Paul Bass Photo
Matt Smith with developer Salinas outside City Hall hearing.
How much money will the city collect in new taxes, Matt Smith was asked, if we approve this project?
Smith answered. Sort of.
He said the project will bring in more taxes than the city gets on the land now — which is zero.
He said the tax assessor will follow the law in calculating the amount of taxes the project’s developers will pay, once they build the project.
But, despite being asked the question several times, he didn’t offer a number. Or a hint of a number.
That was by design. Smith had studied New Haven’s modern history. And he didn’t want to get the city into another legal mess a few years down the line.
Smith sort of answered the question last week at a City Hall hearing of the Board of Alders Community Development Committee. Smith, an economic development officer with the city government, was there to urge the committee to move along toward final approval of a proposal to give vacant land at 470 James St. to developers David Salinas and Eric O’Brien so they can build a “cool” $16 million, 21st century technology and innovation campus there.
Smith, a former East Rock alder, has shepherded the deal as staff project manager for the city. At the hearing this past Wednesday night he succeeded in convincing the alders, in a rare show of unanimous enthusiasm, to fast-track the project to approval, with a final vote of approval expected this coming Monday night by the full Board of Alders.
Smith won the unanimous committee vote even though he didn’t have to answer what used to be a routine question in any deliberation of a city-involved development deal: How much tax revenue the deal is expected to produce.
“Until it’s actually built,” Smith said in response to a question from Newhallville Alder Delphine Clyburn, “we don’t know the actual amount” of taxes it will generate.
Question “Answered”
Kenneth Boroson Architects
Rendering of proposed 470 James St. project.
That’s always true, of course, with any development deal.
But a city ordinance passed in 1982, and updated a couple of times since, requires city officials to complete “fiscal impact statements” when seeking approval for development deals. Aldermen (as they were then called) passed that ordinance to get a better idea of the benefits and costs to taxpayers of deals they were asked to approve.
City Economic Development Administrator Matthew Nemerson did submit a fiscal impact statement to the alders along with other documents in seeking their approval of 470 James St. Whether he answered the tax question is open to interpretation.
“Will this item result in any revenues for the City?” the form asks “If Yes, please list amount and type.”
Nemerson marked “yes.” That was followed by this “answer”:
“Currently the property is owned by the State of Connecticut and is exempt from Property Taxes. Under this agreement, the property will generate property tax revenue for a term of no less than 30 years.”
Policy Shift
Developers Eric O’Brien and David Salinas with city’s Matthew Nemerson at last week’s hearing.
City officials — government officials at any level — have in the past always sought to come up with an estimate of potential tax revenue to include in any pitch for legislative approval. Those numbers can sound big and give elected officials a saleable reason to approve a deal.
The economic development team of the former DeStefano administration did that, for instance, when they convinced the Board of Alders to approve a deal to enable a private developer to build a 32-story apartment tower at 360 State St. That was back in 2007. The city’s then-development administrator presented as part of the documentation associated with the deal an estimate from the tax assessor that 360 State’s owner would pay $1.4 million in taxes once they were fully phased in. The Multi-Employer Property Trust, a union pension fund, claimed it agreed to finance the deal based in part on that estimate (which held no legal weight).
The building opened in 2010. The city then prepared a legal assessment — and came up with a valuation four times as high as that estimate. It presented MEPT with a tax bill in 2011 based on a $186 million assessment. That meant, once the taxes were fully phased in, MEPT would pay $5.7 million a year.
MEPT sued. The suit dragged on for two years, coincident with a public fight, until the city and MEPT reached an out-of-court settlement compromising on an $82 million assessment.
Matt Smith said after last week’s committee hearing that he indeed had that history on his mind when he declined to offer an estimated future tax bill to the alders.
“I was mindful that I didn’t want to put the city, the administration, the Board of Alders, under any obligation” in a potential conflict with 470 James like the one over 360 State, he said.
Smith said city staff had another reason to avoid a tax estimate: It didn’t need one to make its case. Right now the land, which is vacant and owned by the state, generates no tax revenues. That means he could honestly promise that the development will generate a lot more tax revenue than it does now, without getting caught up in theoretical numbers.
Smith’s boss, Economic Development Administrator Matthew Nemerson, said avoiding tax estimates is new city policy.
“We’re no longer allowed to” release estimates, Nemerson said. “We have been told by corporation counsel” — the previous city corporation counsel, Victor Bolden — “we are never to say in writing or publicly what taxes could be.
“You only get in one $180 million lawsuit to learn your lesson,” Nemerson added, referring to the original assessment the city placed on 360 State before the lawsuit settlement.
Comparables
Holmes: Too early for meaningful estimates.
Mayoral spokesman Laurence Grotheer said the city tax assessor’s office has not yet prepared a tax impact statement for this project. That would happen if and when — as expected — the developer applies for a five-year tax phase-in and more details of the project are known.
The city makes that phase-in available to any developer increasing the value of a property by more than 30 percent. That means that at the outset the developers would pay the current tax bill on the property — which is zero dollars, because the state owns it. Once they complete construction, the tax bill would be phased in gradually over five years, 20 percent of the full value per year. (For 30 years, 470 James’s owners would not be able to transfer any land to not-for-profit organizations unless they sign agreements to pay the city the full value of property taxes, according to the pending deal with the city.)
East Rock Alder Jessica Holmes said she’s not concerned about the lack of a hard-number estimate yet of projected tax revenues. She noted that the private project will certainly start producing revenue on what’s now tax-exempt state-owned land. “We know that it’s going to be a net positive,” Holmes said. “But it doesn’t seem like any number they come up with now would be accurate anyway.”
Developers, meanwhile, do come up with guesstimates of their future tax bills as part of the process of raising money and budgeting. David Salinas, one of the two main partners in the 470 James project, said his team looked at comparable nearby buildings like the 370 James St. complex. That complex’s current annual tax bill is $241,559.66, according to Grotheer.
Worth writing once again that the tax break given to 360 State was patently unfair given the amenities and construction quality of the dwellings compared to the outrageously overtaxed East Rock. The union controlled BOA engineered this giveaway to the controlling interest; guess who??? a union pension fund.