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Some Norwalk Council members to mall developer: Not so fast

Councilman Rich Bonenfant (R-At Large)

Norwalk Councilman Rich Bonenfant (R-At Large).

NORWALK, Conn. – While it’s true that a SoNo mall would cost the city money, as would any development, there are Norwalk Common Council members who feel that General Growth Partners should pay its entire freight of taxes without the benefits of the existing Enterprise Zone for the property, Redevelopment Agency Executive Director Tim Sheehan said.

GGP would not pay taxes in its first two years, and only half in its third year under the existing Enterprise Zone, a state designation. But Sheehan said the Enterprise zone was extended to the 95/7 site as an incentive for Spinnaker Real Estate Partners to build office space there, as the market sagged. More than one Council members think a retail-dominated development should not be eligible for the Enterprise Zone, Sheehan said.

Nancy On Norwalk sent an email to all Council members and got three replies. Bruce Kimmel (D-At Large) said he has requested the Enterprise Zone be discussed at the Planning Committee’s March meeting; John Kydes (D-District C) said taking the Enterprise Zone off the property would be a betrayal of trust and Rich Bonenfant (R-At Large) characterized the sale of the land to GGP as a betrayal and said “the tax advantage and designation should be withdrawn as it was never intended to be sold and exploited for greater profit.”

A cost benefit analysis done by Urbanomics in September estimates that the mall would be a $2.7 million “cost burden” to the city in its first two years because no tax revenue would be generated. In the third year, paying half the taxes due on the property, Norwalk would still be $120,000 in the hole, the analysis estimates.

“Any new development comes at a cost. There is a cost on municipal services for any development, whether that be a residential subdivision, an office tower up at Merritt or this project … The objective ultimately is to have the city coming out ahead,” Sheehan said.

The state reimburses eligible towns for up to 50 percent of the revenue lost due to Enterprise Zone benefits, according to DECD’s website. In the fourth year, GGP would pay 60 percent of the tax owed, and it would go up 10 percent every year until GGP would pay the entire amount.

“The Council is willing to open up the LDA. They could put back, as part of their willingness to open up the LDA, the Enterprise Zone benefits and negotiate with the developer on the Enterprise Zone benefits,” Sheehan said.

Time for a history lesson.

“The 95/7 site was specifically excluded from the Enterprise Zone when the Enterprise Zone was formed,” Sheehan said. “The reason for that is the city wanted to derive the maximum tax benefit from the office development that was anticipated on the site. Then the project changes from primarily office to mixed use. Now we have 600,000 square feet of office space in a market that there is virtually no demand for 600,000 square feet of office and this is during the recession years.

“The council ultimately made the determination that as an enticement for a developer to build office they would incorporate the 95/7 site into the Enterprise Zone and they petitioned to the state,” Sheehan continued. “The state accepted that because it’s a contiguous area. So at the end of the day, some members of the Council see the intent of that to incorporate office development, not retail development.”

“At the last Planning Committee meeting, I requested that the enterprise zone issue be on the committee’s March agenda,” Kimmel said in an email. “After that discussion, I will make a decision regarding the Enterprise Zone. I will say, however, that in the short term some revenue is better than no revenue.”

“Removing the Enterprise Zone for 95/7 will send the message that Norwalk doesn’t honor its deals,” Kydes wrote. “The extra tax revenue would be great but not at the cost of Norwalk losing the ability to attract quality development.”

Norwalk has always met its end of the bargain for infrastructure improvements and other motivating benefits under the LDA, Bonenfant wrote, including road construction, sidewalks, utilities, drainage, zoning changes, street abandonment and the use of eminent domain to acquire properties.

Norwalk’s obligations under the LDA have been met in their entirety, Sheehan has said at multiple meetings. Norwalk is not obligated to do anything further.

“Currently there is a smaller representative core group of the approval bodies called the Joint Committee working towards an agreement that would favorable enough to pass through the full membership of all three parties,” Bonenfant wrote. “As a Council member who will have an opportunity to vote on the final package, here are four basic considerations I would hope that will be addressed.

  1. Enterprise Zone: The City provided this designation several years ago as a requested tax incentive to get an approved project jump started as promised by Spinnaker. Nothing ever happened and the benefit was simply used as an asset that went with the property to boost the sales value in a real estate transaction. This tax advantage and designation should be withdrawn as it was never intended to be sold and exploited for greater profit.
  2. Crescent Street abandonment: Based upon agreements, the City conveyed the road to the previous developer who then turned around and included it as part of the same sale. While it may be difficult to reacquire the road, at the very least the thoroughfare should be reopened for greater transportation connectivity, a concept that all parties have often mentioned as a priority consideration.
  3. Current Tax Assessment Value: If a vacant lot can sell for $35 million, how much is that vacant lot worth? $35 million market value X 70% = $24.5 million in assessed value. Multiply that by the mill rate of 25.041 and we should be collecting $613,504 dollars annually because the Enterprise Zone’s tax formula reduction doesn’t start until construction commences.
  4. Traffic Mitigation: The dilemma here is that in order for a mall to be successful, it will have to attract a huge amount of shoppers arriving in many thousands of additional vehicles on our roads. How will that impact the traffic flow in the surrounding area? Norwalk is unique in that there are only three ways within the urban core to cross the river that divides our city, the Stroffolino Bridge, I-95 and Wall Street. Will this traffic choke West Avenue completely or will non-shoppers look for other neighborhoods to cut through in order to avoid the mall area? If the traffic doesn’t flow smoothly past this section, shoppers won’t want to return to either, so GGP has a vested interest in solving this issue.

“The Joint Committee is a good mix of respected City officials and business leaders,” Bonenfant wrote. “Let’s see what they present to the community before we finalize our opinions on the developer’s design, but we must also solicit plenty of input from the public as we consider such an important project. Hopefully the City has learned some valuable lessons to take away for future endeavors. Let’s not convey land or benefits based on promises and paperwork. Make the arrangements contingent on actual construction before we give away our valuable assets.”

8 comments

John Levin February 23, 2015 at 7:03 am

2 things:
1) Thank you council members Kimmel, Kydes, and Bonenfant for responding to the NoN inquiry. Responding in this way speaks volumes about your integrity and concern.
2) There is a HUGE issue with malls that should be addressed directly by Norwalk’s Common Council: it is widely recognized that private mall development has contributed to the decline in traditional “downtown” business districts, while simultaneously removing the traditional “public square” function of those downtown spaces s to privately controlled property. Controversial (perhaps) yet important: a new mall must have explicit allowance for the exercise of 1st amendment rights within it. Yes?

Susan Wallerstein February 23, 2015 at 7:55 am

@John Levin, AGREE! Responding to emails or phone calls is not the new norm but so important, even when elected official doesn’t agree with one’s message or can’t answer a question. Secondly, Anyone else notice something about pictures accompanying this and related article “GGP pushes to move…”?

Bill Nightingale, Jr February 23, 2015 at 12:57 pm

I spoke strongly against the Enterprise Zone in 2010 at the Common Council meeting where it was approved. By now I hope the Redevelopment Agency has learned its lesson about approving and recommending incentives to developers who are not capable of getting development done. Of course the EZ is a huge selling point in Spinnaker’s sale to GGP.

Here is my letter to Norwalk Hour published in April 2010:

Dear Norwalk Hour:

The proposal to expand the Enterprise Zone to encompass 95/7 should be rejected. It is inappropriate for Norwalk taxpayers to provide more financial assistance to developers at this time.

It makes no sense that tax abatements are needed to develop this prime piece of land. The project simply needs to be scaled back to reflect economic reality. Subsidizing a project that is not economically feasible is throwing good money after bad. It seems logical, if given the chance to bid in a competitive process, that there are plenty of developers who would be ecstatic to build on the Reed/Putnam site and even offer public amenities such as parks, schools and sports facilities to do so. But the Redevelopment Agency continues to grant exclusivity to a developer who is struggling and negotiates in secret executive session to hatch a new, unknown to the public, plan that we are now being asked to grant tax abatements for. It has been reported that there are no tenants or financing currently available for the project. To ask taxpayers to fund an unknown and evolving project is reckless.

If the Redevelopment Agency would focus on tasks such as completing Oyster Shell Park, the bikeway and riverfront walk then developers will happily come and build nice projects without us having to subsidize them. Instead, if the Redevelopment Agency is allowed to continue to negotiate with a selected developer in executive session we may end up with another hideous apartment building like 80 Fair Street surrounded by self storage units.

Sincerely,

Bill Nightingale, Jr.

Maritime Yards Condo Owner February 23, 2015 at 2:16 pm

Some rationale, business thought from the city. This should be open to negotiation. Spinnaker “created” value for a profit that is not guaranteed if the LDA is amended. This is not a one-way street. If a mall concept is so successful, then why is the enterprise zone needed?

piberman February 23, 2015 at 9:35 pm

We’d all be on much “safer ground” if the Council would insist on traffic congestion studies, required City infrastructure development (water, sewer, waste, power, streets, etc., required additional City outlays for police, fire, DPW, etc. before becoming “mall boosters” as Sen. Duff and Rep. Wilms who have no need for such information. As the City’s most complex proposed development in decades surely some exercise in judgment is required by our Council. If ever there was a need for “public servants” that time is now. Sadly the word in City Hall is that the mall is done deal “game changer”. So kudos to those Councilmen who have the integrity and sense of public service to ask the relevant questions and seek the relevant facts on a complex project – our last major one for decades to come.

LWitherspoon February 23, 2015 at 10:36 pm

@Nancy

Have I understood correctly that if Norwalk allows the mall to proceed, in the first two years after completion the mall will have a net cost to Norwalk of $2.7 million per year? And the $2.7 million will be comprised of added municipal services arising from the mall, i.e. extra police, fire, etc?

In the third year, the mall will have a net cost to Norwalk of $120,000?

At what point does Norwalk gain, and by how much?

Piberman February 24, 2015 at 9:02 am

The mall boosters claim of $5 million in new taxes is looking more fanciful. Will major new mall induced traffic congestion and associated air pollution reduce City property values and tax revenues ?
Should the time spent in new traffic congestion by Norwalk residents be considered a “cost” to City residents ?
Should eventual removal of the mall be considered a cost to the City ?
It’s beginning to look as if the major net new tax revenues from the mall are “spongy”.
How did Sen Duff and Rep Wilms do their calculations ? Back of the envelop ?

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