Business Incentive Program Gets Backing From Selectmen

By Steve Bigham

The Board of Selectman Monday voted in favor of the Economic Development Commission’s (EDC) proposed “business incentive program.” The plan is designed to lure desired business development within the confines of Newtown.

The program is designed to offset residential growth with business growth. 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 program now moves on to the Legislative Council, which never approved the original “tax break” plan back in 1997. That plan, council members said, had too many question marks about what kinds of tax savings new businesses would receive. The council, concerned about the potential for lost revenue, declined to approve the plan and sent it back to the EDC. However, the commission never returned to the council since untimely resignations by members put the plan “in limbo.”

Meanwhile, then First Selectman Bob Cascella, during informal conversations with the owner of Neumade Products, suggested that 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 don’t 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.