The Common Council will vote at its meeting Tuesday (7PM) on a resolution granting fee waivers and property tax relief to a developer, Waterhouse Development Company, for a proposed luxury apartment project on River Road. The resolution was endorsed by the Economic Development Commission at its August meeting (The Hartford Courant covered the EDC meeting HERE). The proposed subsidy is between $3M and $4M.
The resolution, if passed, would provide two forms of city subsidy to the Waterhouse Company: an immediate reduction in construction costs of perhaps $500,000, and 7 year tax subsidy of at least $3.2M.
Construction Cost Subsidies.
The resolution would place a cap of $450,000 on the sum of the building permit and water and sewer hook up fees.
The standard building permit fee is $14.26 per $1000 of construction cost, so without the cap, the fee to Waterhouse for a $36M project would be $514,361.
The water and sewer connection fees are somewhat more complicated to calculate, Joe Fazzino in the Water and Sewer Department wrote, "The connection fees for apartments depend on many factors like water service size, meter size, building square footage and the lot acreage." However, he noted that condominium connection fees could amount to $1275 per unit for water and $1750 per unit for sewer; if these were to be applied to 200 units, the total connection fee would amount to over $600,000.
The resolution notes that the authority to adjust water and sewer connection fees resides only with the Water Pollution Control Authority (WPCA). WPCA has not yet granted a subsidy to Waterhouse on these connection fees.
Thus, the Council will be voting on whether to provide a substantial subsidy towards construction costs, depending on the calculation of the water and sewer connection fees this portion of the subsidy might be in excess of $600,000.
The analysis of "Fiscal Impact" provided in the resolution estimates that the apartment complex will have an assessed value of $20M. This would generate $538,000 in property taxes at this year's rate. The resolution calls for the Waterhouse Company to pay reduced taxes for 7 years after the apartment complex receives its certificate of occupancy. In the first 4 years after occupancy, assuming no change in the tax rate or the assessed value, Waterhouse would pay taxes of $22,000, it would rise to $107,600, $161,400, and $215,200 in years 5, 6 and 7.
The total tax subsidy for Waterhouse would be $3.2M using $20M as the assumption for the assessed value of an apartment complex costing $36M to build. If either the assessed value or the tax rate rises in the first 7 years after occupancy, this subsidy would be larger.
Benefits To The City
The resolution lists as a benefit to the City only the presence of "high end, luxury housing." It does not include the donation of a very narrow "land strip at the waters edge", which is mentioned in the draft minutes of EDC.
A Commentary On Nomenclature And Numbers
The resolution does not literally call for a "subsidy" to Waterhouse Corporation, it instead authorizes a "property tax fixing/abatement agreement" with Waterhouse.
Every such resolution includes a fiscal analysis (for example, for the ordinance granting property tax relief to senior citizens, the fiscal analysis indicated a $50,000 cost to the City). The analysis for the Waterhouse resolution suggests that it would begin a process that will generate a $2.6M increase in payments to the city over a period of 10 years. This analysis assumes that the current owner of the property, which houses a defunct corrugated products plant, will do nothing with the property for 10 years unless this resolution is passed.
Thus, the fiscal impact of this resolution depends on what would happen in the next 10 years without its passage. If the Waterhouse Corporation (or anybody else) would develop this land as proposed anyways, then if the resolution is voted down it would save the city at least $3.2M. On the other hand, if the land would remain the site of an abandoned cardboard factory without this $3.2M incentive, then if the resolution is voted down the city would forgo $2.6M over the next 10 years.