Governments are good at passing out money in order to underwrite profitable businesses. They’ve had lots of practice at it, as that’s what they do. Presumably, we’re happy with this system because, we’re told over and over again, it’s for our eventual common good. And even if we weren’t happy about it, you can’t fight city hall.
In the case of the tax subsidy for the hotel project on Rt 68, the council on Tuesday night was particularly proficient. It passed out almost $800,000 in future tax revenues spread over 7 years in exchange for a greater comfort level that the developer would finish the half-built hotel. Given the atmosphere in the council chambers, a suggestion that the hotel would have been finished anyway —- even if taxpayers didn’t provide additional financial support, would not have been well received. Not surprisingly, therefore, no one pushed that common sense point of view.
The assumption that public money was needed to help fund the private venture was based upon the belief that the hotel would remain in its dilapidated state for years, unless the developer got big tax breaks. He said that. Or, maybe the appropriate phraseology is he threatened that. One result of the town’s failure to aid him, he said, was that the blighted building would remain at the gateway to the town for the foreseeable future. The other consequence would be that if the building remained as-is and unimproved, it would yield less tax.
So, a false choice quickly gained traction: Either the council backed very generous tax subsidies, or it would be responsible for an ugly property and lost future revenues. The choice is false because it’s not clear that a profit-driven enterprise would allow an asset valued at $2.5 or more, to sit and grow moss when a good case could be made, and solid evidence presented, that big returns could be had by finishing the hotel without more delay, and without more subsidy. The evidence for that position was available, but discussion of it was scrupulously avoided.
It was foreseeable, moreover, if not a slam-dunk certainty, that the council would attempt to negotiate on the fly at the meeting for a compromise tax-fixing deal. A reasonably astute councilor could see the benefit of that. He/she wouldn’t want to roll over too easily for what was little more than a threat and a sales pitch. But, one must also avoid driving too hard a bargain, because the developer might balk. As for the developer himself, he reserved room to wiggle, obviously, as he gave up more taxes to the council with little resistance Tuesday night.
Negotiation is about creating risks for the other side, and evaluating what is in each party’s financial interest. The key is to probe and identify the other side’s breaking point, and get reasonably close. It’s an art that takes preparation and nerve. Effective negotiating doesn’t always mix well with effective politics, and a councilor may have to choose one over the other.
As for the negotiation Tuesday night, it wasn’t pretty.
Wallingford’s assessor presented his evaluation. Using standard valuation techniques, he said that when the hotel was completed, the owner should pay taxes of about $1.6 million over 7 years (more, as the mill rate increases). The developer was hoping to pay about $670,000. After long and awkward discussions, the agreement approved by the council (Craig Fishbein dissenting) was that the owner of the hotel would pay about half of what would otherwise be due, or about $825,000.
The loss of future taxes, we are told, is of no concern because we will never miss the money. It was never “in the bank” in the first place. Without the tax deal, moreover, nothing would have been built, proponents claim. Maybe. We’ll never know. With logic like that, however, our grand list of taxable property will always struggle to grow.
Mike Brodinsky is a former town councilor, chairman of the School Roof Building Committee and host of public access show “Citizen Mike.”