You asked several questions about designating a housing development zone (HDZ) in Manchester. Below, we state each question and the reply. Some require a legal opinion, which OLR cannot give. Consequently, you should not regard this report as providing one.

Does Manchester qualify for an HDZ? If not, how could the legislature change the law so that the town could qualify for one?

Manchester cannot propose an area for HDZ designation because the economic and community development commissioner has not designated the town a distressed municipality. The law allows only these towns to propose HDZs (CGS § 8-376). The commissioner annually designates distressed municipalities based on demographic and economic data, which he uses to score and rank all towns. He designates the 25 top scoring towns as distressed (CGS § 32-9p (b)).

The legislature could allow Manchester to propose an HDZ by extending the authority to do so to all towns or only to state designated public investment communities (PIC), which are also considered to be economically distressed. Manchester is a PIC town. The Office of Policy and Management annually determines PICs by scoring and ranking all towns based on economic indicators and designating the 42 towns in the top quartile as PICs (CGS § 7-545 (a) (8) (9)). Manchester ranks 26 on the 2007 PIC list.

(The distressed municipalities and PIC designations qualify towns for different types of state aid. Attachment 1 is an OLR report discussing the significance of these and other geographic designations (2001-R-0700).

An area must meet statutory criteria before the commissioner can designate it an HDZ. It may consist of one or two contiguous census tracts or part of a tract in which the town has zoned at least 25% of the land for multifamily housing. Manchester's officials should be able to identify areas meeting these criteria from the town's zoning map.

(The law allows the commissioner to designate up to three HDZs statewide, but no town has proposed one since the program's inception in 1987 (PA 87-378)).

What is the “evidence of the commitment of financial assistance” referred to in CGS § 8-377?

By law, a town must apply to the commissioner to have an area designated as an HDZ. In doing show, it must show that the financial resources needed to improve housing in the area will be available if the commissioner designates it an HDZ.

The town must include this information with the plan for improving the zone. The plan must describe the homes, apartments, and businesses to be rehabilitated or developed and the places where the town will improve or construct streets, sidewalks, parks, neighborhood centers, and other public amenities. The plan must also show that the developers, lenders, and local and state officials are ready to commit funds needed to implement the plan (i. e. , evidence of financial commitment).

A town could meet the financial commitment requirement by attaching letters from developers, lenders, and state and federal agencies stating that they have committed or will commit dollars toward improving the area. The town could also attach a statement explaining how it will use federal community development block grant dollars to capitalize revolving loan funds, expand neighborhood facilities, or operate a day care center.

Briefly describe the programs referenced in CGS § 8-378.

CGS § 8-378 references the statutes authorizing many of the programs that were operating when the HDZ law took effect in 1987. It requires the commissioner to give “high funding priority” under these programs to projects in HDZs.

The references apply to three types of programs.

1. Chapter 128 programs provide funds to public, nonprofit, and private developers for developing or rehabilitating rental housing for low- and moderate-income people, the elderly, and people with disabilities.

2. Chapter 130 programs provide funds to towns for redeveloping distressed areas. Towns can use redevelopment funds to acquire and improve blighted areas; urban renewal funds to rehabilitate existing structures; community development funds to address an area's physical and social problems; and urban homesteading funds to help people purchase, rehabilitate, and own abandoned homes.

3. Chapter 133 programs provide funds to towns and nonprofit organizations for providing various services, such as emergency fuel assistance, tenant-landlord counseling, and developing neighborhood facilities (i. e. , Chapter 133).

The legislature has not subsequently amended the statute to include the programs created after 1987. Some of these programs could be used to fund projects in HDZs. They include:

1. the FLEX housing production program, which provides funds for acquiring and demolishing property, develop multifamily housing, and other many other activities (CGS § 8-37pp);

2. the Housing Trust Fund program, which can be used to developing single-family, owner-occupied homes for low- and moderate-income people (CGS § 8-336);

3. the Housing Tax Credit Contribution Program, which provides tax credits to businesses that contribute funds to nonprofit organizations developing low- and moderate-income families (CGS § 8-395);

4. the Historic Homes Rehabilitation Tax Credit Program, which provides tax credits to businesses contributing to individuals or nonprofit organizations restoring one- to four-unit historic homes for owner occupancy; and

5. the Historic Commercial and Industrial Rehabilitation Tax Credit Program, which provides tax credits to businesses contributing funds for restoring and converting historic mills and factories into multifamily housing (PA 06-186, codified at CGS § 10-416a).

Could the legislature amend CGS § 8-378 to require the Connecticut Housing Finance Authority (CHFA) and the Community Economic Development Fund (CEDF) to give high funding priority to projects proposed in HDZs?

It is not clear if the legislature could require CHFA and CEDF to give priority to projects proposed in HDZs. The legislature created these organizations to fulfill a public purpose, but gave them considerably more autonomy and discretion than DECD and other executive branch agencies that report directly to the governor and the legislature.

It also gave them the means to finance their own operations. CHFA funds its projects by selling federal tax-exempt bonds and lending the proceeds for public and private developers. The rules governing these bonds control the type of projects it can fund. CHFA repays the bonds and covers its administrative costs from the loan payments. CEDF provides small business loans with state and private investments. It uses the loan payments to make additional loans and cover it administrative costs.

Extending CGS § 8-378 priority funding requirement to CHFA and CEDF could limit their discretion or cause them to fund projects that do not meet their criteria.

The law does not prevent these agencies from funding projects in Manchester. For example, CHFA funded four multifamily housing projects there (CHFA Multifamily Rental Housing Units, November 2006, p. 6) and CEDF made loans to at least five Manchester businesses since 1998 (OLR Report, “Community Economic Development Fund, December 15, 2006 (2006-R-0610)).

How can the state reimburse towns for the property exemptions authorized under CGS § 8-380?

This statute requires towns with state-approved HDZs to exempt the value of improvements made to any type of property located in the zones. The exemption is an 11-year phase-in of the increase in a property's assessed value resulting from the improvement. The town must exempt 100% of that value for the first two years and then add 10% of the value to the assessment in each of the remaining nine years. Residential property qualifies for the exemption only if it is occupied by people earning less than 150% of the town's median family income. The state does not reimburse the town for the revenue loss.

The current administrative processes for reimbursing state-mandated property tax exemptions could be used to reimburse towns for HDZ exemptions. But whether the legislature should require this is a policy question. The state currently reimburses towns for the property tax exemptions granted to manufacturers and certain service businesses that build, expand, or improve facilities in enterprise zones. But it does not reimburse them for the exemptions granted to people and businesses who improve homes, apartments, stores, and other types of property in the enterprise zone.

Could Manchester become a Targeted Investment Community (TIC) once it has a state approved HDZ?

By law, any town with an enterprise zone is automatically a TIC (CGS § 32-222 (v)). Consequently, the legislature would have to amend the definition of TIC to include any town with a state-approved HDZ.

Currently, 17 towns have enterprise zones and are thus designated as TICs. The TIC designation qualifies economic development projects in these towns for maximum funding under DECD's Manufacturing Assistance Act (MAA) program, which provides loans, loan guarantees, and other credit for a wide range of business development projects. MAA can finance up to 90% of a project's cost in a TIC and up to 50% in a non-TIC.

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