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4 Litchfield bridges could get repaired through federally funded program
Sandra Diamond Fox LITCHFIELD — Through a federally funded project, the town could be extending the life of four of its bridges by several decades.
The project, called the Preservation of Four Bridges Project, involves an 80-20 split of funding to repair four bridges in town that are greater than 20 feet. Eighty percent would be covered through federal funds and 20 percent by the Town of Litchfield.
“We’re one of the lucky towns that got approved and we’re going to pursue this,” Litchfield’s Public Works Director & Town Engineer Raz Alexe said Friday.
Alexe said the bid was expected to be awarded during the Board of Selectmen’s meeting this week.
Selectmen still need to vote to approve the 20 percent disbursement out of the 100 percent of the value of the construction.
The Federal Highway Administration and the state initiated the project several years ago, according to Raze.
The bridges targeted for the program are: East Litchfield Road, next to the East Litchfield volunteer fire department; Wheeler Road at Route 118; Sawmill Road at the intersection with Blue Swamp Road; and Duck Pond Road, which is near Milltown Road.
The bridges were chosen based on the annual or bi-annual inspection of town bridges that are greater than 20 feet, and the state Department of Transportation’s evaluation after the inspection.
The bridges are on important local roads in town, according to Alexe, “so we have to maintain them.”
“They are on the DOT watch list for structural integrity and ratings on a yearly basis when they do their inspections and make recommendations to the town to proceed with improvements if necessary,” he said.
Each bridge would cost $600,000 to $800,000 to replace, according to Alexe. As part of the program, however, the bridges will undergo a rehabilitation instead of being fully replaced.
“It’s a combination of more in-depth structural elements with some cosmetic things to meet standards and expand the life of the bridges,” Alexe said. “In past years, bridges would last about 30 to 40 years. With new technologies currently, the bridges can last up to 75 years.”
“With this preservation, we are expanding the life by another maybe 20 to 30 years — with much less money,” he said. “With $1 million, you hit four bridges.”
There were four bidders on the project. According to Raze, one of the conditions was that it should be a package deal, so there will be one contractor working on all four bridges.
The construction is expected to take 240 days, beginning in April 2021 and finishing before next Thanksgiving. The construction on the Duck Pond Road bridge was deferred until Aug. 1 since it’s right next to a conservancy that has a big annual fundraiser in the summer and “we didn’t want to interfere with that,” Raze said.
According to Alexe, the awards have been pre-screened for several weeks by GM2 Associates — the engineer-of-record for the project and the DOT representative.
“We are very grateful for the opportunity of being able to benefit from this great Preservation Bridge Program as part of the Federal Local Bridge Program. We had very valuable input and support from CT DOT through their consultant, Close, Jensen and Miller and extremely pertinent and professional design and guidance from GM2 Associates,” he said. “For us, [Tuesday’s] meeting is a quasi-validation of these pre-awards.”
Hartford eyeing major downtown parking-lot operator fee hikes in hopes of spurring new development
Sean Teehan he city of Hartford is considering significantly raising fees on downtown parking-lot operators, a move that will help raise new revenue, but also likely lead to higher parking rates for consumers.
The city council is scheduled to vote on an ordinance change at its Dec. 14 meeting that would increase the biennial permit fees it charges downtown parking-lot operators from a maximum of $1,000 per parking lot to as much as $28,900 or more, depending on the number of spaces in a particular lot.
The new higher fees, which appear to have widespread city-council support, would then double in 2025, and double again in 2030.
The move, which doesn’t apply to residential parking lots, aims to raise new revenue for a city that was on the brink of bankruptcy just a few years ago. But it also has a long-term goal of making it less financially appealing to operate parking lots downtown, hoping that spurs developers to turn some empty lots into new apartment, office, retail or other types of buildings that add to Hartford’s vibrancy and grand list.
The pending ordinance change is likely to draw the ire of two major Hartford-based parking operators: Propark and LAZ Parking, whose founder and CEO Alan Lazowski is also a major downtown investor and landlord.
Lazowski, who has previously been outspoken against efforts to increase the cost of operating downtown parking lots, declined to comment on the higher permit fees. Propark did not respond to a request for comment.
Hartford Mayor Luke Bronin also declined to offer his opinion on the proposed ordinance change, which was introduced by all nine city council members.
"This might have the beneficial effect of causing parking-lot operators to think a [little] more critically about how many parking spaces they actually need," said city councilor John Gale, a main proponent of the higher parking fees. "I think everybody agrees … it is [past] time we try to reduce parking spaces downtown and increase development downtown."
Gale has long championed finding ways to get Hartford’s abundance of vacant downtown lots converted into new development. In fact, a few years ago he was the main backer of a controversial proposed land value tax that would have charged owners of undeveloped land near Bushnell Park higher taxes to spur new construction.
That plan garnered opposition from Lazowski and other realty experts who said it would do nothing to incentivize actual new ground-up development, which not only requires demand but also major city and state incentives in order to overcome Hartford’s exorbitant property tax rate and the overall high costs of new construction.
Gale said he ultimately dropped that plan because it could have the unintended effect of raising taxes on some buildings by hundreds of thousands of dollars. The new permit fee hikes, he said, specifically target parking lots. He added that the initial fee increase shouldn't burden parking-lot operators much, since they could pay it by raising customer prices by less than $3 per week, by his calculations.
Missing out
About 17% of downtown Hartford’s 2 square miles is occupied by parking lots, according to Norman Garrick, a UConn civil engineering professor whose research on Hartford was used by the city council to form the permit fee hike proposal. That’s about 80% more land dedicated to parking than in cities with similar populations, like Cambridge, Mass., and Arlington, Va.
In addition to wasting space that could be occupied by businesses or housing, Hartford is missing out on some $20 million a year it could collect in property taxes, if buildings were constructed on the lots, Garrick’s research found.
"We've operated on the premise that parking is free, and it's destroyed the city of Hartford in some ways," said Garrick, who pointed out that neighboring West Hartford has much stricter parking regulations. "This land is in the middle of our city and it shouldn't be used in this way without revenues coming to the city."
If the ordinance change is approved, the annual revenue the city collects from parking-lot operators would rise from less than $30,000 to more than $100,000, Gale said. That will be much-needed tax revenue, following years of municipal austerity in the wake of Hartford's near bankruptcy in 2017, he said.
Gale wrote the proposal, which updates a 2002 ordinance that sets fees and upkeep requirements on commercial non-residential surface lots downtown. The original ordinance charged $500 biennially for lots with a capacity of between 16 and 30 vehicles; $750 for lots with up to 50 vehicles; and $1,000 for lots with more than 50 spaces. The original ordinance also includes landscaping requirements and does not apply to closed parking garages.
If passed, the updated ordinance would create 13 different permit fee structures based on lot size. For example, a lot with 16 to 30 motor vehicles would have to pay a biennial permit fee of $2,000, up from $500 today. Lots with more than 250 vehicles would have to pay $28,900 plus an additional $2,500 for every additional 20 vehicles (under that scheme a lot with 305 vehicles would have to pay a $36,400 biennial fee).
The proposal also expands the ordinance so it applies to parking garages. The fees would double in five years, and double again in a decade. Commercial parking lots outside of downtown would also see more modest permit fee increases.
"It's a small step, but it's a really, really important step," Garrick said. "It sends an important message that we're starting to take this stuff seriously."
Anthony Cherolis, a longtime public transportation advocate in Hartford who urged city councilors to pass the updated ordinance, said he supports the measure, but would have hiked fees more than what's being proposed. But when fees are doubled in the years ahead, it could lead parking-lot operators to cut down the amount of space they use.
"I think at that point the [financial] pressure is going to be more significant," Cherolis said. "I think there's definitely an awareness that those surface lots especially are not paying into the grand list to the level they should."
Hartford has faced significant challenges growing its grand list over the last few decades, which has contributed to its budget struggles.
Hartford’s $4.1 billion grand list is valued nearly 30% below what it was near the turn of the 21st century, and 37% below its 1990 peak of $6.5 billion.
By comparison, neighboring West Hartford — one of the region’s wealthier communities with half the population of Hartford — has a $6.4 billion grand list.
No panacea
However, even if the ordinance change has the intended effect of freeing up space downtown, there's no guarantee developers will come calling, said Michael Freimuth, executive director of the Capital Region Development Authority (CRDA), a quasi-public development agency.
Hartford’s high property tax rate — 74.29 mills, by far the highest in the state, and among one of the highest in the nation — is a major impediment to ground-up development, and most newly built projects in the city require public subsidies and/or tax breaks, in addition to other funding sources like tax credits.
Some realty experts have argued efforts to force development — like taxing parking lots at a higher rate to make it less appealing to sit on vacant properties — could backfire on the city, leading developers to simply avoid Hartford.
The largest ongoing construction project in Hartford — the Downtown North mixed-use development — wouldn't be possible without funding from CRDA, which has invested more than $100 million of bonded state taxpayer money in recent years to help finance construction of nearly 2,000 apartment units downtown.
"I think, at best, this would have a marginal, if any real impact on the decision to move forward with 'vertical' development by property owners," Freimuth said of the permit fee hikes. "Market demand will drive the decision more than an increased cost."
Hartford city councilor Josh Michtom said the higher fees wouldn't be a panacea to reducing Hartford’s glut of downtown parking lots, but it’s a step in the right direction.
"I think this is a piece of that puzzle," Michtom said. "I hope that it's part of a larger project that reorients us toward more walkable, denser Hartford."
Lehman helped CT biz survive the coronavirus pandemic
Greg Bordonaro Department of Economic and Community Development Commissioner David Lehman came into 2020 hoping to reform the state’s business incentive programs and unveil a new jobs-growth strategy.
Instead, he spent the year simply trying to save the Connecticut economy from being overwhelmed by a once-in-a century pandemic.
Lehman is no health expert but he’s been a top advisor to Gov. Ned Lamont throughout the pandemic, providing key advice on which businesses should remain open or closed as the pandemic spiked during the spring and early winter months.
For example, as Connecticut went into lockdown in the spring amid the virus’ outbreak, Lehman helped convince the governor to keep manufacturing and construction open as essential industries. That prevented Connecticut’s economy, which shed hundreds of thousands of jobs in April, from slipping into an even deeper downturn.
Lehman also helped develop business reopening guidelines and oversaw several state grant and loan programs that provided much-needed capital to small businesses desperate for a financial lifeline.
“It’s been an interesting year for everyone to say the least,” Lehman said. “It’s been crazy.”
Legislative priorities
2020 represented Lehman’s first full year as DECD commissioner and he needed, to some degree, to prove his economic-development bona fides.
When Lehman was named to his role in early 2019, the former Goldman Sachs banker drew skepticism and criticism from some state lawmakers who lamented his lack of experience and time on Wall Street, especially during the 2008 financial crisis.
He was prepared to make a splash this year with a legislative agenda that was going to reform the state’s economic-incentives strategy and programs.
The overall goal was to move the state toward a performance-based, “earn-as-you-go” system, meaning employers won’t reap state incentives until they create a certain number of jobs or make a certain level of investment.
The reforms never made it through the General Assembly, which saw its 2020 legislative session cut short due to the pandemic. However, Lehman said the Lamont administration isn’t wavering from its reform efforts and will push for the same changes in 2021.
“I’m very optimistic these changes will pass,” Lehman said.
The reforms included:
• Modifying the Small Business Express program so that it no longer offers state loans or grants, but instead morphs into a loan-guarantee program run by private banks.
• Establishing a new incentive program that provides tax rebates to companies in certain major industries (finance and insurance, advanced manufacturing, health care, bioscience, technology, and digital media) that create at least 25 jobs paying above-average wages.
• Placing a greater focus on two existing incentive programs: the Urban and Industrial Site Reinvestment Tax Credit and the Sales & Use Tax Relief Program.
The state may consider other economic stimulus programs in response to the COVID-19 pandemic, Lehman said, depending what further actions are taken by Congress.
Meantime, a new economic development plan for the state — being developed by AdvanceCT, in conjunction with DECD — was nearly finalized coming into 2020, but had to be shelved once coronavirus hit the state, Lehman said. It’s on hold until after the pandemic passes and could see major changes depending on the state of Connecticut’s post-COVID economy.
“It’s on hold until we get through COVID,” Lehman said. “There is too much uncertainty right now. I think we are going to dust that off and there will probably be some narrowing or refocusing on the efforts once we get to the tail end of the crisis.”
One legislative victory in 2020 was the unexpected reforms to the state’s Transfer Act, which has long been criticized by the commercial real estate industry as creating overly onerous restrictions on the sale of older and formerly polluted industrial properties. The change includes moving the program to a “released-based” system that streamlines contaminated property clean ups, Lehman said.
Financial lifelines
While Lehman’s legislative agenda was largely put on hold, his overall job certainly wasn’t. DECD oversaw three separate loan/grant programs, while also working with the Small Business Administration and local banks and employers on the rollout of the federal Paycheck Protection Program.
DECD’s first $50 million bridge loan program debuted in late March and got off to a rocky start because the agency wasn’t equipped to handle or process the thousands of loan request applications. It eventually partnered with third-party vendors and provided close to 2,200 small businesses with approximately $20,000 loans.
More than 18,000 small employers recently applied for the state's $50 million CT CARES Small Business Grant Program, which is providing one-time $5,000 grants to about 10,000 companies.
DECD also recently administered $9 million in grants to 154 arts organizations, many of which were forced to close in mid-March and haven’t been able to reopen.
Lehman said the funding has been an important source of help for struggling small businesses but he doesn’t envision another state-based lending or grant program for the remainder of the pandemic. Instead, he said the federal government should pass another stimulus bill that allows certain businesses hardest-hit by the pandemic — like restaurants and retailers — to receive another round of PPP funding.
Executive powers
Aside from the capital programs, DECD was given considerable power to help make decisions on how Connecticut’s economy would operate during the pandemic.
For example, in mid-March, DECD was given the power under executive order to designate essential businesses that could remain open during the spring spike in COVID cases.
Later, the agency was given the power to come up with reopening guidelines.
Some major decisions included banning indoor dining early in the spring but allowing restaurants to offer takeout services. Connecticut also left open the manufacturing and construction industries, which Lehman said was crucial to helping stave off further economic pain.
A stunning 266,300 jobs were lost in Connecticut during the month of April, which will likely take a year or longer to recover. Connecticut has slowly regained jobs since then and is down about 89,800 jobs for the year; the unemployment rate is around 11%.
The one bright spot is that Connecticut’s economy has held up better than at least half the country. Connecticut’s economy shrank by 31.1% during the second quarter, outperforming both the national and New England economies, which contracted 31.4% and 32.3%, respectively.
Looking ahead to 2021, Connecticut’s economic recovery will depend on how quickly an effective COVID vaccine is rolled out, Lehman said.
“It’s going to be a bumpy ride until then,” Lehman said. “What’s challenging is we don’t know how the virus behaves during the winter and now you have the entirety of the country with meaningful levels of infection.”
Tax changes on the horizon: What contractors need to know
As the end of 2020 approaches, even as many construction businesses are still struggling with the fallout from the COVID-19 pandemic, it’s time to close out the year financially. That means it's time for tax planning and the consideration of other financial issues, both of which will hopefully put contractors in the best position to take on 2021.
While the smart move is to consult tax and accounting experts in order to properly address the situations that are unique to every business, there are some basic talking points that can help business owners and managers kickstart that conversation. Here are some of the most pertinent:
The construction industry is unique in that contractors are expected to use different methods of accounting in order to pay the least amount of taxes possible and, at the same time, to present a robust financial picture to lenders and other stakeholders, said James Lundy Jr., construction services tax leader in accounting firm Marcum LLP’s Nashville, Tennessee, office.
“The tax code is designed to allow construction contractors to record one set of dollars to the bank and another set of dollars to the IRS,” Lundy said during a recent Marcum webinar. “It has us keeping two sets of books, and it's totally legal.”
All contractors, he said, must use the percentage-of-completion method of accounting for financial reporting, but for tax purposes there are several types of accounting methods that can be used on each tax return with as many as four routinely used at once. Overall tax methods include:
- Cash
- Accrual
- Accrual, excluding retainage
Accounting methods for long-term contracts, which are defined as starting in one year and ending in another, include:
- Completed contract
- Percentage of completion
- Tax percentage of completion
- Percentage of completion-capitalized cost method
The reason that it’s important to consider what method a contractor will use for tax purposes as part of 2020 planning is that some changes from one method to another require that a request be filed with the IRS before the end of the tax year. Choosing the correct method or methods, Lundy said, should allow the contractor to save on and/or defer as much of its tax burden as possible.
Presidential and congressional changes
In a typical year, many contractors maximize their deferred taxes by holding off on collecting receivables, pushing that deposited income into the next year, said Michael Ceschini, managing member at Ceschini CPAs Tax & Advisory in New York. Businesses can also accelerate or add to total expenses for the year by making major purchases, paying out bonuses and paying invoices by Dec. 31, further decreasing tax liability.
However, 2020 is no typical year. Right now, contractors have to decide, with their financial advisers, how they want to factor in the effects of a President-elect Joe Biden tax plan into their end-of-year strategy.
Among other changes to the tax code, Biden is expected to increase the corporate income tax rate from 21% to 28%, said Frank Scala, partner of Marcum's Assurance Services Group in New York City, and to raise individual tax rates for those making more than $400,000 per year. The latter would impact company shareholders who report business earnings on their personal returns via ownership in pass-through entities like Sub Chapter S corporations.
The likelihood that Biden will be able to make tax-related changes greatly hinges on the outcome of the Jan. 5 Senate runoff in Georgia, which will determine whether the Republicans lose or maintain their majority, said Raymond Haller, tax partner at Grassi in New York.
“Unfortunately, we have to do everything by Dec. 31, not knowing what the results are going to be five days later,” he said.
There is a case to be made for some contractors to accelerate income and increase their tax liability for 2020 if they believe that tax rates will rise in 2021 under a Biden administration, Haller said. If that’s the strategy, then they should also postpone big purchases until next year as a way to offset those potentially higher tax rates. The idea is to pay more in 2020 taxes but at a lower rate than is expected to go into effect for the 2021 tax year.
CARES Act and PPP ramifications
The Coronavirus Aid, Relief and Economic Security Act, which Congress passed in March of 2020 in order to alleviate some of the burdens caused by the pandemic, also created some tax benefits. According to Warren Hennagin, Marcum’s California construction services leader, they include:
- More opportunities to carry net operating losses back to previous tax years.
- The ability to deduct more business interest.
- Qualified improvement property eligible for 100% bonus depreciation retroactive to 2017.
- Employer portion of Social Security deferrable to 2021 and 2022.
- A refundable payroll tax credit equal to 50% of qualified wages.
The CARES Act also established Payroll Protection Program loans through the Small Business Administration. If businesses spent the loan proceeds on qualified expenses — i.e. payroll, rent and utilities — then the PPP loans are forgivable. Portions of the loan money spent on other expenses must be paid back at s 1% interest rate.
However, the IRS has issued guidance that expenses paid with the forgiven proceeds are not deductible, which will potentially create bigger tax bills for some contractors.
Accounting professionals, said Ceschini, assumed those expenses would be a write-off. The new guidance “is not in the spirit of how the accounting profession understood it.”
In order to change that and potentially make those expenses deductible, said Barry Fischman, Marcum’s New England construction services leader, Congress would have to pass legislation addressing the issue, but that hasn’t happened yet.
Research and development credit
More construction companies are becoming eligible for the federal research and development tax credit, Fischman said, as they develop their own innovative processes and products. This credit is advantageous because it is dollar-for-dollar.
“Payroll typically drives the credit, and contractors should be inquiring whether or not they have eligible expenses to generate those credits,” he said.
As a general business credit of between 6% and 12% of qualifying expenditures, the R&D credit can provide cash savings to enable reinvestment and growth, according to Cole Marr, research and development director at California accounting firm Sensiba San Filippo.
Unfortunately, many construction companies are performing R&D that qualifies for a credit in the eyes of the IRS but don’t realize it, due a lack of awareness and common misconceptions, Marr said. Possible activities in the construction industry that can be considered include:
- Development of new, improved or more reliable products, processes or techniques.
- Design improvements for LEED or energy-efficient projects.
- Development of a unique assembly or construction methods and processes.
- Experimentation with new building materials.
- Developing or improving construction equipment.
- Any project that requires an extra level of testing or certification upon completion.
Cash is king
The ultimate decider, however, of what tax rules contractors should take advantage of is their cash position, Ceschini said. For example, if a contractor needs money to make payroll before the end of the year, it doesn’t make sense for it to defer the collection of invoices into 2021.
Ceschini said his clients have done well despite the challenges presented by COVID-19. On the other hand, the backlog for some is shrinking, and many haven’t had as much luck winning new projects as they have in the past.
The construction industry also tends to lag other sectors when it comes to economic downturns, so that only adds to the layers of uncertainty as businesses move into 2021, which makes cash preservation even more important.
“You run a company with cash,” he said.
Pete Buttigieg emerging as leading contender for Transportation secretary
Dan Merica and Jeff Zeleny (CNN)Pete Buttigieg is emerging as a leading contender to be Joe Biden's Transportation secretary, multiple sources familiar with the transition's deliberations tell CNN.