OLR Bill Analysis

sHB 6585 (as amended by House “A”)*



This bill requires the board of directors of each federal economic development district to send a copy of the district's regional economic development plan to the Office of Policy and Management (OPM) secretary. The secretary must approve the plan within 30 days after receiving it.

The bill allows the chief elected officials of two or more municipalities that belong to the same federal economic development district to enter into mutual agreements to (1) promote regional economic development and (2) share the real and personal property tax revenue from new economic development. The agreement must (1) provide that the municipalities not compete for new economic development and (2) specify the types of projects subject to the agreement. The municipalities must send a copy of the agreement to the OPM secretary who must determine, within 30 days, whether it is consistent with the bill's requirements. The secretary must send his determination to the revenue services (DRS) commissioner.

The bill requires the DRS commissioner to enter into a memorandum of agreement (MOA) with each municipality participating in an approved agreement to segregate part of the sales and use tax derived from income, items, or transactions that occur in the participating municipalities after June 30, 2010. (It is unclear how revenue segregation will work with regard to MOAs entered into before July 1, 2011, since the segregation provision is not effective until July 1, 2011). This money must be allocated to the member municipalities on a per capita basis, based on the Department of Public Health's (DPH) latest annual population estimate. The municipalities must use the money for the purposes they jointly determine.

The bill requires regional councils of elected officials to identify opportunities and obstacles to interlocal agreements that promote regional cooperation and promote agreements between towns entered into under the bill.

*House Amendment “A” (1) eliminates a provision allowing municipalities that are parties to an agreement to impose a local hotel tax of up to 1% and (2) delays the effective date of the sales tax segregation provisions by one year.

EFFECTIVE DATE: July 1, 2011 for the sales tax segregation provisions; October 1, 2009 for the remaining provisions.


Under the bill, the agreement must provide for:

1. identification of areas for (a) new economic development, (b) open space and natural resource preservation, and (c) transit oriented development, including housing;

2. capital improvements, including the shared use of buildings and other capital assets;

3. regional energy consumption, including strategies for cooperative energy use and development of distributive (on-site) generation and sustainable energy projects; and

4. promotion and sharing of arts and cultural assets.

The agreement must also include terms providing for at least three municipal cooperative programs and at least three educational cooperative programs. These can cover such areas as:

1. collective bargaining;

2. purchasing cooperatives;

3. health care pooling with each other or the state;

4. regional shared school curriculum and special education services, through regional education service centers; and

5. any other mutually agreed upon initiatives.

Each party to the agreement must participate in at least one municipal cooperative and one educational cooperative program. The bill explicitly states that the parties do not have to participate in all of these cooperative programs.

The agreement must be negotiated and contain all provisions on which the municipalities agree. The mill rate used to determine the amount of taxes imposed on the new economic development must be the mill rate of the municipality where the development is located. This municipality must maintain a separate list describing these properties.

The agreement must establish procedures for its amendment and termination and withdrawal of members. It must provide an opportunity for public participation. The legislative body of each participating municipality must adopt a resolution to approve the agreement. The legislative body is the council, commission, board, body or town meeting, or other body that has or exercises general legislative powers and functions in a municipality. A municipality is a town, city, or borough; consolidated town; and city or consolidated town and borough.

The participating municipalities must send a copy of such agreement to the OPM secretary. Within 30 days after receiving the plan, the secretary must make a written determination as to whether it is consistent with the bill's requirements. The secretary must send a copy of his determination to each participating municipality and the DRS commissioner.


Federal Regional Economic Development Districts

Federal law allows entities to designate districts, establish organizations to plan and implement strategies to develop them, and qualify for economic development dollars. It specifies the criteria the U. S. Department of Commerce (DOC) must use to approve a proposed district. DOC may approve a district if it:

1. contains at least one economically distressed area,

2. encompasses a sufficiently large area and have enough people and resources to foster economic development of more than one economically distressed area, and

3. has a DOC-approved comprehensive economic development strategy approved by a majority of the counties in the proposed district and the state or states within which the district is located.

An area is economically distressed if:

its per capita income is 80% or less of the national average,

its unemployment rate for the most recent 24-month period exceeded the nation's by at least 1%, or

the DOC secretary finds that it faces or will face special needs arising from severe unemployment or short- or long-term economic changes (13 CFR 302. 1).

Legislative History

On April 21, the House referred this bill (File 457) to the Finance, Revenue and Bonding Committee, which reported a substitute requiring the DRS commissioner to enter into an MOA with each municipality participating in an approved tax-sharing agreement to segregate part of, rather than up to one-sixth of 1% of, the sales and use tax derived from income, items, or transactions that occur in the participating municipalities after June 30, 2010.


Planning and Development Committee

Joint Favorable Substitute






Finance, Revenue and Bonding Committee

Joint Favorable Substitute