Updated, 6:11 a.m., 5:56 a.m.: Copy edits
NORWALK, Conn. — Tim Sheehan has responded to critics of the proposal to create an Innovation District in Norwalk Center.
The proposed Innovation District would enable tax incentives of up to $15 million over five years for development in Central Norwalk.
Sheehan, Redevelopment Agency Executive Director, on Tuesday issued a 2,906-word memo responding to comments made by members of the public at an Aug. 21 Ordinance Committee meeting. Public comments at the meeting were overwhelmingly against the proposal.
Common Council President John Kydes (D-District C) on Wednesday drew NancyOnNorwalk’s attention to Sheehan’s comments, which are published on the City’s website, in the information packet for a public hearing scheduled for Tuesday Sept. 4.
Sheehan on Aug. 21 said he would respond to the passionate comments from the public.
Critics expressed concern about the plan encouraging too many apartments and too many school children. Sheehan’s response says that the Waypointe development, a development along West Avenue, is more than 92 percent occupied but has generated only 25 school children with its 662 apartments. Even with the additional occupants that Waypointe brings to Norwalk Center, the Census Tract still falls far short of the urban density needed to support its businesses, Sheehan said.
You may ask, “Why would Norwalk consider local tax incentives for development when the State is in a budget crisis?”
Sheehan’s reply summarized the state of Connecticut’s economy and noted that municipalities aren’t just slashing their budgets; they are also seeking to increase revenue, especially in the area of economic development.
“While many may dismiss the need to be mindful of commercial real estate investor perceptions of the local market and associated risks, it is a fact that such investors and developers have the ability to drive local Grand List growth,” Sheehan wrote. “…Investment complacency, as the state has witnessed, comes with its own costs.”
Why on earth would Norwalk want to add more multi-family housing to the area selected for an Innovation District?
The Wall Street-West Avenue area is Norwalk’s second least populated Census Tract, Sheehan wrote, repeating a statement he made on Aug 21, but going further: “A business district of 100,000 square feet requires a market area population of approximately 30,000 people within one to three miles. By way of comparison the Innovation District geography based on the census has a total population of 1,822.”
Several speakers on Aug. 21 objected to the Council considering creating an Innovation District before the new Plan of Conservation and Development (POCD) is complete. Adolph Neaderland said the Innovation District doesn’t seem to acknowledge the POCD effort at all.
The POCD survey represents the opinion of the residents who have responded, a small group not representative of Norwalk’s population, Sheehan wrote.
“The POCD Survey was a result of an online survey of approximately 350 Norwalk Residents. Of those respondents, over 60% of individuals were over the age of 50, over 75% were White Non-Hispanic, and over 60% of their households make over $100,000 per year,” Sheehan wrote. “Additionally, only 51 of the respondents lived in the city’s urban corridor. A majority (over 75%) of the respondents also live in single family homes. … The survey cited does not accurately represent the voices of the entire Norwalk community but rather a small and rather homogeneous subset thereof.”
Neaderland also asked why Norwalk would move ahead with an Innovation District when it doesn’t have an Economic and Community Development Director.
The initiative is under the purview of the Common Council, Sheehan wrote, pointing out that the new Economic and Community Development Director will report to Mayor Harry Rilling, who is obviously supportive of the Innovation District.
Some have complained that the Common Council would be responsible for authorizing the tax benefits, with Sheehan’s Redevelopment Agency as an advisor.
Applicants seeking to invest $5 million in a development, which would result in large tax breaks, would pay for an economic impact study to be completed by the Connecticut Economic Resource Center (CERC), Sheehan wrote. The Redevelopment Agency would recommend denying a request from a developer who doesn’t really need the tax break or plans a project that does not produce a net positive economic impact for the city, he added.
So what about just streamlining the permitting process to encourage development?
“Expediting the time between permit and construction does not itself outweigh the project related advantage of a proposed tax agreement. Tax agreements should only be employed when a project can fully evidence that but for the tax agreement the project would not be economically feasible,” Sheehan wrote.
What are other communities doing to inspire development?
Stamford has three Tax Increment Financing Districts (TIFs) and is claiming success with them, Sheehan wrote.
“Bridgeport and the state Bond Commission used TIF financing for the site development costs for the Steel Point project, home of the Bass Pro Shop, with $22 Million in TIF bonding issued by the state being paid by future sales tax revenue,” Sheehan wrote. “Bridgeport also has Enterprise Zone benefits, a Bridgeport Urban Enterprise Zone Program, and a Tax Incentive Development Program that specifically uses CGS 12-656… The proposed Tax Agreement Ordinance does NOT advance the use of TIF. But it is important that the Common Council understand there are a host of municipalities across the state that are using tax revenue in a variety of different ways to advance economic development and to spur new and stabilized tax revenue over the long term.”
The Aug. 21 ordinance committee meeting where members of the public expressed their concerns was originally announced as a public hearing. The public hearing portion of the meeting was rescheduled to 7 p.m. Tuesday (Sept. 4) in City Hall room A300. The proposed City reorganization will also be a topic.
Here are Sheehan’s comments in their entirety:
1. Why consider local tax incentives for development when the state is in a budget crisis?
“The State of Connecticut has amassed nearly $80 billion in long-term obligations. Its economic recovery since the recession has lagged that of the nation, job growth remains among the lowest in the nation and only modest growth is projected for the foreseeable future. The three major credit rating agencies all downgraded the state, citing weak revenues. Further, the continuing budget fights and tax increases coming from the statehouse has driven down business and investment confidence in Connecticut. The state’s fiscal condition has caused most municipalities to reduce expenses and contain expenditure growth. Simultaneously, municipalities have redoubled their efforts in trying to increase local revenues. These efforts have been particularly evident in the area of economic development, where incentives have been designed locally to attract businesses and new growth, yielding new municipal tax revenues over the long term (Further explained in question 16).
“For more than 50 years, people and businesses have favored suburban environments, but now the pendulum has swung back to activated urban environments. Cities are growing faster than their surrounding suburbs, but urban environments require support and investment to overcome the years of disinvestment in their amenities, infrastructure and building stock. Governor Malloy said, ‘At a time when other states were reinvesting in cities, Connecticut was not, and certainly the state itself was not. Now, when millennials and people 50-plus want to live in urban environments, our urban environments are not up to snuff’. While many may dismiss the need to be mindful of commercial real estate investor perceptions of the local market and associated risks, it is a fact that such investors and developers have the ability to drive local Grand List growth. In considering this ordinance the Common Council can make one of two decisions; either close the door on incentivizing economic development by using a percentage of new tax revenue the city realized because of a project or advance cautious consideration of tax incentives to strengthen the city’s urban environment with jobs, housing, urban amenities and infrastructure. Investment complacency, as the state has witnessed, comes with its own costs.”
2. If the City’s land use entitlement process were more streamlined would that not improve Norwalk’s ability to attract broader development opportunities and potentially negate the need for the proposed development tax relief?
“Time is money in every business endeavor. It only takes a few delays, inter-departmental conflict, agreement modifications and or a contentious commission to turn the local entitlement process into a nightmare. These delays represent an especially difficult challenge for affordable housing and smaller scale development projects, fundamentally affecting who can afford to purchase/rent a home and who can expand their business. As a result, fewer affordable housing units are built and many smaller projects are curtailed resulting in lost tax revenue.
“There can be no argument that the commissions with land use jurisdiction and their staff should be seeking out entitlement efficiencies. Streamlining that process should be an ongoing public policy. Expediting the time between permit and construction does not itself outweigh the project related advantage of a proposed tax agreement. Tax agreements should only be employed when a project can fully evidence that but for the tax agreement the project would not be economically feasible.
3. Why can’t the Innovation District Tax Incentive Program be reviewed in the context of the POCD which is currently being advanced by Planning and Zoning?
“It can and it has been. The Planning and Zoning Director reviewed with Stantec, the POCD consultants, the ordinance and the proposed incentive structure. Stantec is supportive of the ordinance allowing for potential tax agreements. They remain concerned, however, that it is not applied to a project as of right.”
4. Can the ordinance be modified to include conditions such as:
- Apply once every five years
- Agree not to seek zoning modifications
“The Common Council can seek to tighten or qualify any of the CGS 12-65 B statutory provisions of the Ordinance. They cannot, however, exceed any of the referenced thresholds or modify the referenced terms to be greater than what is articulated in the enabling statute.”
5. Why does the Innovation District geography need more multi-family housing?
“The Wall Street-West Avenue area is the second least populated Census Tract behind the Silvermine area. Despite recent growth associated with the new development in the area it is still one of the least populated Census Tracts in Norwalk. Urban areas are meant to be dense, walkable, and highly populated areas. Without additional housing, Norwalk’s urban geography will fail to meet the population levels necessary to economically sustain an active urban environment. The Urban Land Institute provides guidance regarding successful local neighborhood business districts and the population required to sustain them. A business district of 100,000 square feet requires a market area population of approximately 30,000 people within one to three miles. By way of comparison the Innovation District geography based on the census has a total population of 1,822.
“Alternatively, the allocation of 15 square feet of neighborhood business space per household suggests that the existing neighborhood population can only support neighborhood business district uses totaling less than 20,000 square feet.”
6. While the Innovation District may be a useful tool, the tool is only as good as those that administer it. What will be the basis of the Common Council’s decision to utilize the tool beyond politics?
“Larger tax agreements, which are paired to larger improvement projects (any improvement of $5,000,000 or more), the city will undertake at the applicant’s expense an economic impact study. This study, which is planned to be completed by the Connecticut Economic Resource Center, will provide the underlying basis for the Common Council’s decision.
“Should the analysis determine that the project fails to meet the ‘but for’ provision and does not need the tax incentive to be economically feasible or if the project does not produce a net positive economic impact for the city, then that project will be advanced to the Common Council with a recommendation to deny that request.”
7. Why is the Innovation District Tax Agreement Ordinance so heavily weighted toward new development?
“Neither the proposed ordinance nor the enabling statute advantages new development over rehabilitation. Both require a threshold of improvements to be constructed that is not less than $10,000.”
8. Why is the Common Council advancing the potential of tax agreements when the area was just recognized as a Federal Opportunity Zone?
“The Opportunity Zone designation for the district is good news. It does not, however, bring with it direct federal funding or incentives for the development projects being advanced within it. Rather the Opportunity Zone provides a federal tax incentive to equity investors. The tax incentive seeks to unlock potential investor capital that has been withheld from economically distressed geographies because of the higher risk associated with such capital investments.
“H.R.1, the Tax Law, signed in December of 2017, allows investors to defer up to 9 years their payment of the taxes owed on a capital gain if the funds from the gain are invested in a Qualified Opportunity Fund. The law further eliminates any additional investor gain if the investor’s funds remain in the Opportunity Fund for ten or more years. The tax incentive is for the investor only, not the development itself, as the investor and the associated Opportunity Fund will seek to realize a market return on the funds invested with the project.”
9. Why is historic preservation not emphasized more given the Wall Street area is a Historic District?
“As previously stated, neither the proposed ordinance nor the enabling statute favor any type of development over another. Both are based on a threshold improvement, the minimum being $10,000.”
10. Why is the proposed ordinance supporting potential development that the POCD survey participants indicate they do not want?
“The POCD Survey was a result of an online survey of approximately 350 Norwalk Residents. Of those respondents, over 60% of individuals were over the age of 50, over 75% were White Non-Hispanic, and over 60% of their households make over $100,000 per year. Additionally, only 51 of the respondents lived in the city’s urban corridor. A majority (over 75%) of the respondents also live in single family homes.
“While the survey results are valid as opinions of these particular residents of Norwalk, the sample is not representative of Norwalk’s population. Over 25% of Norwalk’s population is of Hispanic or Latino origin, only 6% within the actual survey and only 53% of Norwalk’s total population is White Non-Hispanic compared to the over 75% in the survey. Additionally, the median household income in Norwalk is $80,896 with 59% of the households making less than $100,000 per year. This is compared to the over 60% of respondents making over $100,000 per year within the survey. Only 35.5% of Norwalk residents are over the age of 50 compared to the over 60% of respondents over 50 within the survey. The survey cited does not accurately represent the voices of the entire Norwalk community but rather a small and rather homogeneous subset thereof.”
11. Why is there no support in the proposed ordinance for industrial and manufacturing uses?
“While the ordinance does not support heavy industrial uses, it does support both manufacturing and light manufacturing uses. As such, the Innovation District seeks ways in which to revitalize the area by gaining a competitive advantage, which we believe exists in the traditional distinction between light and heavy industry. To locate in a light industrial zone, an industrial use cannot impact any surrounding properties through loud noises, vibration, noxious fumes, or other hazardous byproducts. Light industrial land uses typically include final-stage or ‘clean’ manufacturing, wholesaling, warehousing and distribution, and the sale and servicing of vehicles and equipment. Light industry includes a broad spectrum of land uses, much of which can be compatible with urban, mixed-use development. Most zoning ordinances do not make this distinction. Certain light industrial businesses have great potential in Norwalk to:
- “Revitalize and preserve urban industrial land
- “Create relatively high-income, low-barrier-to-entry jobs near existing transit and housing
- “Further diversify the local economy
- “Improve regional self-sufficiency as rising fuel costs and rising foreign wages undercut the advantages of outsourcing
- “Supply unique products and retail experiences
- “Provide a sense of place and local character
- “Provide a way to activate street-level storefronts as the conventional retail sector contracts
“The Innovation District cannot support heavy industrial uses within the geography mainly due to the fact that such uses require large footprints for operation and storage that this geography does not have. Additionally, industrial uses can have health, environmental, and social implications that do not mix with residential development or urban areas which are meant to be areas of high human interaction. The types of manufacturing and light manufacturing being sought are compatible with some if not all of the other uses identified in the ordinance.”
12. Why is this ordinance not being deferred until the reorganization is complete and the new Economic and Community Development Director is hired?
“Consideration of a municipal tax ordinance is the purview of the Common Council, not city staff. While the Common Council can and has sought input from various parties regarding this ordinance, it is a legislative decision. Further, the position of Economic and Community Development Director reports to the Mayor. The Mayor has already publicly expressed his support for the proposed ordinance.”
13. Why does the proposed ordinance not do more for the existing businesses that have struggled to remain in business?
“The city cannot write its own tax laws because the city’s taxing authority is derived from the state. Therefore, any municipal ordinance involving taxes must be based on an enabling state statute. According to state statute 12-656 that allows cities to enter into tax agreements, there must be a minimum of $10,000 with of improvements to a property to create a tax increment in which to abate. The incentive is based on these improvements as to not ‘lose’ existing tax revenue, but rather reduce the amount of the new taxes associated with the improvement for a specific period of time. If an existing business owns its building and is seeking to undertake improvements totaling more than $10,000 then they do benefit from the proposed ordinance. If they rent their building and they are seeking property improvements to be undertaken by their landlord the ordinance provides additional incentive for the property owner to undertake the desired improvements.”
14. Why does the ordinance include the potential to incentivize more multi-family housing, when I hear from people that live at Waypointe that there are entire floors of empty units?
“Waypointe is over 92% occupied. Other developments within the area, such as Head of the Harbor, are at capacity (100% occupied). With the multi-family housing available included in combination with American Community Survey data, the population in the area remains one of the least populated Census Tracts in Norwalk. Urban areas are meant to be densely populated to promote economic activity within the area. If there is no additional multi-family housing to bring larger amounts of population into the area, then economic activity-can suffer.”
15. Will additional multi family housing in this geography negatively impact our schools which are already overcrowded?
“Multi-family housing units have not produced significant amounts of additional school children to the Norwalk School Districts. The Waypointe developments (including Mid Block, North-Block, Quincy Lofts, and The Berkeley) have only produced 25 additional students to the school system out of 662 housing units. Similarly, in South Norwalk developments (Ironworks, the Pearl, Sheffield, and 19 Day Street), only 7 students have been produced out of 367 units. In total only 32 students have been produced out of over 1,000 units in all of Norwalk’s urban areas. This data and its interpretation has been supported by the demographer for Norwalk Public Schools as confirmed by Thomas Hamilton, the Chief Financial Officer for Norwalk Public Schools. The demographer stated ‘The number of students coming out of the new apartments that have been developed in recent years is quite low in comparison to the number of students coming out of other housing types.’
“Additionally, the individuals that live in these multi-family developments are often single. In Waypointe, out of 942 residents 675, or 71% of them, are single, divorced, or widowed and only 260, or 27%, are married. (The remaining 7 individuals are related to corporate units or persons who chose not to respond.)”
16. What are other Fairfield County communities doing to incentivize development in their urban areas?
“Stamford has enabled multiple tax incentives within the City. The most significant of which is their use of Tax Increment Financing (TIF) Districts of which the city has three; South Stamford, Mill River Park, and the new Transportation TIF District. Combined the three districts have had bonding authority in excess of $500 Million as approved by the General Assembly. Stamford Economic Development Director Thomas Madden said, ‘We’re one of the most successful cities using TIFs.’ Other economic development incentives include but are not limited to Enterprise Zone benefits, Entertainment Zone benefits, Land Tax Credit Donations, Green Buildings Tax Credits, Renewable Energy Tax Abatement, and Urban and Industrial Site reinvestment Tax Credit. Some of these have also been enabled by CGS 12-656. (http://www.choosestamford.com/incentives).
“Further, Bridgeport has enabled multiple tax incentive programs. Bridgeport and the state Bond Commission used TIF financing for the site development costs for the Steel Point project, home of the Bass Pro Shop, with $22 Million in TIF bonding issued by the state being paid by future sales tax revenue. Bridgeport also has Enterprise Zone benefits, a Bridgeport Urban Enterprise Zone Program, and a Tax Incentive Development Program that specifically uses CGS 12-656. (http://www.bridgeportct.gov/oped/Taxincentives).
“New Haven also has a plethora of available tax incentives including Facade Improvements, Property Tax Assessment Deferrals, and Enterprise Zone Benefits. (https://www.newhavenct.gov/gov/clepts/obd/business/get incentives n funding.htm)
“It should be noted a brief review of communities that have either previously used, recently approved or are advancing TIF Districts as a development incentive include:
- “New Britain – Approved
- “Groton – Approved
- “Suffield – Approved
- “Canton – Approved
- “Cheshire – Reviewing
- “Hartford – Approved
- “Windsor Locks – Approved
- “East Hampton – Approved
- “Norwich – Approved
- “Stamford – Approved
- “East Hartford – Approved
- “Wallingford – Approved”
“Further, I have attached the Yale Law School Community and Economic Development Clinic’s memo regarding Tax Increment Financing and Public Act 15 57 as made effective October l, 2015 which modified the state’s TIF legislation allowing it to be more flexible for municipalities to employ. The proposed Tax Agreement Ordinance does NOT advance the use of TIF. But it is important that the Common Council understand there are a host of municipalities across the state that are using tax revenue in a variety of different ways to advance economic development and to spur new and stabilized tax revenue over the long term.”
17. What is the statistical basis for determining this geography needs potential development assistance?
“The impacted geography is sparsely populated when compared with other census tracts in the city. The median household income is 40% below census tract 441 (South Norwalk) and almost 30% of the families in the geography have incomes below $50,000.”