Image made on Canva.com, photo from Wikimedia
DERBY – City officials are talking about tweaking their tax incentive policy with the hope of “not giving away the store.”
The phrase was from Derby Town Clerk Marc Garofalo, one of several officials who offered opinions on the city’s tax incentive ordinance during an Aldermanic subcommittee meeting on the matter held on May 23.
Tax incentives, also called tax abatements (or tax breaks if you’re not into government jargon) are agreements meant to encourage real estate investment.
Example – a developer may arrive with a multi-million dollar project and ask the city to freeze his or her tax assessment for a number of years as the project gets off the ground.
Tax breaks are somewhat common in the lower Naugatuck Valley, where mill rates tend to be higher and properties – such as abandoned factories – are more expensive to develop.
The theory is that making it cheaper up front by freezing tax assessments and the like can help developers succeed.
Former Derby Mayor Rich Dziekan’s administration authored the city’s current tax incentive ordinance. Click here for a previous Valley Indy story and click here to read the ordinance.
That 2018 ordinance talks about using tax breaks to attract business and industry.
However, the city gave tax incentives to two residential projects: Trolley Point, currently under construction on Main Street, and Cedar Village, currently under construction on Minerva Street.
The discussion May 23 was about making sure the city focuses on giving tax incentives to projects that bring jobs and job growth, not necessarily housing; and that the city come up with a formal process to decide which projects get tax incentives and which do not.
Derby Corporation Counsel Richard J. Buturla said Seymour, where he is also the town lawyer, has an effective policy, one that has convinced major employers to stay in town and expand.
Buturla didn’t mention the company name but Connecticut Basement Systems and its affiliated businesses owned by Larry Janesky have all undergone major expansions in Seymour’s industrial park off Route 67. Thule is there, too.
Buturla suggested Derby take a look at Seymour’s tax incentive ordinance, a copy of which is available here
The lawyer also said that Seymour has a process in place where an application for a tax break is anaylzed by town staffers, who prepare an independent report for the town’s legislative body to vote on.
The idea in Seymour is to get all the facts on the table before voting yay or nay for a tax break.
That has not been done in Derby. Instead, prepared agreements between the city and the applicant have been put in front of the Aldermen/Alderwomen for approval without underlying data on job growth and grand list impact.
The discussion at the May 23 Aldermanic subcommittee meeting was led by Alderwoman Sarah Widomski. She brought along policies of other towns and cities, saying Derby should copy from them as needed.
Example: Widomski said other towns have language saying the tax incentive doesn’t take effect until the project is built, and that the developer has to pay taxes back if he or she moves out of the city or sells within a certain number of years.
Garofalo said the city might want to consider restricting the tax breaks to specific zoning districts in the city where they want to see development – or, in Derby’s case, redevelopment. He suggested the tax program not necessarily go to projects proposed for the south side of Main Street, because the city has done enough work over the years to get that area primed for development.
Alderman George Kurtyka suggested Derby Finance Director Brian Hall work with the corporation counsel and Derby Economic Development Director Roger Salway to come up with a revised ordinance for the subcommittee to study.
A draft could be reviewed at the next meeting of the subcommittee, formally called the Derby Finance and Public Safety Committee, scheduled for June 27.
The subcommittee could vote to send the revised ordinance to the full board of Aldermen/Alderwomen, whose members have the final say on whether to adopt.
