The move to shift state workers to two newly purchased private office complexes from facilities in Hartford and East Hartford and elsewhere in central Connecticut should save the state roughly $200 million — adjusted for inflation — over the next two decades, according to Gov. Dannel P. Malloy.
The state will move at least 3,100 state employees into downtown Hartford with the purchase of the complexes for $52 million in total, Malloy announced Wednesday.
And while the move would generate a projected $11 million in annual economic activity for the capital city, it also would remove properties that currently generate about $2 million in annual property taxes off the municipal tax rolls.
“The purchase of these buildings will save the state millions of dollars and provide an economic boon for downtown Hartford,” said Malloy, who announced the enterprise during a midday press conference in the Legislative Office Building.
The state will buy an office building at 55 Farmington Ave. — at the corner of Flower Street — owned by Hartford Insurance Co. as well as the two towers at 450 Columbus Boulevard, owned by CT River Plaza LLC. Together these properties have about 900,000 square feet of office space, said state Department of Administrative Services Commissioner Donald DeFronzo.
“The governor asked us to find ways to save money in our facilities budget so we undertook what became an almost two-year process during which we analyzed the financial and market conditions, conducted due diligence on the buildings and assessed a wide variety of options to achieve the goals of the project,” he said.
DeFronzo said the administration will begin planning to move workers into the new addresses over the next two years, primarily from two office buildings: the facility at 25 Sigourney St. in Hartford that houses the Social Services and Revenue Services departments, and the East River Drive complex in East Hartford that is home to the Bureau of Enterprise Systems, formerly the Department of Information Technology.
But DeFronzo said workers from about 18 other properties leased by the state also will be relocated to downtown Hartford. The state leases about 140 properties in total in central Connecticut, he said.
Malloy added that he thinks these relocated state workers will complement the planned move of the University of Connecticut’s West Hartford campus into downtown Hartford. The administration estimates that $11 million in new downtown economic activity would be generated.
But the city does stand to lose some local property tax revenues.
According to Mayor Pedro Segarra, the two properties currently pay about $2 million per year in municipal property taxes.
State-owned property is exempt from municipal taxation, though state government currently reimburses communities for about one-quarter of the property taxes they otherwise would collect on state-owned land and buildings.
Due to a delay build into the program, Hartford would likely not be eligible for about $500,000 in annual state reimbursements on the two downtown properties until 2016.
But Malloy has proposed ending this PILOT (Payment In Lieu Of Taxes) program for state-owned land starting next fiscal year and using the dollars that currently support it to bolster education grants. By the time Hartford would be eligible for state aid under PILOT, the program would be gone.
“This is one of many different conversations we’re having with the state,” Segarra told Capitol reporters, adding that his office is working to replace the millions in lost property tax revenue. “Obviously we need to operate our city and we need the resources.”
The mayor said his office has had discussions with administration officials about the city receiving payments in connection with the XL Center, formerly the Hartford Civic Center.
Though owned by the city, the multi-purpose arena is operated by Anschutz Entertainment Group under a contract with the state that allows the operators to keep all profits.
Segarra added, “We have been working with the state to try to create a more vibrant city” and “keeping these (state) workers downtown is important for us for what it represents to the economy.”