3 “Affordable” Projects, 3 Tax Breaks

Thomas Breen / Markeshia Ricks file photos

THOMAS BREEN / MARKESHIA RICKS FILE PHOTOS

Affordable housing developers seeking local tax breaks: RJ Development’s Joseph, Beaulah’s Brooks, and Beacon’s Kovel.

Tax-break deals for three different residential building projects planned for vacant lots around town were fast-tracked for approval — revealing some of the current strategies for promoting affordable housing.

Those three tax deals in question were all heard Tuesday night by back-to-back Board of Alders committees during virtual meetings held on Zoom and YouTube Live.

All ended without any votes, advancing the deals to the full Board of Alders, where they can be discharged from the committee and receive an expedited final vote.

In their similarities, the separate deals revealed the city’s attempts at standardizing such agreements — and in their disparate terms, just how contingent these local subsidies still are on project-by-project negotiations.

Zoom

ZOOM

Tuesday night’s joint Community Development and Tax Abatement Committee virtual meeting.

A joint meeting of the Community Development and Tax Abatement Committees first heard a proposed deal for a planned new 69-unit apartment building to be constructed at 316 Dixwell Ave., 340 Dixwell Ave., and 783 Orchard St. by a partnership between the Dixwell neighborhood developer Beulah Land Development Corporation and the New York City-based HELP USA.

They then heard another proposed deal for a planned new 150-unit apartment building to be constructed at 291 Ashmun St., 309 Ashmun St., and 178-186 Canal St. by the local firm RJ Development & Advisors LLC.

In a subsequent meeting, the Tax Abatement Committee heard a proposed tax break deal for a planned new 60-unit apartment building to be constructed at 300 State St. by the Boston-based Beacon Communities.

All three proposed deals received no formal recommendations from the various aldermanic committees Tuesday night, thereby allowing the full Board of Alders to expedite its votes on the matters during its next meeting on Nov. 5.

Different Terms For Different Projects

The three different housing developments all plan on setting aside a significant share of their respective new apartments at deed-restricted affordable rents. And they all plan on transforming currently vacant lots that contribute virtually nothing to the local tax rolls into new places to live that bulk up the city’s grand list.

That’s where the overlap ends.

They differ widely on what percentage of units will be reserved at below-market rents, what levels of affordability those rents will be capped at, and what funding sources the builders hope to tap into to make these projects financially viable.

The specific terms of each proposed 15-year tax break differed accordingly.

The Beulah deal would cap local property taxes on the affordable units at $400 per apartment with a 3 percent annual increase.

The RJ Development deal would cap local property taxes on the affordable units at $400 per apartment for the first five years, to be followed by a 3 percent annual increase for the remaining decade.

And the Beacon deal would cap local property taxes on the affordable units at $600 per apartment with a 3 percent annual increase.

File photo

City Business Development Officer Clay Williams (at left in photo), recently retired Livable City Initiative (LCI) Executive Director Serena Neal-Sanjurjo, and LCI Acting Executive Director Arlevia Samuel explained that what similarities there were among the three agreements were due largely to the work of the city’s Low Income Supportive Housing Tax Abatement Committee, or LISHTA.

Each tax abatement deal would last 15 years starting at the completion of construction.

Each would have an upfront two-year period between the pulling of building permits and the opening of the building during which the developer would have to pay full assessed taxes on the property.

And each would require the respective builders to pay full market-rate taxes on all of the market-rent apartments included in their developments.

“When the LISHTA committee was first formed back in 2018,” Williams said, “we were given guidelines about what this was all about, but we weren’t given guidelines around what we ought to charge” for affordable housing tax break deals.

He said LISHTA reviewed “three or four” similar local affordable housing tax abatement deals, including the one for 16 Miller St., when figuring out how much of a tax break to grant in each of these three cases.

“We just looked at $400 with a 3 percent increase as a reasonable amount that we should be getting for our affordable housing projects,” he said.

File photo

“Many of these projects are being done with public funding, and in competitive processes” for state tax credits, said Neal-Sanjurjo (pictured). “We don’t want to overleverage them with funding.”

She said each of the proposed tax break deals is a balancing act between increasing the city’s tax base and making sure that proposed developments are financially feasible enough to get built and survive.

When asked by Downtown Alder Abby Roth about why Beacon agreed to pay $200 more per affordable apartment than did Beulah and RJ Development in their respective tax break deals, Neal-Sanjurjo explained Beacon came to the negotiating table with the $600-per-unit number.

“They offered it,” she said. “Our committee was not going to” turn it down.

Roth nevertheless encouraged her colleagues to use Tuesday night’s marathon tax break agreement reviews as an opportunity to come up with a more structured framework for tax abatement deals going forward.

“We now have had a few of these abatement requests over the past few years come to us,” she said. “It does seem like we as a board should think about more standards. Because it is kind of hard to look at these apples to oranges, and think through what is the appropriate amount.”

Tax Deal #1: 69 Apartments Planned For 340 Dixwell
BEULAH LAND DEVELOPMENT CORPORATION / HELP USA RENDERING

BEULAH LAND DEVELOPMENT CORPORATION / HELP USA RENDERING

69 new apts planned for 340 Dixwell.

The first proposed tax abatement and land deal to come before the committee alders Tuesday night was for the planned new 69-unit apartment complex to be built by Beulah, HELP USA, and mass timber developer Jeff Spiritos. The apartments are slated for a vacant lot at the corner of Munson, Dixwell, and Orchard where Joe Grate used to run a popular barbecue stand.

Spiritos and Beulah COO Darrell Brooks said that the project will consist of two four-story buildings: one with 57 apartments, one with 12.

They said that 80 percent of the apartment complex—or a total of 55 of the 69 new housing units—will be restricted to affordable rents for families earning between 30 percent and 60 percent of the area median income (AMI). The remaining 14 units will be rented at market rates.

Their tax abatement and Development and Land Disposition Agreement (DLDA) application to the city states that the project will feature a mix of one-, two-, and three-bedroom apartments, with a total of 14 reserved for homeless households.

It also states that the partnership has applied for 20 Project Based Section 8 vouchers from the city’s housing authority, and that it will be applying to the Connecticut Housing Finance Authority (CHFA) this November for 9 percent Low Income Housing Tax Credits.

Spiritos added that the buildings will be constructed with “mass timber,” a construction method that he described as “stronger than, faster than, more durable than stick frame construction, and which allows for a healthier, more natural living experience for the occupants of the building.”

“As 80 percent of the units are affordable at 60 percent AMI or less,” he said, “we have applied for a tax abatement to help us be able to afford the operating costs of the building.”

Williams explained exactly what those terms would be for this deal.

He said that LISHTA has recommended that the developers pay $400 a year in property taxes for each of the affordable units, with a 3 percent increase per year over the course of the 15-year deal. Meanwhile, they’ll be required to pay market-rate taxes on the market-rate units.

“What is the [tax] rate on the market-rate units?” asked Dwight Alder Frank Douglass. “What will they be paying? Give me some dollar figures, please.”

Williams and Neal-Sanjurjo said that they didn’t have that estimated tax number, which will ultimately be up to the city assessor to decide.

“We won’t know that until the project is actually done,” Neal-Sanjurjo said. “When we submit our recommendations, that number is usually withheld until the project is completed.”

Neal-Sanjurjo and Samuel said that this deal would also have the city sell a publicly-owned property at 316 Dixwell Ave. to the developers for $280,000.

“They are paying the appraised value for the 316 [Dixwell] property,” Neal-Sanjurjo said. “We’re not giving it away.”

Prospect Hill/Newhallville/Dixwell Alder Steve Winter spoke up during the hearing in support of the proposed tax deal and DLDA and apartment project as a whole.

“Not only is it mostly affordable housing, but it will be environmentally friendly,” he said. He praised Beulah and its partners for their extensive community engagement around the project over the past three years.

“They have been everywhere talking about this project,” he said. “It has really strong support in the community.”

Tax Deal #2: 150 Apartments Planned For Ashmun-Henry-Canal

The currently vacant lots at Ashmun, Henry, and Canal.

Next up was a proposed DLDA and tax abatement deal for RJ Development’s planned new 150-unit apartment complex on a vacant, city-owned lot bounded by Ashmun Street, Henry Street, and Canal Street near Science Park.

Neal-Sanjurjo said that the city has been working for two or three years to secure a development project for this lot—“formerly known as ‘the pork chop,’” and originally allocated to the old Elm Haven apartments before being taken over by the city.

RJ Development, a local firm run by Yves Joseph and Jason Rudnick, won a request for proposals (RFP) process to build 150 units of rental housing there, with 50 units—or a third of the total apartments—reserved at affordable rates.

She said that 25 of those units will be set aside for renters earning no more than 80 percent AMI, 15 for those earning no more than 60 percent AMI, and 10 for those with Section 8 Housing Choice Vouchers.

The DLDA would see the city sell the roughly 1.7-acre lot to RJ Development for $500,000.

“This is a pretty aggressive and cutting edge kind of development around affordable housing,” she said. “This is a project we’ve been fighting for for some time.”

Joseph stressed during his presentation to the alders that his firm is not seeking any state or federal tax credits to facilitate the development of this new housing complex.

“We’re not appealing for any direct subsidy from the state via Just In Time or any other grants.”

Williams said that, because the developer is not seeking any state or federal tax breaks, LISHTA decided to go a bit easier on RJ Development in its proposed local tax break deal.

The proposed tax deal would freeze local property taxes for all 50 affordable units at $400 per apartment for the first five years of the 15-year deal. For the remaining decade, that per-unit cap would increase by 3 percent per year.

“One of the reasons why we recommend this is because this doesn’t require any public subsidy,” he said. “They are doing this with debt and equity. You don’t usually see a lot of equity going into these affordable housing pieces.”

Roth pushed back on the notion that this developer is not seeking any public subsidy for this project. A local tax break is, after all, exactly that: a public subsidy.

Furthermore, she said, it concentrates all of the public subsidy on New Haven city government and taxpayers, as opposed to spreading it out across the state.

“The state can handle the public subsidy more than our city, where over half of our property is tax-exempt,” she said. “When the state helps pay for something, that at least spreads some of the burden to other surrounding towns.”

Morris Cove Alder Sal DeCola singled out a different concern with the proposed DLDA. He praised the project itself, but said that the alders should make sure to include a provision before offering final approval that would allow the city to be “at the table” if the developer decides to sell the project before the end of the tax break deal.

“We are giving this subsidy,” he said. “We need to be there. I don’t want the developer to sell the subsidy and walk away with a profit, and we’re left with the bag.”

DeCola and Newhallville Alder Kim Edwards both promoted the notion that, when the full board considers this tax deal and DLDA in early November, it should include specific language that allows the city to have some control over whether or not to continue that tax abatement agreement if ownership changes hands before the 15-year term is up.

Joseph said that his company is “an Opportunity Zone investor. What that means is: It is a long-term investment. We intend to build and own and operate this project for a long time.

“We are not a short-term player here to flip or sell off to another developer.”

Tax Deal #3: 60 Apartments Planned For 300 State

The currently vacant lot at 300 State.

The final proposed tax deal of the night was heard only by the Tax Abatement Committee, as there was no public land sale involved. It was for the planned new 60-unit apartment complex Beacon Communities is looking to build atop a surface parking lot they own at 300 State St.

Beacon Director of Development LeAnn Hanfield said that the company—which also owns and manages the nearby Residences at Ninth Square—plans to set aside 48 of the 60 new apartments at restricted, affordable rents. Twelve of those units will be reserved for renters earning no more than 30 percent AMI, 24 for those earning no more than 50 percent AMI, 12 for those earning no more than 60 percent AMI, and 12 left at unrestricted, market-rate rents.

“Affordable rents don’t support the level of debt that a traditional market deal would use to build,” Hanfield said.

Thus the request for the local tax abatement, which would have the developer pay $600 per year per affordable unit, with a 3 percent annual increase over the 15-year term. The developer would pay full market-rate taxes on the market-rate units, with an anticipated first-year tax bill totalling $50,200 for the building as a whole.

Hanfield said Beacon is applying to the state for 9 percent Low Income Housing Tax Credits for this project, and will also be taking out a roughly $4.1 million mortgage.

Even with the local tax deal, state financing, and a private mortgage, Hanfield and Williams said that Beacon still expects having a roughly $2.5 million gap between available financing and the total cost of building and operating the projected $26 million project.

Williams said that the city is considering making up that gap with a $1.5 million “soft loan,” with another $1 million yet-to-be-determined in other city, state, or private funding.

Hanfield confirmed by email after the meeting that Beacon is seeking city support for closing that $2.5 million gap, even if the terms of that extra support were not part of the tax abatement deal before the committee alders Tuesday night.

“Yes, we are working with the City to identify sources for the remaining 2.5M to fully fund the project which could come from a variety of financing vehicles,” she wrote. “Because the cost of new production is higher than that of rehabilitation, it requires assembly of local support in the form of capital to build the project. This amount represents less than 10% of the total development cost, with the remaining 90%+ comprised of private debt and State resources.”

Roth and Edwards expressed support for the project in theory—and expressed concerns that the specific financial details of the proposed tax deal were not made available to the committee alders in writing in advance of the hearing.

“I personally feel like we have a responsibility to actually see the documents before moving forward on it one way or another.”

Like the other two tax abatement deals, the proposed Beacon agreement received no formal vote from the committee on Tuesday—therefore allowing the full Board of Alders to take an expedited vote on the matter during its next meeting on Nov. 5.

Doyens: “Our Poor City Doesn’t Have The Money To Give”

Gary Doyens at a 2018 budget hearing.

The only member of the public to speak up during the public hearing portions on any of the proposed tax abatement deals was budget watchdog Gary Doyens.

Doyens said that the proposed $50,200 in total local property taxes for the Beacon project represented an improvement over the initial $36,000 in anticipated local taxes pitched by Beacon in its initial tax abatement application. But still, it is not enough.

“There comes a point where a property like this should be paying significantly more,” he said. “$50,200 doesn’t even pay for one police officer with loaded benefits and a car. It doesn’t pay for one social worker.”

He said that amount of money does “next to nothing” to help the city pay its bills, and that when such local tax abatement deals are given, “that means that all the rest of us pay more, and it puts additional pressure on homeowners.”

Doyens said he’s all for the construction of more affordable housing, but that deals like this “erode the tax base”—which already suffers from a surfeit of tax-exempt properties.

“Our poor city doesn’t have the money to give, and that’s what we’re being asked to do. I think something about these numbers has to be recalculated.”

Hanfield responded that Beacon is responding to a deep need for more affordable housing, and that the restricted rents associated with such a project simply do not yield enough to make it financially feasible without local support.

“I don’t want the perception to be that we’re rolling in cash,” she said. “That’s just now how this deal pro formas with the deep affordability that’s proposed.”

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