Towns Begin Grappling With Loss Of Tax Revenue On Homes With Crumbling Foundations
CT News Junkie, August 16, 2019
By Shawn Beals
Even as dozens of homes with crumbling foundations are repaired this summer through state funding, hundreds or thousands more will await a fix indefinitely while their value to the homeowner is cut almost in half.
Since 2016, property owners have been able to apply to have their assessments and property tax bills lowered temporarily to account for the sudden loss in value that follows the discovery of the mineral pyrrhotite in their foundations.
A handful of medium-to-small towns now have seen up to $8 million in losses on their taxable property lists, and the subsequent dip in tax collections is beginning to show up in their budgets.
“It’s going to catch up to us,” Willington First Selectman Erika Wiecenski, said. “We were fortunate to not have to increase our mill rate this year, but I know it’s not going to be sustainable. An increase in taxes is going to have to happen in order to keep what we have and to do any major capital projects.”
As a result, towns will share in their residents’ struggles through the heartbreaking and costly foundation crisis, she said.
“We’re in this together. What affects our homeowners affects everything we do in our town,” Wiecenski said. “There’s continuing, ongoing discussions on what we can do and how we can help.”
Municipal leaders have long worried about their reliance on property taxes to pay for services, and a yearly reduction in tax collections is yet another challenge on top of the constant threat of massive reductions in state aid, Tolland Town Council Chairman William Eccles, said.
“The impact on our budget is roughly $100,000 in lost revenues every year,” Eccles said. “The problem we’re having is that we don’t have a way of estimating the cap on that number. We can’t even really prepare for it.”
He said ideally the number would stay about the same from year to year as foundations are repaired and each property’s true value goes back onto the tax rolls, but there’s no way to estimate how many failing foundations will be identified or how many homeowners will apply for tax relief.
“It’s a concerning problem, but it terms of magnitude it’s a constant as opposed to a compounding loss right now,” Eccles said.
Tolland’s $56.77 million 2019-20 budget included an expected 3.26 percent increase in tax collections, so the town is likely able to absorb the foundation-related decrease in the current fiscal year. But since 2016, the total tax loss in Tolland has been a bit over $375,000 from 137 properties approved for an assessment reduction, Tax Assessor Jason Lawrence said.
21 towns cut assessments back to top
The Capital Region Council of Governments, which has provided funding to get foundations tested for the presence of pyrrhotite, said so far 21 towns have reduced assessments on properties with affected foundations..
“Overall in the region we’re close to $48 million in reductions in the Grand Lists, and that affects the tax revenue,” Pauline Yoder, municipal services director at the Capital Region Council of Governments, said. “It’s a challenge for towns, especially as you see the trends because they know not everybody has come forward yet. You’re talking about $1.7 million to $1.8 million in revenue loss in the region, and that’s not insignificant.”
Data provided by CRCOG says three towns — South Windsor, Vernon and Tolland — have lost more than $8 million each through reduced assessments from crumbling foundations. Manchester’s reduction is $5.6 million, and Willington’s is $3.3 million. Ellington, Stafford, Ashford, Coventry and Somers all have had their Grand List values reduced by $1.2 million to $2.9 million, CRCOG’s data shows.
“It’s a great deal of money, and we’re only just getting into it,” Lyle Wray, CRCOG’s executive director, said.
The state estimates that there could be 35,000 or more homes in Connecticut whose concrete foundations contain pyrrhotite, a mineral that causes the concrete to crack and crumble over time.
The problem concrete was included in homes built between 1983 and 2015, and came from the now-defunct JJ Mottes Concrete Company in Stafford, the state said. The pyrrhotite was present in material the company processed from a Willington quarry that no longer supplies home construction. Foundations with pyrrhotite must be fully replaced in order to be repaired, a costly, weeks-long process that usually involves raising a home off its old foundation and pouring a new one.
State-funded captive insurer Connecticut Foundation Solutions Indemnity Company, Inc. has received nearly 1,000 applications for repair funding. The company announced recently that its total liability will soon reach the maximum state funding amount of $121.6 million.
Repairs were underway at more than 90 homes in the state as of Aug. 5, said Michael Maglaras, superintendent of the CFSIC, and another 61 are already approved for funding once the next round of state bonding is released later this year.