I live in small city within commuting distance of New York City. For the 32 years I've been here, there has been a 4.3 acre hole-in-the-ground within about 1/4 mile of the city's "100% location." It is surrounded by a chain link fence, and bordered by a shopping mall, a hotel, some apartments and some office buildings. It is within walking distance of a major railroad station and two interstate highway exits. It is even identified in the city's assessment database as the hole in the ground. It has weed trees and concrete-lined puddles. I seem to recall that at least one person has drowned when their car ended up in deep water on the property.
When I moved here, the tallest building in town was 22 stories. Today, the tallest building is still that 22-story office building. It sits a bit to the north of the geographic center of downtown. We currently have under construction a 37-story luxury condo complex ... on 1/2 acre at the northwest corner of the downtown ... and a 39-story hotel and condo complex on 3 acres, solidly in the downtown area and close to the highway and railroad.
Today's local paper announces that a few doors north of the 37-story needle, a local church is proposing building a 27 story building on part of its 2.9 acre property, to provide 300 or so apartments.
It seems a shame for the downtown area to be sprawling north, while prime downtown land -- the hole in the ground and several other long-vacant lots -- sit undeveloped. What is the owner of the hole -- whose address is in Manhattan -- waiting for? The land was cleared for "urban renewal" in the 60s or early 70s, and yet it sits.
I wish we had the option of tweaking the local property tax, as they do in Pennsylvania. Were we to divorce the two parts of the property tax ... the tax on land value and the tax on buildings ... we could begin to increase the tax on land value and lower the tax rate on buildings. I can't see any downside to such a reform.
- it would avoid penalizing those who currently put their lots to good use
- it would nudge the owners of properties like the "hole in the ground" to stop sitting and waiting, with a "for sale" sign on the chainlink fence. If their property tax began to approach that of the similarly sized lot across the street that has a 12-story hotel, they would probably lower their asking price, and that 4.3 acre parcel would get put to use. Housing? Retail (that's enough room for a badly-needed grocery store on the street level, though the existing grocery store owners would not be thrilled, and have previously moved to prevent others from serving our city)
- it would put existing infrastructure to better use, rather than producing a need for more infrastructure further from the central business district
- it would produce housing which the town seriously needs, in a location from which people could walk or hop a bus to get to the railroad or to shopping
- it would produce more venues downtown for those who want to open a business but require a site with foot traffic.
- it would create more density downtown, and make more regular bus transportation realistic, which would meet the needs of many downtown residents and commuters
- it would encourage the redevelopment of the portions of downtown which are still sporting 2-story 1940s retail buildings.
- it would slow the sprawl that is taking place within our borders, which occurs because downtown sites feature high asking prices. Instead of being forced to the edges of the commercial area, commercial tenants would have multiple options downtown.
Currently, the millage rate locally is 28.53 mills, or $28.53 per $1000 of assessed value. Assessments in Connecticut are defined as 70% of market value. (Why? It seems like a silly complication.) However, the current assessments are a strange amalgam of a valuation based in 1999 and another based in 2006, weighted 80% to the 1999 value and 20% to the 2006 value. This is a "phase-in" of the 2006 valuation, intended to reduce the pain for those whose property valuations rose significantly (never mind the pain caused to those who were already paying more than their share).
For example, a downtown property currently on the market is 3.18
acres. It has a 3-story 26 year-old building on it, which is expected
to be torn down in order to redevelop the site. Here are the
valuations:
Land Building Outbuilding Extra Features Total Divided by .7
10/1/2007 26,076,530 4,362,250 0 77,280 30,516,060 43,594,371
10/1/2006 8,461,080 2,399,690 0 77,280 10,938,050 15,625,785
Phase-in value (80% of 1999 plus 20% of 2006) 7,796,642 11,138,060
Previous (1999) 7,011,290 10,016,000
Tax $222,438 - based on Phase-in valuation, and 28.53 mills : 1.997% of the so-called "market value"
Tax $222,438, as percent of 2007 market value: 0.51% of market value
Since the Grand List has not yet been finalized (people are still
appealing their valuations), I can't estimate what the taxes on that
property will be. And I suspect that this new valuation might get
phased in, too, further delaying the pain for the property owner (and
prolonging it for some others).
One might wonder why Central Business District property values have risen so quickly. In previous valuations, they have been quite low. My guess is that our assessor has avoided valuing commercial property, particularly that owned by large corporations with large legal staffs, at its full value in order to avoid the time sink involved in defending lawsuits. Well, in the past few years there have been a number of large transactions involving commercial property for very significant prices. This led to a reassessment with a focus on commercial property. The new valuation matches the transactions a lot better than previous valuations have, but still tends to underweight the land and overweight the buildings.
Ah -- this sent me off on a bit of a chase through the assessment database. Here are the assessments on 6 neighboring lots, about 3 blocks from the teardown detailed above: a newly redeveloped portion of the mall (NW corner, across from Hole); the hole in the ground, which actually consists of two parcels, one 3.86 and the other 0.46 acres (NE corner); a large hotel (SE corner); and the land under an office building (SW corner, across from the mall); the office building on that land; and another office building just east of the hotel, across the street from the Hole.
1. Mall (partial) 3.08 acres 20,167,640 12,955,660 0 720,900 33,844,200
2. Hole, parcel 1 3.86 acres 31,989,410 0 0 0 31,989,410
Hole, parcel 2 .46 acre 1,510,630 0 0 0 1,510,630
3. 305 room hotel 3.57 acres 29,464,760 15,391,510 27,480 215,290 45,099,040
4. land for office bldg 5.18 acres 43,656,510 0 0 0 43,656,510
5. building 5.18A 0 0 125,371,320 0 19,043,470 144,414,790
6. 15-story office 4.13 acres 37,840,310 54,100,750 0 408,600 92,349,720
(The $19 million is a parking garage! I found one other $17 million parking garage in town - 630,000 sf, compared to this one's 577,000 sf.)
It appears that the "hole in the ground" has received a rather low valuation, considering the surrounding properties. It also seems strange that the mall lot and the "hole" are valued as low as they are, given the valuations on the land under the nearby office buildings.
Looking just at those properties, it is interesting to think about what would happen if we started taxing the land at a higher millage rate and lowering the millage rate on buildings so as to stay revenue neutral. Since I don't know the balance of land and buildings for the city as a whole, I can only guess at what reduction on buildings would balance a, say, 10% increase in the millage rate on land. But looking at those 7 properties, I'm reluctant to continue to penalize those which are creating jobs and providing customers to neighboring businesses, and provide a free ride to those who leave choice land undeveloped decade after decade. I'd rather derive more of our tax revenue from the unused land and less from the buildings.
I look forward to Connecticut moving forward on the enabling legislation for taxing land and buildings at different millage rates. My city and many others would benefit from applying this tool.
I'm sure this topic will come up again ...
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