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Norwalk ‘Innovation District’ coming back to public hearing, possible vote

A view of West Avenue from the roof of The Berkeley on the corner of Maple Street and West Avenue and across the street from The Waypointe. The Berkeley and its sister building, Quincy Lofts, were built by Belpointe Capital.

Updated, 9:46 a.m.: Copy edits

NORWALK, Conn. – A proposal to create tax incentives for development in Norwalk Center has a new name and may be voted on Tuesday.  What was initially termed an “Innovation District” is now a “Real Estate Tax Agreement” and may be voted on Tuesday.

Common Council members are holding a public hearing on the ordinance which applies to specific boundaries in Norwalk Center. The agenda calls for them to “discuss and vote” on the drafted ordinance, which is connected to the Wall Street – West Avenue Neighborhood Plan.

The maximum amount of incentives to be offered is now $10 million total over five years, Redevelopment Agency Executive Director Tim Sheehan said Jan. 15 at the Ordinance Committee meeting.  That’s a reduction of $5 million from the $15 million figure discussed as recently as August.

An Aug. 21 public hearing drew eight citizens who spoke against the Innovation District.  It’s been heavily revised, and on Jan. 15 a lawyer submitted a letter from Belpointe Capital, the company that has built the Waypointe apartment complex on West Avenue, opposing the drafted ordinance.

“The Innovation District language has been changed to make the ordinance too cumbersome and unworkable for investors and developers,” Belpointe Managing Director Paxton Kinol wrote to the Council. “I do not believe anyone will take advantage of this program as currently drafted. We believe the objective is clear and correct as stated, but the balance of the document fails to put forth a workable system to achieve the objective.”

Sheehan on Jan. 15 offered background information:

“The genesis of the proposed ordinance stem from the inequity confronted by the development community when pursuing investment in Norwalk’s urban core as it relates to the geography of I-95, south of I-95 and north of I-95. Much of the area south of I-95 is within the city’s Enterprise Zone, which by municipal ordinance fixes real estate assessments resulting from improvements to physical real estate.

“The fixed assessment period is for seven years by which the increased assessment resulting from the improvement is phased in according to a schedule. North of I-95, no such tax incentive to stimulate investment and real property exists.

“From a planning and economic development perspective, the city considers both of these areas as essential parts of the city’s urban environment, which it is seeking to better unify.

“Additionally, both census tracts are deemed quote-unquote ‘qualified’ by the federal government, which evidences … a high degree of economic distress with regards to poverty rate, income, unemployment, and high land construction and utility costs relative to the area median income to support development.”

 

Wall Street property owners have formed an association and are speaking out against the use of the label “deteriorated or deteriorating” to qualify the area legally for a redevelopment plan.

The idea to extend the Enterprise Zone originally came from the Mayor’s Office and then-Economic Development Director Elizabeth Stocker, but the Council Planning Committee objected to the as-of-right provision regarding the tax incentives, Sheehan said.  A majority saw the “public policy inequity and the need for some real estate development incentive to stimulate real property investment in the I-95 North geography, given its level of economic distress,” and sought to insert a “but for” clause so that that the “incentive was applied only to projects that would be economically infeasible without such support,” according to Sheehan.

He went on to explain the changes to the proposed ordinance:

  • The tax agreements are limited to new real estate investment that increases the taxable valuation of a parcel of real estate by 100 percent or more, exclusive of land value.
  • The incentive may not exceed 50 percent of the taxable increment realized by the improvement
  • The incentive is to be applied only to improvements that are conducive to attracting industries that are growing or mature and are the attraction and retention priorities as determined by the Approved Market Feasibility Study
  •  The city must collect all current and existing taxes on the property and 50 percent of the taxable increment associated with the improvement

 

 

There were new definitions added and “eligible uses were expanded to be consistent with the newly proposed Zoning for the area,” he said. “Projects are ineligible if they obtained a building permit before Jan. 1, 2019, had past debt to the city totaling $5,000, or more than one year, within five years of filing an application. The submitted application must evidence via a municipal impact analysis a positive financial impact to the city, the project must evidence that quoting again, quote unquote, ‘but for’ the incentive, the project is not economically feasible.”

Applications would be reviewed by the Chief of Economic and Community Development, who would do an internal analysis on those that are valued at $50,000 or less, and there would be a 45-day public comment period on all applications, followed by a public hearing, he said.

Construction would need to begin within three months and be completed within three years. As in the original draft, the tax incentives could be given for a total seven years.

The Committee discussed it for about an hour.

“I don’t know that you need seven-year incentive to attract developers to the area,” Council member Michael Corsello (D-At Large) said.

“The intent of the language is to have it be seven years is the maximum you can get it,” Sheehan replied.

Council member Doug Hempstead (R-District D) asked a series of questions designed to keep a company from double-dipping on incentives.

“Remember, the way the benefit is structured is ultimately left to the discretion of the Common Council,” Sheehan replied at one point.

Hempstead asked about new apartments creating a need for police services and new students for the school district.

“My reading about this has been that this analysis has to take into account things like that,” Council President Tom Livingston (D-District E) replied.

“Those types of analysis are … what’s going to be contained in that municipal impact analysis,” Sheehan said. “So whoever’s doing that is going to have to go out and talk to the various departments and trying to figure out, you know, ‘what is the impact of this particular development on the Water Pollution Control Authority.’”

Analysis will be project-by-project but, “It’s going to be far more information than we have today. Because as you build on it, you’re going to begin to understand the cumulative impacts of that,” Sheehan said.

Kinol’s letter detailed the developer’s objections.

“The Innovation District was conceived more than two years ago to offset the economic head-winds facing the State of Connecticut and to allow downtown Norwalk to continue to redevelop,” he wrote. “By helping proposed and future developments meet their initial investment hurdles, the City of Norwalk will gain fees and taxes from hundreds of millions of dollars in investment. This will not happen without the City’s help.”

The area that is now Waypointe (phase I) was contributing $160,000 a year in property taxes before the development and was projected to produce $1.6 million once it was done, but is actually contributing $2.3 million to the City budget, he wrote.

“This is more than $2MM per year in additional programing the City could not afford if that development was not built,” he wrote. “The proposed incentive program is temporary, but the economic and tax benefits of each development provide a permanent revenue stream for the residents of Norwalk. Shouldn’t the residents and taxpayers of Norwalk benefit from redevelopment like this? What programs could be funded from the taxes and fees from the next new building in downtown Norwalk?”

He suggested changes:

  1. “The exclusions provisions should be removed in its entirety because this district should be open to everyone and encourage open investment in our downtown.
  2. “The application process should be simplified and shortened so developments and progress quickly and do not miss the economic cycle.
  3. “The Planning Board of the City Council should not have veto rights over which development gets approved because that can to lead to political chicanery.
  4. “The size of the program or benefit should not be limited because the City and taxpayers benefit from larger investments paying larger taxes and fees.“The use of ‘approved’ feasibility studies should not be used to limit investors’ creativity and willingness to invest in downtown Norwalk.
  5. “There should be no individually negotiated tax agreement with the City like the one used for POKO. The program should be as of right for everyone.
  6. “There should be no recapture of the benefits based on the success of the investment. If the proposed development is not 80% occupied or the company is forced to downsize that is a function of the economy. As long as the building is complete, the investment in Norwalk has been made and the additional taxes generated. Not every investment will work out as planned.”

“We believe the Innovation District can work for everyone. It should lead to more investment in downtown Norwalk, more revenue for the City each year to fund programs, and lower taxes for the homeowners of Norwalk,” Kinol wrote. “Everyone can benefit if this ordinance is drafted correctly and fairly.”

Real Estate Tax ordinance Wall West 19-0219 draft

Comments

24 responses to “Norwalk ‘Innovation District’ coming back to public hearing, possible vote”

  1. Jason Milligan

    A committee sets out build a horse and they wind up with a camel. This ordinance is a classic camel.

    Paxton has built pretty much everything in the area and he is complaining about the tax plan.

    It is time to scrap this debacle.

    This area needs less rules and restrictions. Make the area simple and easy to do business. That would provide wonderful incentive.

    The best incentive in the world would be to have a functional and transparent government. Then taxes will naturally fall for the entire city. A low tax city becomes even more inviting for business.

    This government is constantly trying to give favors to a selected few which pisses off everyone else including all of the homeowners. It also creates an environment that only attracts government reliant businesses and discourages startups and growing businesses.

    This ordinance is wrong on so many levels including legally. No doubt it will see legal challenge if it is rushed forward.

  2. Piberman

    After encouraging new apartments boosting renters from 30 to 40% of our City – renters who don’t pay their full share of City services especially for schools – Mayor Rilling and Councilmen are now preparing to give away tens of millions of scarce taxpayer monies. Ignoring that neither the Mayor nor Councilmen would qualify for managing a small Wal Mart or see any reason to hire major league Business Development Professionals. Witness the hiring of an Economic Director from tiny Newtown followed by a new Director/Chief with a public transportation background. The pending big giveaway will further cement Norwalk’s shabby reputation with both public and business interests as a failing poorly governed City.

    If Mayor and the Council want to create a “real innovation” District why not hire “real consultants” to advise on how its done successfully across America rather than rely on favoritism and an appalling lack of business development talent in City Hall. Mayor Rilling’s “Legacy” is creating a renters City with falling homeowner property values and exodus of long time homeowners. Norwalk needs far more qualified elected officials to survive and prosper in a tough climate. No other City in CT has hired a former Police Chief as Mayor. Why is that ?

  3. Jake

    Piberma – How is that you and others insinuate that renters do not pay their fair share of City services and schools?? This is factually incorrect and creates a narrative very far from the truth. The average new apartment pays $4000 a year in rent and the average size of new apartments is 900 square feet. These facts are available to the public, one only needs to do a little digging and very little math. Who pays that $4000 dollars??? Golly gee, it’s the renters!! And 97% of them (and that fact is available publicly as well) do not have children in the school system. Lastly, that $4000 translates to $8000 for an 1800 square foot house or $12000 for a 2700 square foot house, etc. Renters are most definitely paying their way.

  4. Michael McGuire

    This is an ordinance looking for a purpose. It is so poorly concocted that the very people it is designed to help, large developers, don’t like it.

    But more importantly, where is the feasibility study that shows the Wall-West area to be in need of tax incentives to develop? Answer – there is none. I looked through all the current plans listed on Norwalk Tomorrow but could not find one. FYI the CERC study is not a tax incentive feasibly study.

    A feasibility study for tax incentives is the most important analytical documents that should have been done to support this ordinance.

    Therefore, Ordinance Committee members – why are you voting on this? You don’t have anywhere near enough information, or experience, to make a qualified, well-educated decision.

    This will effect every Norwalk taxpayer. Do not take this lightly.

    As proposed, this ordinance is pre-mature, unfair and lopsided. Consider the following points;

    •This ordinance will encourage the assemblage of smaller properties for demolition (said process has historically taken years)

    •This ordinance will result in the wholesale loss of small business

    •The program is cumbersome and slow – both issues which add risk and cost to a developer which is why they don’t like it.

    •The incentives can only be given to businesses that meet the criteria of the Approved Market Feasibility Study (not to be confused with the none-existent Tax Incentive Feasibly Study). What happens when the market changes/evolves?

    •Since the New Zoning Ordinances are not yet in place, and the public has not weighed in on the same, don’t you think voting for this Ordinance, which relies on an as yet to be enacted Zoning Ordinance, is a bit pre-mature?

    •This tax incentive is only good for new purchases. In other words, if you were here before January 1, 2019, if you stuck it out through the hard times….Sorry – nothing for you.

    • Who pays for the Municipal Impact Study? More importantly, in light of the NRA’s recent “problems” with their selected advisors (blight and deterioration), can we rely on these studies? Particularly if you don’t know what you should be looking for.

    I’m happy to answer any CC members questions on each of these points.

    NRA has two good questions on the table now that need answering – Where’s the Blight? and; Where’s the Deterioration?

    Now they have a new question – Where’s the Feasibility Study?

  5. Michael McGuire

    Jake – totally agree.

    Rents have been the scapegoat for far too long. Higher density, where appropriate is a worthwhile endeavor and market rate rental housing does pay its fair share.

  6. Jason Milligan

    Fix POKO 1st!!!

    Redevelopment Agency gave us POKO. POKO is still a rotting carcass that is ruining our downtown.

    The City & RDA just want to throw some dirt over the carcass and move on.

    We can’t let them. How can we even consider giving these people more power, more authority, for a larger area until they fix the biggest mess in the city.

    The audacity for them to ask is astounding.

    How are we not demanding action and solutions on POKO every single day?

    We should not consider another single policy or plan for the Wall st area until POKO is resolved!

  7. Paul Lanning

    Renters aren’t to blame for the city’s misuse of tax revenue. Apartment rents are high. But when the developers/landlords get big tax breaks from the city, renters and homeowners alike are getting hosed.

  8. Jake

    Paul-
    What tax breaks??? What apartmwnt developer has gotten tax breaks in Norwalk??? Please enlighten me. Spinnaker?? BLT?? Belpointe?? DiScala?? Avalon?? FD Rich?? Who?? As far as I understand no developers have gotten tax breaks for multifamily in Norwalk with the exception of Poko. Instead of tax breaks, the developers are required to contribute 10% affordable units at their cost. But go ahead and enlighten me and tell me about all of the non existent tax breaks that are always cited on this site.

  9. Michael McGuire

    @ Jason,

    Good points – we now have 4 unanswered questions for the Redevelopment Agency.

    Where’s the Blight?
    Where’s the Deterioration?
    Where’s the Feasibility Study? and
    When’s POKO going to be fixed?

    Until they can answer these questions they don’t deserve to have and say, or sway, over this area.

  10. Paul Lanning

    I’m not going to research this, but have read countless times that the apartment developers were given tax breaks. No city official has ever denied this.

    1. Paul, the City invested in infrastructure around the Waypointe area and I believe spent some money in the vicinity of Head of the Harbor, for sidewalks and such. I am not aware of apartment developers getting reductions in property taxes.

      1. I’m told that Ironworks has a tax abatement. Obviously, I can’t confirm that at the moment. I believe Ironworks was completed in 2013.
        The mall is in the Enterprise Zone, the ensuing tax abatements were a topic when it was approved.
        The Council changed the typical Enterprise Zone abatement so money would come in sooner. A 2017 press release states, “the center will bring $2.5 million in new real estate tax revenue to the City of Norwalk for 7 years, and over $5 million a year in revenue per year thereafter.” The Redevelopment Agency’s website link for Enterprise Zone is nonfunctional … I cannot at this moment find information on the boundaries of the Zone.

  11. Jake

    Paul-

    They don’t exist. It’s a myth that comes to life on this site to perpetuate political negativity and bias.

  12. carol

    same horse different color-as long as the redevelopment agency,tim sheahan,harry rilling rule the taxpayer does not count,only the good old boys. WAKE UP TAXPAYERS.

  13. Paul Lanning

    Thank you for correcting me.

  14. Lisa Brinton

    I believe tax credits came with the mall and Ironworks.

  15. Paul Lanning

    If thousands of new residential units are being taxed, why is the Grand List stagnant?

  16. Elsa Peterson Obuchowski

    I don’t see anything here to promote preservation and rehab of historic buildings. If we want to maintain Norwalk’s character and charm, historic architecture needs to be a significant part of the equation.

  17. Milly

    I see city trucks weekly on Wall St where Harbor View South is – down the sewer line – probably because the system cannot handle the waste that apartment building is generating. Last week they were flushing the line due to a clog I’m sure. How long before the whole system fails? How much is this costing the city?

  18. Milly

    Correcrion: Its called Head of the Harbor South

  19. Bill Nightingale

    The irony of Tim Sheehan trying to argue that we need these developer tax breaks to equalize the Enterprise Zone tax breaks is beyond astonishing.

    The Enterprise Zone is just one of Tim Sheehan’s many epic fails. It was part of his cover up of 20 years of blunder to develop 95/7 with mixed use. He pushed through the enterprise zone (making the argument it might help his mixed use plan) and then punted to a mall developer which could have been done 20 years earlier with no tax incentives.

    I have always pointed out the folly of such tax incentives. One of my primary points being that once you grant a tax break to one business then every other business will come asking for one or they will not invest at all. So now Mr Sheehan is making that exact argument on behalf of his developer constituency (who as we see above is actually trying to do the writing of the ordinance language.) Sheehan is saying that it’s not fair that the area north of I-95 doesn’t get a tax break when the Mall area does via his Enterprise Zone – truly unbelievable.

    As I have noted in NON comment section many times and at various public hearings – and I will say it again here – property tax breaks and any other subsidies are really a DISINCENTIVE for development. It sends the message to ordinary investors that unless you are one of the politically connected developers you will be at a disadvantage to do business here. It may not be so obvious but I can assure you this is turning away investment in our town in droves.

    Tim Sheehan really has to go and the Redevelopment Agency needs to be abolished ASAP.

  20. Red headed movie star

    So, the City of Norwalk is taking the 2019 Federal tax code in terms of deteriorating/distressed properties in urban areas and marketing it as a “Real Estate Tax Agreement” for the City of Norwalk. Benefits are awarded developers as long as property is improved and held for ten years.
    See 2019 tax law for real estate investors in distressed city areas.
    I see no reason for the City to rewrite, badly, the Fed Tax Code for 2019!

  21. Jake

    The grand list goes down because the tax assesor is deficient at his job. He over assesses a bunch of large commercial properties and then loses the tax appeals in court. Those loses come right of the grand list and cannot be returned. Happens every 5 years like clockwork.

  22. Bryan Meek

    Red headed movie star is referring to Economic Opportunity Zones. These offer massive capital gains tax breaks from any kind of investment held if the gains are rolled into a development zone and held for 10 years. You could sell off a granny stock, for example, and instead of paying up to 24% capital gains tax, invest that money into your own development or one of the many REITs that are bound to pop up and pool these monies. In light of these in the new tax code, the city’s approach is head scratching. Coincidentally, the three zones designated by Governor Malloy overlap the Main, Wall, West ave census tracks.

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