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Towns and cities provide the majority of public services in Connecticut. These services include elementary and secondary education; public safety; roads and infrastructure; and social and recreational services. In ad¬dition to these services, municipalities must also comply with numerous mandates imposed on them by the state legislature. Many of these mandates are unfunded or underfunded. To put it in perspective, the state has imposed over 1,300 mandates onto municipalities, according to the Advisory Council on Intergovernmental Relations (ACIR). In isolation many of these mandates are considered “minor,” but altogether these mandates add significant costs to municipal operations.

The Only Significant Local Revenue Source

Funding to provide the services can come from a variety of sources such as taxes, federal and state aid, but the majority of this funding comes from the Property Tax, more than 72%. This has created a system that requires municipalities to be overdependent on revenue from the property tax.

Source: OPM Municipal Fiscal Indicators, 2016-2020

Source: Tax Foundation, latest data available

The per capita property tax burden in Connecticut is $3,215, well above the national average of $1,758 and the 3rd highest in the nation. This burden has continued to rise, placing more burden on residential and business taxpayers. In fact, for many businesses, the property tax is the largest tax liability.

Pros and Cons of the Property Tax

The benefit of using property taxes to fund local government is that property taxes are relatively stable and predictable, unlike income and sales taxes, which can vary widely based on the economy and the market.

There are also downsides to the property tax.

  • It is regressive.
  • It can pit municipalities against each other as they attempt to expand their tax bases.
  • It results in revenue shortfalls in cities and towns that host facilities used for state government, colleges and universities, hospitals, prisons, and nonprofits
  • Administration of the tax is difficult and time-consuming, especially regarding motor vehicles and personal property
  • The personal property tax can discourage business investment on new equipment, which can impact productivity and competitiveness.
  • It often divides communities, especially pitting older residents on fixed income against young families with school-age children.

Over-Reliance on the Property Tax

The revenue options available to Connecticut towns and cities are limited by state statute.  The property tax is the only tax over which municipalities have significant authority.  Municipalities can levy a conveyance tax on real estate transactions, but that tax rate is set by the State and provides a relatively small amount of revenue.

Source: CCM calculations based on the Annual Survey of State and Local Government Finances 2019, US Census Bureau




In a number of towns, property tax revenue accounts for at least 80 percent to total revenue, with that number being 90 percent in a dozen towns. In more than half the municipalities in Connecticut, property tax revenue accounts for three-quarters of total revenue.





Source: CCM calculations based on OPM Municipal Fiscal Indicators 2016-2020

Source: OPM Municipal Fiscal Indicators 2016-2020

The Tax Base and Tax-exempt Property

Taxable property, known as the grand list, includes:

  • real property, such as housing, commercial buildings and land;
  • personal property, such as, but not limited to, construction equipment, restaurant kitchen appliances, computers, office equipment; and
  • motor vehicles.

Source: OPM Municipal Fiscal Indicators 2016-2020

The value of grand lists varies significantly across the state. This results in significant discrepancies between municipalities in their capacity to raise revenue.




Another measure of the property tax base is the equalized net grand list. Each Year, the Office of Policy and Management OPM) annually develops the full-value estimate of all taxable property within the 169 municipalities. A ratio of assessment to market value is calculated from real estate sales occurring within each town and city. This is necessary because towns revalue property on different timetables each five years.

Looking at the equalized net grand list per capita for all municipalities, you see some stark contrasts.








Source: OPM Municipal Fiscal Indicators, 2016-2020

The problem with over-reliance on the property tax is that too often the taxable base within a community is limited and this requires towns and cities to increase the mill rate and tax liability to meet expenses.  This problem is compounded by properties that have been exempted from taxation by the state legislature.  There are currently more than 100 mandated property tax exemptions and in some communities such as Hartford, Mansfield, and New Haven more than 50% of the property within their communities is tax-exempt.

Source: OPM Municipal Fiscal Indicators 2016-2020

These exempted properties still utilize public services but do not share in the cost to provide and maintain these essential services. By exempting these properties, it shifts the burden to fund these services to residential and business taxpayers. This increases the cost of housing for both homeowners and renters and the cost of doing business, which limits needed economic development.

One aspect of tax-exempt property that often gets overlooked is the manufacturing machinery and equipment. 

The State mandates that qualified machinery and equipment is exempt from local property taxes.  Under the  payment in lieu of taxes for manufacturing machinery and equipment (PILOT MME) program, the State was supposed to provide reimbursement to towns and cities in an amount equal to 80 percent of the revenue lost as a result of property tax exemptions.  After several years of underfunding the program, the PILOT MME program was eliminated in 2011 and towns and cities lost $50 million in reimbursement.

State Impacts on the Property Tax

As mentioned previously, the property tax provides 72% of all local revenue, with the majority of the remainder coming from state aid to municipalities. While this state aid is essential, it has been provided at inconsistent amounts over the years and often falls short of the statutorily-required levels. With limited options for filling those revenue shortfalls, towns are forced to raise property taxes.

Two of the largest grant programs are Education Cost Sharing (ECS) and PILOT. These programs have been underfunded for years, and remain so, even with recent funding increases.

Source: CCM calcuations from Office fo the Comptroller annual reports and adopted state budgets

In the case of ECS and education funding, shortfalls require local school districts to make up the difference. This in turn means more pressure om the property tax.

Source: CCM calcuations from Office fo the Comptroller annual reports and adopted state budgets

When PILOT reimbursements fall short, it forces other residential and business property taxpayers to make up the difference.  Thus, other property taxpayers are forced to pay for the State’s underfunded and unfunded property-tax exemption mandates.

The state also passes down numerous mandates onto towns, many of which are unfunded or underfunded. There are currently over 1,300 state mandates around the areas of education, the environment, and public safety, among others.