Hartford Business Journal

14 Hartford Business Journal • February 6, 2017 www.HartfordBusiness.com City still has too many tax-exempt assets/properties from page 1 reaping some added revenues from higher valued properties. That option, however, is complicated by the city's fiscal crisis, in which a current $22.6 million deficit and future $50 million budget shortfall has Mayor Luke Bro- nin asking the state for more revenue. Bronin says lowering the mill rate in light of the city's fiscal struggles would be counter-pro- ductive. He said that growth in the 2016 grand list, which the city partially built into its budget forecasts, will only "make a small dent in the deficits we face'' in fiscal 2018 and beyond. The city's latest revaluation — mandated to occur every five years — found commer- cial property values in the city rose 20 per- cent from 2011, to $1.45 billion. Residential was the city's only declining property sector, down 2.7 percent. Overall the grand list was valued at $4.07 billion, up from $3.7 billion a year ago. "It's encouraging that commercial values are rising,'' said City Assessor John S. Philip, who has spent years compiling property val- ues and assessments in Connecticut com- munities large and small. "I just hope that a significant tax increase, that may very well follow, won't do the opposite.'' Many Class A office towers downtown, along with the corporate headquarters of the city's largest employers, have seen their property values skyrocket by 50 percent or more since the last revaluation in 2011, an HBJ analysis of city records found. That has landlords concerned as they face the prospects of significantly higher taxes. Some say they have yet to receive or see their newest Hartford tax bills, while others expressed privately their intent to challenge the new property assessments. Some landlords have already done so, sources said. Shelbourne Global Solutions has become one of downtown Hartford's most active out- of-state investors in city real estate, buying in recent years 100 Pearl St., 20 Church St., and, as of December, the Metro Center office building on 350 Church St., which houses Lin- coln Financial, the Connecticut Business and Industry Association and other tenants. Shelbourne Principal Bernard Bertram recently said that, had his group been aware of the big jump in Metro Center's property taxes, they might not have closed on the $49 million transaction. Seller The Fremont Group paid $22.7 million in 2013 for the fully leased building. Based on the city's 2016 reval, the building had a market value of $24.5 mil- lion, up from $12.8 million in 2011. "We're seriously re-evaluating our future plans for ownership of property in Hartford,'' Bertram said. He said the landlord, based in upstate New York, intends to "vigorously oppose'' the assess- ments on its city holdings. Shelbourne was attracted, Bertram said, by Hartford's efforts at downtown redevelop- ment, which, in tandem with UConn's open- ing this fall of its relocated West Hartford campus, is driving more Millennials to call the central business district home. The Metro Center deal, in the works the past 18 months, was part of Shelbourne's strategy to acquire more downtown Hartford properties, he said. However, faced with the prospect of steeper tax bills, Bertram said that plan is on hold for now. "Quite frankly, the city and state have some heavy lifting to do before they can bring back the city,'' Bertram said. "They literally have doubled the taxes on properties in the central business district. That is making it impossible for landlords to make money. They're basically telling us, 'we don't want you in town.' " Ready for appeals Investment by the Capital Region Devel- opment Authority to help landlords convert former vacant office towers into apartments has been a key reason commercial property values have grown. That, along with the state's purchase of the former Connecticut River Plaza office tower and more businesses coming down- town, has eliminated significant empty office space, boosting Hartford's commercial real estate values. Former Hartford councilman Michael McGarry, a veteran member of the city's three-member Assessment Board of Appeals, says he expects a significant spike in appeals, as landlords challenge their latest valuations. The reason is, he says, a reval can impact property valuations for the next five years, not just one. McGarry says the city needs another $1 billion to $1.3 billion of additional grand list value to financially sustain itself. "Hartford has too many [financial] respon- sibilities relative to the size of its grand list,'' McGarry said. Commercial broker Jon Putnam, executive vice president of Cushman & Wakefield's Hart- ford office, says the city could make itself more attractive and market competitive to realty investors and office, commercial and apart- ment tenants by trimming its mill rate. The key to economic growth is getting new investment in the city, not just extracting more taxes from current landlords, he said. Seeking help Bronin said he understands the city's chal- lenges and is lobbying for solutions. "I want nothing more than to be in a posi- tion to lower the tax burden on our commer- cial properties and employers,'' the mayor said. "But until there is a partnership at the state level to address the longstanding structural problem with half our property being non- taxable, we won't be in a position to do that.'' According to Bronin, Hartford's growing grand list shouldn't stand in the way of the city qualifying for state assistance. Indeed, he says it's likely to serve as a clarion-call to the state, as the city seeks to partner with it on solutions to the Capital City's fiscal woes and high com- mercial property tax rate. The Connecticut Conference of Munici- palities recently unveiled a legislative package, which Bronin worked on, that would increase revenues to cities and towns by boosting pay- ments-in-lieu-of-taxes and increasing the state sales tax and then sharing those revenues with local governments. CCM is also recommending policy changes related to shared services and cost containment. Meantime, Gov. Dannel P. Malloy has already unveiled a blueprint to ease municipal man- dates. His plan includes allowing cities and towns to tighten prevailing wage standards and make changes to collective bargaining. The Democratic governor is also expected to realign state aid from wealthier to poorer communities, a move that would likely ben- efit Hartford. State House Majority Leader Matthew Rit- ter (D-Hartford), whose district includes the city's West End where he resides, said while the city's grand-list growth is good news, "it doesn't change the bottom line. It doesn't change the underlying situation of having high property taxes and a lot of untaxable property.'' Ritter said he understands that Hartford prop- erty taxpayers are anxious, but urged patience while state leaders craft a budget that takes into account the state's own fiscal uncertainties. "We will have a good product,'' Ritter said, "that is a benefit to the city and the state.'' n Major Hartford Office Tower Property Values on the Rise In Oct. 2016 the city of Hartford conducted a revaluation of all city property, which resulted in significant increases in many commercial property values. Some of the largest market value increases are shown below. 2016 2011 % Office Tower Market Value Market Value Increase One Corporate Center (20 Church St.) $44,569,000 $18,980,200 135% 100 Pearl St. $34,270,600 $17,012,800 101% Metro Center (350 Church St.) $24,495,800 $12,798,200 91% CT River Plaza (450 Columbus Blvd.) $35,247,700 $18,662,700 89% Constitution Plaza (1, 10, 100) $68,146,300 $41,355,900 65% CityPlace I (185 Asylum St.) $108,126,400 $87,193,000 24% One State Street (400 Columbus Blvd.) $49,659,100 $40,280,300 23% CityPlace II (151 Asylum St.) $23,288,500 $20,151,300 16% 218-260 Trumbull St. $7,890,800 $7,465,600 6% 2016 2011 % Corporate HQs Market Value Market Value Increase The Hartford (690 Asylum St.) $99,250,600 $59,771,000 66% Travelers Tower (700 Main St. ) $57,269,600 $44,539,300 29% Phoenix Boat Building (One American Row) $26,667,000 $20,836,600 28% Aetna (151 Farmington Ave.) $98,039,800 $87,935,700 11% S O U R C E : H B J A N A L Y S I S O F H A R T F O R D C I T Y A S S E S S O R R E C O R D S Among the Hartford office towers that saw significance spikes in value after a 2016 reval were (starting left, then clockwise): Metro Center, CityPlace I and II, and 100 Pearl St. Goodwin Square (right) lost some of its value. 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