Study: State needs ur­ban ar­eas if econ­omy is to thrive

Stamford Advocate (Sunday) - - Sunday Business - By Chris Bosak

Growth in Con­necti­cut’s cities has lagged that of cities in other states, fur­ther stress­ing tax bases and rev­enues, ac­cord­ing to a re­cent study by Fitch Rat­ings.

A sam­ple of 24 Con­necti­cut cities shows a com­pound an­nual growth rate of less than 2 per­cent over the last 12 years. The lack of growth puts added tax bur­den on ex­ist­ing prop­er­ties, the study shows.

“I’m sur­prised in that I thought we’d see a big­ger bounce in the last three years. I thought we’d see 3 per­cent. It just stands out that growth here has been slow,” Kevin Dolan, a direc­tor in Fitch’s U.S. Pub­lic Fi­nance group, said. “When the state’s econ­omy as a whole is drag­ging, it’s hard to ex­pect growth in its cities. It’s hard to ex­pect tax bases to im­prove.”

Joe McGee, vice pres­i­dent of pub­lic pol­icy and pro­grams at the Busi­ness Coun­cil of Fair­field County, said the state’s mu­nic­i­pal­i­ties are heav­ily de­pen­dent upon prop­erty taxes for rev­enues.

“When tax­able as­sets are not

grow­ing, you’re in trou­ble,” he said. “The state has to pro­mote growth strate­gies in cities be­cause they can’t sup­port their level of ser­vices.”

Com­pound an­nual growth rate, or CAGR, is a met­ric that pro­vides a con­stant rate of re­turn over a spe­cific time pe­riod. Along with growth prospects, it’s among the mea­sures con­sid­ered by Fitch for its rat­ing analy­ses.

Dolan said he looked at a 12-year pe­riod in­stead of 10 to en­sure that two reval­u­a­tions were in­cluded for reach city. Cities must re-eval­u­ate their grand list every five years. Res­i­den­tial, com­mer­cial and in­dus­trial prop­er­ties, as well as mo­tor ve­hi­cle taxes, were fac­tored into the tax­able as­sessed val­ues.

Over­all pop­u­la­tion de­cline, lag­ging pro­duc­tiv­ity due mainly to an ag­ing pop­u­la­tion, slow job growth and few new busi­nesses mov­ing here have ham­pered the state’s growth prospects, Dolan said.

“It’s harder for busi­nesses to de­cide to come here when they see the work­force-age pop­u­la­tion de­clin­ing,” he said.

A slug­gish hous­ing mar­ket,

par­tic­u­larly home prices, has slowed tax­able as­sessed val­ues for cities, as well.

“In other states we’re see­ing a re­turn to the ap­pre­ci­a­tion of hous­ing val­ues, but that’s not hap­pen­ing in Con­necti­cut,” he said.

Bright spots

A few cities stood out as stal­warts in the study, most no­tably Stam­ford, Mil­ford and New Haven. Stam­ford, with the re­de­vel­op­ment of its South End, led the way with a 5.6 per­cent CAGR from fis­cal year 2007 to 2019. It grew its tax base from $11.2 bil­lion to $21.4 bil­lion.

Mil­ford, hav­ing grown from $3.8 bil­lion to $6.6 bil­lion, was next at 4.6 per­cent. New Haven grew its CAGR 4.3 per­cent, go­ing from $4 bil­lion to $6.6 bil­lion.

Four­teen of the 24 cities an­a­lyzed had CAGR scores un­der 2 per­cent. Fair­field, Green­wich, Trum­bull and Ham­den had neg­a­tive CAGR scores.

“There is growth in Stam­ford, Nor­walk and New Haven, but we knew that be­cause we’ve seen the ac­tual de­vel­op­ment hap­pen­ing,” Dolan said. “Mil­ford also stood out as hav­ing a lot of growth.”

Bridge­port had a CAGR of 1.1 per­cent, but Dolan said he ex­pects

to see more growth in that city soon.

Dolan an­a­lyzes New Eng­land and much of the East Coast. He said many states sput­tered out of the gates fol­low­ing the re­ces­sion, but have re­cov­ered over the last few years at a quicker rate than Con­necti­cut. Rhode Is­land and New Jer­sey are ex­am­ples, he said.

Mas­sachusetts, Florida and Vir­ginia stand out as hav­ing among the strong­est recoveries. Mas­sachusetts has re­cov­ered more than 300 per­cent of the jobs it lost dur­ing the re­ces­sion. Con­necti­cut has re­cov­ered 89.9 per­cent, largely due to a sig­nif­i­cant re­duc­tion in the gov­ern­ment sec­tor.

With in­ter­est rates ris­ing and some econ­o­mists say­ing an­other re­ces­sion is al­ready over­due, has Con­necti­cut missed the boat on the re­cov­ery?

“I don’t think they’ve missed it com­pletely,” Dolan said. “It still has op­por­tu­ni­ties to im­prove the econ­omy. It’s a mat­ter of mak­ing the right de­ci­sions and im­ple­ment­ing them quickly.”

Build up cities

McGee said when a mu­nic­i­pal­ity is strug­gling to build its tax base through de­vel­op­ment, it has two choices: cut ex­pen­di­tures or raise taxes.

A third op­tion, ask­ing the state for as­sis­tance, is not a vi­able op­tion in Con­necti­cut as the state al­ready faces a $2 bil­lion deficit in its next fis­cal year.

McGee said Con­necti­cut must “be bold” in help­ing its ur­ban ar­eas pro­mote growth. Taxes are high in the state’s cities be­cause of a lack of growth and busi­nesses do not want to move to a city with high taxes, creat­ing a para­dox for mu­nic­i­pal lead­ers.

Also, many cities have a sig­nif­i­cant num­ber of prop­er­ties oc­cu­pied by non­prof­its, which are tax ex­empt. McGee said hos­pi­tals, churches and uni­ver­si­ties oc­cupy large spa­ces and uti­lize city ser­vices, but do not pay taxes.

“That’s a huge dis­ad­van­tage to those cities,” he said.

Dolan said cities need to make them­selves more at­trac­tive to lure busi­nesses through ac­tions such as in­vest­ing in schools, im­prov­ing streetscapes and up­grad­ing trans­porta­tion op­tions.

“But all those things cost money and it’s hard to tax your ex­ist­ing res­i­dents,” he said. “It can be a hard sell.”

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.