Delegation Split On Mayor’s Reval Fix

The mayor’s request to state lawmakers to save East Rock homeowners from ​“sticker shock” arrived so late that it missed deadlines at the state Capitol — and he still needs to get New Haven’s own legislators on board to make the special effort needed to pass it.

Mayor John DeStefano’s request, dubbed the ​“Homeowners Fairness Initiative,” calls on the state to pass legislation to soften the blow of a property tax revaluation by phasing in the new values over five years. The phase-in would kick in not for every property, but only for owner-occupied homes that saw an increase in value.

All other property owners would see full implementation of their revaluation, which means a smaller decrease in tax bills — or in some cases, a bigger increase — compared to fully implementing the revaluation.

The idea is to protect homeowners, mostly in East Rock, who would otherwise see tax bills rise as much as $10,000 this year.

DeStefano unveiled the proposal on Feb. 27, 20 days into the three-month legislative session. He incorporated it as a major assumption in his selling the idea to taxpayers across the city. (Click here to view his PowerPoint presentation.)

Now the proposal sits in the hands of the eight lawmakers who represent New Haven at the state Capitol.

One of them, state Rep. Bob Megna, sent an email to his colleagues on March 1 calling the tax ​“fairness” proposal ​“unfair” and problematic.

The plan is ​“possibly unconstitutional,” he argued, and ​“will cause an increase in rents to the most vulnerable people in our city and place a burden on the many small businesses the lease or rent space.”

He explained his reasoning in interviews last week — and added that the proposal came so late in the session that it would have to be rushed through committees without a public hearing.

Megna’s main problem with the plan, he said, is that when you give a tax break to owner-occupied homes, that burden shifts to other taxpayers — those who rent out properties and own small businesses, as well as those who own cars or rent apartments.

“While revaluation is a shocker,” he wrote in his email, ​“it is really the fairest way” to ensure all taxpayers pay their fair share.

A partial phase-in would subvert that fairness and ​“undermines” state law. He called the proposal ​“very odd.”

The plan may send relief to some homeowners, he said. But ​“remember that this request is also to raise people’s taxes above and beyond what the statute requires.”

For example, take the Taft Apartments, high-end rentals in the former Taft Hotel at Chapel and College streets.

The building owner currently pays $419,105 in local property tax. If the revaluation is implemented immediately next year for all taxpayers, the owner would pay $500,438 next fiscal year, according to figures provided by the city.

Under the mayor’s ​“fairness” initiative, the bill would rise to $520,990 — an increase of over $20,000.

The increase comes because the city would have to raise the tax rate from 38.96 mills (that’s $38.96 per $1,000 in assessed value) to 40.56 mills to compensate for the tax breaks for the owner-occupied homes.

Megna said the question then becomes, in this case and at other apartment complexes: Will the owner pass along the extra tax burden to renters?

City spokeswoman Elizabeth Benton countered that rent wouldn’t necessarily rise, because landlords tend to charge as much rent as the market can support, regardless of the tax bill in a given year.

A request for comment left at the Taft was not returned.

Megna said he’s also concerned about commercial properties, which would see a higher property bill under the mayor’s proposal.

For example, take Carter Winstanley’s biotech building at 300 George St. Winstanley Enterprises currently pays $1,668,400 in taxes there. With full implementation of the revaluation, the bill would climb to $2,102,728.

Winstanley would pay an extra $86,000 under DeStefano’s ​“fairness” initiative, bringing the bill to $2,189,083.

Winstanley couldn’t be reached for comment to say whether he’d hike up the leases on tenants in line with the tax bill growth.

Steeper tax bills at commercial buildings often hit small businesses that rent there, Megna argued. That’s especially the case if the businesses have a ​“triple-net” lease, where the cost of the lease is contingent on property taxes and operating costs.

“Bob Megna is correct,” responded DeStefano in an emailed statement Friday. ​“The Homeowner Fairness Initiative acknowledges that the commercial markets in New Haven have done very well even while hundreds of homeowners are facing dramatic increases in their property taxes.”

He said many of the affected taxpayers ​“have lived in their home for decades, are on fixed incomes and have little disposable income.”

The tax relief plan is ​“not a perfect proposal,” DeStefano said, but ​“the best proposal” to address taxpayers’ ​“sticker shock.”

The tax plan is aimed toward the 28 percent of owner-occupied homes that saw an increase from 2010 values to 2011 values at full implementation. Some were staring at tax hikes of as much as $10,000. With the lower mill rate and the mayor’s fairness initiative, many in this group would not see a tax hike at all, City Hall’s Benton said.

The city estimates there are 16,235 owner-occupied homes in New Haven, Benton said. That’s based on the number of taxpayers whose home address matches the billing address. There are another 4,557 residential properties that don’t appear to be owner-occupied, Benton said. (She stressed that’s an early estimate; the city will use a different method to determine owner-occupation if the bill gets passed.)

There are 2,895 commercial properties in the city — all of which would see a diminished benefit due to the mayor’s proposal. They would be the main winners if the revaluation is fully implemented, Benton said.

The difference between a full revaluation and the mayor’s proposal comes down to about 2 mills, or $2 per $1,000 in assessed property value.

Benton said in the wake of the latest revaluation, the city heard the most concern from people who live in homes they own.

“What we tried to do was strike a balance — help the people who we felt really needed assistance, without overburdening” the rest.

Megna stopped short of saying he’d oppose the bill.

“I’m open to supporting it,” he said, but he’d like to see a breakdown of how the non-owner-occupied homes and businesses would be affected. ​“There’s just so many unanswered questions.”

“It’s such a unique thing to do, shifting tax burdens like that — it’s almost like the city of New Haven has become an independent state and they’re creating their own statute.”

In addition to his reservations about the merits of the proposal, he raised questions about the timing.

Mayor DeStefano floated the idea of homeowner tax relief months ago, but in his legislative agenda, he didn’t outline a specific solution to the sticker shock.

The proposal came on Feb. 27, two weeks too late to be raised as its own bill in legislative committees.

New Haven lawmakers still haven’t figured out where they stand on the bill as a group. They’re set to meet on the topic Friday.

New Haven’s lucky in that it has legislators in high-powered spots who can make things happen even if a deadline has passed.

State Sen. Toni Harp (pictured), one of the state’s most powerful legislators, echoed Megna’s concerns.

“At first blush, I thought, ​‘Oh, gee, that this isn’t so bad because we want to encourage owner-occupancy in our town,’” Harp, who co-chairs the legislature’s Appropriations Committee, recalled in a conversation Monday. ​“But then, as I’ve been talking to some of our colleagues,” she concluded that ​“it may drive up the cost of rental units” and ​“it may make some commercial landlords lose tenants.”

“When I began to hear that there may be there ramifications,” she said, she began to ​“have some concerns.”

She said she looks forward to meeting with DeStefano Friday: ​“This way at least we can hear from him on what his rationale is.”

State Sen. Martin Looney, the senate majority leader, said the proposal came ​“rather late” in the session. He saw proposed language for the bill for the first time two weeks ago.

He called the proposal a ​“mixed bag.” ​“It does have some merits to cushion what would otherwise be a severe blow to certain parts of the city — but other parts of the city won’t see the benefit of the adjustment as quickly.”

“I am certainly open to it,” he said, and ​“certainly concerned” about the potential blow the revaluation will have on parts of the city, including East Rock, which he represents.

If the delegation is behind the bill, Looney said, they’d have to find a way to turn it into law.

Because deadlines have passed, ​“it’s past the point where it could be its own bill.” Lawmakers would have to tack it onto another bill, or replace the language in an existing bill.

The bill would likely need approval both by the Finance and Planning and Development committees, he said.

Looney said he knows of no other towns or cities asking for this type of phase-in this year.

Megna called the timing problematic.

“It’s absolutely too late to put it up for public debate,” he said, because of the timing crunch in the short, three-month session. He scored the mayor for making a ​“massive, massive assumption” in his budget without first consulting with the delegation.

The mayor is ​“assuming that the delegation will change state statute without public debate.”

Benton said the idea didn’t come as a surprise — ​“The Homeowner Fairness Initiative was developed after eight public meetings with the mayor throughout the city, consultation with elected officials, and a thorough and responsible review of the options available.”

Looney called the plan ​“still in the exploratory phase — we’ll certainly look at this proposal and look at whether on balance, it’s better.”

State Rep. Roland Lemar, whose district includes East Rock, stood firmly behind DeStefano’s plans.

Lemar said the details of the plan should be left to the Board of Aldermen and mayor to decide. Once they have settled on a local solution, he said, his role is not to debate the merits of the plan — but to ensure that the solution gets approved.

New Haven is hamstrung by a ​“destructive” tax model that penalizes urban areas through over-reliance on property tax, he argued.

“If any community wants to develop a program to protect its homeowners, it should be allowed to do that,” he said.

“It is going to be a struggle to get this done in a very short window,” he acknowledged. But ​“if the city’s got a local solution in mind, I’m going to fight for it.”

Benton was asked what the city plans to do if the bill doesn’t get passed.

“There is no Plan B at this point,” she said. ​“We’d have to have another series of conversations to see what makes the most sense.”