Passero makes a deal, and uses all his skills doing it
As the late Kenny Rogers sang in "The Gambler" − "You've got to know when to hold 'em. Know when to fold 'em. Know when to walk away."
On Friday, New London Mayor Michael Passero walked away with a pretty good deal for his city.
But, I suspect, the mayor realized that if he pushed his luck much further, he could have walked away empty handed.
For the past year, Passero had sought assurances that New London would see a fair and reliable revenue stream to city coffers as a result of the massive development that is intended to turn State Pier from an underutilized port into a busy hub for the assembly of wind-power turbine parts and their transport to offshore wind farms.
The mayor's aspirations were complicated by the fact State Pier is state property, and so not subject to property taxation. And under the public-private partnership negotiated with the developers, the heavy-lift cranes and other infrastructure to be constructed will also be untaxable state property.
New London had anticipated $1.2 million to $1.4 million would annually flow to the city as a result of the project. This was calculated from a combination of state subsidies to partially offset the pier's tax-exempt status, payments from the Connecticut Port Authority and port operater Gateway, and revenues from developer North East Offshore in accordance with the Host Community Agreement.
But later calculations showed the city falling about $450,000 short of that expectation, primarily because the city had counted on state PILOT funds − payments in lieu of taxes − increasing as the State Pier assessment grew with new construction. Instead, the administration learned, PILOT aid could remain frozen at the current $125,000, a measly 12.5% of the property's assessed value, unless the legislature approved an increase.
Passero, a retired city firefighter who earned a law degree during his time in the department, turned to a legal term to explain how all the parties had miscalculated the expectant revenue that would flow to the city.
"It was mutual mistake of fact," said Passero.
North East Offshore, made up of the Ørsted/Eversource partnership, did not see it as its job to boost the funding available through the Host Community Agreement because Connecticut was shorting New London on PILOT funds. And the administration of Gov. Ned Lamont gave no signs it was ready to offer any guarantees. The stalemate dragged for months.
Passero saw as his bargaining chip the Master Development Plan for the property, developed in the 1990s by agreement of the city and state to govern development at State Pier and the surrounding 125 acres. Not surprisingly, it envisions nothing like the major overhaul of the port in support of wind development as now planned. Amending or repealing the MDP would require the city's agreement, Passero contended, and he wasn't prepared to give it unless the compensation issue was settled.
Which brings us to Friday, with the proceedings for the necessary Department of Energy and Environmental Protection permits set to begin and the city ready to press its case that the project was not in compliance with the MDP.
That appeared to provide a sense of urgency, leading to the deal. As a result of talks last week, North East Offshore agreed to amend the Host Community Agreement and boost its guaranteed minimum payments to the city to $750,000 a year for at least seven years and up to 10 years. These are significantly higher amounts than originally guaranteed, but do not entirely close the gap Passero had sought to fill. But if Ørsted/Eversource wins additional wind-power contracts, payments could reach $1.5 million annually.
In return for the increased payments, New London has withdrawn any objections involving the MDP and will cooperate in either amending it, dissolving it, or establishing its legal compliance with the planned project, whichever proves necessary.
"As of that signature, I am a cheerleader for the project," said Passero, referencing the revised host-community deal.
Passero could have pushed harder. He had reached out to the Lamont administration to, as part of a grand bargain, also dissolve the MDP for Fort Trumbull, which the mayor said only makes development there more difficult. The governor had no interest and Passero opted to fold on that one. Likewise, he decided not to hold out for assurances of greater aid to the city.
Had Passero overplayed his hand, and endangered the project, it could have proved to be a million-dollar mistake, annually, not counting the jobs and economic development that would have been lost.
But more aid may yet flow to New London for State Pier. In the state legislature, Sen. Paul Formica, a Republican whose 20th District includes New London, has introduced legislation that would direct $400,000 annually to New London as compensation for the pier facility that it cannot tax. The legislation mirrors existing law that directs $1 million annually to the city in lieu of the taxes that are lost because it hosts the U.S. Coast Guard Academy.
Sen. Cathy Osten, a Democrat representing the 19th District and co-chair of the Appropriations Committee, said a more likely source of added revenue could come from a movement, within the Democratic caucus, to boost PILOT funds across the board.
Passero seemed to need all his skills in this high-stakes poker game − the politician using the media to apply pressure, the lawyer utilizing the MDP for legal leverage, and the firefighter getting in and out of the burning building before the floor let go.
Paul Choiniere is the editorial page editor.