NAUGATUCK — Naugatuck officials are seeking to drum up business by offering tax breaks.
The Joint Boards of Finance and Mayor and Burgesses discussed a possible commercial tax abatement ordinance Tuesday night.
Dave Prendergast, chief executive officer of the Naugatuck Economic Development Corporation, said this ordinance came from ideas the NEDC and borough had about how to attract more commercial business.
Currently, Prendergast explained, the borough only gives the tax breaks that the state offers. Giving this extra tax break would make the borough more competitive in trying to get new businesses, he said.
“I think the concept in mind is that we would like to add to the list of assistances for economic development,” Prendergast said.
The proposed ordinance has three levels of tax abatements.
Businesses investing between $25,000 and $499,999 would get a maximum of 50 percent of their taxes forgiven the first year after they are issued a certificate of occupancy, followed by 25 percent abatements for the next two years.
Those investing between $500,000 and $3 million would get a full abatement the first year and a 50 percent abatement the next year.
Those investing more than $3 million would get a full abatement the first year and then abatement percentage would decrease by 20 each year.
Prendergast explained that these are the highest tax abatements possible under this ordinance and that the borough could offer lesser tax abatements, depending on the situation.
According to the ordinance, any business would have to pay back all of the abated taxes, plus interest, if the business leave Naugatuck before the 10 year anniversary of the agreement.
“Our committee spent a lot of time looking at that portion of it and seeing what was an incentive, but not giving away the store,” Prendergast said.
Prendergast said the abatements would help the borough address the large parcels of unoccupied commercial estate, such as the former Peter Paul lot on New Haven Road.
Prendergast told the Joint Boards that other towns, such as Berlin, Cheshire, and Bristol, already have some form of tax abatement in place. Prendergast felt if the borough wants to be competitive in attracting businesses, it will have to look into doing something along these lines.
Prendergast explained even though the borough would be abating so much of the taxes, it would not be losing all of that money.
“After the completion and [certificate of occupancy], the next year the owner would pay 20 percent of the taxes owed on the increase, the town would abate 80 percent, and the state would reimburse the town for half of what the abated. So, in reality, the town ends up getting 60 percent of the increase in taxes,” Prendergast said.
Prendergast said that plan stays that way for five years until the owner is paying 100 percent of the taxes.
Board of Finance Chair Robert Butler Jr. pointed out that, while the borough is not collecting all the taxes, it is also not paying anything for this ordinance.
“So the town really has no out of pocket expenses for anything,” Butler said.
Mayor Robert Mezzo felt this would be a useful ordinance.
He said he gets asked many times why Naugatuck does not have a specific business or why it has so many churches and nonprofit agencies. It is because the market right now leans towards that kind of establishments and away from larger for-profit businesses.
“This will lower the playing field, if not level it,” Mezzo said.
The Joint Boards voted to support the ordinance. The ordinance will go to the Board of Mayor and Burgesses for final approval at a later date.