River Bank Construction Seeking Tax Abatement For Fort Trumbull Project

River Bank Construction of Westport has formally requested a tax abatement on its to four lots at the Fort Trumbull peninsula.

The company, which is under contract with the New London Development Corporation for the development, suggests that there is a need for an increased population of residents with disposable income to help revitalize the city. In a 27-page summary presented to the City Council, it says the current real estate market and need to set competitive rates necessitate a property tax exemption in the early years of the project in order to attract renters and buyers.

The item, referring the proposal to the Economic Development Committee, was among those on the council agenda accepted by a roll call vote.

River Bank has proposed building 80 Italianate and Greek Revival homes at the site, and is waiting on word from the Connecticut Department of Economic and Community Development and Department of Environmental Protection on whether the number can be expanded to 104. It plans to begin work on the “Village on the Thames” after making the necessary application to the Planning and Zoning Commission.

The proposal says that while some units may be sold at the outset, the condominium market is depressed and the plan is to rent the townhouses for a period of five years with sales taking place during a market recovery. The company says that this plan requires it to “build to a higher standard of a condominium, but receive the same or similar rents prevailing in the competitor rental properties.” It says that in this way, a 1,414 square-foot unit at the Village on the Thames will rent for about $1.09 per square foot while a 1,072 square-foot unit at The Ledges rental property in Groton rents for $1.31 despite lacking amenities available at the Village on the Thames such as garages and gardens.

“Achievable rents are based on area housing market comparables and therefore the rent revenue achievable in the near future cannot adequately sustain the required debt service ratio and to attract the equity investment needed to produce an ownership housing product,” the summary states. “For these reasons tax exemption to lower operating costs is necessary and justified.”

Under River Bank’s request, a 95 percent deferral on property tax would be in place for five years for rental properties, with the deferral going to the company. The rental deferral would decline to 50 percent in the sixth year and 25 percent in the seventh year, with the intention of phasing out renters in favor of owner-occupied units. For purchasers, a sale benefit exemption would defer 70 percent of the tax and decline by 10 percent each year for five years as a way of stimulating purchases. River Bank says that during the construction phase, it would pay $1,000 in real estate tax per year for each unit approved by the Planning and Zoning Commission, up to a cap of $100,000.

The proposal suggests that during the construction phase, the city will see $250,000 in revenue over a two-and-a-half year period. It estimates that in the 80 unit plan, the city will see $1,654,335 in combined property and automobile taxes over eight years if 67 units are rented and transitioned to purchases. It predicts that under the 104 unit plan, the city will gross $2,286,496 in the same taxes if 80 units are rented and transitioned in the same period. It says the city will also see revenue from the use of municipal utilities.

River Bank estimates it will cost $15,987,000 to develop 80 units and $20,784,000 to develop 104 units. It says it intends to rely mostly on a Department of Housing and Urban Development program allowing the construction of only rental units, which prohibit sale of the units for at least five years. The proposal suggests that the profile of the occupants is likely to change with the transition from rental to sale properties, going from young engineers, untenured college professors, Coast Guard and Navy officers, and college students to boaters, “empty nesters,” tenured professors, divorcees, and families with pre-school children. It estimates a low population of children, with a Rutgers University study on new residential communities suggesting the 80 unit development will have 13 children in a total population of 142.

The proposal estimates that residency in the 80 unit development will generate about $7 million in household income, with $2.1 million going toward consumer spending while the 104 unit development would create about $9.2 million in household income with about $2.7 million going toward consumer spending. It suggests these household incomes will bolster business in local establishments including downtown shops, shopping centers on Colman Street and in the region, and other places in the city.

During the public comment portion of the meeting, some residents cautioned the councilors about the abatement process. Dennis Downing said he felt most abatements were going to downtown businesses and that businesses in other areas of the city were suffering as a result.

“To me it just seems like it’s out of whack,” he said. “Don’t exclude these small businesses that aren’t downtown. They’re just as important.”

David Hayes asked the councilors to consider the terms and length of the proposed abatement carefully.

“I think that’s giving away too much,” he said. “I don’t think you need to do it in such a remarkable fashion.”