There is an overreliance on property taxes, and one way cities and towns can diversify revenue is by getting a cut of the state’s hotel tax, says the Connecticut Conference of Municipalities.
The organization, which represents cities and towns throughout the state, is pushing for the passage of House Bill No. 5483, which currently sits on the House calendar. The bill would increase the hotel tax from 12 percent to 15 percent. It would also allow cities and towns to receive a portion of the revenue collected from the state hotel tax.
One-third of the increased hotel revenue would go to revenues where the hotels that collected the tax are located and two-thirds would go to regional planning organizations on a pro rata basis.
The Office of Fiscal Analysis estimates that the hotel tax increase would generate an additional $9.4 million in fiscal year 2010-2011 and $18.8 million in fiscal year 2011-2012 for cities and towns and regional planning organizations.
An increase in revenue could help cities and towns help offset state aid cuts and prevent property tax increases or service reductions, CCM says. It could also help foster cooperation between communities, the group says.
CCM reports that Connecticut is one of only nine states that do not have some sort of local hotel tax. Nearby Massachusetts has a local tax rate of up to 6 percent. Rhode Island has a 1 percent local hotel tax.
House Bill No. 5383 was passed by both the planning and development and the finance, revenue and bonding committees last month.