By Becky Coffey, Harbor News Senior Staff Writer:
OLD SAYBROOK:
A routine Board of Finance (BOF) approval of a tax refund for overpayment became the source of a public dispute late last month. According to citizen activist Dick Goduti, refund was actually represented additional, undisclosed expenditures by the town for the new Gateway Center building.
First Selectman Michael Pace challenged Goduti’s interpretation, saying that property owner Prospect Connecticut Properties (PCP) had been overcharged for taxes assessed on land now used for municipal purposes. The land in question is now the site of the town’s Village Gateway building.
Town Attorney Michael Cronin wrote in a letter to BOF Chairman Carl Fortuna, Jr., that Old Saybrook holds a 100-year lease on the property at 1 Main Street. Per the terms of that lease, the town pays $1 per year. According to Cronin, PCP had paid the taxes that would be levied if the property had a commercial tenant, not the town.
Assessor Norm Wood said PCP paid the full tax assessment for both the commercial- and municipal-use portions of the property in 2004, 2005, and 2006 because the tax assessment for the parcel did not reflect the terms of the town’s lease with PCP. The lease states that property taxes due on the parcel would be pro-rated between the town and PCP.
Wood said that he didn’t receive a copy of the lease until 2006 and therefore the parcel’s assessment for tax purposes for 2004, 2005, and 2006 was at its full commercial value. He said the adjustment he made in 2007 to compensate was to value the parcel at zero.
Goduti charged that town residents were not made aware of the lease terms that allowed PCP to charge the town additional “rent” beyond the $1 per year. The lease states that the town is responsible for the pro rata share of the overall parcel’s property tax assessment, a provision that Goduti said had value beyond $1 per year.
The lease states that PCP can charge the town additional annual rent to compensate for increases in the annual property tax for the underlying parcel based on a 50-50 split for tax responsibility between the town and PCP. According to the lease, Old Saybrook’s pro rata share of the overall parcel’s property tax assessment–in return for exclusive use of land for the Village Gateway Building and shared use of driveways and parking areas–is estimated at 50 percent.
Since the town never pays property taxes to itself on town-owned land, the dispute between Goduti and Pace may just reflect different perspectives. When the town leased 1 Main Street for exclusive municipal purposes for 100 years, it converted the value of the municipal-use portion of the parcel–and the pro rated shared spaces of the parcel–from commercial to municipal use.
The “rent” the town pays to PCP to lease the land at 1 Main Street, therefore, is not paid in cash but rather in the form of a lower tax assessment for the overall parcel, an assessment that reflects the split between the increased usage rights of the town and the decreased usage rights of the land’s commercial owner.
Cronin’s letter to the BOF states that discussions between the town assessor, the attorney, and the landowner further defined future allocation of tax assessment between the town and landowner based on both shared and exclusive uses of the parcel.
Despite Goduti’s objections, the BOF approved a net tax refund in the amount of $9,914.04 to be paid to PCP for tax overpayment for the years 2004 through 2006.