Hartford Business Journal

www.HartfordBusiness.com • June 24, 2019 • Hartford Business Journal 13 SPECIAL REPORT: CITIES PROJECT city — Hartford's $4 billion grand list is valued 30 percent below what it was near the turn of the 21st century, and 38 per- cent below its 1990 peak of $6.5 billion. By comparison, neighboring West Hartford — one of the region's wealthier com- munities with half the popula- tion of Hartford — has a 41 mill rate and $6.3 bil- lion grand list. New Haven, a city with a com- parable popula- tion to Hartford but lower mill rate (42.98 mills) has a $6.6 billion grand list. "[Hartford's mill rate] has brought development to an absolute screeching halt," said Hartford City Councilor and lawyer John Gale. "It's a huge drag. This has been the biggest single financial is- sue the city has faced in the last 15 years." With limited exceptions, private development has eschewed Hartford over the last decade or longer, unless it's been supported by state govern- ment subsidies or city tax breaks. The city's small businesses in par- ticular have felt enormous pressure from the high property-tax rate, part of the reason key commercial avenues — Franklin, Maple, Main, Albany, etc. — in various neighbor- hoods have lost their luster. And for anyone who thinks com- mercial taxpay- ers will soon get relief after the state last year helped the city avert bankruptcy by agreeing to pay off Hartford's $550 million in general obligation debt over the coming decades, think again. Despite its bailout, Hartford's financ- es remain in a precarious position, and commercial taxpayers aren't likely to see a tax-rate reduction anytime soon, according to Mayor Luke Bronin. "For a small business or any prop- erty owner paying the full freight 74 mills, it's an unsustainable and unfair burden," Bronin said. "I think it's a huge issue and one that our state has to con- front if we want to be competitive." For Hartford's mill rate to be com- petitive over the long run, Bronin said it needs to be cut in half. That, however, would likely require major reforms at the state level, or a miraculous surge in new commercial development. House Majority Leader Matt Ritter (D-Hartford) said he agrees Hartford still has a long road to recovery, but he also thinks the bailout he helped broker provided the city with much- needed financial stability. He said it could take 10 to 15 years to put any sizable dent in the mill rate, and that's only if Hartford is able to grow its grand list and secure additional state funding, among other efforts. He also said the bailout deal was the best the city could have hoped for, given the political environment. "For anyone who thinks the deal could have been better, they are sorely mistaken," Ritter said. "There was not an appetite to reduce the mill rate." The Hartford Business Journal has spent months interviewing property- tax experts, commercial property owners, landlord-developers, policy- makers, homeowners, city officials and others about the effects of Hartford's property-tax system, which is compli- cated and broken in myriad ways. Occupying just 18 square miles, Hartford is a tiny city that also houses many tax-exempt properties, sig- nificantly limiting the city's ability to grow its grand list. In fact, 59 percent of the assessed real estate in the city is exempt from taxation because it's owned by gov- ernments, nonprofits, churches or other tax-exempt organizations, an HBJ analysis of city property records shows. Meantime, Hartford is also home to one of the poorest popula- tions in the country, increasing the need for social, health care and other services. Adding insult to injury, Hartford has the state's only bifurcated property- tax system, in which commercial property owners pay a higher tax rate than residential homeowners. Hartford's challenges are a statewide concern because the city's fortunes are directly tied to the state's, especially as more employers and skilled workers want to be in or near vibrant cities. Despite its challenges, some business leaders are still bullish about Hartford's future, especially given downtown's new vibrancy in recent years, helped by the additions of Dunkin' Donuts Park, UConn's West Hartford campus, a fledgling tech scene and about 1,500 new apartment units. "I'm more optimistic about Hart- ford's increasing attractiveness as a location for companies due to the urbanization trend," said Jon Putnam, executive director of commercial re- alty broker Cushman & Wakefield. How did we get here? Hartford didn't land in its current fi- nancial and property-tax predicament overnight. Numerous factors over many decades stacked up to create an unstable and untenable situation with no clear or easy solutions. The start of the decline of Hartford's property-tax base and system can be traced to the mid-20th century when the city — like many others in Connecti- Calculating a commercial property tax bill in Hartford To calculate any property tax bill in Connecticut, an individual or business owner must multiply the assessed val- ue of their property by a city's or town's mill rate and then divide by 1,000. In the 1970s, Connecticut passed a law that required all cities and towns to adopt a 70-percent assessment ratio. That means to determine the as- sessed value of a property — whether it's a single-family home, commercial office building or apartment complex — assessors multiply its market value by 70 percent. Hartford is the only municipality allowed to have a lower assessment ratio — 35 percent — for single- family homes, so it's highest-in-the- state 74.29 mill rate has a much big- ger impact on commercial property owners. That high mill rate also gives neighboring towns a competi- tive advantage, at least in terms of attracting commercial development and investment. For example, take a small of- fice building with a market value of $450,000. If it was located in Hartford its annual tax bill would be $23,401. If it was located in West Hartford, which has a 41 mill rate, that same valued property would have an annual tax bill of $12,915. Property values, however, are much higher in West Hartford. With a 35 percent assessment ratio, Hartford homeowners have an effec- tive tax rate in line with surrounding communities. For example, take a home located in Hartford with a market value of $250,000. Its annual tax bill would be about $6,500. In West Hartford, a $250,000 house has an annual prop- erty tax bill of $7,175. However, a lower assessment ratio hurts home values, and home values in West Hartford are much higher. Continued on next page >> 10 highest mill rates in Connecticut Municipality FY 2019 mill rates Hartford 74.29 Waterbury 60.21 Bridgeport 54.37 New Britain 50.5 Naugatuck 48.35 Hamden 47.96 East Hartford 47.66 Torrington 46.17 New London 43.62 New Haven 42.98 10 lowest mill rates in Connecticut Municipality FY 2019 mill rates Salisbury 11.3 Greenwich 11.36 Warren 14.25 Washington 14.25 Sharon 14.7 Roxbury 15.85 Darien 16.08 Cornwall 16.62 Westport 16.86 New Canaan 16.96 Source: Office of Policy and Management Greater Hartford mill rate comparison Municipality FY 2019 mill rates Hartford 74.29 New Britain 50.5 East Hartford 47.66 West Hartford 41 Wethersfield 40.78 Newington 38.5 South Windsor 37.67 Bloomfield 37.52 Bristol 36.88 Simsbury 36.42 Glastonbury 36 Manchester 35.81 East Windsor 33.9 Plainville 33.84 Enfield 33.4 East Granby 33 Windsor 32.96 Berlin 32.5 Burlington 32.5 Rocky Hill 32.4 Avon 31.35 Canton 30.7 Southington 30.48 Suffield 29.32 Farmington 27.18 Windsor Locks 26.66 John Gale, Hartford City Council Matt Ritter, House Majority Leader, (D-Hartford)

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