Hartford Business Journal

14 Hartford Business Journal • November 23, 2015 www.HartfordBusiness.com from page 1 Citing past efforts, Malloy lukewarm to idea and hospitals — none of which, except in rare circumstances, are legally required to pay property taxes. About 51 percent of the prop- erty in the city is tax-exempt. "I strongly support and will aggressively advocate for anything that would fairly com- pensate cities such as Hartford for the dispro- portionately high percentage of non-taxable properties,'' Bronin said via email. "In the absence of full funding of the PILOT formula, I would urge the state to consider the kind of sale-leaseback arrangements that the Metro- Hartford Alliance suggests." Meantime, Malloy reacted coolly to their sale-leaseback idea, noting the city's office market benefitted from the state's purchase in recent years of mid-town's 55 Farmington Ave. office building and downtown's Con- necticut River Plaza office complex. Both Class-A buildings were largely vacant or being vacated before the state invested more than $100 million to buy, reno- vate and outfit them. Those purchases helped decrease Hartford's office vacancy rate into the mid-teens, boosting property values of nearby buildings. They also will bring more state workers downtown, potentially helping restaurants and other small businesses. In addition, the state, through the Capital Region Development Authority, has invested tens of millions of dollars in recent years, to help convert vacant downtown office buildings into apartments now owned by private developers. "There are strengths and weaknesses of sale-leasebacks,'' Malloy said during a recent HBJ interview. "I've encouraged people to consider them in some instances and not encouraged them in others." "We took a lot of property off the rolls that would apparently still be available if we hadn't done it,'' Malloy added. "Part of the recovery of Hartford's rental base is the moves that we took. So now we're supposed to, you know, dissipate that?" In 2012, Hartford Business Journal report- ed on the state's strategy to reduce its real estate costs by consolidating more expensive leased space into facilities owned by Con- necticut taxpayers. Searching for answers Griebel said the sale-leaseback proposal was among a half dozen ideas that the Metro- Hartford Alliance submitted in response to Malloy's call during his Oct. 22 visit with the organization for their input into dealing with the state's overall fiscal challenges. Griebel repeated his letter's assertion that the alliance and the private sector "stands ready to participate in helping identify and exploit opportunities'' to boost employment and quality of life for Connecticut residents." Griebel emphasized that the push to revise how the state reimburses Hartford for PILOT does not diminish steps the state has already taken to improve Hartford's fiscal and eco- nomic-development prospects. Hartford's onerous property-tax struc- ture has been the subject of much discussion among home-, office- and other commercial- property owners who view the city's mill rate of $74.29 for every $1,000 of assessed value as a barrier to investing in or upgrading property. Hartford is the only city that taxes commer- cial and residential property owners different rates: Residential property is assessed at about 30 percent of value while commercial property is assessed at 70 percent of value. In fiscal 2015, the state's PILOT payments to the city totaled $14.8 million for its 158 proper- ties, or an average $93,000 per property, accord- ing to state Department of Administrative Services data. In fiscal 2009, the city collected PILOT sums totaling $12.7 million, or $89,000 for each of the 148 properties the state owned then. Some brokers say the sale-leaseback of office space and other commercial properties is a viable concept that is regularly applied in the private sector by corporations that want to focus on their business models, not manag- ing real estate. It also has been used sparing- ly in the public sector, brokers and others say. However, whether Connecticut policy- makers embrace and apply the concept to the state's urban property holdings hinges on a myriad of factors, brokers said. "It certainly is a viable alternative as long as it meets the objectives the state originally developed when they bought those office build- ings,'' said Christopher Ostop, executive vice president in investment realty broker-adviser Jones Lang Lasalle LLC's Hartford office. Two of Hartford's biggest employers/tax- payers, Aetna Inc. and The Hartford Finan- cial Services Group Inc., in past years used sale-leasebacks to manage several of their former office-space assets. Aetna's former sprawling Middletown office complex and The Hartford's former Simsbury office build- ing at one time were sold, then leased back from their owners. Both insurers later reclaimed title to their office properties, a typical contractual end in such deals. Aetna has since razed most of the Middletown complex; The Hartford sold its Simsbury campus. In Connecticut's case, for example, a sale-leaseback of the state's Hartford office holdings could generate millions of dollars in upfront cash. However, one question brokers have privately is what would the state do with the sale proceeds? They note that the state and taxpayers would have to commit to at least 25 years or so of lease payments to remain in the spaces that were part of the sale-leaseback. With its fiscal pressures, they ask, would the state be willing or able to earmark the sales proceeds to cover those future lease payments? Pending a long-term solution to more equalize the city's property-tax apparatus, a sale-leaseback of the state's city properties is merely a stop-gap measure, Griebel said. "The idea doesn't solve the problem. Some- body's going to pay,'' Griebel said. "But the concept is to build a broader [tax] base.'' n State PILOT Payments to Hartford Grand List Fiscal Year # of Properties PILOT 2012 2015 158 $14,816,241 2011 2014 160 $13,792,383 2010 2013 148 $13,570,279 2009 2012 148 $12,691,078 S O U R C E : C T D E P A R T M E N T O F A D M I N I S T R A T I V E S E R V I C E S The state of Connecticut owns Hartford's Connecticut River Plaza (above, left) and 55 Farmington Ave. (right). dean of institutional effectiveness and outreach, said it's something Tunxis hasn't done in years. The school is also hosting Saturday enrollment days, acknowledging that many community college students have jobs and families during the week. The most recent one netted about 300 enrollments, he said. But as much as Tunxis is aiming to bring in new students, it's trying to retain the ones it has. Across the state's community college system, keeping students is a challenge. Part- time students outnumber full-time students by more than two to one, and most commu- nity colleges lose more than half of their part- time pupils within their first year. England said Tunxis opened a read- ing and writing lab for remedial-level stu- dents, and last year implemented a track- ing system faculty members can use to report a student who is struggling with the curriculum or has stopped coming to class. School counselors are notified, and reach out to students to try to help them. There's no clear data yet on the tracking system's effectiveness, but England said anecdotally he thinks it's working. "We're trying to hold onto as many stu- dents as we can," he said. Retention is also a focus at Manchester Community College, where administrators are hoping that a grant-funding boost for a summer program aimed at low-income and remedial- level students might boost retention, according to G. Duncan Harris, interim dean of academic affairs and dean of student affairs. A five-year, $1.2 million grant for the Stars Program requires the school to grow enrollment in the program to 140 students by next fall. "With dwindling state resources, that's one of the strategies we've deployed," Harris said. n Slowing Demand P H O T O | P A B L O R O B L E S H B J P H O T O | G R E G O R Y S E A Y

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