The city of Hartford would lease the XL Center to the state under a proposed 10-year agreement that would guarantee the city annual payments of $3 million in the first two years, the state’s budget director told me today.
Details of the agreement between the city and the Capital Region Development Authority were still being worked out today. The agreement is necessary so the CRDA can finalize a contract with Global Spectrum, which has been chosen to manage the XL Center for the next decade.
The city council must approve the lease. A public hearing is expected to be held April 15.
Initially, it was thought that the city would transfer ownership to the state. But the prospect of the state ending its “PILOT,” or payment in lieu of taxes program — proposed and supported by Gov. Dannel P. Malloy — would have meant an abrupt end to payments to city from the XL Center property, according to Ben Barnes, the secretary for the Office of Policy and Management.
The state doesn’t pay property taxes to buildings it owns in towns and cities, instead compensating for some of that lost revenue through PILOT.
The city has received between $2 million and $2.5 million a year in lease payments under a soon-to-expire, 20-year lease agreement with the state.
“We prefer not to pay rent to the city,” Barnes told me. “But to discontinue all at once would’ve been highly disruptive to the city when they have extreme financial pressure.”
The city is trying to close a $70 million budget deficit for the 2013-2104 fiscal year.
The state is taking over ownership two major office buildings in Hartford — 55 Farmington Ave. and Connecticut River Plaza — to consolidate office workers.
If PILOT is ended, the state also wouldn’t make payments on those buildings, costing the city about $2 million in taxes because they have been privately owned. The legislature has not made a decision on the future of PILOT.
“The lease would offset some of the loss from 55 Farmington and Connecticut River Plaza,” said Jared Kupiec, Hartford Mayor Pedro E. Segarra’s chief of staff.
Kupiec said the city wanted to retain ownership of the XL Center because its pivotal downtown location could make the property increasingly valuable in the future.