Paul Bass Photo
360 State’s Becker & Hatcher huddled before Tuesday’s vote …
… as did City Hall’s Matt Smith and Victor Bolden.
Owners of New Haven’s tallest apartment tower wanted a public discussion about a 400-percent election-year tax hike they got slammed with. Instead, after a new 11th-hour lawsuit threat, city lawmakers handed them a summary repudiation.
That happened, in a matter of minutes, at City Hall Tuesday night.
It happened at meeting of the Board of Aldermen. The aldermen voted unanimously to ditch a bill to “fix” an eye-popping tax assessment received by the owners of the new 32-story 360 State Street apartment tower.
Even the alderman who proposed the “fix” voted to kill it.
360 State had sought a vote by the aldermen to resolve a dispute between the building’s owners and the DeStefano administration over the tower’s tax assessment. When the city administration originally drew up the deal with 360 State and shepherded it through public approvals, it estimated that 360 State would pay $1.4 million a year in taxes after a five-year phase-in. Then, last fall, 360 State got socked with the bill—and it came out almost four times as high, at $5.7 million a year. The subsequent failure to negotiate a resolution came during a heated mayoral campaign. In that campaign, 360 State developer and architect Bruce Becker broke two unspoken New Haven political rules: Unlike other top developers and corporate leaders in town or contractors who do business with local government, he didn’t contribute money to the mayor’s reelection campaign or bundle contributions from relatives or coworkers. And he resisted a personal demand from the mayor that 360 State’s new food market accept a union without an election. Rather than work out differences behind closed doors, the two sides went to war, Mayor John DeStefano on the hustings, 360 State in court with a legal appeal of its assessment.
360 State owners had hoped to avoid a drawn-out court fight over the assessment by having the aldermen vote to “fix” the building’s phased-in taxes at $1.4 million.
But the aldermanic majority concluded it was unfair to bail out a developer unhappy with his tax bill when so many other everyday homeowners upset about their own new tax bills. So Tuesday night the board voted to “discharge” the proposal from committee without coming up for a vote.
Despite a marked dearth of debate, Tuesday’s vote still raised questions about what it means to give prospective city developers “predictability” when they consider doing business in New Haven.
It also proved a moment of truth of sorts for the labor-backed majority that took over the Board of Aldermen this year. Critics of that majority (including commenters in the Independent) suggested that the majority would side with 360 State — because a union pension fund-backed outfit called Multi-Employer Property Trust (MEPT) owns the building. Instead, the majority took a stand against a developer looking for tax help from the city.
Not that the aldermen said that Tuesday night.
Before Tuesday’s meeting a 360 State representative threatened to sue the city if the aldermen proceeded with voting to kill the proposal.
So at least some aldermen with strong feelings about the broader issues — whether city government treated 360 State unfairly — made a point of keeping those feelings to themselves.
They did so on “the advice of counsel,” said one alderman — who asked not to be named.
A labor-backed alderwoman who played a key role in killing the bill, East Rock’s Jessica Holmes, made a point of not not taking a stand on those larger issues when she spoke from the floor.
Twice she made a point of stating on the record that the aldermen’s vote should “in no way” be interpreted “to mean the city is not interested in a negotiation solution” to the dispute between 360 State and the city.
“It doesn’t belong in the [aldermanic] committee process,” Holmes said of the dispute: It belongs in Connecticut Superior Court.
Threat Letter
An email to Mayor John DeStefano and aldermanic President Jorge Perez Monday set the stage for Tuesday night’s truncated discussion.
The email came from David L. Antonelli, MEPT’s executive vice-president for portfolio management.
Antonelli wrote that MEPT “does not wish” to sue the city for damages for breach of contract. Then he vowed to file such a suit (a separate suit from the already-filed court challenge to the raised assessment) — if the aldermen vote to ditch the proposed legislative “fix.”
He wrote that MEPT “is poised to engage McCarter & English and two of their top lawyers, Tim Fisher and Thomas Finn, to review the various types and grounds for civil, contract and other claims and how they would approach these claims. We hope the Board of Aldermen decides to continue consideration of the legislation so that protracted litigation can be avoided.”
“The City’s actions, in assessing the property at an irrational and unsustainable level, have decimated the property’s value. As a result, MEPT’s investment is now both economically impaired, by tens of millions of dollars, and illiquid. The only way to restore value and liquidity is through predictability in the form of a long-term tax agreement, which only the Board of Aldermen can provide,” Antonelli wrote.
Instead of cowing the aldermen into approving the “fix,” the letter may have helped limit the public discussion as the aldermen backed away.
“Whenever the city is in legal proceedings, we have to be cautious about what we say so don’t get the city in legal trouble,” East Rock Justin Elicker explained after the meeting.
In the email and in other forums, 360 State’s MEPT has argued that the city promised in its original legal development agreement to “‘work with’ [the] Developer to support applications made for approvals by the Board of Aldermen.” That should include Tuesday night’s vote, Antonelli argued in the email.
Not so, city Corporation Counsel Victor Bolden argued in a legal memo released Tuesday. That section of the agreement referred to approvals related to getting the necessary approvals for 360 State to be built, such as zoning OKs, he argued. Bolden also assured aldermen in his opinion that they wouldn’t get in legal trouble by voting to kill the proposal. “Actions taken by the BOA within its legislative discretion and consistent with its legislative duty are entitled to immunity” under state law, Bolden wrote. (Click here to read Bolden’s memo. Click here to read MEPT’s arguments posted on a website 360 State put together in advance of Tuesday vote; the website includes the above video.)
Another concern of the aldermen: MEPT was arguing for a four-decade guarantee. “They’re asking us to approve a 40-year tax deal. We don’t like that,” one alderman, requesting anonymity, said before the vote.
MEPT spokeswoman Tilly Hatcher responded that that 40-year proposal, along with other ideas suggested by 360 State, were meant as suggestions to discussed by the parties. “We can’t get anyone to sit down with us,” she said.
She and 360 State’s Bruce Becker expressed frustration at the idea of a protracted court battle. City government and the developer should be able to negotiate a resolution to this conflict the way they resolved issues earlier in the development process, the way City Hall negotiates resolutions with other developers. They disagreed with aldermen who argued that the developer should go to court the way others dissatisfied with their tax assessments go to court, that offering a tax deal instead would set a “dangerous precedent.”
Asked after the vote if MEPT will proceed with the threatened lawsuit against the city for breach of contract, Hatcher responded, “It’s too soon to say.”
Define “Predictability”
Alderman Hausladen after voting against his own proposal.
360 State’s owners continued to argue this week that the city set a dangerous precedent of its own by taxing a developer at four times the rate it projected. The owners acknowledge that the city never made a legal promise to tax at the lower rate, that it never signed an agreement to that effect, that it was only making projections. But such a wild difference between projection and tax bill sends a chilling message to people considering doing business with the city. Developers need “predictability,” they argued.
In the one millisecond of formal discussion of the larger issues in the case on the floor Tuesday night, Alderman Elicker suggested that the vote to kill the “fix” actually “adds predictability for developers” by removing politics from the process of adjudicating tax disputes.
That argument didn’t impress developer Becker. “No one wants to go to court,” he said after the vote and referring to Elicker’s argument. “What does this help developer predict? That they have to go to court?”
Downtown Alderman Doug Hausladen saw the issue Becker’s way. He introduced the bill for a “fix” that got killed Tuesday night. (Technically Tuesday’s vote concerned two related bills, one authored by Hausladen, one introduced by 360 State’s local attorney, power lawyer and former state Senator Anthony Avallone.) “We’re never going to get another project financed in New Haven” if the 400 percent assessment leap remains, Hausladen continued to argue after the vote.
And yet … Hausladen joined the majority in voting to kill his proposed fix.
Why?
Hausladen responded that he had originally introduced the bill in order to start a discussion.
Tuesday night’s vote “sent a very clear signal that [this] should be handled in the courts,” he said. “This doesn’t threaten any dialogues from going on behind closed doors. I wanted us to talk about it. I wanted us to debate it.”
During the formal debate before Tuesday night’s vote, Hausladen, like most aldermen, refrained from speaking.