Corporate tax changes could impact Meriden’s downtown development

Corporate tax changes could impact Meriden’s downtown development


MERIDEN — President Trump’s promise to lower the corporate tax rate could impact hundreds of affordable housing units planned for downtown Meriden that rely on low-income housing tax credits to entice investors.

Representatives for three city housing developments are waiting to hear if the Connecticut Housing Finance Authority has granted their applications for tax credits to build mixed-income developments at Meriden Commons II, 143 W. Main St., and 11 Crown St. The city and the Meriden Housing Authority, with various partners, hope to build 670 new units, 240 of which are considered affordable, and about 100,000 square feet of commercial development. City officials have said the projects are expected to cost $110.4 million. Plans to redevelop the former Meriden-Wallingford Hospital building and a medical building at 116 Cook Ave. could also be affected.

CHFA representatives declined to comment at the current status of low-income housing tax credits, citing no clear policy.

“Because the situation in Washington is so fluid, we’re reluctant to discuss (low-income housing tax credits),” CHFA spokeswoman Lisa Kidder said. “Once there is a decision on tax reform or no tax reform, we’ll be happy to discuss it.”

Tax credits are a way for investors to reduce their tax bills, but when corporate tax rates drop so does the need for tax-saving investments. According to a recent Boston Globe article, market experts say the value of the tax credit has dropped from a high of $1.04 per $1 to as little as 89 cents.

“Those applications may be affected if the corporate tax rate changes,” said Juliet Burdelski, Meriden’s economic development director. “A reduction in the value of a low-income housing tax credit from an investor’s perspective would lead to a loss of funds for the developer. Such a scenario could lead to funding gaps or even jeopardize the viability of the development.”

Burdelski and others said it is probably too early to speculate on changes to the corporate tax rate, but they hope to see some certainty regarding tax policy at the federal level in order to ease the uncertainty for tax credit investors.

“Investors are kind of waiting and seeing,” said Robert Cappelletti, executive director of the Meriden Housing Authority. “It hasn’t affected Meriden but more tax reform could lower it (funding), and they may have to raise more capital.”

Community and regional banks often step in to lend developers the gap funds necessary to make up the difference in the project value and costs, should the values drop, said Lawrence Kendzior, a former city manager who now sits on the Meriden Housing Authority’s board of commissioners.

“There are still other tax advantages,” Kendzior said. “The Community Reinvestment Act requires banks to do funding for these types of projects.”

Cappelletti said he’s seen tax credits drop as low as 49 cents, but projects were reworked and refinanced through government funding or local banks. Small projects valued at several hundred thousand dollars could be stalled, but larger ones would likely receive gap funding.
Twitter: @Cconnbiz

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