Written May 16, 2011     

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Who should get property-improvement tax abatements?
Downtown businesses

© 2016 Bob Lonsberry

Mt. Morris  

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A few weeks ago I sat at a community meeting to hear Greg O’Connell speak.

He’s the millionaire New York City developer who has come to Mount Morris to rebuild Main Street. He has put his money into our infrastructure and as a result our two-block business district, once dead, is showing clear signs of life.

As he spoke, though, he said the key was tax breaks.

He said nobody was going to make investments in commercial properties if doing so increased the value and consequently the tax assessments of those properties. For example, some of his Mount Morris buildings he bought for very little, in tax auctions and under other distressed circumstances. And so a property he paid $4,000 for, after he fixed it up, would realistically be assessed for substantially more.

Property taxes in our village are calculated by taking the assessed value of a property and multiplying it by the tax rate. His argument is that bettering his property ends up costing him money in higher taxes – tax policy punishes him for investing in his buildings.

That, he said, can be fixed by extending lengthy tax abatements to business investors like himself. He suggested, if I understood him correctly, a period of between 12 and 25 years. That means that if he has a $4,000 building, which he invests $100,000 in, he would only have to pay taxes on a $4,000 building for the next many years.

Greg O’Connell explained that that is the only way decayed village downtowns can redevelop in rural upstate New York. I disagree.

For example, Mr. O’Connell has invested substantial sums without significant tax abatements.

Though it’s probably not realistic to believe that there are many more investors out there like Mr. O’Connell. If his model of massive investment in an environment of low return made sense, there would be people lining up to do what he is doing.

Mr. O’Connell is motivated by something other than the sort of foreseeable-return most investors demand. Call it sentimentality, vanity or vision, there is something very different about Greg O’Connell – to our village’s everlasting benefit.

Nonetheless, I oppose his call for spot tax abatements for downtown investors.

I can’t in good conscience support a benefit for out-of-town investors that is denied to lifelong residents or established businesses. As a village trustee, my responsibility is to all who live, work or do business in the village. My particular responsibility is to those who live, vote and pay taxes here.

Tax policy – at any level of government – always gets into trouble when it carves out special deals for special people. Tax policy is fairest when it is equally applied. What’s good for the goose is good for the gander.

So I have a counter proposal for Mr. O’Connell.

Instead of an extended benefit for the few, how about a moderate benefit for all.

If out-of-town investment is discouraged by reassessment and the higher taxes that come with it, so, too, is in-town investment. And if such reassessments are hurtful to commercial properties, then they are hurtful to residential properties as well.

Some can afford to put $100,000 worth of improvements into a commercial building. Others struggle to put $10,000 worth into their homes. Yet our system would come after them both with higher tax bills.

Maybe we can do something about that.

Hoping to find out, I have proposed that the village of Mount Morris take the legal steps necessary to postpone reassessment of all property improvements – residential or commercial – for either three or five years after those improvements are made.

For example, if you build a room or a floor onto your house, or redo your store or factory, the village will not reassess your property upward to reflect those improvements for three or five years. That means you wouldn’t be taxed for those improvements until a little time had passed.

That would give homeowners and business owners a few years to catch their breath from the expense of the improvements before they faced a likely increase in their property tax.

This, it seems, would encourage people to invest in their properties, and upgrade the housing and commercial stock in the village.

I have raised this proposal with the village board and, if I understand their positions correctly, trustees Jim Murray and Joe Christiano consider it a promising idea. I asked the village attorney if such a scheme would be legal and he couldn’t think of any reasons why not. The village board asked him to research the matter and report back.

It is important to note that property tax doesn’t all go to the village. The county, school and town also levy property tax. Those taxing entities would need to agree with this, and I would be willing to try to talk them into it.

What I hope to do is to take the wisdom of Greg O’Connell’s suggestion and apply it to everyone, not just developers.

At the same time, I think deferments of 12 or 25 years are too long. We do have a police department to pay for and streets to maintain. There are legitimate, essential expenses of the village which our stock of young families and elderly homeowners can’t afford on their own.

Soon, for example, the village is going to have to deal with one of the happy consequences of the success of Mr. O’Connell and his tenants – a shortage of parking. We are going to have to buy municipal parking lots for downtown businesses and we can’t do that in good conscience with the taxes of widowed homeowners.

So, mid-range tax deferments for all who improve their property, yes. Long-term tax deferments just for business investors, no.

At least that’s how I see it.

- by Bob Lonsberry © 2011

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