🔒Bronin eyes surcharge on major property owners, nonprofits

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As Hartford stares down mounting budget deficits over the next few years, Mayor Luke Bronin is weighing how to squeeze more revenue out of commercial property owners and not-for-profits.

The strategy may include a limited revival of a decades-long surcharge on commercial properties that expired in 2012, and a payment-in-lieu of taxes (PILOT) program for the city's larger not-for-profit property owners.

Both ideas would require state legislative approval and were recently outlined in a bill filed with the Finance, Revenue and Bonding Committee, which is co-chaired by Hartford Democrat state Sen. John Fonfara.

Businesses and nonprofits are already raising concerns about the prospects of higher taxes or fees, warning that any attempts to increase the cost of doing business in Hartford may unwind progress the city has made in recent years attracting new development, residents and businesses.

But businesses also say they understand the city's fiscal outlook, which Bronin recently described as dire, signaling they may be willing to pitch in if there's shared sacrifice.

Proposal Details

The proposal calls for the city to enter into negotiations with an unspecified number of the largest not-for-profit property owners and commercial taxpayers. Also unspecified is whether a surcharge or PILOT fee would be mandatory, and what percentage or amount each group would be asked to contribute.

An initial leaked draft of the bill published by Hartford blogger Kevin Brookman, which was different from the proposal submitted to the legislature, called for a surcharge as high as 10 percent on the city's 20 largest commercial taxpayers and a maximum 10 percent PILOT fee on Hartford's 15 largest not-for-profits.

Eversource, Travelers, The Hartford and Aetna are among the city's largest taxpayers and would be likely targets for the surcharge. Hospitals and colleges, including Hartford Healthcare, St. Francis Hospital and Medical Center, and Trinity College are among the city's largest not-for-profits.

Bronin said “the proposed bill would establish the legal authority for assessing PILOT payments and a surcharge, but the bill also makes clear that the process is meant to be as collaborative as possible.”

A Blunt Assessment

The city's largest property owners “have a stake in a strong, successful Hartford, and all we can promise is a city that's managing its fiscal crisis honestly, transparently, and doing everything possible to build our future on a strong foundation,” the first-term Democrat said.

Bronin gave a blunt assessment of the city's finances in his State of the City speech last week, likening Hartford to a household that had taken out a second mortgage and maxed out its credit cards. Debt service and pension costs are rising, and the city can't count on a state bailout. Hartford faces a $9 million deficit in the fiscal year ending June 30, and a $32 million deficit next fiscal year.

The bill now before the legislature would also create a “financial sustainability commission,” consisting mainly of Hartford officials and appointees, to oversee budgeting, borrowing, union contracts, pensions and other matters.

Ruffled feathers

The surcharge and PILOT program proposals aren't new for Hartford.

A 2012 attempt by former Mayor Pedro Segarra to do the latter, when the city was facing a $56 million deficit, was unsuccessful.

Meantime, Hartford commercial property owners paid a 15 percent surcharge for more than two decades, something they fought against for years until the legislature eliminated it in 2012. It was created to ease the tax burden on the city's homeowners, who have benefited from an artificially lowered property tax rate over the years. Hartford's current 74.29 mill rate is the highest in the state. Seventy percent of a commercial property's fair market value is taxed at that rate, while only about 32 percent of a residential property's value gets taxed at 74.29 mills.

Businesses have pushed for the city to bring those assessments back to parity as quickly as possible.

MetroHartford Alliance CEO Oz Griebel said that a return to a mandated surcharge, which he fought for years, “truly would send [the city] backwards.” But he said he also understands the city's fiscal woes. To go along with a tax surcharge, businesses would need to know there's buy-in from both not-for-profits and residential taxpayers, he said.

“The solution here has to be comprehensive in the sense that everybody has to understand not only the scope of the problem … but the specifics of the solution … how long those specifics have to be in place, and what the projected and anticipated outcome is,” Griebel said. “You don't go after one segment of property owners without them knowing what you're going to ask the other property owners to do.”

Surcharge could undo gains

Christopher Ostop, senior vice president/broker for commercial realty adviser Jones Lang Lasalle, said reviving the surcharge would threaten to stall or undo Hartford's recent gains in luring suburban corporate tenants to downtown buildings.

“I think [Bronin] understands,'' Ostop said, “that the burden can't be 100 percent borne by the corporations in downtown Hartford. We've got to figure out a way to cure that budget deficit while not putting the whole burden on businesses in downtown Hartford who are part of the solution of the Capital City's revitalization.''

New York City landlord Yisroel Rabinowitz owns several downtown Hartford properties: The Grand apartments and ground-floor retail space at 201 Ann St.; and 11 Asylum St., which houses Burger King and the Hartford Parking Authority, among other tenants.

Rabinowitz said he would unwelcome any city proposal that involves raising taxes on its commercial landholders, which most likely would force him to raise rents for his downtown commercial and residential tenants.

“I definitely understand where the mayor is coming from,” Rabinowitz said, “but I believe that is not the direction to go into.''

Showing his belief

Rabinowitz noted that he went under contract recently to acquire 275 Asylum St., which houses High School Inc. and a Franklin Trust Federal Credit Union branch.

“I'm trying to show my belief in downtown,'' he said. “I hope the city doesn't come back and contradict my belief in what the city will be.''

Aetna spokesman Walt Cherniak said the insurer is concerned about anything that might raise the cost of doing business in Hartford.

“If a property tax surcharge is proposed, we would expect that it would be part of an overall plan to get Hartford back on firm fiscal grounds, and that the state would find opportunities to offset this increased cost in other places,” Cherniak said in an email.

Not-for-profits impact

Meanwhile, several major not-for-profit property owners, including St. Francis Hospital and Medical Center and Hartford Healthcare, declined comment on the PILOT proposal.

Trinity College spokeswoman Kathy Andrews said school officials have discussed the proposed PILOT with Bronin.

“The bill that will be considered by the state legislature could have serious ramifications for the fiscal health of our college, but we are committed to working toward solutions that sustain our relationship with the city and the significant community investments Trinity College makes that are a direct benefit to the city and our neighborhood,” Andrews said. “We recognize the fiscal crisis facing Hartford and the limited revenue options available to the city.”

A potential PILOT program would come just as hospitals and nonprofits face state funding cuts, likely increasing their hesitation to cough up more money to the city. In 2012, nonprofits largely rebuffed demands from the city to make voluntary PILOT payments.

Clarification: A statement issued Trinity College did not say added costs related to a possible PILOT program would lead to higher tuition. A previous version of the article improperly stated that. 

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