Hartford Business Journal

HARTFORDBUSINESS.COM | MAY 1, 2023 29 Editor's Take The state Capitol with downtown Hartford in the background. HBJ FILE PHOTO Capping commercial property tax rate would help Hartford, but policy likely a non-starter A bill introduced late in the legis- lative session that would create incentives for redevelopment of underutilized properties and offer companies a tax credit for moving to distressed municipalities' down- towns could help cities like Hartford recover from the pandemic, which had a devastating impact on the office market as companies and their employees embraced remote work. That not only drove up office vacancy rates but sucked life out of downtowns, with fewer people walking the streets on a daily basis. But is the proposal good policy overall? As is the case with most economic development proposals, it's complicated. Senate Bill 1240 was introduced by state Sen. John Fonfara (D-Hartford), co-chair of the powerful Finance, Revenue & Bonding Committee, who is also running for mayor in the city of Hartford. He's looking to replace current Democratic Mayor Luke Bronin, who isn't seeking reelection but is backing Fonfara's proposal. As my colleague Michael Puffer reported, the bill, which received a public hearing on April 10, would: • Cap at 31.25 mills local property taxes on commercial and industrial properties. Cities and towns would be reimbursed for lost tax revenue by the state. • Offer a state tax credit to compa- nies that sign office leases within the downtowns of distressed municipalities with at least 80,000 residents. The tax credit would be equivalent to a 10% discount on lease payments, in addition to covering 10% of the fit-out costs for the new space (furniture, fixtures and equipment, telecommunica- tions upgrades, etc.). To qualify, companies would need to sign a minimum three-year lease for 10,000 square feet or more. • Offer a 25% state tax credit for conversion of underused commer- cial and office spaces into apart- ments, or a mix of apartments and commercial space. The bill, which also introduces a new municipal revenue sharing program, faces opposition from the Lamont administration. The governor's budget director, Jeffrey Beckham, argued it would offload local property tax burdens onto state taxpayers, diverting money from the General Fund. Reimbursing municipalities for the 31.25 mill rate cap, for example, would cost the state at least $227 million annually, Beckham said. He also opposed the new tax credits for office leases and property conver- sions, arguing they duplicate existing programs. Here are some thoughts about each component of the bill: Mill rate cap Capping the mill rate on commer- cial and industrial properties would be a boon to Hartford and other major cities, which often have higher mill rates than smaller, suburban towns. Hartford's 68.95 mill rate, for example, is nearly double neigh- boring Glastonbury's 31.01 mill rate and significantly higher than West Hartford's 40.68 mill rate. Policymakers, business leaders and others for years have complained that Hartford's high commercial prop- erty taxes have stifled investment in the city and depressed commercial property values. Need proof? The city of Hartford, with a population of more than 120,000 residents, reported a 2022 grand list of $4.9 billion. By comparison, West Hartford — one of the region's wealthier communities with half the population of Hartford — saw its grand list top $7 billion last year. Cities like Hartford are at a competitive disadvantage because they host significant amounts of tax-exempt property — government buildings, college campuses and hospitals — as well as some of the state's poorest residents most in need of social services. That restricts grand-list growth. However, the mill rate cap isn't likely to pass muster in the legis- lature. It's essentially a form of regionalization because it shifts the tax burden away from local property owners to state taxpayers. That will draw resistance from towns with mill rates below the proposed cap. Also, mill rates are based on how much tax revenue a city or town needs to balance their budget. Capping the commercial mill rate could reward communities that lack fiscal discipline or resist economic Greg Bordonaro Impact of a 31.25 commercial property mill rate cap on Hartford: Take an industrial building in Hartford's south meadows neigh- borhood with an assessed value of $4 million. Under Hartford's current 68.95 mill rate, the owner of that building pays $275,800 in annual property taxes (68.95 X $4M / 1,000). Under a 31.25 mill rate cap, that same property would have a $125,000 tax bill (31.25 X $4M / 1,000), a savings of $150,800.

• Cover