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Hartford Again Looking To Soften Tax Blow For Residents

The Hartford Courant

April 10, 2011

Five years ago, legislation was needed to prevent a massive tax increase for Hartford property owners. Here we go again. Legislators are again seeking a means to soften a blow that could mean a 100 percent tax increase for the city's residential taxpayers next year.

This isn't easy, because the city has the highest commercial tax rates in the state. That is an incentive for businesses to leave, just as a big jump in residential taxes would encourage residents to move out. The situation is likely to produce another band-aid, muddle-through compromise, but it should also lead to a serious examination of the state's heavy and archaic reliance on the property tax.

Public policy today should encourage the repopulation and revitalization of our cities, for many good reasons. But it doesn't work when cities with many expenses and little land — Hartford comprises 17.3 square miles, about half of which is off the grand list — have to rely so heavily on local property taxes. We need to finance our cities in a way that makes them attractive and competitive. The Hartford experience makes the point.

Homeowners Helped At Business' Expense

The city has been trying to help residential taxpayers for more than 30 years, with various forms of special treatment. In 1989, in an effort to stabilize residential properties, the state, at the city's behest, adopted a "cap/surcharge" system, that capped tax hikes on certain residential properties at 1.5 percent and paid for it with a surcharge on commercial taxpayers of up to 15 percent.

Officials hoped the cap/surcharge would spur homeownership in the city. It hasn't, but it has helped create a downtown office vacancy rate approaching 35 percent and been a disincentive to business development.

Business groups successfully argued for the end of the 15 percent surcharge in 2006. This is the final year of the surcharge's five-year phase-out. Property tax is a zero-sum game: If businesses have no surcharge next year, residential taxes will double to make up the difference.

So again, officials are scrambling to soften the blow. Of several proposals, the one that has emerged, from state Rep. Matthew Ritter, calls for a 3 percent cap on average property tax increases for residential properties and 5.25 percent for apartment buildings with four or more units each year for the next five years.

On the other hand, the MetroHartford Alliance, a business group, wants a five-year phase-in to a property-tax assessment ratio of 70 percent. In all other towns, property is assessed at 70 percent of fair market value for taxation. The cap/surcharge legislation allowed Hartford to assess residential property at a much lower rate; this year at 26.7 percent for residences and 37.6 percent for apartments, said city assessor Larry LaBarbera.

There should be some kind of phase-in. Also, the Ritter bill is right to call for a higher tax rate for apartments; there's no compelling reason apartments should get preferential treatment over other kinds of businesses. Some say it could lead to rent increases for tenants, but a 2007 property tax task force studied the issue and concluded that rent increases would not be significant.

City Hall's Big Appetite

But ultimately, Hartford should use the same tax system as the rest of the state. There's an argument that the surcharge has insulated residents from city hall's appetite for spending, which drove the budget from $422.4 million in 2002-03 to $544.4 million in the current fiscal year. Attentive taxpayers can help the city discover fiscal discipline, an absolute necessity.

But the state must take a long look at improving the property tax system. Cities bear many of the burdens of their regions and need the resources to deal with them.

Perhaps, as Harvard economist Edward Glaeser has suggested, the federal government should pay more of the cost of social services. In any event there should be incentives, not disincentives, to locate businesses in cities and help grow their grand lists.

Gov. Dannel P. Malloy, a former big-city mayor, said in a recent interview that he wants to look at the property tax system when the state budget is finished. We strongly encourage him to do so.