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Hartford Deal Gives Business Tax Relief Hope

Greg Bordonaro

June 27, 2011

Some state, local and business leaders are praising new sweeping reforms to Hartford’s property tax system as a step in the right direction that aims to gradually relieve businesses from continuing to pay a disproportionate share of the city’s tax bill.

The elimination of a special tax surcharge on commercial property is also being heralded.

But don’t expect the tax burden shift to happen overnight. And there could still be a disagreement brewing between the MetroHartford Alliance and the city on the interpretation of a key aspect of the law.

Essentially the new law, which was crafted by State Sen. John Fonfara along with Reps. Douglas McCrory and Matthew Ritter, more closely ties increases in city tax collections to residential tax rates. It does that by requiring the city to adjust the assessment ratio for residential property to reflect the growth in property taxes raised over the previous fiscal year.

And the end goal is to get the city’s residential assessment ratio to 70 percent, which is the rate all other Connecticut municipalities must abide by under state law. In Hartford, however, residential property is currently assessed at about 26 percent of value, while commercial property is assessed at 70 percent of value.

To determine the adjustment, the city will have to annually calculate the difference between the total amount of taxes the city raised in the current and prior fiscal years, and adjust them for inflation using the consumer price index for urban consumers in the northeast region.

If the city tax levy in the current fiscal year, for example, exceeds the prior year’s levy by 50 percent of inflation or less, then the residential assessment ratio increases by 2.5 percentage points. The highest residential assessment ratio increase allowed in a single year will be 5 percentage points.

The new measure will be in place until the residential assessment ratio reaches 70 percent.

The new law also gives city residents the right to petition for a budget referendum if the adjusted year-over-year tax levy increase exceeds 2.6 percent. “I think it’s a small step in the right direction,” said Katie Bailey, a lobbyist for the MetroHartford Alliance.

Bailey said she hopes the new law will help lower the city’s mill rate and control the tax levy. But she said it may take 10 years or more for the residential assessment ratio to reach 70 percent.

The impetus for the new law stems from the city’s decades long dysfunctional property tax system, which was thrown out of whack after past delays in revaluations.

State law mandates that both residential and commercial property be assessed at 70 percent of its market value.

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. According to the MetroHartford Alliance, Hartford’s commercial mill rate of $79.34 is far higher than any other town or city in Connecticut.

Those measures designed to protect homeowners, however, are set to expire and if they did, city and state officials say, it could have led to a 100 percent increase on residential property taxes, a potentially devastating blow to homeownership in the city.

But there was also an agreed upon need to lessen the tax burden on businesses, especially with the commercial vacancy rate in downtown Hartford being around 35 percent.

Jared Kupiec, the chief of staff of Mayor Pedro Segarra who has been closely involved with the property tax issue, said while the new law isn’t perfect, it is a great compromise among various interest groups.

“It incentivizes the city to stabilize the budget and encourages us on a yearly basis to reduce and make strategic cuts in ways that don’t disrupt important services,” Kupiec said.

He added that new measure gives businesses some comfort and predictability on what their tax bills will be indefinitely.

Bailey said, however, there is still ongoing dialogue between the MetroHartford Alliance and the city about how the adjusted tax levy will be calculated and a disagreement on the issue could be brewing.