February 21, 2005
By DON STACOM, Courant Staff Writer
Sell a house for $250,000
in Bristol, and the city collects a quick $1,250 in taxes. But
sell a house for the same amount just over the line in Plainville,
and the tax bill drops to $625.
That difference adds up to hundreds of thousands of dollars
a year for Bristol and 16 other communities that used a special
tax bonus two years ago. They are mostly the cash-strapped cities
and big towns that suffered the worst under state budget cutbacks,
and many now rely on the extra revenue to balance their books.
The rest of the state's towns and cities got a smaller share
of the tax bonus and have enjoyed windfalls, too. But on July
1, a hefty part of that revenue flow will be shut off. The state
is scheduled to roll back local conveyance tax rates, a prospect
that has municipal leaders anxiously lobbying the General Assembly
"We're talking about $50 million a year for our cities
and towns," said Middletown Mayor Domenique Thornton. "I
think you're going to see every one of them oppose this."
Mitchell Goldblatt, first selectman of Orange, is pressing state
lawmakers to intervene.
"If this goes through, it's just going to put more pressure
on property taxes for my residents," Goldblatt said. "It
will push a property tax increase. We're a small town, and we
could lose $152,000 next year - that's almost what it costs to
hire three cops. Or more than it costs to buy a 10-wheel truck
and snowplow for public works."
On the opposite side of the debate are the lobbyists for real
estate dealers, mortgage brokers and home builders, who insist
that the rollback is overdue. They claim the higher conveyance
tax rates are regressive and unfair.
"It's just bad tax policy. It hurts the people who can
afford it the least - first-time homebuyers and elderly people
who are selling their properties," said Robert Fiorito,
president of the Connecticut Association of Realtors. "And
remember, the legislature made a promise, and they should live
That promise came in 2003, when the General Assembly was scrambling
to get past a vicious budget deficit. Then-Gov. John G. Rowland
slashed state aid to towns and cities, and lawmakers hunted for
a cost-free way to make up some of the loss. They settled on
the conveyance tax, the fee that homeowners pay when they sell.
The state collects its own conveyance tax but historically allowed
municipalities to take a small share, too - $1.10 for every $1,000
in property value. In 2003, the General Assembly authorized towns
and cities to bump up the local tax. Eighteen towns and cities
were told they could charge $5 per $1,000 of property value,
and all but Stamford ultimately took advantage of the offer.
Other communities raised their rates to $2.50.
The real estate industry fought the move, and lawmakers wrote
the bill with a clause that would eliminate the increase after
one year. A year later, though, municipal leaders complained
that state aid was still lagging badly and successfully lobbied
for a one-year extension. And this year, the General Assembly
is facing the same debate.
"The conveyance tax issue is one of the top five priorities
on our legislative agenda," said Bart Russell, executive
director of the Council of Small Towns.
Connecticut's robust real estate market has made the tax a big
revenue producer for two years and has undercut the argument
that the tax would discourage sales.
"It certainly hasn't hurt sales in our town. The average
time a house is on the market here is less than a month," said
East Hartford Mayor Timothy Larson. "It's brought about
$400,000 in new revenue [annually]. So if we lose it, that's
how much we'll be behind next year."
But Fiorito said communities such as Larson's stand to lose
the most if the real estate market weakens. A tax of $500 or
$1,000 would suddenly be a much bigger part of a deal.
"When prices stabilize or God forbid go back [down], people
will look hard and fast at their net sheets. And the irony is
that the New Britains and Bristols, the towns that want to encourage
more affordable housing, will be adding to the cost of buying
there," Fiorito said. "It's the Greenwiches that are
getting the real windfall because of the value of their houses."
Leery of losing the conveyance revenue each year, many suburbs
earmark the money for one-time projects instead of building it
into their day-to-day budgets. Avon, for instance, used its income
to buy land for a library expansion.
Bristol leaders debated what to do for months and put off a
decision until this spring. A half-dozen city council members
want to spend it on various pet projects, while Deputy Mayor
Art Ward warns repeatedly against adding it as regular income
on the books for fear that it will vanish this summer.
But some cash-strapped cities have quickly grown to rely on
"We don't have the luxury of setting it aside - we have
to put it into the general fund," said Thornton of Middletown.
The conveyance tax was offered to Middletown and 17 other towns
and cities that have enterprise zones, blighted urban areas where
the state provides tax abatements and other incentives to attract
businesses. Those municipalities were allowed to levy the additional
tax above the conveyance charge that all other communities impose.
Most of those 18 municipalities immediately put through the
maximum tax rate, but some - including Bristol - waited a year
to see if it would dampen the real estate market.
By the start of this current fiscal year, though, every one
of the targeted communities except Stamford has levied the full
Unless the General Assembly acts by July 1, the conveyance income
will drop for virtually every community in the state. The tax
rate will fall by 28 percent in the 17 targeted communities and
by 50 percent everywhere else.
That could mean a loss of more than $300,000 for a city such
as Middletown, according to City Clerk Sandra Hutton.
The city is already banking on that money to pay teachers or
librarians, replace decrepit police cruisers, or pay for street
repaving, Thornton said.
Those on both sides of the issue hope to get a final resolution
"It just makes sense to make this [increase] permanent," said
Gian-Carl Cafa, legislative services director for the Connecticut
Conference of Municipalities.
"It doesn't serve anyone
to have this fight year after year."
Fiorito agrees with that last point.
"We know we're in for a battle, but this is a stealth tax
and it's time to sunset it," Fiorito said. "People
don't even know they'll be hit with this tax until they go to
sell. It isn't fair. This isn't the way to build a homeownership
Reprinted with permission of the Hartford Courant.
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