Hartford Business Journal

18 Hartford Business Journal • July 22, 2019 • www.HartfordBusiness.com SPECIAL REPORT: CITIES PROJECT Becker also got a 15-year tax break from the city that runs through 2029, city records show. The deal set a fixed property-tax as- sessment of $2.17 million during the project's con- struction phase and then tied fu- ture tax payments to a percentage of the property's gross revenues, records show. Becker says without the help from both CRDA and the city, his project, which cur- rently enjoys over 90 percent occu- pancy, wouldn't have been possible, and that's not a good thing. He said a system that fosters an environment in which the city must cut tax deals to make development happen isn't ideal. Hartford city government has its own system for granting tax breaks, largely to encourage affordable housing, ground-up development, or other types of projects seen as important to eco- nomic development, said Johnson, the city's development services director. Deals have taken several forms. In the past, the city has signed ground and/ or air leases with developers who then would be exempt from property taxes but would pay an annual set payment to the city in lieu of taxes. That helped Northland Investment Corp.'s Hartford 21 luxury apartment tower get built in the early 2000s. In lieu of property tax- es, Northland agreed to make an annual $500,000 payment to the city during the first 20 years of the agreement. Today, that deal is saving Northland more than $6 million a year in city property taxes. More recently, the city has adopted tax-fixing agreements that tie tax pay- ments to a percentage of gross income generated by a property. The first phase of the proposed $46 million Downtown North mixed-use development and $26 million 108-unit Park and Main Street apartment project have deals like that. Johnson said tax deals require the city to strike a delicate balance between being opportunistic while also not hurting Hartford's ability to generate revenues. A review of city council meeting agendas and minutes show Hartford has considered less than a dozen tax- fixing deals since the start of 2018. CRDA has been more active. "You can't have the perception that you are giving away revenues at the expense of providing the essential services that are necessary for the city to operate," Johnson said. New Haven's incentives offer wide latitude While it's standard practice for mu- nicipalities to offer tax enticements, pro- grams often restrict eligibility to specific geographic areas or types of property. A few decades ago, New Haven de- cided to simplify its offering, enacting an as-of-right assessment deferral pro- gram. Most new construction, whether commercial or residential, as well as properties in need of rehabilita- tion are eligible, and the program is citywide. The only core requirement is that the invest- ment in the property exceeds 35 percent of its assessed value. In return, the property's assessed value is frozen dur- ing construction, followed by a five-year phase in of the increased property value. It's become a popular development incentive in the Elm City, which has a mill rate of 42.98, nearly half of Hartford's, said Steve Fontana, deputy >> Helping Hand continued Erik Johnson, Director of Development Services, Hartford Steve Fontana, Deputy Director, Office of Business Development, New Haven A major tax deal for a prominent Hartford landlord By Gregory Seay and Greg Bordonaro gseay@hartfordbusiness.com; gbordonaro@hartfordbusiness.com A recent and notable tax-break deal the city of Hartford hatched in recent years was with one of its most prominent down- town landlords: Shelbourne Global. Shelbourne is a New York realty investor/developer/landlord that has purchased more than $200 million in Hartford real estate over the last few years, including some of downtown's most prized Class A office towers. Most recently, Shelbourne was among a trio of landlord-developers to propose a $100 million residential- commercial redevelopment linking Trumbull and Main streets, via the Pratt Street retail corridor. That proj- ect proposes to create 375 new apart- ments and townhomes, plus 45,000 square feet of retail, mainly along the south side of Pratt, where Shelbourne owns much of the commercial space. Shelbourne has been bullish on Hartford ever since its first $44 mil- lion purchase of the Stilts Building (20 Church St.) in 2014. However, Shelbourne ran into problems a few years ago, following the city's 2016 revaluation, which more than doubled the taxes on three of its Class A office towers: 20 and 350 Church St. and 100 Pearl St. The combined tax bill on all three properties grew from $2.6 million to $5.4 million. "No landlord could withstand those types of increases and few tenants that were required to reimburse for those taxes would remain in our buildings," Shelbourne managing member Ben Schlossberg said of the revaluation's im- pact. "(It) basically put us out of business." Shelbourne sued the city over the new valuations, but eventually came to a settlement agreement in 2017. The deal provided Shelbourne property-tax relief by reducing assessments for a set period on several of its downtown Hartford properties, saving it more than $1 mil- lion in the most recent tax year. Without the relief, Schlossberg said, "Our buildings would have gone into foreclosure and, we dare say, the city would have been recertified as a bad Shelbourne got a tax break on its Stilts Building property. PHOTO | HBJ FILE Hartford tax breaks Here is a list of projects and properties in Hartford that benefitted from a tax-break deal during the 2017 grand list year. Fair market Assessment Unadjusted Project name/Beneficiary Location value ratio assessed value Unadjusted tax Adjusted Tax Difference % Difference Hartford 21 225 Trumbull St. $138.3M 70% $96.8M $7.2M $500,000 $6.7M -93% Sage Allen 884 Main St./29 Temple St. $18.9M 70% $13.3M $986,934 $109,810 $877,123 -89% 777 Main Street 777 Main St. $41.9M 70% $16.1M $1.2M $224,604 $975,173 -81% Trumbull on the Park 100 Trumbull St. $16.4M 70% $11.4M $850,280 $167,147 $683,134 -80% Convention Center Hotel 200 Columbus Blvd. $47.3M 70% $33.1M $2.5M $552,989 $1.9M -78% Shelbourne 100 Pearl St./20 Church St./ $83.1M 70% $58.2M $4.3M $2,592,111 $1.7M -40% 36 Talcott St./30 Talcott St. New Country Realty 236 Rev. Moody OP $2.4M 70% $1.7M $124,214 $91,330 $32,885 -26% Airport Autobody 75 Locust St. $1.5M 70% $1M $76,803 $61,512 $15,291 -20% The Hartford 690 Asylum Ave. $107.3M 70% $75.1M $5.6M $4,881,337 $699,973 -13% Source: Hartford City Assessor

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