Connecticut considers property tax changes for not-for-profit hospitals

Two bills that could determine how much money Connecticut municipalities are paid for their tax-exempt properties passed legislative committees this week.

In a 14-5 vote, the state's Joint Committee on Planning and Development approved a House bill that would require not-for-profit colleges, universities and hospitals to begin paying municipal property taxes. But the state would then reimburse those not-for-profits for a similar amount of money. If signed into law, the tax requirement would be phased in over a five-year period beginning Oct. 1, 2014. During the first year, these institutions would be expected to submit 20% of real property taxes to their municipalities, with that amount increasing by 20% each year until reaching 100% of real property taxes in 2018.

Opponents of the bill argue that removing the tax-exempt status of these organizations would put jobs, financial aid and charity care at risk. But supporters see little reason why not-for-profit facilities should be given a tax break.

“The truth is, nobody wants to pay taxes, but everybody wants services,” Daryl Finizio, mayor of New London, Conn., told the committee last week. “This bill would more equitably, more strongly and more stably fund the services that everyone, including our colleges and hospitals, want and need.”

Currently, Connecticut reimburses its municipalities with PILOT—payment in lieu of taxes—funds to partially make up for tax revenue lost in hosting not-for-profit facilities. The state pays cities 32% of the taxes that would have otherwise been generated. For New London, that's about $4.5 million in PILOT funds, according to Finizio. But if the city's two colleges and one not-for-profit hospital paid taxes at their assessed value, the city would receive about $12.5 million annually.

The other bill, which also deals with PILOT funds, was approved in a 32-18 vote of the state's Finance, Revenue and Bonding Committee. The Senate bill addresses how the state distributes those monies to municipalities, creating a formula that would give more funds to Connecticut cities that have more tax-exempt properties than to those with fewer tax-exempt properties.

Meanwhile, another bill affecting not-for-profit hospitals moved ahead in the Connecticut Legislature this week. The bill, if passed, would prohibit not-for-profit hospitals from converting to for-profit status after Oct. 1. It would also add new regulatory requirements affecting ownership changes of not-for-profit hospitals and make state bond money available as grants for hospital capital improvements. The bill cleared the state's Joint Committee on Public Health in a 16-9 vote Tuesday.

Follow Rachel Landen on Twitter: @MHrlanden