In presenting his two-year budget proposal, Gov. Dannel Malloy said that, “we have no desire to shift the burden to our towns and cities. This budget holds them harmless.”
Indeed, even though Malloy stripped municipalities of several traditional grants, he made up the difference with a new grant, calling it the “Hold Harmless Grant.”
But Avon officials say the town could lose as much as $3 million should Malloy’s plan to do away with one of their largest sources of revenue – the car tax – take effect.
Avon Assistant Town Manager Steve Bartha said that the proposal would eliminate car taxes for anyone with vehicles that have an assessed value of less than $20,000, or under $28,500 in market value. Cars with a higher value would still be taxed.
“It’s a proposal he’s making and calling it middle class tax relief," Bartha said.
In the current fiscal year, Bartha said the car tax is "a ballpark $4.5 million revenue stream for the town.” He said Town Assessor Harry DerAsadourian estimated that car tax revenue in Avon could shrink to about $1.5 million if the governor's proposal passes.
“Roughly two-thirds of the revenue (from motor vehicle taxes) could go away,” Bartha said.
That means "property" and "real estate" "would have to absorb the $3 million" if the proposal is passed, shifting more burden onto those two categories to make up for the gap.
“If this proposal were to survive you would probably see the mill rate increase, but the impact would vary from home to home," Bartha said.
In his address, Malloy proposed exempting more than 90 percent of vehicles from the tax, which the Connecticut Conference of Municipalities estimates raises more than $560 million for Connecticut communities. He called the plan tax relief for middle class and poor families.
Towns would have the option of phasing in the exemption in 2013 but would have to forfeit it in July 2014.
Local officials see a number of problems resulting from the loss.
“To make up revenue you need to cut certain services or raise taxes on real estate,” summarized state Rep. Brian Becker (D-19), who represents Avon, Farmington and West Hartford.
In Farmington, Town Council Chairman Jeff Hogan said he was “shocked and appalled” when he read the governor’s budget and that cutting the car tax was amounted to an attack on those cities and towns that had been worked hard to be financially responsible and maintain low mill rates.
“I feel … that the loss of PILOT and the loss of the car tax to Farmington specifically would be devastating. On the car tax — why? We run a great town here. We’ve done it right. … Farmington has been governed well for many, many years and we’re being punished,” he said. “It’s ludicrous that we should raise taxes on our residents to finance the ills of the state.”
Farmington Town Councilor John Vibert had another concern: leaving the majority of residents with no tax responsibility to keep them invested in local government.
“As far as I can tell this will just shift the tax burden from car owners to property owners. In most cases that will remove all property tax burden from renters in town and disconnect people from town government,” Vibert said.
Though the inevitable increase in real estate taxes might be passed along to renters in the form of higher rent, Vibert worried that renters wouldn’t associate that with supporting town government.
“Nobody likes the taxes but it provides them a feeling that …’my kids go to school here. I pay taxes and support this,’” he said.
Malloy’s rationale for removing the tax was that it’s “unfair” because “residents in different communities pay very different amounts on the same property value.”
Sen. Beth Bye (D-West Hartford) said Malloy is just trying to keep “the balls in the air while waiting and hoping for the economy to come back.”
But she didn't back the plan.
"When you sit down and talk to residents, its one of the most unpopular taxes. So [eliminating the car tax] is a popular thing to do and that’s why governors propose it... you can say it’s unfair but mostly the governor is looking for a way to provide relief... I do think it takes one of the very few ways communities have to raise revenue away from them, so unless you replace that with something else, you've given them a difficult task," Bye said.
She advised that Malloy’s budget will be subject to a public comment period when residents and officials may voice concerns. Public hearings and bills are listed on the www.cga.ct.gov. Budget information will be listed under Appropriations.