with the rate on land higher than the rate on buildings and improvements.

The bill specifically requires the plan to apply the land value tax only to taxable property. (By law, municipalities may only tax property the statutes do not exempt from property taxes. )

It also prohibits the plan from applying the tax to state-owned property and private hospitals and colleges. The law exempts this property from property taxes but requires the state to reimburse municipalities for a portion of the revenue loss, which a municipality calculates based on the property's value and the municipality's tax rate. Consequently, the bill requires the plan to tax the property at a single rate for calculating state payments in lieu of taxes.

ELIGIBILITY CRITERIA

The bill allows OPM to choose only one municipality for the pilot. A municipality qualifies for the pilot if it is a state-designated distressed municipality with up to 26,000 people and has a city manager and city council form of government. (New London is the only municipality that meets these criteria. )

APPLICATION PROCESS

A municipality must apply to the OPM secretary for approval to prepare the land value tax plan. The secretary must specify the application procedure and any other criteria besides those the bill establishes. He may select an eligible municipality if its legislative body approved the application. If the application is in order, he must send the municipality's chief executive officer a notice of selection.

PLAN REQUIREMENTS

The municipality may begin preparing the plan after the secretary approves its application. Its chief executive officer must appoint a committee consisting of relevant taxpayers and stakeholders to prepare the plan.

In preparing the plan, the committee plan must:

The committee must submit the completed plan to the municipality's chief executive officer, tax assessor and tax collector for review and comment. It must also submit the plan to the municipality's legislative body for approval. The municipality must then submit the plan to the Planning and Development and Finance, Revenue and Bonding committees on or before December 31, 2009.

COMMITTEE ACTION

Planning and Development Committee

Joint Favorable

Finance, Revenue and Bonding Committee

Joint Favorable