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Property Taxes Dividing Hartford Residents, Business

Greg Bordonaro

May 09, 2011

For years, Hartford’s business community has complained that it’s paying a disproportionate share of property taxes and that the inequity is one of the factors sapping the business vitality from the Capital City.

Now the debate over who should be paying the bulk of the city’s bills — residents or business is heating up.

Several key legislative measures that protect homeowners from shouldering a much larger load of the tax burden are set to expire, prompting Hartford business leaders to call for change to the system.

Some relief could be at hand for businesses. A surcharge that has added 7.5 percent to commercial property bills is due to expire and Mayor Pedro Segarra says he opposes efforts to keep the levy alive.

But a push to maintain caps on property tax increases for homeowners and continue to allow residential property to be assessed at a lower rate than commercial buildings is stirring concerns from businessmen like Carlos Mouta who says he is ready to sell off his company and leave Hartford if the city can’t get a handle on its rising property taxes.

Over the past five years, Mouta, who owns Westside Property Management, said his tax bill has gone up about 250 percent on the nearly half-dozen commercial properties he owns in the Parkville section of Hartford.

In contrast, he says his taxes on commercial property he owns in East Hartford, West Hartford and Wethersfield have either gone down or seen slight increases.

Mouta’s frustrations aren’t unique.

According to the MetroHartford Alliance, Hartford’s commercial mill rate of $79.34 is far higher than any other town or city in Connecticut. West Hartford and East Hartford, for example, have mill rates of $38.38 and $33.82 respectively, MetroHartford Alliance data shows. The mill rate is the tax levied per $1,000 of assessed value on a property.

Part of the problem is that past delays in revaluations have thrown Hartford’s property tax system out of whack. State law mandates that both residential and commercial property be assessed at 70 percent of its market value. In Hartford, residential property is assessed at about 30 percent of value while commercial property is assessed at 70 percent of value.

Compounding the problem is the fact that 51 percent of the property in Hartford is tax exempt because it is owned by the state, educational or religious groups. The state reimburses the city for some of that lost revenue.

Over the past 30-plus years, the city has sought state legislative approval on several occasions to amend its system in order to prevent a massive tax increase for residential property owners. Allowing residential properties to be assessed at 30 percent of market value was one of those changes. Another fix allowed only Hartford to cap tax hikes on certain residential properties and place a surcharge on commercial taxpayers, forcing businesses to take on a larger share of the tax burden.

Now those measures designed to protect homeowners are set to expire. If that happens, city and state officials say, it could lead to a 100 percent increase on residential property taxes on July 1, 2012, a potentially devastating blow to homeownership in the city.

Everyone seems in accord that can’t be allowed to happen. Some city and state officials favor maintaining a ceiling on residential property tax increases, likely somewhere in the 2.5-3.5 percent range, to phase in the tax hikes over a five-year period.

The MetroHartford Alliance is open to a phase-in approach, but is ultimately lobbying for the gradual elimination of the tax cap and surcharge, and, more importantly the establishment of a 70 percent assessment ratio for all properties over the course of five years.

“We cannot allow a doubling of residential property taxes,” Segarra said in a recent interview. The Hartford mayor said he understands lawmakers must walk a tight rope in determining how to divvy up the property tax burden in the city.

To complicate things further, Hartford is in the midst of conducting its state-mandated revaluation, which will likely shift some of the tax burden back onto homeowners because of expected declines in commercial property values.

Segarra said he would like to see a 2.5 percent cap on property taxes for one-to- three family households and condominiums, and a 5.5 percent cap on four-family homes and apartment buildings.

State Rep. Matthew Ritter, former city councilman, has proposed a bill in the state legislature supporting that 2.5 percent cap on residential property tax increases, and a 5.25 percent cap for apartment buildings with four or more units each year for the next five years.

The current cap on residential property taxes is 3.5 percent.

Segarra said his plan would bring small and large businesses some tax relief because of their expected declining values. He estimates, for example, it would result in an 11.8 percent decrease for commercial and mixed-use commercial properties over five years.

Oz Griebel, CEO of the MetroHartford Alliance, said his group opposes the bill in its current form. While businesses would be open to a phase-in approach, he said, the goal needs to be to eliminate the cap and bring back the 70 percent assessment ratio for all properties.

Griebel said the city’s current tax structure has placed Hartford at a competitive disadvantage and has contributed to the high commercial and retail vacancy rates, which currently stand at about 30 percent and 19 percent respectively.

“The property tax on real and personal property is weighed heavily when an employer makes relocation decisions,” Griebel said. “High taxes clearly contribute to high vacancy rates.” Businesses will need to come back to the city if Hartford is going to grow its assessment base, which Griebel said is the main goal.

For investors like Mouta, a cap that protects homeowners at the expense of renters and other property owners is a problem.

“You can pay less in taxes with two cars in West Hartford than with one car in Hartford,” Mouta said. “Sometimes the car taxes are worth more than the car.”

Mouta said his rising tax bill in Hartford is putting a dent in the value of his properties, making it harder for him to refinance and keep up with maintenance.

“If this doesn’t get fixed, myself and a lot of my investors are leaving because we can’t take it anymore,” Mouta said. “I’m not just going to sit around and watch my properties continue to lose value.”

One area where there seems to be consensus is eliminating the surcharge on commercial properties, which has been in place since 1989.

Lawmakers agreed in 2006 to reduce and phase out the 15 percent surcharge over five years. The surcharge, currently at 7.5 percent, generates about $8 million a year but is now set to expire. While there is a legislative proposal to continue the surcharge, Segarra, and other members of Hartford’s state legislative delegation don’t want to revive it.

“I would like to see the surcharge gone permanently,” Segarra said. “We need to create an environment that is more considerate to business and would allow for expansion in the city.”

When asked how the city would make up for the lost revenue, Segarra said some of the burden would be absorbed by homeowners. But he said creating a more fiscally responsible budget, which ultimately determines the tax needs of the city, will also have to be part of the equation.

Some business leaders have criticized the spending habits of the city and even Ritter said the budget has “grown leaps and bounds in the last 10 to 15 years.”

Segarra, who took office last summer, said he has been working to reduce costs. His recent $547.7 million budget proposal raises spending slightly, but doesn’t call for an increase in the tax rate.