New London ponders tax abatements for developers of new apartment complex
New London — Developers exploring construction of a new $30 million apartment complex on Howard Street have asked the city to help defray environmental cleanup costs.
RJ Development + Advisors LLC, the would-be developer of a 203-unit building on the long-vacant parcel in the Fort Trumbull Municipal Development area, have negotiated with the city’s development arm, the Renaissance City Development Association, for a 20-year tax abatement plan to help cope with the estimated $3.78 million in remediation costs.
Attorney William Sweeney, representing RJ Development, said the developer is poised to start work but could not proceed with the project without the abatement. He pointed out that the land has not generated any taxes for nearly two decades.
“This environmental issue is going to affect whoever develops the property,” Sweeney said.
The City Council will vote the abatement plan later this month.
The return for the city eventually would be $574,000 a year in new tax revenue, or more than $11 million over a 20-year period. The developer would save roughly $4.36 million in tax payments over that same period.
RCDA Executive Director Peter Davis said state and federal brownfield funds for cleanup are getting harder to come by and “without this tax abatement program, this development doesn’t work for anybody.”
The land in question, portions of which are owned by Lawrence + Memorial Hospital, is known as parcels 5C1 and 5C2 and the project would be the first “out-of-the-ground project” in the Fort Trumbull Municipal Development area.
It was land purchased by the city during a time it was seizing property on the nearby Fort Trumbull peninsula, which led to the 2005 landmark Supreme Court eminent domain case Kelo v. City of New London.
A portion of the site was home to Hughie's Restaurant but historically was the site of industrial uses such as a gas station and barrel recycling facility. At one point it was used as a landfill, and it has some pockets of buried solid waste, Davis said. The site still occasionally is used as an illegal dumping ground.
Environmental reports show the property is severely contaminated with PCBs and other chemicals and would require not only removal and disposal of 1,000 tons of soil but also installation of an impermeable liner engineered to control any runoff. The liner alone could cost upward of $2.8 million.
The tax abatement plan starts with an 80% abatement in the first year the complex is completed, dropping to 40% from year three through year 20. RJ Development would pay an estimated $232,000 in annual taxes the first year of operation, a figure that rises to $574,000 by year three and throughout the remainder of the abatement plan. RJ Development would pay an estimated $61,128 for the two years the complex is under construction — taxes on the value of the land.
RJ Development Principal Jason Rudnick, who answered questions from the City Council at a public hearing Monday, said his company was hoping to be able to work with the city and start the process of land use approvals in coming months.
“We presented this to the city as a means to be able to resolve an outstanding issue without the city having to go into its own pockets to come up with money,” Rudnick said.
The proposed housing development comes on the heels of a failed attempt by a different developer to complete a similar project known as Shipway 221. Davis said at least four different developers have shown interest in the property but most haven’t been able to make it work financially because of the environmental cleanup costs.
Several residents spoke during Monday’s public hearing.
Kat Goulart urged the council to negotiate further before accepting the agreement. “The businessperson in me really hates accepting the first offer on the table. I hope whoever is negotiating this ... you give a little push back,” she said.
Rudnick said the abatement schedule was the result of ongoing negotiations and “not the first offer.”
Seanice Austin called on the city to pay attention to job creation while seeking economic development. “Can we make a concerted effort to hire local residents for these construction jobs ... also with a focus on black-owned subcontractors? Can that also be a part of the conversation? And, quite frankly, it should be.”
Rudnick responded by saying RJ Development is a 50% minority-owned business and takes the hiring of locals as well as minority-owned businesses seriously.