Published January 13. 2008 4:00AM Updated December 12. 2009 6:16AM
New London — Imagine the city's vacant storefronts transformed and decaying homes fixed up, all with the help of a new tax system.
Members of the Center for the Study of Economics in Philadelphia came to New London Saturday to make their pitch on how it could happen. City councilors in the audience promised a closer look at the idea.
The center predicts change for urban centers through a land-value tax. Such a system taxes land at a higher rate but reduces or eliminates tax on buildings and other improvements.
Revenue to the community would remain the same, said center Director Joshua Vincent at the New London Public Library, before an audience of more than 20 local activists and officials.
Under the current system, owners of vacant land are penalized for developing the land because new buildings mean more taxes, said Vincent, who is also a former New London resident. As a result, vacant land often remains vacant.
“It punishes those that do for the community and rewards those that decide to abandon the community,” Vincent said.
It also encourages urban sprawl, as the high tax rate in the city drives homeowners to the suburbs, he said.
Reducing the tax on improvements, in contrast, creates a greater incentive to build, or selling it to someone else who will. They would build with higher-quality materials, avoid blight and redevelop economically depressed areas, Vincent said. Environmentalists like it, because if you save cities, then you save the countryside, he said.
As an example offered by Vincent, Clairton, Pa., had a tax rate of 29.5 mills. It was getting 25.3 percent of its revenues from land values, and 73.5 percent from building values.
Using the land value tax system, it set a tax rate of 104 mills on land and 4.3 mills on buildings, which yielded 89.6 percent of its revenues from land and 10.4 percent from buildings. Its revenue of $3.7 million remained the same.
Its residents saw tax cuts, development opportunities opened up and revenues stabilized, Vincent said. Other Pennsylvania cities have had success, as have communities worldwide, he said.
New London could take advantage of such a change, especially as an underutilized hub for ferry and train transportation, Vincent said.
But various legislative efforts to allow towns to use land value taxation in the state have failed to move forward.
Both Mayor Kevin J. Cavanagh and newly elected council member Adam Sprecace said they will ask legislators to help the city take a closer look at the option when they meet with them Jan. 22.
Cavanagh said more research would have to answer questions, such as whether businesses will actually pay their fair share of property taxes, if homeowners would actually see a savings, and whether it would promote development in reality.
State Rep. Elissa Wright, D-Groton, said she also wanted more information, but that it “could be an arrow in the quiver to revitalize urban centers and refocus investment to areas with existing infrastructure.”
Connecticut is too reliant on property taxes, she added.
“I don't think there's any harm in creating options,” Sprecace said. “It could be a way to help New London help itself.”