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A Tax Drawback To State Buying Buildings

Hartford Courant Editorial

March 07, 2013

Thanks to Connecticut's property tax system, what ought to be great news for Hartford instead has some residents worried that they are getting more of the cloud than the silver lining.

The good news is that the state is buying two major office buildings — Connecticut River Plaza on Columbus Boulevard and 55 Farmington Avenue — for $52 million, as part of a plan to get out of expensive leases and avoid expensive repairs to aging state-owned buildings. The state estimates the consolidation will save the $100 million over the next 20 years, twice that when adjusted for inflation.

The move will brings as many as 3,300 state employees from 20 city and suburban locations to the two properties in the next two years. This will put more feet on the streets, diners in restaurants, fans in the XL Center. It should help the market for downtown housing.

Filling two properties on the fringe of the downtown core lowers the vacancy rate and concentrates the remaining vacancies in the center, where, some real estate people believe, synergy and proximity can help fill them.

What could possibly go wrong?

Just this: The two buildings, now privately owned, generate about $2 million a year in property taxes. State buildings do not pay property taxes. The state has historically compensated towns for a large percentage of the lost tax revenue with a payment in lieu of taxes, known as PILOT. But Gov. Dannel P. Malloy has proposed eliminating the PILOT payment.

Hartford is battling to fill a projected $9.4 million shortfall in this year's budget and a $70 million deficit in next year's. It cannot take a $2 million hit.

Mr. Malloy and Mayor Pedro E. Segarra understand the problem and are looking for a way to compensate the city. Mr. Segarra wants a vibrant city with a healthy downtown density, and hopes to do more deals with the state.

That's the right idea. Reviving Connecticut's major cities is smart growth; it saves energy and cuts back on pollution, and it creates cultural and economic dynamism. Putting government workers, along with education and medical facilities, in downtown areas is a great revival strategy.

We just need a tax system that doesn't stand in the way.