The Norwalk Redevelopment Agency has previously proposed a plan for real estate tax incentives to spur investment in the redevelopment of the Wall Street and West Avenue areas. This proposal was earlier referred to as the Innovation District and is now a proposal in the form of an ordinance. There has been some opposition voiced to the notion of tax incentives in general, but the reasons articulated are counter-intuitive to the goals of tax incentives and redeveloping designated areas of the City. Any discourse on tax incentives should begin by making sure that the community understands what a tax incentive actually is. We believe this discourse has been missing.
First and foremost, there exists a myth that tax incentives are an abatement of taxes that already exist and are currently collected by the City, thus resulting in a decrease in the City’s tax income collection. This is NOT true and is actually just the opposite of what the main goal of tax incentives are. Tax incentives are a tool for ADDING tax income to the City. Tax incentives are a short term discount on NEWLY created taxes when a business, developer, builder or any other entity creates something new that becomes part of the grand list and adds new tax income. New tax income is immediately paid to the City and this is tax income that did not previously exist. When a tax incentive is granted, this newly created tax income is allowed to be partially discounted over the short term as a way to spur investment. As will be further discussed below, potential projects or business opportunities would not be pursued without the economic benefit of a tax incentive.
Our company, M.F. DiScala (including strategic partners) has projects in the planning stage that cannot move forward without some type of tax incentive. When one invests money (in anything) there is a fundamental requirement during the formulation of an investment or business plan that the equity investment creates a return or profit. One cannot knowingly invest with good fiduciary faith in an investment that merely breaks even or yields almost no profit. This brings us to redevelopment areas. Unfortunately, when investing in areas that are designated for redevelopment (such as the Wall/West area) there generally exists some economic degradation and/or current lack of desirability. Many would refer to these areas as “up and coming” or in need of “renewal”. These areas, which provide hope and opportunity for many are sadly, typically, economically depressed areas. As such this creates an environment where investment is risky and any normalized financial returns on an investment take many
years to come to fruition. What tax incentives do, which is their crucial role and the exact reason they were invented and are used widely, is to create a level playing field. Tax incentives reduce some of the elevated risk and allow a business/investment plan to mitigate substandard equity return dangers. In other words, tax incentives allow investors and businesses to make investments that otherwise do not make sense financially.
We recently completed a project in the Wall Street area which is essentially the only new development (completed) in the area for over 30 years. The only reason/way we were able to make sense of our investment plan in the Head Of The Harbor South project was because we were going to occupy a portion of the property as a user/owner. Our new
offices are located within the project and this allowed us to go ahead with a project that did not make sense from a financial/investment analysis in the redevelopment area. If we had not made the choice to relocate our offices to the project we would not have been able to move forward with that project without tax incentives. And frankly, our real
estate taxes today far exceed the projections we had based on historical information. If we had known previously the outcome of our current real estate taxes, we likely would not have built Head of the Harbor South even as a user/owner. I think most people in the City agree that, since its completion, Head of the Harbor South has been a positive addition to the Wall Street area and Norwalk as a whole.
Local business overall is not thriving in the Wall Street area as half of the storefronts are vacant. This is not a new phenomenon but has been one that has troubled us and the community for years. The key to retail success in the Wall Street area is people and we do not have anywhere near enough. Very few people come to Wall Street and the
northern part of West Avenue directly as a shopping destination, unless they happen to already be there. The area needs more people that actually live and work in the neighborhood in order to help local businesses and property owners become successful.
Over the last 30 years we have had a business in the area, been property owners in the area and have been vocal supporters of the area and Norwalk. As such, we say with expertise and optimism that the proposed tax incentive ordinance is required for the area to continue forward with its renaissance. From a business perspective, the high risk level and inability to forecast a profit makes it near impossible to initiate smart investments in the area without tax incentives. It is for this reason that the majority of the small cities around us (Stamford, Fairfield, Stratford, Trumbull, Milford, Danbury, Waterbury, Bridgeport, New Haven, Port Chester, White Plains, New Rochelle – just to name some in proximity) utilize tax incentives and why we fully support the proposed ordinance.
Another myth in regard to tax incentives is that they are “just for big developers” but this is simply not true. All property owners and business owners can take advantage of tax incentives; they just have to be comfortable with the level of risk and the profit potential of their investment – just like any other investor, big or small. Yes, it does require an investment into property, but that comes with owning real estate whether big or small. The risk and potential are the same regardless of the size of your equity investment. Our company committed to this area over 30 years ago and continues to do so today. In fact we doubled down on our commitment to the area by building Head of the Harbor South. However, over those 30 years, we have seen virtually no other significant positive change to the area. It is time for it to happen and we firmly believe that the tax incentive ordinance will be a primary tool in advancing the success of the area. And again and with emphasis- at no cost to the City or taxpayers, contrary to the often promulgated local myth.
In closing, it has appeared that no one has taken the lead to step up, clear the record and communicate plainly about tax incentives – even as vocal opposition has continued to speak a distorted rhetoric. We feel it is time for us, as longtime stewards and stakeholders of the area, to stand up and speak factually, frankly and favorably for the tax
incentive ordinance. The area needs it and we fully support it. We would be happy to sit down and further the conversation, on an individual basis, with anyone who would like to get a more in depth understanding of our views.
Michael F. DiScala – President, M.F. DiScala & Company
Alan Webber – CFO, M.F. DiScala & Company
Jason Enters – Principal, EDG Properties
Bryan Dietz – Principal, EDG Properties