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City Merchants Close Ranks Against Tax Hike

June 6- 13, 2007
By ANDY HART, The Hartford News Staff Writer

In an unprecedented show of solidarity, a coalition of Hartford’s small business owners voted Monday night to reject a plan that would have saved some – but not all – of them from paying the drastic increase that is expected to be included in their next tax bill.

Instead, 157 members of the recently formed Hartford Small Business Alliance (HSBA) all voted to support the “Six Percent Plan,” which would provide across-the-board tax relief to small businesses.

The plan the HSBA voted down was supported by several of Hartford’s largest property owners. This plan would have provided tax relief to only 476 of the city’s small businesses, while the Six Percent Plan will assist 1,472 companies, according to an HSBA press release.

The Six Percent Plan calls for limiting this year’s tax increase for small businesses to six percent (hence the name). However, this would leave a gap in the City budget of about $6.5 million, said HSBA Attorney Gregory Piecuch.

To make up the difference, he said, all city businesses would chip in to pay half ($3.25 million) of the shortfall and the City of Hartford would account for the other half by reducing its budget by approximately .5 percent and/or acquiring more state aid.

Although the plan would thus require businesses to pay a higher increase than six percent, Piecuch said that increase would be under 15 percent for 99 percent of the city’s small businesses. As things stand now, he added, small business owners are facing tax increases that average around 35 percent.

Piecuch also said that he is confident the City will be able to trim spending by $3.25 million (.5 percent of the total budget), especially if the alternative is losing a significant number of Hartford’s small businesses.

Events are rapidly coming to a head because the current legislative session closes at midnight tonight, June 6. If any help is expected from that quarter before the tax bills go out, it must be accomplished by then.
Throughout the day on Tuesday, HSBA representatives pressured members of Hartford’s legislative delegation to all get behind the Six Percent Plan in order to give it a better chance of passing in the legislature. On Tuesday afternoon, HSBA issued a release stating that State Representatives Marie Kirkley-Bey and Minnie Gonzalez had joined State Senators John Fonfara and Eric Coleman in backing the Six Percent Plan.

Whether a broader consensus could be reached among Hartford’s eight-member legislative delegation, whether the plan they finally endorse will be the Six Percent Plan or a compromise between the two plans and – most importantly – whether the legislature as a whole will have the time and the inclination to approved the recommended plan was still up in the air at press time Tuesday night.

Monday night’s HSBA meeting came in the wake of a protest by the group at last week’s City Council Meeting. Despite the protest, Council voted to accept the city’s proposed budget (the City Charter requires that the budget be approved by May 31). Based on the budget, many city businesses will have to pay double – and in some case triple – what they paid last year in taxes, unless the legislature is able to pass some type of relief package.

Several business owners have publicly stated that if the drastic tax increases stay in place, they will either have to close down or move out of Hartford, resulting in a loss of jobs and tax revenue for the city.
The HSBA has also threatened a class action lawsuit if its Six Percent Plan plan or something similar is not passed by the legislature.

The basic root of all the tax trouble is the city’s recent property revaluation, which it uses to calculate the amount of taxes property owners have to pay. All Connecticut cities and towns are required to conduct a revaluation every five years. Hartford’s last revaluation was conducted in 1999. The current revaluation should have been conducted in 2004 but was postponed to 2006 at the request of the legislature.

In the intervening seven years, property values in Hartford have risen dramatically. But, a rise in property values doesn’t necessarily mean a corresponding rise in property taxes. The city calculates its budget and the amount of taxes it will need to finance it as a percentage of the grand list of properties. If property values rise, the city can extract the same amount of money by charging a lower percentage (known as the mill rate).

Of course, it’s not that simple. The City has a cap in place limiting how much homeowners have pay in taxes, regardless of how much their property may have increased in value.

A second problem is that property values do not rise uniformly for all classes of property. In fact, values for one type of property could rise while values for another type decrease. A former city official who is familiar with Hartford’s current tax crisis said that a major part of the problem is that values for most of Hartford’s large businesses did not increase in the last revaluation while values for most small businesses increased dramatically.

Whatever the final outcome of the tax crisis is, the HSBA’s success in organizing the city’s business community has added a new element to Hartford politics. Small businesses may play a key role in the future elections – if they don’t move out of town first.