Make NL tax trailblazer
The Day: 29 May 2009
New London may soon have the opportunity to act as a state trailblazer in the use of innovative taxing policy to generate redevelopment.
The state Senate, by a 30-6 vote on Tuesday, approved legislation that would allow New London to implement land-value taxation (LVT) on a trial basis. As of this writing, the House of Representatives had not voted on the bill but will likely give approval. The bill would then head to Gov. M. Jodi Rell. We urge her to sign it into law when given the opportunity.
Municipalities using LVT assess taxes either entirely or predominately on the land. Under LVT, an owner can undertake building improvements without having his or her property taxes increase.
In a booming city, customary taxation is not a problem. Confident that improvements will generate increased revenues through higher residential or commercial rents or the sale of the property, owners undertake them without concern for the resulting increase in taxes. But in struggling urban areas such as downtown New London, with high commercial vacancy rates, owners are reluctant to invest in improvements and confront higher taxes because they cannot be confident of success.
LVT would not only remove the tax penalty for improvements, but would provide an incentive to renovate. If the city passes an LVT ordinance it would phase in the new system, gradually shifting the assessment from buildings and land to the land only. Owners holding vacant buildings would eventually find they are paying the same taxes as owners of neighboring building with improved property and tenants. At that point, the obvious choice would be to repair the property or sell it.
Trying LVT on a trial basis in New London, where the City Council has already voted in support of the idea, makes sense.
If the legislation becomes law, we would encourage the council to utilize the LVT only in the downtown commercial district. The timing could not be better. Renovations to the Parade are nearing completion, visually reconnecting the business district with the waterfront. A study looking at ways the city can more effectively benefit from its ferry, train and bus transportation hub is almost finished. A new city manager will soon be in place, and most economists predict the recession is nearing an end.
Led by the Re-New London group, the city has spearheaded the effort to give LVT a chance. It could prove a vital tool in New London's renewal.
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TAGS: land-value_taxation, LVT, municipal_tax, property_tax, tax, taxes
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