A Mega Tax Increase For Hartford's Small Business May Go Ahead, As The Legislature Stalls.
June 21, 2007
By DANIEL D'AMBROSIO, Hartford Advocate Staff Writer
Let the fallout begin.
The regular session of the legislature has come and gone without a bill to help Hartford’s tax-beleaguered small businesses, and there’s no guarantee a special session this Friday or next will bring a rescue either.
Now some small businessmen, unsure what they’re going to do when their new, gigantic tax bills come due on July 1, are lashing out against a political system they believe has failed them.
The recently formed Hartford Small Business Alliance is contemplating a lawsuit against the city, based on the 2006 revaluation in which property taxes increased an average of 31 percent for many businesses and in some cases doubled.
The Alliance is also in feverish negotiations with the Chamber of Commerce, representing big business, and the city to package a last-minute tax deal to present to the legislature to spare them such a big tax increase, which would begin on July 1. Even if the deal comes together, it will require an amendment to get on the agenda for the special session.
Hartford Representative Art Feltman, who ironically was trying to help, has been singled out by small business as particularly traitorous because he earlier ditched a tax relief bill in favor of a bill to force quotas for minority hiring on the Metropolitan District Commission when it begins its $1.6 billion Clean Water Project next year.
Even though the switch came from the Hartford legislative delegation, and not Feltman alone, it may hurt his run for mayor, as well as his standing as a representative.
In an attempt at damage control, Feltman paid a surprise visit to a meeting of the Small Business Alliance Monday night and told them he’s on board with the new tax plan they’re formulating with the chamber.
“He started out by saying ‘I’m here to eat crow, I was wrong, I didn’t pay attention to you.’” said John Tornatore, owner of Gordon Bonnetti Florist. ”
As the Advocate reported in its June 7 issue, small businessmen like Tornatore are considering leaving the city after decades in business here. Tornatore’s tax bill went up 92 percent, from $9.600 last year to $18,400 this year.
An exodus of small businesses is not something Hartford can afford as it struggles to address the issues that have left the city one of the poorest in the nation.
“What’s the future of the city?” Tornatore asks. “The big boom never came, and it’s not coming so, let’s stop with that crap.” Tornatore says Hartford’s future depends on “the whole community working together.”
“The whole community is the churches, the people who live there and the businesses,” said Tornatore. “When you destroy any one part of that group, you’re destroying the community.”
Hartford’s tax crisis has been brewing for years. The city was supposed to complete a revaluation in 2004 but when it became clear homeowners would be hammered with tax increases of up to 70 percent, the legislature put together a deal that protected them with a cap and actually reduced taxes on big business.
That left small business to pick up the slack, but no one realized just how much slack that would end up being. On June 8, Mayor Eddie Perez and the City Council pushed through a last-minute measure that will “phase-in” the tax increases over five years.
But as Paul Mozzicatto, owner of Mozzicatto de Pasquale Bakery & Pastry Shop, points out, a 100 percent increase made in 20 percent increments yearly is still a doubling of taxes.
“It does buffer the problem but it doesn’t solve it,” Mozzicatto said. The phase-in may also be illegal, according to many observers including the state Office of Policy and Management. Owners of high-rise office buildings, slated for a 5.6 percent reduction in taxes, might decide to sue because their decrease would not be as large as it would have been without a phase-in.
It’s that inequity — big business paying less taxes while bakeries and flower shops pay more — that has many small business owners believing no one is looking out for them.
Feltman’s political problems with the small business leaders came in the closing days of the legislature. He was leading a last-ditch effort to pass a bill that would have capped property tax increases at 25 percent for 405 of the “most distressed” Hartford small businesses. The $2 million cost of the temporary fix would have been covered by a sixth-tenths of a mill increase in the tax rate.
(That bill was never popular with the Small Business Alliance however, which offered its own plan to cap the tax increase at 6 percent for all 1,472 of the city’s small businesses. To pay the $6.5 million cost of their plan, the alliance suggested all businesses, large and small, would pay an additional mill, raising $3.25 million, and the city would kick in $3.25 million. Hartford senators Eric Coleman and John Fonfara signed on to the alliance’s plan and promised to champion it in the Senate.)
Feltman believed as late as last Wednesday that his bill would succeed.
“We had gotten a lot of people on board with it,” he says.
Then House Speaker Carl Amann called Feltman to the rostrum and delivered an “unexpected body block from the sidelines,” according to Feltman.
Here’s what happened: In addition to the tax bill, Feltman was pushing for a bill that would impose minority hiring quotas on the MDC for its 15-year plan to fix Hartford’s decrepit sewer system, which annually dumps a billion gallons of raw sewage into the Connecticut River.
Now Amann gave Feltman an ultimatum: Choose one issue or the other.
“(Amann) told me that Hartford legislators had to choose between the MDC bill and the tax revaluation bill and that only if the minority hiring provision were stripped in the Senate from the MDC bill would the House consider the tax revaluation bill,” Feltman said.
Hartford legislators quickly made a decision to drop their revaluation bill, despite what Feltman described as “extreme pressure” to give up the quotas.
“We were very angry with the choice we were presented,” said Feltman. “One bill was being used to leverage the other. “
Although small businessmen didn’t like Feltman’s bill that much, some saw his choice to stick with the MDC bill instead of helping them out as the final nail in his political coffin.
Tornatore says he knows why Feltman tossed aside the revaluation bill in favor of the MDC bill.
“He thinks a few hundred jobs lost are nothing,” Tornatore said. “He has said explicitly he doesn’t care about businesses in Hartford because they’re not voters.”
When the City Council voted on June 8 with one abstention for a phase-in of tax increases over five years, it took what was probably the only course of action it had left to address the tax crisis.
“Since the State legislature did not approve a tax relief plan for Hartford small businesses, this phase-in will prevent a large shift in taxes to neighborhood small businesses,” said Perez.
Gregory W. Piecuch of O’Connell, Flaherty & Atmore, which has been retained by the Small Business Alliance for the tax fight, said the phase-in really isn’t much help at all. There are a couple of problems with the plan beyond its potential illegality, according to Piecuch.“We haven’t seen a single number from the mayor or city council about how (the phase-in) will impact small business owners,” Piecuch said.
And then there are those property values resulting from in-house assessments done by city Assessor Lawrence G. LaBarbera. Piecuch said the phase-in, while it may break down the impact over time “represents implementation of this revaluation our clients feel is flawed on its face.” Flawed as in way too high. Mozzicatto met with Perez this week to tell him small businessmen rejected his plan.
Instead, the Small Business Alliance and the chamber have tentatively agreed to a $6.5 million plan that will result in an average tax increase of 10 to 12 percent for all businesses. For the plan to work, the city will have to contribute $4.1 million, according to Tornatore.
“We’ll deal with the chamber and the legislature,” said Tornatore. “If the city wants to come along they need to step up soon.” But if the city doesn’t step up, the alliance already has 250 businesses signed up for a lawsuit.
“Our guys have maintained from the outset when this fell in their laps four weeks ago they believe the revaluation was fundamentally flawed and that some of these assessments are manifestly excessive,” said Piecuch. “Ultimately the case would be doing some discovery and demonstrating that to a judge.”