Council Committee Agrees To Compromise On Tax Break For Myrtle Street Housing Development
Incentive Drops From 26 To 13 Years In Amended Resolution That Goes To Common Council For Approval
By John McNamara
NEW BRITAIN- The Common Council’s Committee on Administration, Finance and Law (AFL) unanimously approved a “compromise” tax break at a January 4th meeting for Avon Towers LLC to develop 119 housing units at 480 Myrtle Street, the vacant office building that was once a part of The Stanley Works complex.
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The original resolution provided for a tax reduction agreement which limits real estate property taxes to “$550.00 per residential unit with annual real estate property tax increases of 2% for each succeeding
assessment date for a total term not to exceed twenty-six (26) years.”
The amended resolution, proposed by Alderwoman-at-Large Desiree Costa, cut the abatement agreement in half to 13 years while retaining the $550 per unit limit. It was unanimously sent to the January 11th Common Council meeting for final approval.
In making the amendment Costa said reducing the length of the abatement to 13 years is a fairer approach for “our own residents” while providing an incentive for development. Ward 3 Alderman Aram Ayalon seconded the amendment and Ward 5 Alderman Paul Catanzaro praised the compromise, saying that it “breaks the mold” from 26 to 13 years.
The 13-year property tax abatement period for Myrtle Street appears to alter a template used by the Stewart administration for other downtown developments. Several of Developer Avner Krohn’s JASKO Development projects in downtown have received tax reductions on new construction for 26 years in similar agreements that cap the amount to be levied on each housing unit. Krohn’s Main and Chestnut LLC, for example, was approved last September for a market-rate housing project dubbed “The Strand” at the site of the old movie theater on Main Street. That resolution “limits real estate property taxes to $550.00 per residential and/or commercial unit… with annual real estate property tax increases of 1% for each succeeding assessment date for a total term not to exceed twenty-six (26) years.”
Developer Amit Lakhotia, the principal of Avon Towers LLC, is proposing to convert the former Black & Decker office building into 119 units of market-rate housing as part of the revitalization of the Myrtle Street corridor. Lakhotia told the committee that a tax adjustment agreement is necessary to make the project viable under a “balanced arrangement.” He cited current interest rates at 7.5% and soaring construction costs headed into planned renovations, indicating he “will take 13 years” but would prefer15 years or longer in setting the terms for the abatement. “I’m taking a huge risk.”
“As far as I’m concerned we’re not losing money,” said Ward 5 Alderman Kris Rutkowski defending the 26-year term for a tax reduction that would turn an empty building into housing. “We have to give something to get something.”
Questioned by Alderman Ayalon, City Assessor Mike Konik provided assessment information and projections for the tax modification agreement noting that prospects for office rentals in the dormant building are extremely low.
If the tax modification is approved Avon Towers LLC would be paying $63,250 in a second year of full occupancy compared to a full rate of $398,475, according to data provided to the AFL Committee from Director of Planning and Development Services Director Jack Benjamin. An estimated $78,643 in real estate taxes would be due in the 13th year of the tax modification agreement or 16% of what would be due if there was no modification. With no tax modification real estate taxes are projected at $483,000 annually in the 13th year. Mill rates are subject to change every year. The current 49.5 mill rate is expected to be reduced in the next fiscal year because of higher assessments.
Current taxes on the property, acquired by Lakhotia last February, are $42,000 at the 49.5 mill rate with an additional $2,200 interest due on the 2022-2023 tax bill.
The project has been named “The Burritt” in honor of Elihu Burritt by Lakhotia and city officials consider it a key component of economic development in the Myrtle Street corridor where a jobs-producing fuel cell park, the razing of Mt. Pleasant public housing and state-funded infrastructure improvements are planned. The area has been designated an enterprise zone that allows for abatements and other developer benefits. Lakhotia is also the developer of the former American Saving Bank building in the downtown district where 80 housing units and mixed uses are proposed in a $17 million project. That project has received a $2 million state community challenge grant at the Main Street building formerly occupied by the banking data center. The state is providing $32 million in challenge grants in economically distressed communities.
