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Norwalk Council members consider tax incentives for developers

A fence goes up June 27 on Quincy Street, signifying coming demolition of the Loehman’s Plaza to make way for the Waypointe South Block development, also called Pinnacle. Developer Paxton Kinol told the Zoning Commission last week that, “We need some help on taxes.”

Updated, 11:17 p.m. July 17: PDF added. 

NORWALK, Conn. – Buildings are going up, others are planned, but if you look at the big picture development has been stagnant, Common Council Planning Committee Chairman John Kydes (D-District C) said.

“There’s so much left on the table and I don’t see anyone stepping up to do anything at this point,” Kydes said in June, expressing a willingness to discuss a possible Enterprise Zone, which would offer tax incentives to developers.

“There is a project attempting to try to advance… The equity investor is saying return is insufficient,” Redevelopment Agency Executive Director Tim Sheehan said on June 12, after being asked by Council member Tom Livingston (D-District E) what need was being addressed by considering tax incentives.

While Sheehan didn’t identify the developer was seeking tax breaks, here’s a spoiler alert: it appears that Paxton Kinol of Belpointe Capital is seeking tax incentives to move ahead with the Waypointe South Block.

The Planning Committee moved ahead last week with considering tax incentives, forming a three-member sub-committee to study the idea and, if it develops a concept it wants to advance, bring it back to the full committee.

“I think the process is a more engaged process than having something brought to you and debating that,” Redevelopment Agency Executive Director Tim Sheehan said on July 6.

Council members on June 12 queried Economic Development Director Elizabeth Stocker about her concept for a Wall Street/West Avenue Enterprise Zone, outlined in a memo offering guidelines“for discussion and approval.”

Incentives would be discretionary, with each agreement approved by the Council, Stocker’s memo said. A minimum investment of $15 million would be required and there might be a cap of $82 million.

Improvements would include at least one of the following uses:

  1. Mixed use, provided a minimum of 25 percent of the project is commercial use
  2. Office
  3. Retail
  4. Structured multilevel parking, in connection with a mass transit system
  5. Information technology
  6. Recreation facilities
  7. Transportation facilities

The increased assessment would be fixed for up to seven years, with a phased in formula, with the options negotiated with the developer.
Her suggestions:

  • First year, the increase would be 100 percent deferred
  • Second year, the increase would be 100 percent deferred
  • Third year, the increase would be 50 percent deferred
  • Fourth year, the increase would be 40 percent deferred
  • Fifth year, the increase would be 30 percent deferred
  • Sixth year, the increase would be 20 percent deferred
  • Seventh year, the increase would be 10 percent deferred

Stocker’s memo suggested that incentives only be considered for properties on:

  1. West Avenue from the intersection with Connecticut Avenue, north to and including Belden Avenue
  2. Wall Street from Belden Avenue to the former South Smith Street
  3. Cross Street
  4. North Avenue
  5. Main Street between Wall Street and North Avenue

 

Some Council members expressed an interest in case-by-case incentives and others objected to possible favoritism.

“I get a little nervous,” said Council member Rich Bonenfant (R-At Large), who is not a Committee member. “…I hate to see 10 years down the road, when none of the current players are here, that those that donate to political campaigns are going to get the inside track on getting what they want, and they’re going to get a more favorable deal than somebody else. I don’t want to see people betting on racehorses with their money as developers and candidates making promises to developers, ‘I’ll take care of you in that zone when you are done.’ It’s going to get ugly in the future.”

“I hear what you’re saying,” Kydes said, going on to describe the pockets of development but the stagnation overall.

“I don’t disagree with Mr. Bonenfant,” Council member Doug Hempstead (R-At Large) said. “…We don’t want to see favoritism.”

Hempstead’s main quarrel with the concept was a “cart before the horse” issue, as the Council recently authorized a grant application to fund a Transit Oriented Design study for East Avenue and the Wall Street area, with a particular focus on a possible Wall Street train station.

“Why are we thinking about this before the TOD report comes in that is supposed to tell you what you want?” Hempstead said.

Investors want a 6 percent return and they’re not getting it now because the housing market is flooded, Hempstead said.

“We are kowtowing to people who are making a profit, they’re just not making enough profit and we are taking away more of what we need in the first place, which is tax revenue. We just passed a few of these…Why not wait for TOD plan?” he asked.

Livingston said he agreed, and asked about the reasoning behind the list Stocker had prepared.

“Should we wait for a plan? I don’t know if that’s the answer but from this, I can’t tell, I have no basis for knowing these are things I should support,” Livingston said.

“That’s what’s statutorily allowed in terms of the uses,” Stocker said.

Sheehan explained that the specifics were up to the Council.

A 100 percent deferral of the tax increase “is a crazy place to start,” Council member Shannon O’Toole Giandurco (R-District D) said, asking, “Doesn’t negotiating by project open us up to all kinds of liability?”

Major developments already get handled on a case-by-case basis with incentives handled in public through a Land Disposition Agreement (LDA) process, Sheehan said.

“It can be case by case where there is specific need for project to come to fruition,” Stocker said later.

Hempstead said he’d like to know if there were other possibilities, like incubators, that could work in a zone rather than restaurants and apartments, and a TOD study might offer suggestions.

“Right now, Norwalk is exciting to developers,” Council President John Igneri (D-District E) said. “If we continue to wait, in three years things may change. You can put all the incentives you want in there, they may not want to come in to the area. Incentives now, when there’s interest in developing those areas, we should do that.”

The Committee on July 6 talked briefly on the topic, with Sheehan saying it will take a lot of time to advance the idea. Narrowing it down to a few Council members would move it along, he said.

“Quite frankly, I think what was brought to you was something that was from a staff level was fully formulated and you weren’t given an opportunity to have input into that and ultimately have structuring that you might be supportive of,” Sheehan said. “… This can be somewhat time intensive.”

On Sunday, Mayor Harry Rilling said some developers expect tax incentives because other communities do it.

“Other cities do it,” Rilling said. “There’s a state statute that allows us to do certain tax abatements but we want to make sure we do it fairly and squarely so that we don’t give preferential treatment to anybody, that if it meets certain criteria then we’ll consider it for tax abatement.”

Sheehan on June 12 mentioned a “project attempting to try in advance” where the “equity investor is saying return is insufficient.”

He didn’t say who that was, but Hempstead mentioned a developer who spoke recently in favor of The SoNo Collection.

Kinol, developer of the Waypointe project, spoke at the recent public hearings about the mall, promising that his South Block was about to start construction.

“It would need some level of subsidy so return is adequate to what the market is looking for,” Sheehan said, at the June 12 meeting. “That is a fundamental problem with a lot of projects. We have looked at what has advanced north of 95 is great but we can clearly see there are pockets that need to have additional development come into them and it’s just not an automatic that some of these mixed-use projects are willing to be able to sustain themselves economically in terms of the equity partners coming in and saying, ‘Yes, the returns are there.’ Without the equity partners coming in there is no project.”

Kinol mentioned this to the Zoning Commission last week.

“We need some help on taxes, we are working with the city right now,” Kinol said. “But if that happened, we do have an investor lined up to start in October. This is why we are pushing to get approval … and start in October. You will see in the next two weeks the building start to come down.”

On Sunday, Mayor Harry Rilling said it was a little premature to say what Kinol is looking for.

“He’s indicated he would need some assistance of some sort with the Loehman’s Plaza area,” Rilling said. “I wouldn’t want to get into specifics because I don’t think he’s articulated exactly what he needs but he would certainly be open to having something. Everything is under consideration, so that is what the committee is doing. They’re looking at what is the best way that we incentivize people to develop the areas of Norwalk that we feel are ripe for development but people need some sort of tax assistance, or some skin in the game from the community.”

“This initiative by the Planning Committee wasn’t the result of any developers request,” Kydes said in a Sunday email. “We want to explore our options and hopefully spark development in areas that are currently producing very little tax revenue for the city.”

Resistance continues; Bonenfant, in a Sunday email, said:

“I’m not in favor of city sponsored Enterprise Zones, especially for residential units. The explosion of apartments, traffic congestion, and high taxes are frequent issues which come up in conversations with constituents. An Enterprise Zone is a permanent financial advantage that stays with the land. Future development expansions or rebuilding from scratch would qualify for another seven years of subsidies on those changes. Meanwhile school populations increase, public safety services are needed and wastewater treatment challenges could affect our beaches and shellfish industries.

“They are asking the rest of us taxpayers to pay our share and theirs too of what it cost to run a city.”

Enterprise Zone 17-0612 memo

26 comments

Non partisan July 17, 2017 at 7:14 am

Give developers a tax break by reducing the % of workforce/ affordable units required- this would increase their rent roll while decreasing the tax subsidy paid by the rest of the taxpayers

Than reduce the personal property tax on on corporations
This will reduce the cost of having your buisiness in Norwalk and increase the pool of companies willing to locate here- which would lead to higher rent

Then- enforce zoning and the scourge of illegal apartments and the number of students in our public schools.

Declare all out war in urban blight- and increase property values

Be more financially conservative- and begin a downward trend in real estate taxes.

Do all of this and you will see a building boom- without subsidies.

Josh Ornstein July 17, 2017 at 7:20 am

This is a giveaway to specific developers in return for campaign donations to Rilling, in my opinion. 20 years ago, we needed apartments. Now, the last thing we need is apartments. Seems a few of them get it, but likely it gets rubber stamped anyway.

Bill Nightingale, Jr July 17, 2017 at 8:16 am

You have to be kidding. We are going to let the Redevelopment Agency fall for this developer line again? Kydes and RDA (Sheehan) are totally smitten by developers trying to take advantage of taxpayers in Norwalk. We don’t need development that is not economically viable. STOP subsidizing development in Norwalk. Please. Abolish the totally naïve and incompetent RDA.

Bill Nightingale, Jr July 17, 2017 at 8:38 am

A I pointed out many times regarding the Enterprise Zone for the mall; once you subsidize one business you will have to subsidize them all. Any other business / developer will come asking for the same – as is now happening. It is a viscous cycle that unfortunately the Redevelopment Agency has already triggered in Norwalk.

I suspect that most Norwalkers do not care for a mall if it does not generate fair property tax. I also believe that most residents do not care for cheap apartment complexes that do not generate fair property tax. I certainly do not.

Please stop this madness of tax subsidies. It will spin out beyond control if not.

Tony P July 17, 2017 at 9:09 am

So, he purchased the land and submitted his plans knowing that he wasn’t in an EZ, why is there an expectation that he should get one now? So, taxpayers are subsidizing the development, then we are subsidizing some (if not most) of the renters who will be living there (via section 8, workforce rates etc), on top of continuing to fund schools, police, fire, etc. Insanity

Adolph Neaderland July 17, 2017 at 10:35 am

Appears to be a total lack of administrative coordination!

Here we are, in the process of creating a mandated 2018 Norwalk “Plan for Conservation and Development”,(POCD), a process of determining what the people want, which our independent commissions appear to completely ignore!

Instead of cow towing to developers who insist on a profitable return, our commissioners should be concerned with the concerns of the city’s stakeholders, who are in the process of pulling together their views.

This rush to appease developers is a guaranteed long term, irreversible disaster for this city.

Major changes to the culture of the city should be put to a referendum, rather than commissions.

Debora Goldstein July 17, 2017 at 11:04 am

Oh, where to begin…
How about the fact that Norwalk, once again, is negotiating against itself?

“Right now, Norwalk is exciting to developers,” (Igneri)
“…I don’t see anyone stepping up to do anything at this point,” (Kydes)

Or that, once again, Norwalk considers it an appropriate ask that we subsidize projects to a profitability level that the developer/owner deems appropriate?

“The equity investor is saying return is insufficient,” (Sheehan)
“Investors want a 6 percent return and they’re not getting it…We are kowtowing to people who are making a profit, they’re just not making enough profit” (Hempstead)
“It would need some level of subsidy so return is adequate to what the market is looking for,” (Sheehan, again)
“We need some help on taxes, we are working with the city right now,” (Kinol, the developer)
“…people need some sort of tax assistance, or some skin in the game from the community.” (Mayor Rilling)

Or, how about the notion that a negative return to the city is better than a small positive one?

“We want to explore our options and hopefully spark development in areas that are currently producing very little tax revenue for the city.” (Kydes)
“First year…Second year, the increase would be 100 percent deferred”

Not a single councilmember asked Mr. Kinol about his inability to populate the existing projects with tenants. Nor, why Mr. Kinol would initiate zoning approval on a project that he knows he cannot get financing for without city subsidies https://www.nancyonnorwalk.com/2016/02/score-two-pointes-for-norwalk-developer/

Mr. Kinol is getting plenty of help from the city already:

In Feb of 2016 Zoning amended regulations to save the Waypointe development from an error in the construction of their parking garage in which 202 of the 853 parking spaces are short, she said, making the facility 76 percent compliant. The revision to the Central Business Design District zoning regulations, which apply only to the Design District park, which is only Waypointe, is to reduce the length of no more than 25 percent of the parking spaces. Waypointe needs its certificate of occupancy, Flaherty told the Commission. “We do need you, if you are so willing, to act tonight,” Flaherty said. (Craig Flaherty was the attorney for Waypointe)

Isabelle Hargrove July 17, 2017 at 11:10 am

We are basically 3 months away from our next municipal elections. Norwalkers should demand that candidates articulate their vision for our city and their specific views on developments, taxes & tax-incentives, grand-list stagnation, quality of life, zoning code and enforcement, relationship to DOT and the State, charter revision, municipal-government structure, and so on. Too many people are getting elected with a wink, a smile and a vague promise to make it all better.

Andrew July 17, 2017 at 11:10 am

I would love to see this much conversation going into how to reduce property taxes for the single family property owners in the city.

Debora Goldstein July 17, 2017 at 11:13 am

Then there’s the timing/money nexus:

From Rilling’s April campaign finance report:
$1,000 from Paxton Kinol of Belpointe Capital, developer of the Waypointe apartments and the neighboring Berkeley and Quincy Lofts
From Rilling’s July campaign finance report:
$1,000 Brandon Lacoff of Greenwich, Belpointe Capital managing director
“This is why we are pushing to get approval … and start in October.” (Kinol, the developer)

But Mr Kydes suggests this was not initiated by the developer: “This initiative by the Planning Committee wasn’t the result of any developers request,”

So, which is it? Is the developer pushing? Or is this just a happy coincidence for him that the stars will align before November’s election?

carol July 17, 2017 at 11:21 am

ENOUGH-why just say you don’t have to pay taxes and we will give you the city.
Lets think of the residents and stop this wave of money to developers.

Debora Goldstein July 17, 2017 at 11:22 am

Lastly, there’s the fact that the Rilling administration’s style of informal governance is now fully infecting the council (the people’s body).

“The Planning Committee moved ahead last week with considering tax incentives, forming a three-member sub-committee to study the idea and, if it develops a concept it wants to advance, bring it back to the full committee.”

Who is on this sub-committee? Where are its agendas? When does it meet so that the public may observe their work? As a sub-committee of the planning committee,will it also continue with the fatal flaw of being staffed by redevelopment, who has jurisdiction for planning in only some parts of the City?

There are now TWO TOD planning studies going on–one in South Norwalk and one in East Norwalk. Can we pause this long enough (as Mr. Hempstead has so wisely suggested) to let the Committee get real data as to what impacts are going to be in ALL of Norwalk from these types of projects before committing the citizens to the consequences?

I know when I moved to Norwalk, I thought my real estate investment was the home I bought. Now I realize, I am an unwilling investor in real estate all over the City via tax dollars.

Isabelle Hargrove July 17, 2017 at 11:30 am

Mayor Rilling’s donor list makes me vomit. There are no other words for it.

All this cash will certainly get him re-elected, but at what price to our city?

How long can we sustain a model where fewer and fewer home owners with stagnant property values face rising tax bills to support an ever growing city budget to pay for the infrastructure and maintenance needs of more and more renters living in properties paying no taxes?

Bill Nightingale, Jr July 17, 2017 at 11:49 am

Debora Goldstein: So well said – negotiating against ourselves. Worst policy ever. The sucker in the room and then some.

Redevelopment Agency has always worked that way. Common Council should know better.

Debora Goldstein July 17, 2017 at 12:30 pm

Tony,

It’d be funny if it weren’t terrifying. I don’t have the min $15 million to invest (apparently Kinol doesn’t either).

If I did, I’d start a business that would generate jobs.

Sarah Mann July 17, 2017 at 1:26 pm

As a homeowner and taxpayer I could not believe that I am possibly going to be asked to subsidize an apartment building that is going to offer a percentage of affordable housing that I will also be subsidizing. At some point this madness has to stop.

I don’t care if developers donate to the mayor’s campaign. That is their prerogative however, to then ask for tax breaks is truly beyond the pale.

We have an election coming up and I can only hope that the citizens of our fair city are given a choice this year of credible candidates that have a solid platform and are willing to do the work that is needed to get this city on track. Ideally these candidates will be familiar with publications that do not begin with the word Norwalk. Maybe, maybe not only will they know where to buy the Wall St. Journal they will read it and understand that many of the articles have local implications. Oh well, one can wish.

Donna July 17, 2017 at 2:05 pm

Steve Kleppin, Director of Planning & Zoning, along with paid consultant Stantec, are working on a revised Master Plan (POCD). Why does it seem that Economic Development Director’s recommendations do not take into account the current POCD, nor do they allow room for what may come of the Transit Oriented Design (TOD) Design Study for Wall Street and East Ave? Shouldn’t these conversations about offering developers tax incentives use the current POCD as an their guide? A subcommittee of unidentified CC members meeting in secret to discuss incentives to developers, so developers can increase their profit margins, gives me heartburn, especially since I just paid my property tax bill and it’s up 30% from previous years. When will the CC incent me to stay in Norwalk?

Michael McGuire July 17, 2017 at 2:06 pm

Re-activate the Wall Street Train Station, then at least you won’t have to worry about Enterprise Zones for the Wall-Main area.

That saves a lot of money. It also makes a lot of money with the boost to the Grand List from the existing buildings – no need for new development.

Owners will finally have rents high enough to adequately take care of their buildings.

Nancy Chapman July 17, 2017 at 3:37 pm

Clarification: Workforce housing units are not subsidized. Renters pay a reduced rate but there are no tax dollars paid to the developer to make up the rent deficit. These rules apply to new developments of apartment buildings that have more than (I believe) 12 units. It’s up to the developer to decide whether or not the development will be profitable, knowing that 10 percent of the units will be rented at a reduced rate based on the median income.
Full disclosure: I have workforce housing.

Rick July 17, 2017 at 5:31 pm

People mention influx in taxing our cities services,schools,fire police and all other departments are now preparing for the new mall correct?

City shouldn’t need much after it ramps up services,last few weeks out of town ambulances have been used a lot Norwalk hospital is busy or under staffed with their ambulances. Plesase note the increase is substantial.

But we have a new mall coming its so exciting the taxes on that alone will cover everything we need ,yet another GGP mall built in recent years turned out to be costly for one community but it was a destination mall not a local one with high end stores and it brought with it this.

Shouldn’t the counsel be working on increasing the services for the taxpayers not getting commercial discounts? At least pointing out new construction is biting into some departments .

This new deal everyone is talking about the pressure has been put on to act if not mistaken the plaza on west ave ready to take down has been condemned labeled a fire trap by the fire dept and have orders to fight a fire from the outside building is collapsing .Walls are buckling roof is caving in .

Back to the crime increase of the mall is Norwalk ready? Taxpayers have been told what we need to increase protection I must of missed that city hall banter.

http://wjla.com/news/local/statistics-growing-crime-in-virginias-tysons-corner-area-since-silver-line-opened

Non partisan July 17, 2017 at 7:32 pm

@ Nancy

The subsidy to renters receiving workforce housing are not apparent- but are very real

Here is how it works
The real estate tax on a multi family is based on what the building is worth if the owner was to sell the building

I’ll set up a hypothetical Now- let’s compare 2 identical buildings but One with 10% work fair, one with zero.

The building with no workfair would make x dollars. The building with work fair would make less.

Therefore the building with work fair is worth less ( as a buisiness) than the same building- full market only.

As a part of real estate assesment every landlord has to submit their books to the city assessor. This is done so they pay real estate taxes roughly equal to 1.75% of market value.

In recap- if the building with workfair is worth less at resale that an identical one without- the workfair building would pay less in real estate taxes- but use the same services ( ceteris Paribus) the city sets the mill rate based on the grand list- and the approved budget- and if you have enough workfair units spread out across the city the subsidy is transferred.

Its really an ingenious tool used by the progressive left to make people think that their policies are free. But they are not.

If you think I’m incorrect- please confirm this with the assessors office.

Sue Haynie July 18, 2017 at 8:52 am

Agree with Michael McQuire, reactivate the Wall Street Train Station, that will create a whole new dynamic.

@Nancy, agree with @non partisan. Nothing’s free. A property with less profitability has less value, less value means less tax dollars.

Al Bore July 18, 2017 at 2:06 pm

Is Mr. Conroy awake? I know nothing about what his plans for Norwalk are and what he wants to do as mayor. Please help me have a choice this go around, maybe Mr.Conroy is the wrong choice and the party needs someone else to step forward. Too many apartments and too much development in a city that has already to much traffic. Open space so we can breathe, see the trees, and sky not apartment buildings.

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NancyOnNorwwalk.com was conceived as the place to go for Norwalk residents to get the real, unvarnished story about what is going on in and around their city. NancyOnNorwalk does not intend to be a print newspaper online; rather, it exists to pull the curtain back and shine a spotlight on how Norwalk is run and what is happening regarding issues that have an impact on taxpayers’ pocketbooks and safety. As an independent site, NancyOnNorwalk’s first and only allegiance is to the reader.

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Nancy came to Norwalk in September 2010 and, after reporting on Norwalk for two years for another company, resigned to begin Nancy On Norwalk so she engage in journalism the way it was meant to be done. She is married to career journalist Mark Chapman, has a son, Eric (the artist and web designer who built this website), and two cats – a middle-aged lady and a young hottie who are learning how to peacefully co-exist.