Some Norwalk Council members to mall developer: Not so fast

NORWALK, Conn. – While it’s true that a SoNo mall would cost the city money, as would any development, there are Norwalk Common Council members who feel that General Growth Partners should pay its entire freight of taxes without the benefits of the existing Enterprise Zone for the property, Redevelopment Agency Executive Director Tim Sheehan said.

GGP would not pay taxes in its first two years, and only half in its third year under the existing Enterprise Zone, a state designation. But Sheehan said the Enterprise zone was extended to the 95/7 site as an incentive for Spinnaker Real Estate Partners to build office space there, as the market sagged. More than one Council members think a retail-dominated development should not be eligible for the Enterprise Zone, Sheehan said.

Nancy On Norwalk sent an email to all Council members and got three replies. Bruce Kimmel (D-At Large) said he has requested the Enterprise Zone be discussed at the Planning Committee’s March meeting; John Kydes (D-District C) said taking the Enterprise Zone off the property would be a betrayal of trust and Rich Bonenfant (R-At Large) characterized the sale of the land to GGP as a betrayal and said “the tax advantage and designation should be withdrawn as it was never intended to be sold and exploited for greater profit.”

A cost benefit analysis done by Urbanomics in September estimates that the mall would be a $2.7 million “cost burden” to the city in its first two years because no tax revenue would be generated. In the third year, paying half the taxes due on the property, Norwalk would still be $120,000 in the hole, the analysis estimates.

“Any new development comes at a cost. There is a cost on municipal services for any development, whether that be a residential subdivision, an office tower up at Merritt or this project … The objective ultimately is to have the city coming out ahead,” Sheehan said.

The state reimburses eligible towns for up to 50 percent of the revenue lost due to Enterprise Zone benefits, according to DECD’s website. In the fourth year, GGP would pay 60 percent of the tax owed, and it would go up 10 percent every year until GGP would pay the entire amount.

“The Council is willing to open up the LDA. They could put back, as part of their willingness to open up the LDA, the Enterprise Zone benefits and negotiate with the developer on the Enterprise Zone benefits,” Sheehan said.

Time for a history lesson.

“The 95/7 site was specifically excluded from the Enterprise Zone when the Enterprise Zone was formed,” Sheehan said. “The reason for that is the city wanted to derive the maximum tax benefit from the office development that was anticipated on the site. Then the project changes from primarily office to mixed use. Now we have 600,000 square feet of office space in a market that there is virtually no demand for 600,000 square feet of office and this is during the recession years.

“The council ultimately made the determination that as an enticement for a developer to build office they would incorporate the 95/7 site into the Enterprise Zone and they petitioned to the state,” Sheehan continued. “The state accepted that because it’s a contiguous area. So at the end of the day, some members of the Council see the intent of that to incorporate office development, not retail development.”

“At the last Planning Committee meeting, I requested that the enterprise zone issue be on the committee’s March agenda,” Kimmel said in an email. “After that discussion, I will make a decision regarding the Enterprise Zone. I will say, however, that in the short term some revenue is better than no revenue.”

“Removing the Enterprise Zone for 95/7 will send the message that Norwalk doesn’t honor its deals,” Kydes wrote. “The extra tax revenue would be great but not at the cost of Norwalk losing the ability to attract quality development.”

Norwalk has always met its end of the bargain for infrastructure improvements and other motivating benefits under the LDA, Bonenfant wrote, including road construction, sidewalks, utilities, drainage, zoning changes, street abandonment and the use of eminent domain to acquire properties.

Norwalk’s obligations under the LDA have been met in their entirety, Sheehan has said at multiple meetings. Norwalk is not obligated to do anything further.

“Currently there is a smaller representative core group of the approval bodies called the Joint Committee working towards an agreement that would favorable enough to pass through the full membership of all three parties,” Bonenfant wrote. “As a Council member who will have an opportunity to vote on the final package, here are four basic considerations I would hope that will be addressed.

1. Enterprise Zone: The City provided this designation several years ago as a requested tax incentive to get an approved project jump started as promised by Spinnaker. Nothing ever happened and the benefit was simply used as an asset that went with the property to boost the sales value in a real estate transaction. This tax advantage and designation should be withdrawn as it was never intended to be sold and exploited for greater profit.
2. Crescent Street abandonment: Based upon agreements, the City conveyed the road to the previous developer who then turned around and included it as part of the same sale. While it may be difficult to reacquire the road, at the very least the thoroughfare should be reopened for greater transportation connectivity, a concept that all parties have often mentioned as a priority consideration.
3. Current Tax Assessment Value: If a vacant lot can sell for $35 million, how much is that vacant lot worth? $35 million market value X 70% = $24.5 million in assessed value. Multiply that by the mill rate of 25.041 and we should be collecting $613,504 dollars annually because the Enterprise Zone’s tax formula reduction doesn’t start until construction commences.
4. Traffic Mitigation: The dilemma here is that in order for a mall to be successful, it will have to attract a huge amount of shoppers arriving in many thousands of additional vehicles on our roads. How will that impact the traffic flow in the surrounding area? Norwalk is unique in that there are only three ways within the urban core to cross the river that divides our city, the Stroffolino Bridge, I-95 and Wall Street. Will this traffic choke West Avenue completely or will non-shoppers look for other neighborhoods to cut through in order to avoid the mall area? If the traffic doesn’t flow smoothly past this section, shoppers won’t want to return to either, so GGP has a vested interest in solving this issue.

“The Joint Committee is a good mix of respected City officials and business leaders,” Bonenfant wrote. “Let’s see what they present to the community before we finalize our opinions on the developer’s design, but we must also solicit plenty of input from the public as we consider such an important project. Hopefully the City has learned some valuable lessons to take away for future endeavors. Let’s not convey land or benefits based on promises and paperwork. Make the arrangements contingent on actual construction before we give away our valuable assets.”