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Cleveland: Ohio City: INTRO (Market Square / Harbor Bay Development)

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30 minutes ago, CbusTransit said:

I’m not following @KJP, is there an initial post covering this issue? Market Square was going for a sizable source of financing for this project and it was tabled? And it is putting this project in danger of happening?

 

No, yes, and yes.


"Life is 10% what happens to you and 90% how you respond." -- Coach Lou Holtz

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Everyone: "Wow, look at this innovative and sustainable project going in the most prime piece of real estate in the state! Very cool!" 

 

Local Officials: "Ummm not so fast, sweetie." 

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This is all very disheartening.  How can we continually get in our own way?  This is getting a little ridiculous and counter productive for the growth of our cities.

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A developer tries to game a program to get an unusually large tax abatement and people are mad at city officials for questioning it?

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4 minutes ago, Mendo said:

A developer tries to game a program to get an unusually large tax abatement and people are mad at city officials for questioning it?

 

I just don't see how it's "gaming the system" rather than taking advantage of existing laws

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4 minutes ago, YABO713 said:

I just don't see how it's "gaming the system" rather than taking advantage of existing laws

 

The program clearly wasn't intended to fund new highrise construction. If you want to call that taking advantage of a loophole, fine. I'm okay splitting hairs.

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1 minute ago, Mendo said:

 

The program clearly wasn't intended to fund new highrise construction. If you want to call that taking advantage of a loophole, fine. I'm okay splitting hairs.

 

Yeah I hear you, but I guess I took issue with the premise underlying your comment, which was that the developer shouldn't have even tried to qualify for that money

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1 minute ago, Mendo said:

 

The program clearly wasn't intended to fund new highrise construction. If you want to call that taking advantage of a loophole, fine. I'm okay splitting hairs.

 

Isn't that up to the state agency and its board to decide how it wants to invest its funds (not local governments)? Aren't buildings a major contributor to poor air quality? Doesn't this project address that?

 

The tax abatement term is large -- 30 years, because it aligns with the term of the bonds. But its application is the same as the abatement the city gives to all new construction -- 100 percent on new buildings only, not on the improved, more valuable land. 

 

I think all parties will find that Harbor Bay would be able to make the financing work with a shorter term since interest rates keep falling.

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14 minutes ago, Enginerd said:

I also don't see how it’s much different than attempting to use Port financing (as @misterjoshr noted) and no one complains about that being outside their purview either.

 

From what I understand, this project could go forward if it used standard city tax abatements and turned to the port (or any other port authority) for financing. But the timing is the issue. The developer has contracts and agreements and labor in place now. To go through the processes to get the city tax abatement and the port financing will take time. Some of those deals would have to be reworked, potentially at higher cost and potentially putting this project (and thus, other spinoff projects like the Voss plant conversion, the Carnegie/RTA TOD, and others not yet publicized) at risk -- with a possible recession looming. Vendors are leaving the West Side Market and tenants are leaving the Market Plaza, the latter soon to become completely vacant. How long would it take for southern part of Ohio City to recover if this development doesn't go through?

 

 

Edited by KJP
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4 minutes ago, KJP said:

 

From what I understand, this project could go forward if it used standard city tax abatements and turned to the port (or any other port authority) for financing. But the timing is the issue. The developer has contracts and agreements and labor in place now. To go through the processes to get the city tax abatement and the port financing will take time. Some of those deals would have to be reworked, potentially at higher cost and potentially putting this project (and thus, other spinoff projects like the Voss plant conversion, the Carnegie/RTA TOD, and others not yet publicized) at risk -- with a possible recession looming. Vendors are leaving the West Side Market and tenants are leaving the Market Plaza, the latter soon to become completely vacant. How long would it take for southern part of Ohio City to recover if this development doesn't go through?

 

 

 

Exactly, it's like we already forced the people from their homes but now we're not building the highway

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2 minutes ago, YABO713 said:

 

Exactly, it's like we already forced the people from their homes but now we're not building the highway

 

Hats off to the developers for putting the cart before the horse. This strikes me as atypical, but not being one that works in commercial RE development, this could be normal for all I know. Curious to hear from folks working in the space - was this just a supremely stupid way for the developer to go about things? Or par for the course?

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12 minutes ago, KJP said:

 

From what I understand, this project could go forward if it used standard city tax abatements and turned to the port (or any other port authority) for financing. But the timing is the issue. The developer has contracts and agreements and labor in place now. To go through the processes to get the city tax abatement and the port financing will take time. Some of those deals would have to be reworked, potentially at higher cost and potentially putting this project (and thus, other spinoff projects like the Voss plant conversion, the Carnegie/RTA TOD, and others not yet publicized) at risk -- with a possible recession looming. Vendors are leaving the West Side Market and tenants are leaving the Market Plaza, the latter soon to become completely vacant. How long would it take for southern part of Ohio City to recover if this development doesn't go through?

 

 

 

That makes sense. I was more trying to say; no one is complaining about the Port aiding developments like this, so why complain about OAQDA doing the same thing?

Edited by Enginerd

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It's hard to know from the outside what's really at stake here, and what, if anything, this type of financing would cost the city/county taxing authorities beyond what the standard package of city abatement on the residential portion + a TIF on the commercial building + port financing would cost.  

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5 hours ago, Enginerd said:

 

That makes sense. I was more trying to say; no one is complaining about the Port aiding developments like this, so why complain about OAQDA doing the same thing?

 

That being said, the city, school district and the Metroparks have a legit gripe about the 30-year tax exemption and each claims in letters to OAQDA that they weren't fully aware of the exemption. Apparently, OAQDA was also prepared to act on the resolution without a public hearing on it, let alone less than 24 hours public notice. OAQDA on June 14 held a public hearing on a proposed $350 million bond issue and tax exemption for an industrial development project in Muskingum County. So it isn't unreasonable to request one here. Ultimately, it sounds like both sides seem willing to accept a lesser term for the tax exemption, so all hope is not lost.

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9 hours ago, KJP said:

I'll just tell you. I don't like it when other people play these kinds of guessing games with me. It's the Metroparks, specifically Brian Zimmerman. He apparently urged the city and county to oppose the OAQDA financing and, from what I understand, they did. OAQDA tabled the request last week. I'm still trying to get the details from all the parties involved but I did get confirmation from OAQDA. 

 

 Thanks  for eliminating the guessing games. I never would have thought of The Metroparks. . 

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It sounds like everyone is feeling a lot better about this project today and its way forward than they did a week ago. Hope to learn more next week.

 

 

Edited by KJP
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Maybe it's just how long Nucleus has been painfully dragging on, but I'd be much more upset if this project fell through. I think Market Square is going to be much more transformative for its immediate neighborhood. While OC is a great urban neighborhood as it currently is, adding two more high rises will give it the feel of being a real big city neighborhood.

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Which is why some developers spoke up in support of this project in the last few days. Their projects would make less sense if Market Square was not built.

 

Meanwhile....

 

 

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On 8/21/2019 at 10:37 AM, StapHanger said:

It's hard to know from the outside what's really at stake here, and what, if anything, this type of financing would cost the city/county taxing authorities beyond what the standard package of city abatement on the residential portion + a TIF on the commercial building + port financing would cost.  

 

The egos at city hall are just mad that the developers found a way to go around them. The developers were naive in thinking that that would be a good idea.

Edited by mu2010
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Approximately 60 days after financing is secured. The Chinese restaurant may be the last to go.


"Life is 10% what happens to you and 90% how you respond." -- Coach Lou Holtz

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34 minutes ago, cle_guy90 said:

Borrowing a phrase from reddit, "tell me how I'm supposed to feel about this". 

 

It seems 30 years is a LOT of time. A couple questions is OC considered an opportunity zone (sorry, on my phone), and do you think Ohio/Cle/the developer would consider a PILOT (payment in lieu of taxes) program?

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39 minutes ago, cle_guy90 said:

Jeepers. I’m very confused by this. Is this article saying that the state agency has power to abate local taxes? And 30 years? That seems insane.

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Depending how the deal is structured, it's also not clear whether the city/schools/other taxing authorities would continue collecting taxes on the existing land value. The article says only the additional value would be "abated" (it's actually exempt, but whatever), but hard to know how focused the report and the city were on that exact question. 

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36 minutes ago, cle_guy90 said:

I wish people would stop saying these large tax abatements are going to hurt the schools. It clearly states in the article:

 

"That proposal would have granted 100 percent abatement for 30 years on new taxes generated by the project." 

 

This project with a 100% tax abatement will not harm anything, it also will not directly financially benefit either. What it does is supply jobs and taxable wages and spending that this project will produce. You will also gain/retain payroll taxes to the businesses and companies that will locate here as well as the few hundred residents. This project will also allow the city to raise property values on neighboring properties after the neighborhood is "improved" with this project.

 

These large projects are a stimulus to the neighborhoods they are built in. I personally feel 30 years is a bit much, I also would like the abatement to be only beneficial to the company that originally constructs a project , so a non transferable abatement, to encourage the builder to construct a product that will withstand the test of time, since they cannot sell the property with an enticing abatement to profit from. This could keep builders from constructing some of the poor quality projects that are falling apart in some of the pre-recession projects around the city.

 

I love this project, I understand the various thoughts and feelings but even with the abatement, nobody is being negatively effected by this project.

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8 minutes ago, WhatUp said:

I wish people would stop saying these large tax abatements are going to hurt the schools. It clearly states in the article:

 

"That proposal would have granted 100 percent abatement for 30 years on new taxes generated by the project." 

 

This project with a 100% tax abatement will not harm anything, it also will not directly financially benefit either. What it does is supply jobs and taxable wages and spending that this project will produce. You will also gain/retain payroll taxes to the businesses and companies that will locate here as well as the few hundred residents. This project will also allow the city to raise property values on neighboring properties after the neighborhood is "improved" with this project.

 

These large projects are a stimulus to the neighborhoods they are built in. I personally feel 30 years is a bit much, I also would like the abatement to be only beneficial to the company that originally constructs a project , so a non transferable abatement, to encourage the builder to construct a product that will withstand the test of time, since they cannot sell the property with an enticing abatement to profit from. This could keep builders from constructing some of the poor quality projects that are falling apart in some of the pre-recession projects around the city.

 

I love this project, I understand the various thoughts and feelings but even with the abatement, nobody is being negatively effected by this project.

Well put

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After reflecting on it more I have a few thoughts

 

1) I think 30 years and a full TIF are too much 

2) If this occurs it may send an unhealthy precedent for future development

3) I hate the overreach of government whether at the federal or state level. Thus, regardless of whether or not I’m for the TIF, I am against the state granting this because it’d be a clear overreach of power.

Edited by cle_guy90
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17 minutes ago, cle_guy90 said:

After reflecting on it more I have a few thoughts

 

1) I think 30 years and a full TIF are too much 

2) If this occurs it may send an unhealthy precedent for future development

3) I hate the overreach of government whether at the federal or state level. Thus, regardless of whether or not I’m for the TIF, I am against the state granting this because it’d be a clear overreach of power.

Except when Voinovich was there, I never felt that Columbus has ever had the best interests of NEO in mind.  NEO is it's own unique region, completely different from the rest of the state.

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5 minutes ago, WindyBuckeye said:

And why do you say this? Just curious.

 

The mention of a potential lawsuit from the city to block the project is what did it for me

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Part of the backdrop (which I know won't illicit any tears) is that the Port has become much harder to use for sales tax exemption when they went full on with prevailing wage requirements. Some would also argue that the City requirements that are associated with abatement are onerous (I am not arguing this at all - just stating what I think others would say) -- and that this OADQA is a work around that is only being looked at because of the above.

 

My own thought:  Home Rule above all else.  It is why I disagreed when the state got involved in our minimum wage or plastic bag ban.

 

OTOH - the state gives out tax credits/awards of tax dollars all the time without City approval.

 

 

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I've been sitting on this story for more than a week because I've heard (on Friday) that the developer, the city, the school district and the Metroparks have had positive meetings over the previous week. The last word from the developer was that the project is "on track" -- a very different sense of things after Harbor Bay had felt that the project was in serious jeopardy. So now I'll write the article now that Cleveland.com has reported on it.

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15 minutes ago, KJP said:

I've been sitting on this story for more than a week because I've heard (on Friday) that the developer, the city, the school district and the Metroparks have had positive meetings over the previous week. The last word from the developer was that the project is "on track" -- a very different sense of things after Harbor Bay had felt that the project was in serious jeopardy. So now I'll write the article now that Cleveland.com has reported on it.

 

I'm very glad to hear that.  Thanks for the information.

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1 hour ago, KJP said:

I've been sitting on this story for more than a week because I've heard (on Friday) that the developer, the city, the school district and the Metroparks have had positive meetings over the previous week. The last word from the developer was that the project is "on track" -- a very different sense of things after Harbor Bay had felt that the project was in serious jeopardy. So now I'll write the article now that Cleveland.com has reported on it.

 

Heard from someone that could pretty much be considered the "horse's mouth" that this thing is running on steroids after these meetings. 

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However....the city planted that story after meeting with Harbor Bay yesterday. The developer is PISSED. The developer thought things were moving in a positive direction. Seems everyone was willing to make concessions--except for the city, apparently. 

Edited by KJP
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Market+Square-Harbor+Bay-M.jpg

 

WEDNESDAY, AUGUST 28, 2019

Market Square tax abatement isn't the issue; it's about control

 

With just 35 minutes to go before an Aug. 13 meeting of the Ohio Air Quality Development Authority's (OAQDA) board of trustees, representatives of Harbor Bay Real Estate Advisors thought their request for $150 million in 30-year bonds and a property tax exemption would be approved.

The bonds would finance most of the $200 million Market Square development, including a 10-story office building and seven-story apartment building, at Lorain Avenue and West 25th Street in Ohio City. The innovative project, using timber framing, would reduce emissions by 40 percent mostly from reduced heating and cooling, but also from avoiding the manufacture of steel and concrete.
 

MORE:

https://neo-trans.blogspot.com/2019/08/market-square-tax-abatement-isnt-issue.html

Edited by KJP
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^If the city is able to get better terms on the abatements, I’ll be happy they pushed for it.  That’s money that can be invested in the city. But if the way the city is going about it results in this project falling through, I’ll be beyond apoplectic. Talk about shooting yourself in the foot. It’s important for everyone to keep in mind that the discussion is over tax money that does not exist yet and will not exist without this project happening. Right now it looks like Metroparks and city schools are being reasonable. 

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And just like the city's 15-year, 100 percent tax abatement which it routinely awards to similar developments, the state's exemption wouldn't apply to land -- only to buildings.

 

This isn't quite right. The 15 year 100% abatement is only for the residential part of the development. The TIF, which we've now seen reguarly, would be for the non-school portion of the remainder (in this case office and retail).

 

Harbor Bay's empty retail plaza is solely their fault for putting the cart before the horse. Those letters of support are mostly worthless. Except for Councilman McCormack, the rest are trades and non-profits.

 

I didn't get a chance to read the Aug 13 measure yet. Did it include any contingincies or drawbacks if the office workers are simply relocated from somewhere else in Cleveland? Otherwise their promises of "new jobs" is empty.

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50 minutes ago, Mendo said:

Harbor Bay's empty retail plaza is solely their fault for putting the cart before the horse.

 

What is the city's approval of a demolition permit regarding the retail plaza?

 

The rest is opinion.


"Life is 10% what happens to you and 90% how you respond." -- Coach Lou Holtz

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The argument this project deserves a 30 year 100% tax abatement is unacceptable. Cleveland has one of the worst poverty rates in the country. These tax dollars will go on to be invested in poorer neighborhoods and schools. I feel as though everyone sees a flashy design that can't work without large tax exemptions and argue the neighborhood needs THAT project. If this project cannot survive without a substantially lower tax abatement, it simply shouldn't be built.

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9 minutes ago, KJP said:

 

What is the city's approval of a demolition permit regarding the retail plaza?

 

The rest is opinion.

 

Its not the city's responsibility to make sure they have financing in place before approving demolition permits.

 

My comment about the residential abatement is fact. Your statement compares apples to oranges.

 

As for the rest of comment yes its opinion. That's what we do here.

 

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2 minutes ago, Mendo said:

 

Its not the city's responsibility to make sure they have financing in place before allowing demolition.

 

My comment about the residential abatement is fact. Your statement compares apples to oranges.

 

As for the rest of comment yes its opinion. That's what we do here.

 

If the city didn't want another vacant lot, let alone across street from the West Side Market, then why shouldn't it check to see if financing is in place first?

 

Abatements are often awarded for commercial projects.

 

@Metz44 The city doesn't exist in a vacuum. The city is competing with others that are vying for residents and employers, and all of them use tax abatements. This project will add 1,000+ jobs, all located at a busy transit hub, which will help address the city's poverty situation.

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I love love love this project, but I'm firmly in agreement with the city.  If the state wants to write a check, fine, but it needs to do it with its own checkbook. Home rule is too precious, especially the way politics in the cruddy state is bifurcating.

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Acknowledging that I don't know all the discussions that might have taken place being the scenes, the developer seems pretty naive here.  They tried an approach that hasn't been used for this sort of development before (certainly in Cleveland, maybe in the state) and that would create a much larger abatement than is typically awarded and didn't seem to get their ducks in a row with the affected parties beforehand.  While the specifics are different, if they followed the Nucleus discussions they would have known that this would be contentious.  I really like this development and want to see it move forward, but feel like the developer has made some pretty obvious mistakes in how they went about this.

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The developer overreached with the 30-year tax exemption but the city overreacted to someone other than them possibly awarding an abatement. If the city were to offer a income tax TIF to the schools, Metroparks etc, I'm this could be worked out with a 15-year exemption.

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^Why should anyone other than the city be allowed to offer an exemption from city taxes?  It's an astonishing and hypocritical overreach from the state government to make this program available for these kinds of projects without explicit city support.

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12 minutes ago, StapHanger said:

^Why should anyone other than the city be allowed to offer an exemption from city taxes?  It's an astonishing and hypocritical overreach from the state government to make this program available for these kinds of projects without explicit city support.

Does the State even talk to the City?

 

It seems absolutely ridiculous that the state would offer anything before talking to the city.

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