Meet the architect of Hartford’s bifurcated tax system

Joe Cooper :: Hartford Business Journal

Downtown Hartford

It was around Easter 1978 when John McDermott, who just a year earlier left his post as Hartford’s assessor to take a job at a national consulting firm, got a call from then city political power boss Nick Carbone, who needed help coming up with a scheme to counteract what amounted to a pending property-tax crisis.

After years of delay, Hartford was in the middle of its first property revaluation since 1961, which exposed tremendous inequity in the assessed value of the city’s residential real estate.

It was determined single-family home values in the city’s North End were being over assessed by as much as 30 percent, while homes in the South and West ends were dramatically underassessed.  

Homeowners were threatening lawsuits over those inequities, creating intense political pressure for a reval.

At the same time, inflation during the previous 17 years drove up housing prices at a faster rate than commercial-building values.

As a result of the pending reval, some Hartford homeowners faced tax hikes of 80 percent or more, a politically untenable situation.

Carbone, who was deputy mayor and a Hartford City Council leader at the time, had a meeting set with then Gov. Ella Grasso and other legislative leaders to discuss legislation to counteract the potential homeowner impact.

He needed McDermott to draw up a plan — and quickly.

What McDermott devised was a tax differential scheme that would become the framework for a controversial policy still in place today.

The plan equalized residential assessments and restricted the residential tax burden to 14.7 percent of the city’s overall budget, the same level it had been prior to the reval. It also led to a bifurcated assessment ratio.

Under McDermott’s scheme, commercial properties and apartments were assessed at 70 percent of value while the single-family home assessment ratio was set at 45.8 percent.

A year prior, all real estate — including single-family homes, apartments and commercial properties — were assessed at 65 percent of value.

Hartford became the only Connecticut municipality allowed to have a split assessment ratio.

Overall, the policy shielded homeowners from major tax hikes, while shouldering commercial taxpayers with a higher tax rate, a move vehemently opposed by the business community.

Hartford Business Journal

John McDermott

“Hartford was in a real mess,” McDermott said. “It was a compounding, almost untenable situation. The differential plan softened the impact on the residential sector and allowed some time for government officials to gradually phase in their tax burden.”

The residential assessment ratio was gradually increased over the next few years until it reached 70 percent in 1986.

However, that bifurcated system was readopted in 2006 after the city faced another near crisis from a revaluation. Today, commercial and apartment properties are assessed at 70 percent of value, while single-family homes are assessed at 35 percent.

William “Billy” DiBella, who sat on the city council alongside Carbone during the late 1970s, said the stakes for the city back then were huge, and required a wholly creative response.

“Had we not done that,’’ said DiBella, a Wethersfield resident who chairs the regional water works, the Metropolitan District Commission, “we would have had a city without residential property in it, because nobody could afford to live there.’’

In the late 1970s, McDermott said suburban lawmakers distrusted the city of Hartford, so convincing them to go along with the scheme wasn’t easy. Some state lawmakers worried that a revaluation would simply give Hartford city officials an excuse to spend more money.

So, a backroom deal — one previously not made public — was hatched to get the legislation passed. Lawmakers agreed to approve the bifurcated tax structure, but only after city officials pledged not to raise spending the next year by more than $1.5 million.

National perspective

McDermott recalled Hartford’s late 1970s property-tax troubles during a recent interview with the Hartford Business Journal.

Today, he runs his own consulting firm, McDermott & Associates, whose clients include Connecticut property owners.

McDermott first came to the city of Hartford in 1974. Prior to that, he was the assessor in Amherst, Mass., a state known for experimenting with different tax rates for different property classes.

He said he drew on that knowledge base when he came up with Hartford’s bifurcated tax structure.

“There was a lot of work going on in classification schemes in Massachusetts and across the country at the time,” McDermott said.

McDermott stayed with the city until 1977 when he took a job at a national consulting firm. When he got the call from Carbone in 1978 he was working in Alabama, assisting in the resolution of that state’s major property tax inequity problems.

Ironically, McDermott, who has also consulted for the MetroHartford Alliance, said he’s not proud of the bifurcated tax structure because ideally all property classes should be assessed evenly. He said the original property-tax scheme was only meant to last for a few years while lawmakers discussed ways to increase funding to Hartford and other urban centers.

He said the city should move away from its current classification scheme.

Still, he doesn’t regret the system he helped develop in the 1970s.

“We were caught between a rock and a hard place, but honestly I don’t think there was any other choice at the time,” he said.