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Town meeting OKs tax proposal for Georgetown Land Development Company

1/8/2009
The Redding Pilot

Written by Rachel Kirkpatrick

The town will pursue tax incremental financing through a state program to help Georgetown Land Development Company get the funds it needs to start infrastructure work at the Gilbert & Bennett site.

Approximately 132 people attended the town meeting Tuesday night amidst freezing rain and the threat of more ice throughout the evening. Of the 132 who attended, 101 voted in favor of the proposal, with 31 voting against.

Probate Judge Richard Emerson was elected the meeting’s moderator at the packed community room at the Redding Community Center on Lonetown Road.

While some of the debate centered around an explanation of just what the proposal is — tax incremental financing — the majority of time was spent tweaking the wording of the motion before the town.

Three motions were made to amend the original motion as it appeared in the legal notice — the amendments centered around semantics. Many wanted to be sure safeguards were in place for the town.

However, after three motions to amend all ended up being withdrawn, and amidst shouts from the audience, like: “Enough is enough, let’s just vote,” a motion was made to end debate over the issue.

The motion to end the debate at the town meeting required a two-thirds vote, which it received. Then, the group immediately voted to approve the motion for the proposal as stated in the meeting’s legal notice.

“Do you want me to read it again?” Mr. Emerson asked, as the crowd shouted emphatically, “No!”

The proposal the town meeting approved is for tax incremental financing for a loan in the amount of $3.5 million plus interest from the Connecticut Development Authority to Georgetown Land Development Company to remediate North Main Street, according to the notice.

The vote authorizes the Boards of Selectmen and Finance to “ascertain compliance” with several conditions before entering into any agreements with the state agency or GLDC for tax incremental financing.

The conditions include that the redevelopment company meet all requirements set forth by the state development authority or its subsidiaries, that GLDC provide documentation of the financing needed to complete remediation on the North Main Street roadway infrastructure improvements leading to the new train station, and the full commercial phase of the project, and to authorize First Selectman Natalie Ketcham to do any legal due diligence required to accomplish these conditions.

Comments ranged from whether GLDC has provided evidence it can’t get a loan in this market, to if the motion even makes sense — all leading back to questions about how tax incremental financing works.

What is TIF?

Tax incremental financing (TIF) is a concept provided through the Connecticut Development Authority by which GLDC can get a loan to complete the infrastructure work. The increased site value from that work creates higher real estate assessments, which, in turn, increase tax revenues for the town — revenues the town may gain sooner than if the project stalled due to lack of funding.

The proposal pertains only to the commercial properties on the Gilbert & Bennett site. The town will still collect tax revenues earned in full from the residential properties on the site and it will earn revenues associated with building permit fees.

Under tax incremental financing, the town always collects what GLDC pays now in commercial property taxes, but the town would direct a portion of the tax revenue collected above that base amount in a payment to the state. After making a payment to the state each year, over a negotiated period of time, the town keeps the remaining revenue that comes in.

At full build-out, it was projected by GLDC that the site would generate an estimated $5.4 million in total annual taxes for the town — that is, commercial and residential property taxes. One-third of that total is commercial property taxes.

Questions and answers

Lee Hoffman of Pullman & Comley LLC, hired by the town, explained that agencies such as the Connecticut Development Authority were created because of the problems in redeveloping contaminated, or brownfields, sites. It’s an “inventive financing” tool that comes from the Midwest, he said, where a lot of properties such as the Gilbert & Bennett site exist.

“Until you get these sites to a point where they’re clean enough to reuse, there isn’t always the money to get there,” Mr. Hoffman said.

This financing mechanism approved by the town is for remediation of North Main Street, a road that the town gave to Georgetown Land Development Company.

Mr. Hoffman explained that the state development authority is “on the hook” if the project fails. “The state will never make the town worse off than it was before the program,” he said.

Asked whether GLDC has proven it can’t get financing, Bill Alvarez, finance board chairman, said the company can’t with all five major investment banks having failed.

Another question pertained to whether there was reason to believe the state could get a better bond rate than GLDC could.

“It’s a totally different market,” Mr. Hoffman said. The CDA has its own bonding authority, he said, and issues tax-free bonds.

One man asked why, when the project started, GLDC said it would not need any additional funding from the town.

Ms. Ketcham said an unexpected additional cost arose when the town abandoned North Main Street and it became the property of GLDC. “The [state Department of Environmental Protection], as it turns out, has different levels of acceptable standards. Now that it’s a road leading to a residential complex, the DEP has required unplanned remediation resulting form the town abandoning the road,” she said.

Later in her closing statement, Ms. Ketcham described why the Board of Selectmen approved the proposal. The board approved it, she said, “not because we don’t fully value any tax dollar that flows from any source,” but because “the best way to reduce the tax burden is to increase revenues from the town’s commercial tax base.”

“First this project was a victim of state bureaucratic delay and now it’s a victim of the trouble economy,” Ms. Ketcham said. “Our participation sends a positive signal to potential investors.”

She added that the town’s two state representatives, Jason Bartlett (D) and John Stripp (R), as well as newly elected Senator Toni Boucher, support the project.

As for the interest rate in this loan, Mr. Alvarez said it would most likely range between 5% and 6%, but, he added, the town won’t know specifically until the agreement is negotiated. The town may accelerate payments, he said.

Acknowledging that the state development authority has loan programs aside from tax incremental financing, Mr. Alvarez said GLDC has already applied for those loans to make up for a shortfall from the investment banks failing.

In his presentation, Mr. Alvarez told the public that the proposal is “not a bailout, rather an investment.” The proposal, he said, “is so the town can benefit from increased tax revenue.”

Rosalind Kopfstein, Commission on Aging chairman, said her group strongly supports the tax proposal. She said the project will “improve the quality of life for seniors” in Redding. The finance board also has a unique opportunity to guarantee the responsible growth of the area, she added.

Stephen Soler, Georgetown Land Development Company president, “has met the needs of the town — no one forced him to do it,” Ms. Kopfstein said. Speaking of the some 40 affordable senior housing units proposed by GLDC, Ms. Kopfstein said, “We’ve been championing this for years with no success.”

Rob Dean, Planning Commission vice chairman, reiterated the commission’s support for the tax proposal. He read from a report that described how the Gilbert & Bennett site would become a prime target for a large-scale affordable housing project that would crowd out the kinds of commercial uses Redding needs for its tax base. The report also cited the potential burden the school system.

“How many of you were living here in 1986?” Mr. Dean asked. He was referring to the year Gilbert & Bennett was still operating. The tax base, then, he said “was a different animal.”

Mr. Hoffman told the crowd that if the state does its due diligence, an agreement could be negotiated within 30 days. The Board of Selectmen, on recommendation from the Board of Finance, will then formerly approve the agreement.