New Haven’s Board of Aldermen struck down a proposal Tuesday that would have provided financial relief to the owners of 360 State Street after the complex received a tax bill far exceeding initial city projections.

The vote comes as the latest blow to the union-backed pension fund Multi-Employer Property Trust, which owns 360 State, the city’s tallest apartment building, and has been fighting the tax assessment for nearly a year. City officials had originally projected annual taxes of $1.4 million for the 500-unit, 32-story luxury apartment tower based on square footage and taxes at comparable buildings. But after the final bill came in at $4.3 million, Ward 7 Alderman Douglas Hausladen ’04 submitted a proposal to the board that would lock MEPT into a $1.4 million annual tax plan for 20 years.

Proponents of Hausladen’s proposal said it would be a step toward restoring the damage the 360 State ordeal has done to the city’s reputation as friendly to developers.

“360 State was the first major new construction downtown in two decades, and nobody wants to wait another 20 years for the next,” Hausladen wrote in a letter to the board. “But quite honestly, any potential developer who learns that a tax projection can be arbitrarily quadrupled once the building is built will fold up his plans and run as fast as possible in the opposite direction.”

Hausladen’s proposal was initially assigned to be reviewed by the joint legislation and tax abatement committee, co-chaired by Ward 9 Alderwoman Jessica Holmes of East Rock and Ward 8 Alderman Michael Smart of Wooster Square. But Holmes and Smart decided not to hold a public hearing on the legislation, arguing that a well-defined appeals process through which property owners can dispute tax assessments exists in the courts, and MEPT should not be given special treatment. The Board unanimously discharged the issue after Hausladen had announced on Aug. 31 that he would not fight the committee’s efforts to toss out the proposal.

“Our discharging this [proposal] in no way should be interpreted as an indication that the city is not interested in negotiating a solution. However, the committee process is not the appropriate venue to address this issue,” Holmes said during the Tuesday evening board meeting.

Mayor John DeStefano Jr. has vocally opposed any tax relief proposal for MEPT since last September and criticized what he called MEPT’s efforts to “circumvent” the courts.

But Hausladen, MEPT and Bruce Becker SOM ’85 ARC ’85 — 360 State’s architect and developer — argued that the tax break proposal is about holding the city to its word, not about stepping around established legal proceedings. The $1.4 million annual tax projection was approved by the board at a public meeting in 2007. The next day, the city sent a letter to the state’s Department of Economic and Community Development, saying the estimated taxes had been “closely analyzed” by the city’s tax office, the city assessor and the Board of Aldermen and were “agreed [to be] fair.”

New Haven’s Office of Economic Development confirmed the original $1.4 million projection as late as August 2010. The assessment was then quadrupled last year by the city’s former assessor shortly before DeStefano fired him.

“This isn’t just a run-of-the mill property tax complaint. 360 State is the result of a carefully planned partnership between the City and MEPT, and MEPT wants to solve this problem as partners with the City,” Tilly Hatcher, a consultant to MEPT, said in a letter to the board. “If the City ultimately decides to repudiate its prior commitments, the union pension funds that invest in MEPT stand to lose tens of millions of dollars.”

The contested tax assessment even stirred controversy during last year’s mayoral race, with DeStefano’s sole general election opponent, Jeffrey Kerekes, accusing the mayor of “cooking the books” of city tax revenue for political gain.

MEPT launched a website — www.360StateTaxProblem.com — with a video, timeline and Q&A detailing the property’s impact on the local community and the ensuing tax debate. The video highlights locally owned businesses that have set up shop in the retail space in and around 360 State and features testimony from residential tenants, one of whom said she “decided to move to New Haven because of this building.”

The $180 million tower broke ground in September 2008, and the first tenants moved into the building in August 2010.

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