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New London mayor favors new approach to taxation

By Johanna Somers

Publication: The Day

Published 05/09/2013 12:00 AM
Updated 05/08/2013 11:55 PM
Supporters say 'land value taxation' spurs upkeep by giving land, buildings different rates

Hartford - The idea of taxing land at a higher rate than the buildings on it is coming up for discussion again under a proposal from the Municipal Opportunities Regional Efficiencies Commission.

Buildings and land currently are taxed at the same rate for property tax purposes. The new model is called "land value taxation," commonly shortened to LVT.

Joshua Vincent, executive director of the Philadelphia-based Center for the Study of Economics, presented LVT information to the M.O.R.E. commission and worked with New London several years ago when it explored applying LVT to city properties.

He said raising tax rates for land and lowering them for buildings would provide a municipality with the same amount of revenue but would encourage development. Some owners of multiple properties don't revitalize or take care of their buildings, he said.

"(LVT) would discourage easy holding of vacant land," Vincent said. "The higher tax on land would encourage people to sell and enter the market."

The proposal being discussed would create a pilot program for up to three municipalities.

The legislature passed, and the governor signed into law, a similar program in 2009 in which the City of New London would have been the pilot municipality if the process had not stalled at the city level.

This time around, there are many interested cities, including Norwich, Waterbury, Bridgeport, New Haven and Hartford, according to Vincent.

Those selected for the pilot program would need to create a process for implementing the differing tax rates, designate a geographic area for the program and identify legal and administrative issues.

Past resistance

Art Costa, former chairman of the New London committee charged with evaluating the benefits of adopting the LVT pilot program three years ago, said the original plan was to apply LVT throughout the city. The majority of committee members, some of whom owned large parcels of land in the city, voted against the program in 2010.

The New London City Council asked for a six-month extension, but Costa said the city never received an answer from the state.

Gian-Carl Casa, spokesman for the Office of Policy and Management, said OPM told the committee it did not have the authority to make an extension and that the committee would need a legislative "fix" to get the extension.

Much of the resistance to the program three years ago came from people who said LVT would hurt owners of large lots, such as car dealerships, New London Mayor Daryl Justin Finizio said.

But Finizio, who took office in 2011, said that if New London were chosen to participate this time, he would focus on the downtown area and exempt waterfront properties and large lots.

"I support it because I believe it will remove one of the largest disincentives to revitalization in downtown New London," Finizio said Tuesday.

There are buildings downtown with collapsing roofs or crumbling façades and other buildings being sold because owners aren't paying taxes on them, Finizio said.

Developers take a look at a property and assess how much it would cost to renovate and how much the market value of the property would increase afterwards. Often, they decide that property taxes on the newly renovated building would be too high, negating the benefit of renovation, Finizio said.

He said banks often refuse to finance renovation projects because of estimated poor returns.

Right time for New London

The latest LVT proposal came out of the M.O.R.E. commission's Municipal Tax Authority working group. The commission is made up of state legislators, local officials, advocates and concerned citizens and is responsible for finding ways to reduce municipal costs and save taxpayers money.

The working group's final recommendations will be reviewed by House Speaker Brendan Sharkey, D-Hamden, and other commission chairmen, said state Rep. Elissa Wright, D-Groton, a member of the group.

The LVT proposal is one idea that working group chairman, state Rep. Jeffrey Berger, D-Waterbury, said he would like to see passed this session.

Wright said she has some reservations about the proposal because without a uniform tax rate, it might be more difficult to compare the tax impact on different properties. But, she said, the topic warrants discussion for urban areas.

"(Lower taxes on buildings) is going to provide a greater return on investment after tax," Wright said.

If it becomes law, a newly renovated building would still be taxed more than if the building hadn't been renovated, but the spike in taxes would be much smaller, Finizio said.

"This is an opportune time, with other developments in New London such as the National Coast Guard Museum," Finizio said. These new developments, combined with the tax program, would be an excellent way to spur revitalization, he said.

Vincent said there were some lessons learned from New London's prior attempt. For instance, this new proposal would require more of the committee stakeholders to be from the city government, he said.

Primarily property owners comprised the former committee, Costa said.

j.somers@theday.com

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