Councilmen McCarthy, Kimmel weigh in on Senate Bill 1 reboot

NORWALK, Conn. – Two Norwalk Common Councilmen who spoke out against the original version of Senate Bill 1 as co-sponsored by State Sen. Bob Duff (D-25) are taking a wait-and-see stance on the revised version.

Bruce Kimmel (D-At Large) and David McCarthy (R-District E) weighed in on the latest version of the bill, one that on Wednesday won the approval of the General Assembly’s Finance, Revenue and Bonding Committee.

The bill, according to a press release from the state Democratic delegation, “fundamentally reforms the way the state funds cities and towns, reforms the Payment in Lieu of Taxes (PILOT) program, provides property tax relief for Connecticut’s families, fixes the state’s broken car tax system, delivers new revenue for towns and promotes regional planning efforts.”

Duff, in the press release, said Norwalk would reap $9 million in additional state aid next year if the bill passes.

“I am certainly glad the original version of the bill has been modified and that it looks like Norwalk stands to gain additional revenue,” said Kimmel, chairman of the Council’s Finance Committee. “But I am reserving judgment until the bill, in its final approved form, is vetted by Norwalk’s finance department.”

McCarthy, who authored a Council resolution calling for the bill to be killed – a resolution that passed 10-0 with three abstentions – said there was one part of the rewritten bill that could make it a positive, but he remained skeptical of the package as a while.

“I am very curious to see how this will work and figure out the real impact,” he said. “Given where the bill started, this is not as bad. However, given the $1.8 billion in tax increases laid on the citizens of Connecticut, as a citizen, this does not seem equitable, and in fact is a drop in the bucket or a side show.”

One of the highlights of the bill as announced by Duff and the General Assembly Democrats was a reworking of the car tax, which would be permanently capped in all towns at 29.36 mills. Currently, taxes vary wildly from municipality to municipality.

“The car tax cap will have no impact on Norwalk now,” McCarthy stated. “If the proportions hold, it will be $50M out of Norwalk (from sales taxes and increased income tax) and $9M back in. So it is state-level redistribution of wealth.”

SB-1 Bullet Point List

The sales tax redistribution is new, he said, and was not in the original bill.  According to the release, 0.5 percent of the state sales tax will be dedicated exclusively to municipalities and regions (Councils of Government or COGs) beginning Oct. 1, 2015, and 90 percent of the resulting revenue will be distributed directly to towns. Ten percent of the revenue will be distributed to the COGs to support regional services and efficiencies.

“It is the only thing making this bill look remotely good in my mind,” McCarthy said. “I have always considered ECS (Education Cost Sharing formula) to be the redistribution of sales tax and would have wished for ECS reform instead of this new scheme. This may be the bait that lures us into the trap, unfortunately. I have no idea how long this sharing will remain in place. Given that the plan is to reduce the sales tax rate, the odds are that the amount will shrink over time, especially considering the state’s continual increase in spending. I don’t believe the marginal decrease is enough to spur a surge in new sales to cause an overall revenue increase, but I could be surprised.”

The bill in its current form also carries a “soft cap” on municipal spending. If towns increase spending by more than 2.5 percent or the rate of inflation (whichever is greater), their sales tax revenues will be reduced accordingly.

McCarthy gave cautious approval to the measure.

“I am glad to see the check valve on municipal spending, though I would like to understand the parameters, as this could be another factor that prevents us from doing something like building a school.”

At its core, though, the bill is about regional planning and spending, and that I something McCarthy and other Norwalk officials have looked at with concern since the new COG’s were put in place.

According to the release, SB 1 establishes a voluntary revenue-sharing option for COGs, to allow member towns to share up to 20 percent of property tax revenues on new commercial and industrial development. The provision will facilitate improved regional planning and coordination, the release claimed, rather than divisive competition among towns for development and economic growth.

“What still scares me is the imposition of the framework for sharing across towns,” McCarthy said. “It is voluntary now. OK, what towns will volunteer? Net receivers. Why would any town wish to give away its revenues? It makes no sense unless there is a plan (on the part of the governor or Senate) to make it not voluntary in the future. That is not worth $9M for a year.

“The … statement that this will facilitate regional planning is the funniest joke I have heard this year. The potential for a loss of home rule is scary,” he continued. “I think we may need to look hardest at this and potentially weigh leaving the COG if the numbers don’t add up now and in the future. I have to agree with Bruce, leaving it up to a formula is not a good way to run a city.”

McCarthy said raising a ruckus about the bill and sending a message to Duff and his Hartford brethren was a good thing, but it doesn’t mean calmer waters lie ahead.

“Moving deck chairs on the Titanic can get you a better view of the ocean for a short time, until you are up to your neck in it. I am glad we screamed. The changes reflect that the original drafters knew they were in trouble and someone helped them make it more palatable, but as I said – it may be bait for the trap.”