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:
- “The exclusions provisions should be removed in its entirety because this district should be open to everyone and encourage open investment in our downtown.
- “The application process should be simplified and shortened so developments and progress quickly and do not miss the economic cycle.
- “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.
- “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.
- “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.
- “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.”