Alders Cut Mill Rate, Reval Phase-In

Luxury developers and megalandlords won’t get as bountiful de facto taxpayer-funded tax breaks as originally planned — because an aldermanic committee endorsed an amended new city budget that drops the mill rate by over 9 percent and phases in the latest citywide revaluation over two years instead of five.

That was the outcome of Thursday night’s meeting of the Board of Alders Finance Committee. The meeting took place in person in the Aldermanic Chamber on the second floor of City Hall.

The committee voted all-but-unanimously in support of an amended version of Mayor Justin Elicker’s proposed $633 million general fund budget for Fiscal Year 2022 – 23 (FY23), with East Rock Alder Anna Festa casting the sole dissenting vote.

The amended budget now advances to the full Board of Alders for a final debate and vote on May 23. If adopted, it would go into effect on July 1.

The key amendment that the committee overwhelmingly endorsed Thursday night would leave the top-line operating budget number essentially untouched from what the mayor proposed back in March.

That means that, if approved by the full Board of Alders, the general fund would grow from $606 million to $633 million, or by around 4.42 percent.

The committee alders did, however, make proposed changes regarding how to get to $633 million in expenditures and revenues. 

Those changes included:

• Lowering the mill rate to 39.75. That’s 9.41 percent less than the current fiscal year’s mill rate of 43.88. It’s also a 3‑mill drop from the mayor’s FY23 proposed mill rate of 42.75. (The mill rate equals $1 in taxes owed for every $1,000 in assessed property value.)

• Phasing in the new 2021 revaluation property values over the next two years, rather than over the next five years, as the mayor had initially proposed. Since the latest citywide revaluation saw property values skyrocket by over 32 percent, the quicker two-year phase in — even at a lower mill rate of 39.75 — would result in an increase in revenue from local property taxes by $4,969,049 above what the mayor had proposed collecting next fiscal year, according to the committee. 

Under the Finance Committee-endorsed plan, a property owner who saw their property rise in assessed value by $50,000 during revaluation, for example, would owe property taxes next fiscal year as if their property had increased in value by $25,000, and off of a mill rate of 39.75. The remaining $25,000 reval-induced bump to their underlying assessed property value would then take effect the following fiscal year. That’s different from the mayor’s five-year phase-in plan, which would have seen that same property taxed next fiscal year as if its value had increased by $10,000, off of a mill rate of 42.75. The mayor has argued that his five-year version of the phase in plan would have been most beneficial to homeowners in areas like Newhallville and Fair Haven who saw their property values increase at a much steeper rate than the city average. (See more below for alders’ and the mayor’s comments on the phase in plan. And click here, here, here and here for previous Independent articles about the phase in plan.)

• Decreasing the contribution of federal American Rescue Plan Act (ARPA) aid to the general fund budget from the mayor’s proposal of $10 million to a Finance Committee proposed total of $5 million. That would free up $5 million of pandemic-relief ARPA aid for a future non-general-fund-balancing use. 

• Removing or cutting funding for 10 of the 25 new city jobs that the mayor had proposed including in the FY23 general fund budget. The new positions that the Finance Committee recommended axing include two new Livable City Initiative (LCI) neighborhood specialists, two new public health nurses, three new fire department captains, one new fire department lieutenant, a library technology supervisor, and a library personal computer technician. The committee recommended leaving in the budget a new chief technology officer, a new fire department mechanic, two new deputy directors for the Youth and Recreation Department, and a new chief civil engineer.

• Cutting the mayor’s proposed $5 million increase to the Board of Education budget by $500,000, bringing the general fund bump to the school system down to $4.5 million in total. The Board of Ed had originally requested a $9 million increase next fiscal year.

• Adding $1,206,687 to the city’s ​“expenditure reserve” budget line. That’s essentially a catch-all line item for the city and the alders to request transfers from and tap into if certain departments go over budget during the fiscal year. The mayor had proposed not putting any money in the budget’s expenditure reserve line for FY23. 

Putting New Tires On A Car W/ 100K Miles

In some ways, Finance Committee Chair and Westville Alder Adam Marchand said towards the end of Thursday’s two-hour-long meeting, this year’s budget process has been easier than in previous years. 

That’s because the city’s general fund has been ​“under less duress” thanks to a number of positive fiscal developments.

The state agreed to increase its annual municipal aid to New Haven by $49 million. Yale agreed to bump its annual voluntary contribution to the city by $10 million. 

And that’s not to mention the one-time $100 million-plus Covid-era bump from the feds, which — unlike the state and Yale money — does include limits on how that money can be spent.

“These are big game changers,” Marchand said. ​“Some members of the public are understandably asking: ​‘Where’s that money? And should we not return that to the taxpayers?’ ”

“Much of that money,” he continued, ​“was already spoken for the moment it was agreed to, in the form of rising structural costs.” 

Namely: Higher healthcare, pension, and debt service costs.

As for cutting 10 of the mayor’s proposed new positions and decreasing the mayor’s proposed bump to the Board of Ed, Marchand said, ​“This committee recognizes that we need to provide services to our residents. Bringing city staff levels up in a measured and cautious way is the right thing to do for our community.” 

He said that the plan endorsed by the committee is more ​“cautious” and ​“measured” than that first put forward by the mayor.

Board of Alders Majority Leader and Amity/Beaver Hills Alder Richard Furlow agreed. 

In response to Festa’s criticism that now is not the time to ​“grow government,” Furlow said, ​“I don’t think that we are growing government. I think: We’re not buying a new car. We’re putting new tires on a car that has 100,000 miles on it, and the treads are showing.”

He pointed to a proposed salary increase to a labor relations attorney position in the city corporation counsel’s office. The city has had trouble hiring for that position because the salary is relatively low, he said. Bumping up the salary to attract a qualified candidate to help lead union contract negotiations will only make city government work better.

“If we don’t fix these tires,” Furlow continued, ​“then we’re not going to be able to maintain government. And I think that’s what we’re doing with this budget.”

Festa explained her sole dissenting vote — against Thursday’s key amendment, as well as against the amended budget as a whole — as coming from a concern that local government is growing too much, too quickly at a time when New Haveners are having to ​“tighten our belts at home” because of rising costs across the board.

More city employees on the general fund payroll, she said, means higher pension and healthcare costs, a higher structural burden for future generations of taxpayers.

“We cannot afford to grow government,” she said throughout the night. ​“It’s not that we don’t want to see our departments get more help. It’s just that we can’t afford it.”

Ultimately, all of her colleagues on the Finance Committee disagreed — and voted to move forward with the amended budget.

Board of Alders President and West River Alder Tyisha Walker-Myers said that this amended budget does ​“take into consideration the residents” from the city’s most vulnerable neighborhoods. It does so by boosting funding for youth services, Sunday library hours, and the public school system.

2-Year Phase-In = "Reasonable Balance"

One of the few committee alders to discuss the merits of the amended two-year reval phase-in plan during Thursday’s committee meeting was Prospect Hill/Newhallville Alder Steve Winter.

“Some of the largest beneficiaries of the five-year phase in [proposed by the mayor] would be our largest real estate owners,” he said.

He referred to a New Haven Independent analysis that the various owners of such luxury apartment complexes like the Corsair, 360 State St., and the Winchester Lofts would reap de facto tax breaks worth hundreds of thousands of dollars under the mayor’s plan to phase in the revaluation over five years and slightly lower the mill rate to 42.75. The same would be true for megalandlords like Mandy Management.

That’s because, during the latest citywide revaluation, their properties increased in general at a faster rate than the total 36.5 percent jump to all taxable real estate assessed values in town. (The Independent used a hypothetical full-reval mill rate of 33.59 in that analysis. The Elicker Administration subsequently argued that a more accurate hypothetical full-reval mill rate would be 36.00. In that case, the five year-phase in/42.75 mill rate plan would have resulted in even larger de facto tax breaks for these luxury developers and megalandlords.)

Winter pointed out that ​“commercial real estate” — that is, residential buildings with five or more housing units — ​“had the highest increase of valuations” of any property category in the city, at around 55 percent.

“I think there’s a question of how will landlords react to this,” he said. ​“I think many landlords are likely to increase their rents with the revaluation” even if they do get a de facto tax break with a phase in. ​“No matter what the length of the phase in is, or if there is no phase in at all,” many landlords are likely going to hike rents.

And yet, Winter said, ​“we have many smaller property owners in the city who have also seen significant increases to property valuations. It’s important to provide some relief” to them, too.

He concluded that a two-year phase in at a 39.75 mill rate — rather than a five-year phase in at a 42.75 mill rate — strikes him as a ​“reasonable balance between those two interests, and it also reduces our reliance on American Rescue Plan funding” to help make up for phase-in-induced de facto losses to property tax revenue collection.

“I personally was really uncomfortable with using $10 million in federal grant money to balance the budget,” Winter said, ​“so we’ll have [$5 million of] those funds to hopefully make investments in other pressing priorities facing the city.”

Asked after the meeting about why he and Finance Committee Co-Chair Ron Hurt introduced the successful amendment that sped up the reval phase in from five years to two, Marchand said that the two-year proposal was the ​“best common ground” that emerged from alders’ discussions about how to handle skyrocketing property values.

He said that he too took into consideration the Independent’s analysis that the largest property owners in town stood to benefit the most from a five year phase in. But that was just one consideration among many, he said.

Another key consideration was finding a way to get a lower mill rate, he said. A quicker two-year phase in also allows for just that, with the mill rate in the amended budget dropping to 39.75 from the mayor’s proposal of 42.75.

Edgewood Alder and former Finance Committee Chair Evette Hamilton agreed during her brief remarks on the matter during Thursday’s committee meeting.

“The two-year phase in brings our mill rate down,” she said. ​“That’s of key importance for our residents.”

In an email press release sent out Friday morning about the Finance Committee-endorsed budget, Elicker doubled down on his rationale for proposing a five year phase in with a 42.75 mill rate without addressing the de facto subsidies for luxury developers and poverty megalandlords.

“After conducting the state required property revaluation we saw significant property value increases across much of the city,” the mayor is quoted as saying in that press release. ​“Some neighborhoods like Fair Haven, Newhallville and Dwight were hit particularly hard with some property values increasing more than 80 percent. I felt it not fair for these areas that saw dramatic property increases to experience such a significant jump in their taxes, so I proposed a five-year ​‘phase-in’ so people could ease into the new values and taxes. The Alders’ vote will implement the change over two years rather than five. As such, those areas of the city that saw a significant increase in values will see their taxes rise more dramatically over these next two years, instead of more slowly over five years. While ultimately the Alders and I may disagree about how quickly to phase in the increase, I think we all share the goal of balancing the City’s ability to provide quality services to residents with the taxes people pay. When you step back and compare this year’s budget to last year’s, the City is in a dramatically better situation because of increased funding we were able to secure from the State Payment In-Lieu of Taxes (PILOT) program and Yale University’s annual payments to the City.”