By Steve Bigham

The Economic Development Commission went before the Legislative Council last week in the hopes that it might receive an endorsement for its proposed business incentive plan. What it got, however, was something that might best be described as tepid.

The council failed to demonstrate much enthusiasm for the plan, although none of the members seemed vehemently opposed to the plan designed to lure desired business within the confines of Newtown.

Some, like council chairman Pierre Rochman, admitted they never favored these types of programs, pointing out that they need to generate an awful lot of business to be worthwhile – as far as building the town’s tax base. Others, like Peggy Baiad, argued that Newtown must follow suit with other area towns who offer similar incentive plans to prospective businesses. Doug Brennan wondered what the legal ramifications might be if the council chose one business over another. A lengthy discussion ensued regarding the validity of such a program.

The Board of Selectman in March voted in favor of the proposed “business incentive program.” The program is designed to offset residential growth with business growth. Some town officials believe the temporary loss in revenue created by this plan is worthwhile in order to achieve the tax base increase.

Unlike the “tax deferral program” that was proposed more than three years ago, this new plan offers more than just tax breaks to prospective new businesses. According to EDC Chairman A. Winthrop Ballard, the new program would include applicants’ requests for either physical improvements to the site and/or tax abatements

The council does not have to vote “yes” or “no” on EDC’s plan, although, as First Selectman Herb Rosenthal points out, it does not make much sense to institute a plan that is not favored by the town’s financial body.

“The Board of Selectmen would not adopt a program if the Legislative Council did not support it in concept,” Mr Rosenthal said.

Mr Ballard said he was not surprised by some of the council’s concerns and said they will be taken into consideration as the EDC returns to the drawing board. The council simply needs to agree that the business incentive plan is a useful tool, Mr Ballard noted. However, the council must eventually vote “yes” or “no” on each individual application.

“I don’t think there was any attempt by anyone on the council to outright dismiss,” Mr Ballard said. “I thought their criticisms or suggestions were, in a sense, minor. But they did have items or suggestions that they felt would improve it.”

A similar “tax break” plan by the EDC was brought to the Legislative Council back in 1997 with similar results. In that case, however, EDC left the meeting never to return as the board experienced high turnover.

That plan, council members said, had too many question marks about what kinds of tax savings new businesses would receive. The council was concerned about the potential for lost revenue. The plan remained in limbo.

Meanwhile, then-First Selectman Bob Cascella, during informal conversations with the owner of Neumade Products, suggested the company might be eligible for a tax break if it set up shop in Newtown. The company soon moved to its home on Peck’s Lane only to learn that the tax incentive plan was never passed.

Sonics & Materials, another new company, was also surprised to learn that the tax break offer was no longer on the table. Eventually, the council reluctantly gave both these companies some tax savings.

EDC members are hoping to avoid the problems of the past with this new plan.

“This plan is more specific than the one that was on the board before,” noted EDC member Eugene Kiely. “We want to avoid the embarrassing situations of the past that we had with Neumade and Sonics & Materials.”

Mr Ballard said the program would offer in-kind services or infrastructure improvements. Tax deferrals or abatements would be just one component of the plan. That sounded good to First Selectman Herb Rosenthal, who, since taking office more than two years ago, has spoken out against tax deferrals, pointing out that business tax deferrals cost the town revenue and do not necessarily increase the tax base.

According to the EDC, the purposes of a business incentive plan are to promote private investment, improve the physical appearance of the town business and industrial zones, and increase the business and industrial contributions to the town economy.

The EDC has included a list of eligibility requirements and has recommended that a review committee be established to study each application. The committee would then pass its recommendations on to the Board of Selectmen for further consideration. If approved by the selectmen, the application would be sent on to the Legislative Council, which would then consider adopting a resolution authorizing the first selectman to enter into an agreement with the applicant.

Business incentives would be offered to new businesses and/or existing businesses looking to expand their facilities.

Business Incentives

Business incentives such as subsidized physical improvements would include the paving of driveways or parking lots, tree/branch removal, street and road drainage work, sewer and water hook-ups, and other in-kind services.

Tax abatement requests would be based on the estimated assessment of the property after improvements. The EDC has included a long list of stipulations, including a clause that states that after final approval of any incentive agreement, work on the approved program must begin within 12 months and shall be completed within 24 months.

Any applicant who has been approved for a tax abatement and has the effect of a net gain of the assessed value in an amount of $100,000 or more may receive an abatement of 20 percent the first year, 15 percent the second year and 10 percent in year three. The tax savings schedule goes up as the net gain of the assessed value goes up.

The highest savings would go to a business with a net gain of the assessed value of $5 million or more. Under that scenario, the business would stand to receive a 30 percent tax savings the first year, 25 percent the second year, 30 percent the third year, 15 percent the fourth year and 10 percent in year five.

Mr Ballard said the tax abatement schedule was patterned after those in other Connecticut towns.