Every year Hartford loses more than half a million dollars on its Morgan Street Garage. So why is the State purchasing it for more than double the buildings assessed value? Troubleshooter Sabina Kuriakose follows the money.
The Morgan Street Garage sits eight floors high, with almost 2,300 parking spaces in downtown Hartford. Yet on any given weekday, the garage operates at just a 30% occupancy rate.
It’s a money pit for the city. Documents obtained by the Troubleshooters show Hartford loses $650,000 a year on the garage, and it’s the Parking Authority’s lowest performing garage. But now, the building won’t be the City’s dilemma anymore. Instead, it will be state taxpayers’ problem.
“It turns into a state-funded bailout, whether it was intended to be that way or not. That’s the way it’s ending up,” said Republican State Senator John Kissel.
The State of Connecticut is in the process of purchasing 155 Morgan Street for $23 million—exactly the amount the City still owes on the building. Add to that $200,000 in closing costs, $3.5 million for renovations, and a $3.2 million lease agreement—total cost to the state will be more than $30 million. Governor Dannel Malloy approved the release of the funds at a Bond Commission meeting last month.
It looks like a hefty price to pay when compared to two state appraisals which found the value of the garage to be anywhere between just $7.8 million and $9 million. The Troubleshooters went straight to state officials to find out why.
“Why pay more than double the assessed value?” asked our Troubleshooter Sabina Kuriakose.
“The purchase of anything involves a willing seller and a willing buyer. We feel that this is a very advantageous price for us,” said Ben Barnes, the Secretary of the State Office of Policy and Management.
Barnes said the state is trying to support its capitol city by keeping state jobs downtown. That’s why the state is buying Connecticut River Plaza, just down the street from the garage. Barnes said the 2,000 state employees moving into the Plaza will need a place to park.
“The two transactions are completely linked. The office transaction will fall through if we can’t secure parking,” he said.
Barnes added that buying the building at the City’s asking price is cheaper than alternatives. When the Troubleshooters questioned the sale, city and state officials insisted that despite the state’s own assessments, current value of the garage is actually $25 million—but that’s only when the garage is operating at full occupancy, which it hasn’t been doing. In fact, the top two floors of the garage are closed to cars.
So the state is spending a total of $30 million on the garage. It’s assessed value is under $10 million. And even with all that cash exchanging hands, the state won’t own the ground beneath the garage. It’s not part of the deal because the City of Hartford wants to keep it. So the state will pay $3.2 million for a 99-year lease instead.
“I think it’s a great deal for the City. And I got to hand it to them that they were actually able to pull this off. I mean, would you buy a house if you didn’t own the land underneath it? Would anybody lend you money to do that kind of purchase? I don’t think so,” said Senator Kissel.
Currently, the City owns the building and doesn’t get property taxes on it. With the sale, the state will start paying Hartford $250,000 a year in payments in lieu of property taxes. So the City’s not only getting rid of its debt, but it’s making money too. There’s more: for two years after the sale, the City will keep using office space and 300 parking spots at the garage for free.
“I think it’s fair to say that this is just a very cushy deal for the City of Hartford. God bless them, they were able to squeeze that money out of the State of Connecticut. But as a taxpayer and someone who is charged with looking out for taxpayer dollars, I don’t think it’s a great deal,” said Kissel.
“We think that the price is right. The City is unsatisfied with the price that we’re paying. They think it’s too low. We think it’s too high and that’s the way most business transactions end up,” contended Barnes.
“So what’s your response to that, to these people that say it’s a state funded bailout?” asked our reporter.
“I don’t think that’s true because it is a valuable asset to the city of Hartford,” answered Barnes.
Hartford Mayor Pedro Segarra’s office isn’t commenting on the deal because it’s still in negotiations.
“I don’t think it’s a good deal for the people of the State of Connecticut and I really question why we’re going through with it,” said Kissel.
The deal is expected to close in mid-July.