June 9, 2007
By DANIEL E. GOREN, Courant Staff Writer
In an effort to blunt the impact of the 2006 property revaluation on small businesses, Hartford's city council approved Friday a phase-in of drastic tax increases over the next five years.
The council and Mayor Eddie A. Perez also moved to form a task force to study long term solutions to the city's property tax predicament.
"This is our short-term solution for this year because there are no other solutions out there at this point," Council President John Bazzano said Friday. "We have to act now and do what we can to help small businesses."
The tax problem for small businesses stems from a 2006 revaluation of Hartford property that saw values skyrocket, primarily for residential property owners. But subsequent state legislation designed to protect homeowners had largely unanticipated consequences to small businesses, throwing many mom-and-pop shops into a fiscal crisis. Some would have had their tax bills triple.
The council's latest plan to phase in the tax increases over five years comes after the state legislature failed to resolve the problem during its regular session. Local officials were left trying to find relief for thousands of local business owners, some of whom faced potentially door-shutting tax bills.
Perez applauded the council's actions Friday, saying it was the best possible resolution given the lack of alternatives provided by the state.
"Our small-business community plays a vital role in Hartford's economic revitalization," he said in a press release. "The uniqueness of these shops helps provide and sustain the character and diversity of all of our neighborhoods. By working together, city council members and I devised a local option to keep these businesses strong."
The phase-in plan would not stop the tax increases altogether but delays their impact on small businesses by spreading them out over five years.
For example, a property with an old assessment of $100,000 and a new assessment of $200,000 would instead have its assessment increase for tax purposes by $20,000 a year for five years.
Similarly, any business that has a decrease in its tax bill would have that decrease spread out over the same period. Some of Hartford's larger businesses that expected big reductions in their tax bill this year will now see less of a reduction, city officials said.
And because the 2006 revaluation will be rolled out over five years, the city must alter its tax rate this year to raise the money required to fund its $511 million budget, officials said. The city council plans to adopt a new tax rate of 63.39 mills, up from 58.55, but first must have a public hearing on the matter.
City lawyers say they believe existing state law allows the phase-in of the revaluation, but not everyone believes the city's latest plan will be considered legal by state budget authorities.
State Sen. John Fonfara, D-Hartford, said Thursday that he believed the phase-in to be illegal. R. Nelson "Oz" Griebel, head of the MetroHartford Alliance regional chamber of commerce, agreed. And on Friday, City Councilman Kenneth Kennedy, who is also a state assistant attorney general, abstained from voting on the city's plan, citing concerns about the move's legality.
"I think this is the best possible solution at this time," Kennedy said Friday. "It is creative, and I hope the state allows it to stand. But I would have liked to have seen a legal opinion from the state before we acted."
Kennedy said he fears the state could decide the city has acted illegally and force it to pay substantial fines.
It is unclear whether the issue will be brought up again during the legislature's special session, but city officials said it is still possible for the legislature to find additional relief for the city's small business owners.
Reprinted with permission of the Hartford Courant.
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