Hartford - Two bills aimed at helping municipalities that have tax-exempt properties are headed to the floor in the General Assembly but the sponsors of the bills are talking to see if they can be combined.

Senate Majority Leader Martin Looney, D-New Haven, along with the Finance, Revenue and Bonding Committee co-chairman John Fonfara, D-Hartford, have introduced a bill that would require the state to give municipalities with a higher concentration of state-owned properties and nonprofits more Payment in Lieu of Taxes, or PILOT, than municipalities with a smaller concentration.

A bill introduced by House of Representatives Speaker Brendan Sharkey, D-Hamden, referred to as "reverse PILOT," would allow municipalities to tax nonprofit colleges and hospitals and require the state to reimburse the nonprofits a portion of the tax.

Sharkey and Looney met Thursday and said they will continue to discuss whether there could be a compromise bill.

"We are intending to do a package with the Senate that would include both pieces - the reverse PILOT plus a variation of increasing the contribution on the state PILOT," Sharkey said last week.

Looney said on Friday it might be possible to create "some mechanism for securing a payment from the nonprofits that could then be collected at the state level and distributed back to the municipalities. It would be sort of a by-product of the reverse PILOT idea."

The state would have to be careful about how it structured the legislation because some nonprofits such as Yale University are exempt from paying taxes in the Connecticut Constitution and thus would be exempt from the reverse PILOT legislation, Looney said.

Some municipalities charge nonprofits fees for municipal services such as sewage and fire serves, he said. The nonprofits could pay "some sort of fee in lieu of taxes" that would not violate the tax-exemptions, he added.

The bill is a "possibility for this session," Looney said. "We would like to move forward on this in some way and take advantage of the momentum of PILOT that is developing. … But full implementation will carry on over a period of years."

Municipalities that host nonprofit colleges and hospitals are supposed to receive 77 percent of the associated lost tax revenue but received only 32 percent last year. Municipalities that host state-owned properties are supposed to receive 45 percent of the lost tax revenue but received only about 23 percent last year.

Sharkey's reverse PILOT bill, House Bill 5583, would phase in a property tax on nonprofit colleges and hospitals over five years. Proponents of the bill said that it is time for nonprofits that resemble for-profit corporations, with six-figure executive salaries and expanding campuses, to pay taxes as residents and businesses do. The colleges and hospitals say they benefit their communities by creating jobs and providing free services, and that if they were taxed they wouldn't be able to offer as much financial aid and public health services.

Looney said he was concerned about the reverse PILOT because municipalities could be tangled up in lawsuits over property valuations of the nonprofit hospitals and colleges. Nonprofits don't contest their property valuations because they don't pay taxes, he said.

He said Sharkey's bill would also allow property tax agreements to be different in each municipality and between each nonprofit and municipality.

"One concern is that it would potentially create a different negotiation in every community between the host community and colleges and hospitals in that community," Looney said. "Some communities might seek a tax payment that would equal a very substantial amount of the exemption that the nonprofit has, others might be willing to settle for less."

Sharkey said the provision of his bill that allows nonprofits and municipalities to negotiate a lower contribution than 100 percent of the property tax would work.

"I think towns like New London get the fact that maybe it is not appropriate to charge them full rate right off the bat, but they understand that those negotiations have to take into account what the individual institution's circumstances are," Sharkey said.

Looney's bill, Senate Bill 467, would rank municipalities by the quantity of state-owned and nonprofit properties and provide PILOT funds on a sliding scale. The 20 municipalities with the greatest amount of tax-exempt property would receive PILOT funds equal to 50 percent of the taxes the exempt properties would have otherwise generated.

Looney said the state is examining this issue now because the budget picture has improved and the state isn't in the "same period of retrenchment."

The Appropriations Committee has passed a budget proposal that includes a $5 million increase for state-owned property PILOT payments and the governor's $8 million increase for nonprofit PILOT payments. These additional funds wouldn't be enough to implement Looney's bill, he said. But they could roll out the new legislation incrementally. Looney also said that his bill would have to include a mechanism to require the state to pay the PILOT funds to the municipalities whereas the state now pays PILOT funds based on whether the state has the funds.

Increasing funding for state-owned property PILOT makes sense, Sharkey said, because if the state were to ask nonprofit colleges and hospitals to pay a property tax, the state should pay municipalities more for its properties.

"I am sure if we can work an arrangement out with Senator Looney's bill so that we are putting the two together we would have bicameral support," Sharkey said.

j.somers@theday.com