Groton seeks ‘seat at the table’ in awarding tax incentives
Groton is among a group of municipalities seeking a “seat at the table” and more reliable state funding for a program that grants tax incentives to businesses located in areas targeted for economic development.
The town is concerned that the state hasn’t been fully funding tax abatement reimbursements to municipalities under the state’s Enterprise Zone program — and wants a say in the process of awarding the incentives.
A proposed bill, approved last week by the General Assembly’s Finance, Revenue and Bonding Committee, would allow the municipal legislative bodies to vote to opt out of the Enterprise Zone program, though any opt-out wouldn’t affect businesses that already have been approved to receive the benefits.
“I’m very glad to see the bill make it out of committee with a strong showing of support,” Groton Town Manager John Burt said. “Passage of the bill would put more control in local hands, though the ideal would probably be to give us a seat in the current process and guarantee full reimbursement from the State.”
Burt said at this point he’d like to have the option of the town opting out of the state Enterprise Zone program, and if the legislation passes, the Town Council would take its time to look at the pros and cons of opting out. Before making a decision, he said the town wants to understand all the consequences and make sure it has appropriate tools in place to continue working with businesses to entice them to locate here or to help current businesses expand.
Groton is working on its own policy, currently in draft form, to establish set guidelines for negotiating incentives at the local level that would be both fair to the town and help the company locate here, Burt said. He said the town wants to have the policy in place whether or not it ends up opting out of the state program.
Connecticut started its Enterprise Zone program in 1982 in which companies “can receive tax incentives for developing properties in distressed areas,” according to the state Department of Economic and Community Development website. The DECD verifies whether companies are eligible to participate in the program or not, and once eligible, issues certificates of eligibility, spokesman Jim Watson said.
Groton joined the Enterprise Zone program in the 1990s, amid concerns over a downturn in the defense industry, according to The Day’s archives. Enterprise Zones cover a large swath of Groton’s downtown area and the city.
The state program, where the largest companies typically apply for benefits, offers an up to 80 percent five-year abatement on local real and personal property taxes for new or expanded manufacturing, research and warehousing uses within an Enterprise Zone, local officials said. Towns typically absorb half of the abatement and, when the program is fully funded, the state reimburses the other half. The program is intended to encourage development that wouldn’t happen without the incentives.
The bulk of Enterprise Zone tax abatements awarded in the 1990s and 2000s were related to expansion of Electric Boat and Pfizer, Groton Tax Assessor Mary Gardner said. The town went through a quieter period in which no abatements were awarded in fiscal years 2014, 2015 and 2016, but abatements were awarded for some projects in 2017 and 2018.
But the state has not always fully funded its share of reimbursements to towns, with Groton losing about 5,423,986 appropriated in fiscal year 2017, no funding appropriated in fiscal year 2018, and 51,797,043 in state reimbursement for a 39,518,955 unfunded by the state.
Burt, who also supported another proposed bill to require a review of state mandates, said the concern is that because the state hasn’t met its financial obligations to municipalities for mandated programs, municipalities had to either increase their tax rate or make cuts to services to make up the difference. Both options could have a negative impact on people deciding whether to move to the municipality or Connecticut as a whole.
Fixed assessment policy
Paige Bronk, Groton’s economic and community development manager, said Groton supports economic development, but there’s been no assurance to municipalities that they will receive reimbursement under the state program.
“We do believe in targeted and performance-based incentives to assist with development and growth, and I think most importantly we believe in partnerships,” Bronk said. He noted that Groton is one of the first communities in the state to implement Tax Increment Financing, and also has an economic assistance fund program.
Through its own policy, Bronk said the town essentially would control its own destiny and be able to manage and directly incentivize certain investments.
State statutes already enable municipalities to provide tax relief, with the state granting municipalities more flexibility three years ago. But the town didn’t have a formal road map that set parameters for awarding incentives, he said. The town is trying to become more targeted in how it promotes growth and development through tax relief, he said, and the new policy would create a structure to measure expectations for a project and its performance.
The policy, currently in draft form, would address new investments, such as an expansion of an existing business or development of land, or anything that would increase the town’s grand list. It focuses on a number of criteria and has tiers — for example, the town can weigh a project based on how many jobs it would create — enabling the town to better control how much relief it is granting to each project.
It also would open up the opportunity for more developers throughout most of Groton — including more small- to medium-sized investors — to potentially take advantage of incentives, Bronk said.
Ultimately, any agreements would have to be approved by the Town Council, he said.
With ongoing marketing and programs that have drawn interest in Groton from outside of the region, Bronk said advancing the policy would be the “next step” in ensuring Groton has solid programs for its investors and continues to maintain its business-friendly image.
Burt said the town is completing its final review of the draft policy, and it is expected to soon be presented to the Town Council. He said the policy is needed regardless of the outcome of the legislation, so Groton can have set guidelines for its local tax incentive programs, even those outside of the Enterprise Zones.
More flexibility for municipalities
The original purpose of the Enterprise Zone program was to help distressed municipalities with economic development, but Jim Bellano, the town of Windham’s director of economic development, said that if the state is not reimbursing the municipalities, the program puts them at a disadvantage.
While the ideal solution would be for the state to fully fund the program, Bellano said, the proposed legislation would allow towns to opt out of the Enterprise Zone program if the state isn’t paying. Towns then could opt back in if the state does have the money.
“It’s really about flexibility for the municipalities,” Bellano said. “If state aid is being cut across the board in a number of areas, we have to come up with solutions ourselves.”
Norwich Mayor Peter Nystrom said his city, where Enterprise Zones cover portions of downtown, Greeneville, Taftville and Thamesville, is not considering opting out of the program if the legislation passes.
New London Tax Assessor Paige Walton said her city still internally is reviewing all options concerning the proposed legislation.
In East Hartford, home to an Enterprise Zone since 1995, Mayor Marcia Leclerc said she has advocated for legislative changes that would allow municipalities to make their own decisions concerning the availability of Enterprise Zone benefits and worked closely with state Rep. Jason Rojas and the Connecticut Conference of Municipalities to draft portions of the proposed legislation.
“While, in the past, it has helped spur some development in East Hartford, it has become an economic burden,” Leclerc said of the Enterprise Zone.
She said that while in the past the state has reimbursed towns for up to half of the 80 percent abatement of real and personal property taxes for new or expanded manufacturing, research and warehousing uses, the state’s budgetary constraints have curtailed the funding.
“This puts a municipality in the untenable position of receiving only 20 percent of real and personal property taxes associated with new development in an Enterprise Zone for five years,” she said.
With the legislation allowing the town to opt out of provisions of the Enterprise Zone program, she said a “new business seeking future tax benefits could then work with a municipality and its legislative body on a case-by-case basis to determine what is best for the community and the business.”