On 6/25/19, the Wallingford Town Council voted 7-2 to grant property tax breaks to Emerald Hospitality Inc., the new buyers of the Hilton Garden Inn. The tax breaks are spread over three years, 2019-2021, and they are worth $354,000. The town got nothing in return. This was a serious mistake because when taxes are reduced for one entity, other taxpayers have to pay a little extra to make up for the loss. Or, the town receives less revenue.
Why did this happen? The story begins in 2008, when the state stopped the construction of a hotel on the property where the Hilton Garden Inn now stands. The developer couldn't come up with a $1.9 million bond for traffic improvements. The project was abandoned, and the property became an ugly mess. Wallingford, desperate for a well-financed developer who would finish the project, welcomed a hotel development company headed by Robert Winston III. He bought the property in 2013. Afterwards, Winston sought tax breaks from the town, and the town was receptive. Negotiations regarding a tax reduction scheme took months. In the end, though, everything was worked out with taxes reduced in each of seven years starting in 2014, and a nice, new hotel was built — the Hilton Garden Inn.
One of the provisions in the tax agreement specified that if Winston sold the hotel within seven years, the town could cancel the remaining tax breaks unless he became a managing member of the new owner. After four years, in June 2019, Winston sold the hotel. He did not stay on as a managing member. Under the specific terms of the agreement, therefore, Wallingford was entitled to cancel three years of future tax breaks, and retain $354,000 for the town.
Emerald didn't want that to happen, however. It wanted the tax breaks Winston would have gotten if he had not sold the Hilton Garden Inn. But it had no right to these tax breaks, and it offered nothing to get them. Nevertheless, Emerald approached the Economic Development Commission with its request for the tax breaks and, surprisingly, the EDC was in favor. Then, with EDC backing, Emerald's representatives went to the council.
One might think that this would have been an obvious decision for the councilors, whose first duty is to protect the town's interests. Emerald had no agreement with the town, and it bought the hotel without first securing an extension of Winston's tax reduction agreement. On 6/25/19, the question for the councilors, therefore, was this: Should the council secure the $354,000 for Wallingford's taxpayers? Or should they allow Emerald to get this money?
Sadly, seven town councilors were seduced by the prospect of giving away future taxes. They sided with Emerald. Why?
Some councilors seemed impressed by Emerald's promise to spend $1 million over time to spiff up the property. But waiving taxes in the amount of $354,000 for that reason makes no financial sense. Even if the hotel's expenditure raised the value of the hotel to some degree, it would not, under any fantastical scenario, return $354,000 to the town by way of increased taxes. Besides, these concessions by the council were unnecessary. Emerald's representatives told the council they would spend that sum regardless of the council's vote. The Hilton organization was requiring upgrades, and as they explained, hotels must update and improve the property from time to time as a cost of running a successful long-term business.
At times during the discussion, some councilors and the EDC spokesman seemed to invoke naive non-financial intangibles to justify their decision. One suggested that Wallingford would show honor by extending tax relief that it didn't have to extend. Some believed this would prove Wallingford was business friendly. Another hinted that Emerald should be rewarded for buying a hotel in Wallingford rather than somewhere else. Some may have over-valued the hotel's vague suggestion that hotel employees (they quaintly called them associates) would become part of the community, and the company would eventually parcel out money to support local nonprofits. Others may have been confused. There was certainly some crazy math being tossed about at the council meeting. One official even concluded that giving up taxes in the amount of $354,000 was really just "a wash." Finally, and this I think is the key, some councilors may have wanted to be seen by voters as nice, and nice people say "yes."
During the discussion, representatives of Emerald were professional and smooth. The Economic Development Commission advocated strongly for them. The mayor kept quiet. And when it was over, seven councilors voted to give the hotel what it wanted. Only Councilors Fishbein and LeTourneau voted "no." Good for them. It's unfortunate, though, that this is how the town does business.
Mike Brodinsky is a former Wallingford town councilor and host of "Citizen Mike" on WPAA-TV.