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 towns of several traditional grants, including reimbursement for state-owned property, he made up the difference with a new grant, calling it the “Hold Harmless Grant.”
But area officials are concerned with a proposal to eliminate the motor vehicle tax for most owners over a two-year period. Towns would have the option of phasing in the exemption in 2013 but would have to forfeit it in July 2014.
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.
In Canton, the move would force the town to increasing the burden to those that own personal and business real estate to make up $2.3 million in lost revenue, Chief Adminstrative Officer Robert Skinner said.
"It's basically taking liability from car owners to people that own real estate," Skinner said.
First Selectman Richard Barlow said on one hand he understands that a person living in a city with a high tax rate pays a lot more in motor vehicle taxes than in a town with a lower rate but agreed it would either mean drastic cuts or a huge burden for some taxpayers.
"Clearly it allow municipalities to readjust that grand list cost to real estate and private property," Barlow said.
Malloy argued it would help those who need it.
“Owners of vehicles with market values under $28,500 would pay no property taxes at all on those vehicles,” Malloy explained, calling the plan tax relief for middle class and poor families.
But Barlow said it could eventually affect those it's meant to help such as apartment owners whose landlords raise rent to cover their additional tax burden.
In Farmington, it would mean a loss of about $5 million, officials estimated.
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 amounted to an attack on those cities and towns that had 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.
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.”
In Avon officials say the town could lose as much as $3 million.
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.
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.