PA 09-236—sSB 379

Planning and Development Committee

Finance, Revenue and Bonding Committee

AN ACT ESTABLISHING A LAND VALUE TAXATION PILOT PROGRAM

SUMMARY: This act 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 act's criteria and applies to the Office of Policy and Management (OPM) secretary for approval. It must prepare the plan according to the act's criteria and submit it to the legislature by December 31, 2009. Neither the act nor the law authorizes the municipality to implement the land value tax.

EFFECTIVE DATE: Upon passage

LAND VALUE TAX

By law, municipalities must tax land and any improvements made to the land (e. g. , buildings) at the same rate. The act 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 a higher rate on land or land exclusive of buildings.

The act 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 differential tax rate 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.

ELIGIBILITY CRITERIA

The act 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 plan for implementing the land value tax. The secretary must specify the application procedure and any other criteria besides those the act 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:

1. specify the process for implementing the separate tax rates on land and buildings,

2. designate the geographic areas where the municipality will impose these rates, and

3. identify the legal and administrative issues affecting the plan's implementation.

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.

OLR Tracking: JR: KM: JL: DF