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Cincinnati Property Tax Abatement

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Lovely people of UrbanOhio, I need your help.

 

So I purchased a tax abated condo on Race Street in Cincy in April of 2014. A couple days after closing I delivered the property tax abatement documentation to the Community Development Office. Being a first time homebuyer and never having gone through any of that process I spaced and didn't realize they would send a confirmation letter so I never suspected there was an issue. And with all the expenses associated with buying a place, moving, purchasing new furniture, etc. missed that they never cashed my deposit check.

 

The tax parcel didn't exist in 2014 so it officially didn't exist until the 2015 tax year. Which just had its first payment in January. I checked my escrow account and saw that it was withdrawn the full tax amount signaling an issue. I met with people at the city and called a bunch of different people and was basically told, "something obviously got lost in the process, but if we never cashed the check it's on you."

 

So basically here I am redoing the tax abatement submission again and I have a handful of questions since I can't get a clear answer from anyone I've called.

 

If I fill this form out and submit it and it becomes official, does the abatement start at that date of filing? Or did it start at the date of improvements to the property? Would there be a refund possible for the property tax payment I made in January for the unabated amount or is that a cost I'm going to have to eat?

 

Any information would be very helpful since I have gotten multiple answers from multiple sources that conflict with one another and I'm just curious if I can expect a refund or if I should just suck it up and realize it's the price to pay for a mistake.

 

Thanks in advance!

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Here is What Cincinnati Public Schools Could Ask for From the City in Coming Abatement Negotiations

A deal between Cincinnati and its school district that allows big property tax breaks for developers expires at the end of the year. What will replace it?

 

With the expiration of a 20-year-old agreement about tax abatements for developers between the City of Cincinnati and Cincinnati Public Schools approaching, the district is mulling what it would like to see from a new deal. 

The 1999 tax abatement agreement arose from the 1996 vote to build Paul Brown Stadium and Great American Ball Park on the riverfront. It allows the city greater power in striking deals with commercial property developers when it comes to tax incentives — hefty discounts on property taxes meant to incentivize new development within the city limits. [...]

 

Without the 1999 agreement, the city can only offer 50 percent abatements and 75 percent contributions to TIFs without the school district’s approval under state law. The city may also be liable for 50 percent of income tax revenue over $1 million a new development generates.

 

I feel like the status quo (letting the 1999 agreement expire) would be not that bad of an option. The biggest downside is that since we're right on a state border, Kentucky could up their incentive game and offer 100% property tax abatement to lure developments away from Cincinnati. Cincinnati could still offer 100% tax abatements, they would just need to get CPS to sign off on them on a per-development basis, rather than having a blanket agreement that gives Cincinnati all of the negotiating power.

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As for big developments...land owners get to sell for higher prices when taxes for developers are abated, so it's a wash for development deals.  The money goes to the original land/property owner, not public coffers. 

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Calls to abolish the tax abatement; longtime property owners whine about new neighbors paying less property tax:

https://www.wcpo.com/news/transportation-development/move-up-cincinnati/concern-over-cincinnati-tax-abatement-policy-could-result-in-big-changes-for-taxpayers-developers

 

This guy doesn't bring up the fact that CPS's taxes went up big-time thanks to the preschool promise levy, of which only 1/3 went to preschool.  I'm now paying about $50 more per month in tax thanks to preschool promise, and I don't have any kids.  Whoa is me.  

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I agree that this Tax Abatement stuff has been a little too beneficial to developers, but at this point, aren't these abatements starting to fall off the books?

 

The program started 20 years ago, so those properties built/rehabbed from 2000-2004 ago are paying normal taxes now.  The city should see a swell of tax money in the mid-late 2020's as the heavy-hitting projects, following the recession, start to fall off.

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3 minutes ago, 10albersa said:

I agree that this Tax Abatement stuff has been a little too beneficial to developers, but at this point, aren't these abatements starting to fall off the books?

 

The program started 20 years ago, so those properties built/rehabbed from 2000-2004 ago are paying normal taxes now.  The city should see a swell of tax money in the mid-late 2020's as the heavy-hitting projects, following the recession, start to fall off.

 

Philly has started to see a windfall from tax abatements coming off the books. I would imagine Cincy will soon. 

 

We bought our house in Northside this year right after the abatement expired. We're paying a little more total than we would have if we had bought a slightly higher priced, abated property--but the location was perfect so we're happy with the trade-off. A lot of people are worried that people won't buy in the city if they can't get an abatement but our house had multiple offers on the first day it went on the market. 

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1 minute ago, DEPACincy said:

A lot of people are worried that people won't buy in the city if they can't get an abatement but our house had multiple offers on the first day it went on the market

 

This probably was true 10-20 years ago.  Behavioral trends and the abatement helped bring demand into the city.  Said demand brings more interested eyeballs and it cascades from there.  I don't think an abatement this heavy is needed anymore, the ball is already rolling. 

 

Boomers may not be interested in the city limits, but Millenials and empty-nesting Gen Xers will happily explore the idea of living within city limits.

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I don't believe the city will actually see any new net monies when other properties roll off tax abatements, since it is set in stone what the number is. The only thing which will happen is that existing property owners who are paying the tax will start paying less since it gets redistributed to meet the millage rate.

 

Someone can correct me if I am wrong.

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26 minutes ago, IAGuy39 said:

I don't believe the city will actually see any new net monies when other properties roll off tax abatements, since it is set in stone what the number is. The only thing which will happen is that existing property owners who are paying the tax will start paying less since it gets redistributed to meet the millage rate.

 

Someone can correct me if I am wrong.

 

I'm no expert, but I don't think this is true. The property tax is 2.58% in the city. My taxes don't go up because my neighbor has an abatement. 

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2 hours ago, IAGuy39 said:

I don't believe the city will actually see any new net monies when other properties roll off tax abatements, since it is set in stone what the number is. The only thing which will happen is that existing property owners who are paying the tax will start paying less since it gets redistributed to meet the millage rate.

 

Someone can correct me if I am wrong.

 

By far, the city gets the majority of its income from the earnings tax.  Property tax revenue is roughly 1/4 of its income, if I remember correctly.  

 

The thought that non-abated property owners pay more to make up for abated properties is only partly true.  The city adjusts its millage each year to collect $29 million.  There are school and county property taxes that do the same thing.  This causes a lot of confusion - and the city part of one's overall tax bill is less than half.  

 

 

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2 hours ago, DEPACincy said:

 

I'm no expert, but I don't think this is true. The property tax is 2.58% in the city. My taxes don't go up because my neighbor has an abatement. 

 

No, @IAGuy39is correct, but you’re also not wrong in the second part of your statement. The abatements are on new taxable value being created anywhere in the city, and also there is a cap on the total property tax that’s collected. So your taxes wouldn’t go up because of the abatements, but they could go down when abatements expire and properties that had the abatements on a portion of their value become fully taxable again. 

 

I don’t know what happens when someone tears down a house and builds a larger one however- do they get the abatement on the entire value of the new house or just the difference in value between the two?

 

 

Edited by thebillshark

www.cincinnatiideas.com

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42 minutes ago, thebillshark said:

I don’t know what happens when someone tears down a house and builds a larger one however- do they get the abatement on the entire value of the new house or just the difference in value between the two?

 

They get the abatement on the difference in value. Furthermore, the city's residential property tax abatement program only abates the first $275,000 in increased value (for the majority of abatements).

 

Most property owners will not see an increase in property taxes solely due to property tax abatements. Again, the abatement is only for the increase in value due to the renovation/new construction of a particular parcel so it is as though nothing happened on that particular property in terms of paying property taxes. As has been mentioned though, folks will see a decrease in property taxes when abated properties begin to start paying taxes on the full taxable value.

 

People are just bitching that the $700,000 new build is paying less in property taxes than the $180,000 house that's been there forever. But the taxes on the $180,000 home will not increase just because of an abatement on a new build.

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One of the things I have been watching in OTR is older renovations with expired abatements or that are about to expire are selling for about $20,000 less than their initial listing price or in some cases not selling at all. Most of these properties have not been renovated since the 2000's when they were done by 3CDC or Urban Sites, etc. It's interesting to see with all the fuss about abatements and gentrification in OTR, a middle-income affordable product is beginning to emerge.

 

Meanwhile the new high-end stuff with abatements continue to command much higher prices.


“All truly great thoughts are conceived while walking.”
-Friedrich Nietzsche

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41 minutes ago, JYP said:

One of the things I have been watching in OTR is older renovations with expired abatements or that are about to expire are selling for about $20,000 less than their initial listing price or in some cases not selling at all. Most of these properties have not been renovated since the 2000's when they were done by 3CDC or Urban Sites, etc. It's interesting to see with all the fuss about abatements and gentrification in OTR, a middle-income affordable product is beginning to emerge.

 

Meanwhile the new high-end stuff with abatements continue to command much higher prices.

 

That's interesting. This wasn't the case in Northside when we bought earlier this year. We paid 3% over listing price for our home that had just had its abatement expire. We offered 2% over list price on another home that had 2 years left on its abatement and we were outbid. We also offered 1% under list price on a home with 4 years left on the abatement. Those sellers rejected our offer and ended up selling the house for the list price. 

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10 minutes ago, DEPACincy said:

 

That's interesting. This wasn't the case in Northside when we bought earlier this year. We paid 3% over listing price for our home that had just had its abatement expire. We offered 2% over list price on another home that had 2 years left on its abatement and we were outbid. We also offered 1% under list price on a home with 4 years left on the abatement. Those sellers rejected our offer and ended up selling the house for the list price. 

 

My wife and I looked in Northside and Walnut Hills earlier this year as well. All the good stuff goes pending in a day so if you are not fast enough or in the know, you lose out. We ended up in Prospect Hill because a friend decided to sell and saved $$ by not using realtors. Oh and we have no abatement.

 

The theory on city property tax in Cincinnati is that because the millage is set to collect only $29 million (at least until we eliminate the rollback) the rate changes to collect that amount. Two things are happening here regarding property taxes.

1.) The rate is likely going down due to inflation. This was a policy put into place in 1999. The buying power of $29 million today is much less than in 1999.

https://www.bizjournals.com/cincinnati/news/2019/01/03/cincinnati-council-members-to-set-property-tax.html

 

2.) Urban revitalization in OTR and other distressed communities are lifting city tax rolls. Over the last 20 years many of the abatements were used to revitalize properties in the urban core that were a net drain on the city's tax resources. While abatements have kept property taxes low for many of these revitalization projects, not every building in OTR or Walnut Hills was abated. Thus, it sets higher market pricing for existing buildings that may be earlier rehabs, and therefore more property tax collection. More taxes collected city-wide means lower overall taxes for the city (because of the $29 million deal). 

 

Cincinnati is the only place I am aware of that does this. It's kinda ridiculous from a practical governance standpoint but does make for some interesting back door tax logic.


“All truly great thoughts are conceived while walking.”
-Friedrich Nietzsche

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I don't think you can argue that the downside of the abatement has offset the benefits, at least not yet.  We had that historic home torn down in Hyde Park or Mt. Lookout so the lot could be split, and no doubt the abatement helped incentivize that, but Cincinnati has not experienced a crazy wave of abatement-chasing tear-downs.  Part of the reason is that most residential lots in Cincinnati a bit too small to do lot splits (where zoning allows it), at least with the current market.  

 

That said, there seems to be a much deeper emotional tie to property taxes than seemingly any other.  Plus, property taxes are also very complicated.  There is the auditor's assessment, appeals to the board of revision, etc., with reference to your particular property.  Then there are the complexities of the various city, county, and school taxes.  Plus millage, homesteading, abatements, reductions, and other property tax-specific jargon.  Then there are the oft-heard complaints that renters don't pay property tax.  

 

 

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17 hours ago, JYP said:

Cincinnati is the only place I am aware of that does this. It's kinda ridiculous from a practical governance standpoint but does make for some interesting back door tax logic.

 

Sadly Cincinnati is not the only jurisdiction with this ridiculous policy.

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14 hours ago, GCrites80s said:

People don't like property taxes because they turn all properties, even paid-off ones, into condos.

 

People think that their upkeep of their house - if not their mere glorious presence - is enough of a gift to the neighborhood.  Somebody else should have to pay to police it and protect it from fires and maintain the road that makes it useful. 

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I belive the policy works like this:

 

$29 Million in property taxes

 

1,000 houses valued at $1,000 pay $29

 

= $.029 per house

 

5 houses get rehabbed and tax abated, $29 Million in Property Taxes, still pay same tax on old value

 

1,000 houses valued at $1,000 pay $29

 

= $.029 per house

 

New Construction = 500 houses, if no tax abatement

 

1,500 houses pay $29

 

= $.0193 per house

-----

General Case in Cincinnati:

 

Say # of houses don't change, 1,000 houses still valued at $1,000 pay $29, 50 houses "run out of abatement", their value goes up previous to value before rehab to $2,000 -> 50 houses then now have a higher value than previous, they take more of a percentage of the taxes

 

So the 950 Houses with Value still = $1,000 will now pay $.02762

 

The 50 Houses with Value Now = $2,000 will now pay $.05524

 

Total = $29

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It seems likely that the current City of Cincinnati-Cincinnati Public Schools tax abatement agreement will expire on December 31, as no replacement agreement has been passed yet, and the city council is rushing to pass a number of tax abatements this month in order to get them in before the agreement expires. Again, I don't think that's a terrible thing for the agreement to expire, as I explained above:

 

On 4/8/2019 at 12:15 PM, taestell said:

I feel like the status quo (letting the 1999 agreement expire) would be not that bad of an option. The biggest downside is that since we're right on a state border, Kentucky could up their incentive game and offer 100% property tax abatement to lure developments away from Cincinnati. Cincinnati could still offer 100% tax abatements, they would just need to get CPS to sign off on them on a per-development basis, rather than having a blanket agreement that gives Cincinnati all of the negotiating power.

 

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3 hours ago, taestell said:

It seems likely that the current City of Cincinnati-Cincinnati Public Schools tax abatement agreement will expire on December 31, as no replacement agreement has been passed yet, and the city council is rushing to pass a number of tax abatements this month in order to get them in before the agreement expires. Again, I don't think that's a terrible thing for the agreement to expire, as I explained above:

 

 

I would be a really bad thing. It would make it extremely difficult to get anything substantial built in the city, especially downtown. You have a wildcard with the school board who could take a militant position on things that are detrimental to the city. With the agreement, you have one voice to negotiate with in the room. WHen you enter  multiple parties in the negotiation process, you just create chaos and make it extremely difficult to get to a decision. Even when things get done, they move a lot slower and at a snails pace. When you are developing and have money wrapped up on a project, you need to make sure you can get it to the finish line in a timely basis. 

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The City would not need the school board's permission for all tax abatements. It would only need the school board's approval for tax abatements above 50% and TIF districts that divert more than 75% of new revenue.

 

Quote

Without the 1999 agreement, the city can only offer 50 percent abatements and 75 percent contributions to TIFs without the school district’s approval under state law. The city may also be liable for 50 percent of income tax revenue over $1 million a new development generates.

 

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I'm not a fan of tearing down homes (especially historic ones) to then split the lot and build 2+ new tax-abated homes in the place of an existing one.  Abatements for these situations should be eliminated. 

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Yeah, that doesn't do enough to increase density or property tax revenue enough to make it worthwhile, especially with abatements. And even without abatements, you probably wind up with about the same number of people living there. Sounds like a Nashville trick. I actually don't see this going on much around Columbus... usually multifamily goes in when teardowns happen in Columbus proper.

Edited by GCrites80s

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^Most of Nashville is built sort of like North College Hill and Mt. Healthy - on 50+ foot lots, even for very small houses.  So developers can't help but tear down the 1,100 sq foot homes and replace them with two or even four "tall-sknnies".  Sometimes the tall-skinnies are laid out 2x2, with a shared center driveway.  Other times the form-based code allows them to jam the houses in sideways, like four mobile homes placed parallel to the street, rather than perpendicular, with a single driveway down the edge of the lot that serves all four houses. 

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56 minutes ago, jmecklenborg said:

I'm not a fan of tearing down homes (especially historic ones) to then split the lot and build 2+ new tax-abated homes in the place of an existing one.  Abatements for these situations should be eliminated. 

 

But the abatement is only on the *increase* in value, so the assessed tax can't go lower than what it was.  I don't know how that works with lot splits, but even if the original taxed value of the single parcel is now divided 50/50 among the two new ones, then the total receipts to the city shouldn't change.  Such a lot split can only happen if the underlying zoning is more permissive than what's there, so it seems like something to be encouraged, even if it's a relatively rare situation (I know Hyde Park and Mt. Lookout folks get all bent out of shape over this but that's a different conversation).  Removing the abatement only for that specific case sounds like a knee-jerk reaction that could have other unintended consequences.  

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4 hours ago, taestell said:

The City would not need the school board's permission for all tax abatements. It would only need the school board's approval for tax abatements above 50% and TIF districts that divert more than 75% of new revenue.

 

 

Yes, the large projects. The ones that get derailed when you have too many parties with differing interests trying to negotiate together.

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1 hour ago, jmecklenborg said:

I'm not a fan of tearing down homes (especially historic ones) to then split the lot and build 2+ new tax-abated homes in the place of an existing one.  Abatements for these situations should be eliminated. 

 

The bigger issue is that most of the tax abatements are passed out in areas that don't "need" them. In OTR, I don't think we should be passing out tax abatements for market rate housing south of Liberty...that area is healthy and will continue to develop without abatements. But if we kept the abatements in place north of Liberty, that could draw some of that investment towards the part of the neighborhood that desperately needs it.

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