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OLR Bill Analysis
sHB 6655
AN ACT CONCERNING MUNICIPAL TAXATION AND
INCENTIVIZING REGIONALIZATION.
SUMMARY
This bill generally limits the total revenue municipalities may raise
through property taxes. It does so by imposing limits that generally
cap (1) total taxes levied at 2.5% of the municipality’s net grand list
(commonly referred to as a “levy ceiling”) and (2) annual increases in
the tax levy to 2.5% over the preceding fiscal year (commonly referred
to as a “levy limit”). The bill allows municipalities to exceed these
limits but generally requires voter approval for any additional levies. It
also establishes narrow conditions under which municipalities may
levy additional taxes or adjust the limits without voter approval.
Separately, the bill allows municipalities to impose, by ordinance, a
local tax on income, goods, services, or other tangible or intangible
assets that their legislative bodies determine are necessary or desirable
to meet the municipality’s public service or other needs.
The bill also establishes state grants for municipalities that enter into
interlocal agreements to jointly provide services that they currently
provide separately. It requires that the grants be funded by the
municipal revenue sharing account (MRSA).
The bill deems that any provision of a municipal charter, special act,
or home rule ordinance that prohibits or limits a municipality from
sharing services with other municipalities is repealed, revoked, and
rescinded. It allows collective bargaining units to enter into
agreements with other units to establish a coalition bargaining unit to
negotiate with multiple municipalities to provide regional public
services, including education, police, fire, and emergency medical
services. 2021HB-06655-R000654-BA.DOCX
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EFFECTIVE DATE: July 1, 2022, except the local option tax
provision is effective upon passage.
§ 1 — PROPERTY TAX LIMITS
General Provisions (§ 1a)
Beginning in FY 23, the bill establishes property tax limits on
“municipalities,” which the bill defines as towns, cities, boroughs,
consolidated towns and cities, consolidated towns and boroughs,
special taxing districts, and municipal corporations statutorily
authorized to levy a property tax. It also establishes a process by which
municipal legislative bodies may exceed the limits, generally with
voter approval. Under the bill, a municipality’s “legislative body” is
the:
1. board of selectmen in any town without a charter, special act, or
home rule ordinance relating to its government;
2. council, board of aldermen, representative town meeting, board
of selectmen, or other elected legislative body described in a
charter, special act, or home rule ordinance relating to
government in a city, consolidated town and city, consolidated
town and borough, or town having a charter, special act,
consolidation ordinance, or home rule ordinance relating to its
government;
3. board of burgesses or other elected legislative body in a
borough; and
4. district committee or other elected legislative body in a district
or other municipal corporation.
The bill defines a “voter” as (1) an elector of the municipality (i.e., a
registered voter) or (2) a U.S. citizen older than age 18 who is liable, or
would be but for certain tax exemptions, to the municipality for taxes
on an assessment of at least $1,000. (Generally, these are the same
individuals who may vote in town meetings.)
Levy Ceiling (§ 1b & 1c) 2021HB-06655-R000654-BA.DOCX
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The bill limits the amount of property taxes municipalities may levy
at 2.5% of their net grand list (i.e., levy ceiling). This limit applies to the
“total tax levied” by municipalities (i.e., the amount of property taxes
levied on real and personal property and motor vehicles).
If the total tax levied by a municipality exceeds the levy ceiling, the
municipality generally must reduce its levy by at least 15% for each
successive fiscal year until it no longer exceeds the ceiling. However,
the bill allows a municipality’s legislative body, by a two-thirds vote of
the members who are present and voting, to hold a referendum
seeking voter approval to add taxes back to the levy after the required
reduction is made. The amount added back may not exceed the
required reduction.
The bill requires a (1) two-thirds majority of the voters casting votes
to approve proposals to levy an additional amount that is greater than
half of the required reduction and (2) simple majority of the voters
casting votes to approve amounts less than or equal to half of the
required reduction. Table 1 below lists the questions that must be
presented to voters.
Levy Limit (§ 1d & 1e)
The bill generally requires municipalities that levy taxes below the
levy ceiling to limit the levy for any given fiscal year to 102.5% of the
maximum levy limit for the preceding fiscal year (i.e., no more than a
2.5% increase from the previous year). It allows municipalities to
increase this levy limit as a result of new growth in the tax base or
voter overrides, as described below. It similarly allows them to
decrease the limit as a result of voter underrides.
New Growth. Under the bill, a municipality may increase the total
tax levied for the then-current fiscal year by an amount equal to the tax
rate for the preceding fiscal year multiplied by the amount of any
increase in the assessed value of specified real or personal property
over the preceding fiscal year. For purposes of this calculation, the real
or personal property is property (1) that is subject to property tax, or
taxed as a separate parcel, for the first time during the then-current 2021HB-06655-R000654-BA.DOCX
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fiscal year or (2) whose assessed valuation increased over the
preceding fiscal year. Any increase in property valuation due to
revaluation is not included in the calculation.
Overrides. The bill authorizes a municipality’s legislative body, by
a two-thirds vote of the members who are present and voting, to hold
a referendum seeking voter approval to levy additional taxes in excess
of the levy limit. The question must be submitted to voters, as
provided in Table 1, and requires approval by a majority of the voters
casting votes.
Underrides. The bill allows a municipality’s legislative body, by a
majority vote, to call a town meeting seeking voter approval to reduce
the taxes levied to an amount below the levy limit described above (see
BACKGROUND). It also requires the legislative body to hold such a
meeting if at least 50 voters request it. The question must be submitted
to voters as provided in Table 1. If approved by a majority of the voters
casting votes, the proposal is deemed approved, and the municipality
must decrease its tax levy accordingly.
Special Exclusions (§ 1f)
The bill authorizes municipalities to exempt taxes levied for
specified purposes, as described below, from the levy ceiling or levy
limit. Amounts exempted from the levy ceiling must be excluded from
the calculation of the total tax levied, while the amounts excluded from
the levy limit must be excluded from the calculation of the maximum
levy amount.
Capital and Debt Expenditures. The bill authorizes municipalities
to assess taxes for certain debt and capital outlay expenditures in
excess of either the levy limit or levy ceiling if voters approve the
expenditures. Specifically, the bill allows a municipality’s legislative
body, by a two-thirds vote of the members present and voting, to place
questions on the ballot at a regular or special state or municipal
election, as provided in Table 1 (see BACKGROUND). The proposed
exclusions require approval by a majority of the voters casting votes. 2021HB-06655-R000654-BA.DOCX
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Specifically, at any regular or special state or municipal election
held before the annual tax rate is set, municipalities may seek voter
approval to levy additional taxes for capital outlay expenditures, as
long as the expenditures are for a municipal purpose for which the
municipality would be authorized to borrow money under title 7 of the
statutes.
At any regular or special state or municipal election, municipalities
may also seek voter approval to levy additional taxes for debt
payments (1) that are outstanding as of July 1, 2022, or (2) incurred on
or after July 1, 2022. The bill defines “debt payment” as the payment of
principal and interest on bonds or notes or certificates of indebtedness
issued by a municipality, excluding revenue bonds.
Water and Sewer Debt (§ 1h)
The bill authorizes a municipality’s legislative body to levy taxes
exceeding the levy ceiling or levy limit solely to pay water or sewer
debt charges, in whole or in part, as long as the total amount of water
and sewer charges are reduced by the same amount.
Under the bill, any municipality with water and sewer service
provided and separately billed by an independent commission,
authority, or district may enter into an agreement with the provider to
similarly pay the debt charges and reduce the rates. The municipality’s
tax collector or treasurer must immediately pay the taxes collected
under this provision to the provider, without appropriation by the
municipality, minus any amounts agreed upon by the parties for
administrative costs. The bill specifies that this provision does not
affect the commission’s, authority’s, or district’s eligibility for loans
and grants for water pollution control projects or eligible drinking
water projects.
Extraordinary Events (§ 1i)
The bill authorizes a municipality’s legislative body to adjust the
levy ceiling and levy limit to counterbalance the effects of
extraordinary, nonrecurring events that (1) occurred during the base
year, (2) were not within the purview of normal financial practices, 2021HB-06655-R000654-BA.DOCX
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and (3) would otherwise cause a limit to be set that would be
inconsistent with those intended under the bill’s provisions. The
municipality must provide written and detailed notice of such an
adjustment to voters.
General Requirements for Voter Approvals (§ 1)
Home Rule Charters and Ordinances Superseded. The bill’s
voter approval provisions apply regardless of any municipal charter,
special act, or home rule ordinance.
Placing Questions Before Voters. The bill generally allows the
municipality’s legislative body to (1) direct the question or questions
authorized for a referendum under the bill to be placed on the ballot at
any regular or special state or municipal election or (2) call a town
meeting to submit the question or questions to voters. However, for
certain questions (e.g., underrides), the bill specifically provides for
one of these methods only, as shown in Table 1 below.
Under existing law, local questions voted on at an election generally
must be approved for submission at least 60 days before the election
(CGS § 9-370).
Form of Questions. The bill specifies the form of the questions to
be submitted to voters, as listed in Table 1. The votes must be by a
“yes” or “no” vote by paper ballots or voting machines.
Threshold for Voter Approval. As described above, each question,
other than certain exceptions to the 15% levy reduction, requires
approval by a majority of the voters casting votes.
Table 1: Form of Questions Submitted to Voters
Type of Voter
Approval
Question Submission to Voters
Exception to
15% levy
reduction
(applies to
municipalities
whose total levy
"Shall the ____ (insert name of
the taxing entity) be allowed to
levy an additional $____ (insert
the amount) in real and personal
property taxes for the fiscal year
commencing July 1, ____ (insert
(1) Regular or special state
or municipal election or (2)
town meeting 2021HB-06655-R000654-BA.DOCX
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exceeds the
ceiling) (§ 1c)
the year)?"
Override (§ 1d) “Shall the ____ (insert name of
the taxing entity) be allowed to
levy an additional $____ (insert
the amount) in real and personal
property taxes for the purposes of
____ (insert the intended purpose
or purposes for which the moneys
from the levy will be used) for the
fiscal year commencing July 1,
____ (insert the year)?”
(1) Regular or special state
or municipal election or (2)
town meeting
Underride (§ 1e) “Shall the ____ (insert name of
the taxing entity) be required to
reduce the amount of real and
personal property taxes to be
assessed for the fiscal year
commencing July 1, ____ (insert
the year) by an amount equal to
$____ (insert the amount)?”
Town meeting
Exclusion for
capital outlay
expenditures (§
1f)
“Shall the ____ (insert name of
the taxing entity) be allowed to
levy an additional $____ (insert
the amount) in real and personal
property taxes for the purposes of
____ (insert intended purpose or
purposes for which the moneys
from the levy will be used) for the
fiscal year commencing July 1,
____ (insert the year)?”
Regular or special state or
municipal election before
the tax rate is set
Exclusion for
debt payments
outstanding as
of July 1, 2022
(§ 1f)
“Shall ____ (insert the
municipality) be allowed to exempt
from ____’s (insert municipality)
levy limit the total amounts
required to pay for bonded
indebtedness incurred prior to July
1, 2022?”
Regular or special state or
municipal election
Exclusion for
debt payments
incurred on or
after July 1,
2022 (§ 1f)
“Shall ____ (insert the
municipality) be allowed to exempt
from ____’s (insert municipality)
levy limit the total amounts
required to pay for the bonds
issued in order to ____ (insert the
purpose or purposes for which the
Regular or special state or
municipal election 2021HB-06655-R000654-BA.DOCX
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moneys from the bonds issued will
be used)?”
§ 2 — LOCAL OPTION TAXES
The bill authorizes municipalities to impose, by ordinance, a local
tax on income, goods, services, or other tangible or intangible assets, or
any combination of these, as its legislative body determines is
desirable or necessary to meet the municipality’s public services and
other needs. The tax is not effective until the municipality has notified
the municipality’s residents and general public about the tax by
posting information on the municipality’s website and other
appropriate means, as determined by the legislative body.
The ordinance must include the (1) specific items or amounts on
which the tax will be imposed, (2) tax’s rate and effective date, (3)
interest and penalty imposed on delinquent taxes, (4) collection and
remittance method, and (5) provisions for a taxpayer’s right of appeal.
Under the bill, this authorization supersedes the provisions of any
municipal charter, special act, or home rule ordinance.
§§ 3 & 4 — GRANTS FOR REGIONAL SERVICES
Eligible Municipalities
The bill establishes new state grants for any municipality that enters
into an interlocal agreement on or after July 1, 2021, with one or more
municipalities to provide a service that each municipality currently
provides separately. Under the bill, each such municipality is eligible
for a grant for each year in which it remains a party to the agreement
and the applicable service is provided regionally. Municipalities that
terminate or withdraw from an agreement, or otherwise cease to
provide a regional service, become ineligible for these grants
beginning in the fiscal year of the termination or withdrawal.
Grant Amounts
The bill sets the grant amounts at a specified percentage of the
amount the municipality budgeted for the service in its most recently
approved budget. They are (1) 10% for education services; (2) 5% for 2021HB-06655-R000654-BA.DOCX
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police, fire, or emergency medical services; and (3) 2.5% for any other
service. In the case of non-education services, the grants are based only
on the budgeted amount that is attributable to the specific service
being provided regionally.
Application Process
Under the bill, eligible municipalities must apply annually to the
Office of Policy and Management (OPM) secretary in the form and
manner she prescribes. The application must include the following:
1. a description of the specific service being provided regionally,
2. the other municipality or municipalities that are a party to the
interlocal agreement, and
3. documentation of the amount budgeted in the municipality’s
most recently approved budget that is attributable to the
service.
The OPM secretary must review each application to verify the
service claimed and calculate the grant (or grants) due to the
municipality.
Funding Source
Current law establishes a schedule for distributing the sales tax
revenue directed to MRSA. The bill requires that an amount sufficient
to pay the grants for regional services be distributed before the
municipal revenue sharing grants to municipalities but after the
distributions for (1) motor vehicle property tax grants, (2) payment in
lieu of taxes (PILOT) grants, and (3) regional services grants to councils
of government.
BACKGROUND
Town Meetings
By law, questions submitted to a town meeting may be taken up at
the meeting, or the board of selectmen may decide at least five days
before the meeting date to hold the vote on a question at an adjourned
town meeting. Alternatively, at least 200 voters or 10% of the qualified 2021HB-06655-R000654-BA.DOCX
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voters, whichever is less, may petition to hold the vote on a question at
an adjourned town meeting, where eligible voters go to the polls on a
day set between seven and 14 days after the date of the town meeting
and cast ballots on the question (CGS § 7-7).
Questions Submitted at State or Municipal Election
By law, only electors of a municipality may vote in an election.
However, when a question is submitted to voters who are not electors
of a municipality, the municipality may submit it to a vote by electors
and voters held in conjunction with an election. Voters who are not
electors must vote at a separate location using separate tabulators or
paper ballots containing solely the question, or by separate absentee
ballot containing solely the question (CGS § 9-369d).
COMMITTEE ACTION
Finance, Revenue and Bonding Committee
Joint Favorable
Yea 32 Nay 16 (04/22/2021)