
A screen shot from a video showing AIEP opening its doors in Derby after spending more than \$1 million in renovations at 101 Marshall Lane.
The Derby Board of Aldermen and Alderwomen balked Thursday at giving a tax break to a new business, opting for a city lawyer to check out the deal one last time before voting.
At a meeting Dec. 13, the city’s lawmakers were considering giving AIEP, the company that converted the former Marshall Lane Manor nursing home into a dormitory for international private school students, an approximate $47,700 break on real estate taxes over three years.
But First Ward Alderwoman Barbara DeGennaro pointed out the renovation work was done before Derby created the tax incentive ordinance — and the ordinance clearly states the ordinance cannot be retroactive.
Carmen DiCenso, the city’s economic development liaison, pointed out the city always had AIEP in mind while creating the tax incentive program.
Charles Sampson, the Aldermanic president, suggested the board table the issue for a month so the city’s corporation counsel could have a closer look. The legislators agreed.
The Program
AIEP has spent $1.5 million in renovations on its 101 Marshall Lane property, and will possibly spend another $500,000 so that eventually 110 students can live there, according to the company’s application to the Derby tax incentive program.
Those kinds of improvements increase real estate assessments and tax bills. The Marshall Lane redevelopment is expected to increase Derby’s grand list by more than $1 million, according to the company.
The idea behind the city’s new tax incentive program is to phase-in taxes for large projects such as 101 Marshall Lane. The company would be paying its full real estate tax bill in year four.
Mayor Rich Dziekan’s administration set up a committee over the summer to create a tax incentive program for entities looking to invest in Derby, a community that placed fifth in the state’s annual list of economically distressed municipalities.
Click here to open a PDF report explaining how the state defines a distressed municipality.
The Committee members were told tax incentives can not only lure investors, but give business and companies a chance to truly succeed by giving them a temporary break on what they have to pay the local government.
Click here for a previous Valley Indy story on the tax incentive committee’s work.
Both DiCenso and Mayor Rich Dziekan have talked about tax incentives on podcasts with The Valley Indy, pointing out such programs are common and are a way to help Derby become more competitive with cities such as Shelton, Derby’s neighbor and lower Naugatuck Valley economic development engine.
It’s a way to transfer the “we’re business friendly” words use into action, Derby officials have said.
And Derby needs help.
The city’s bond rating was lowered in 2017 due to declining fiscal health, prompting elected officials to double down on growing the city’s grand list and stabilizing taxes.
The Board of Aldermen and Alderwomen adopted the program in October. Click this link, then scroll down to read the complete ordinance, which explains what types of projects qualify and the specific tax “abatements” offered.
DeGennaro’s Point
DeGennaro worried about the position the city could be in if lawmakers gave the benefit to a company that had done renovation work prior to the program’s existence.
She said the last line of the ordinance plainly reads “this ordinance is not retroactive.”
“My concern is that we passed this ordinance in October, at our meeting of Oct. 11. They started the work in March of 2018. I don’t believe that was the intent of some of the language here in the ordinance,” DeGennaro said.
The Alderwoman said she was worried other property owners who have done work in recent years could come forward and say “We’ve been renovating. We’ve spent this much,” and then ask for a tax break.
DeGennaro said based on how the tax-incentive ordinance is written, AIEP should be applying for the program based on future renovation work to be done, not what is already completed.
DiCenso’s Response
DiCenso, who chaired the tax incentive committee, disagreed.
AIEP was always meant to be the first project to benefit from a tax incentive program, DiCenso said. In fact, the company inquired to the city about whether a program existed, which became part of the city’s motivation to launch it, he said.
“We (the committee) discussed that we were going to start the program with (AIEP),” DiCenso said.
DeGennaro again warned about applying the tax incentive benefit retroactively.
“What’s to stop Lowes from coming in and saying we did this in the last year so we want money off our taxes?” DeGennaro asked.
Lowes is a home improvement store on New Haven Avenue in east Derby.
After a discussion that lasted about 7 minutes, Sampson made a motion to get a legal opinion on the matter, which the board supported.