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

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16 minutes ago, WindyBuckeye said:

So does that mean you’ll start your own paper like the KJPost

 

I already have. 😄

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

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1 hour ago, KJP said:

 

What's the deal with the article making it sound like no progress was made with the city?  Very different tone than the conversations you had with the developer.

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26 minutes ago, StapHanger said:

 

What's objectionable about the article?

 

What gg707 said.


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

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I thought it was a decent article. Could have used more detail about how the subsidies compare and how Harbor Bay is proceeding. Too many throwaway lines that would have been a good time to expand.

Edited by Mendo

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My favorite part of the article:

 

"Get insider texts about Cleveland City Hall on your phone from Robert Higgs. Cut through the clutter of social media and communicate directly with cleveland.com’s City Hall reporter, just like you would with your friends. Sign up here and give it a try.It’s just $3.99 a month, which works out to about 13 cents a day."

 

Such a professional tagline.

 

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On 9/13/2019 at 3:42 PM, KJP said:

 

How so?

 

"Cleveland objected to the proposal, complaining that it had been kept out of the loop, learning about the request just hours before it was to go before the agency’s board in August.

If the state awarded abatements of local taxes, the action would be a challenge to Cleveland’s home rule authority"

 

"Gov. Michael DeWine came out strongly against the proposal, saying tax decisions such as what Harbor Bay sought should be decided at the local level."

 

These are points that I would agree with. In general, tax incentives nationwide has been mismanaged and abused by developers and corporations alike. And now it is probably likely that the developer will pull out and plop their generic development on another city much like how Columbia has done with Cincinnati for years.

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Did you watch his recent video "interview" of the mayor? How many questions did Higgs ask? Two, maybe? Why did the mayor's office pick him to get his viewpoints out regarding his grandson yet reject interview requests from all other reporters? And why does the mayor's office keep turning to him to get an article written about this development project when the real estate reporter is Jordyn Grzelewski? And why did Higgs not wait until he heard from the developer before submitting the article? How many of Higgs' articles on this development have included any comments from a Harbor Bay rep? So far, I count zero.

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

 

WEDNESDAY, SEPTEMBER 18, 2019

Market Square project to shrink by about one-third

 

Without state financing and a tax exemption for its project, the developer of a $175 million, mixed-used development has decided to scale back the project by about one-third -- at least at the outset.

Harbor Bay Real Estate Advisors, LLC is hoping for the city to approve a conventional, 15-year, 100 percent tax abatement, for the residential portion of its Market Square project. If that happens, a seven-story apartment building with ground-floor retail would be located at the corner of Lorain Avenue and West 25th Street in Cleveland's Ohio City neighborhood.

But without a tax exemption for the entirety of the roughly 500,000-square-foot development, the 150,000-square-foot, 10-story office building is going to have to wait for more signed leases and an as-yet-unidentified form of public subsidy before it can be built. That building was expected to increase the daytime population of the Market District with 1,000 office workers, said Harbor Bay's Project Director Dan Whalen.

 

MORE:

https://neo-trans.blogspot.com/2019/09/market-square-project-to-shrink-by.html

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2 minutes ago, KJP said:

Market+Square-Harbor+Bay-M.jpg

 

WEDNESDAY, SEPTEMBER 18, 2019

Market Square project to shrink by about one-third

 

Without state financing and a tax exemption for its project, the developer of a $175 million, mixed-used development has decided to scale back the project by about one-third -- at least at the outset.

Harbor Bay Real Estate Advisors, LLC is hoping for the city to approve a conventional, 15-year, 100 percent tax abatement, for the residential portion of its Market Square project. If that happens, a seven-story apartment building with ground-floor retail would be located at the corner of Lorain Avenue and West 25th Street in Cleveland's Ohio City neighborhood.

But without a tax exemption for the entirety of the roughly 500,000-square-foot development, the 150,000-square-foot, 10-story office building is going to have to wait for more signed leases and an as-yet-unidentified form of public subsidy before it can be built. That building was expected to increase the daytime population of the Market District with 1,000 office workers, said Harbor Bay's Project Director Dan Whalen.

 

MORE:

https://neo-trans.blogspot.com/2019/09/market-square-project-to-shrink-by.html

 

As long as the office idea isn't dead or scaled down to something super minor, this doesn't strike me as a terrible thing. I'd rather them build to their original specifications than to do a super scaled down version just to do it. I wonder if the Voss building development would help move this project along and/or nudge the office component along...

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Too bad but seems like a smart way to proceed, with PROCEED being the key word!  Will the apartment portion be scaled back in any way or be built as original proposed in the above rendering?  Splitting this into phases does not bother me at all and I hope they are able to proceed with the office portion at some point in the near future.

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The proposed residential conversion of Voss was in response to the proposed Market Square project.

 

The residential building will be built as planned. I believe the retail will be as well.

 

The reason why the office building is a big deal is because the West Side Market needs more weekday/daytime customers (as do local restaurants). The office building would have put up to 1,000 daytime customers across the street.

Edited by KJP
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6 minutes ago, KJP said:

The proposed residential conversion of Voss was in response to the proposed Market Square project.

 

The residential building will be built as planned. I believe the retail will be as well.

 

The reason why the office building is a big deal is because the West Side Market needs more weekday/daytime customers (as do local restaurants). The office building would have put up to 1,000 daytime customers across the street.

So what do you think the city should

do to improve

The prospects of building new office buildings? Searching for answers.

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10 minutes ago, KJP said:

The office building would have put up to 1,000 daytime customers across the street.

 

This is so important. Let's be real, the area is kind of dead outside of prime "going-out" hours and beautiful summer Saturdays.

Edited by mu2010
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10 minutes ago, KJP said:

The reason why the office building is a big deal is because the West Side Market needs more weekday/daytime customers (as do local restaurants). The office building would have put up to 1,000 daytime customers across the street.

 

That would do wonders for the area... Do you think the bigger problem was the financing or the fact that they didn't have enough leasing from potential tenants?  I guess my question is why build this building if its going to be half-empty, at least for the time being.  Though didn't the Ernst & Young Tower lease up surprisingly quickly?  

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2 minutes ago, mu2010 said:

 

This is so important. Let's be real, the area is kind of dead outside of prime "going-out" hours and beautiful summer Saturdays.

My hope it will come in time.

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8 minutes ago, mrclifton88 said:

That would do wonders for the area... Do you think the bigger problem was the financing or the fact that they didn't have enough leasing from potential tenants?  I guess my question is why build this building if its going to be half-empty, at least for the time being.  Though didn't the Ernst & Young Tower lease up surprisingly quickly?  

 

Based on some back of the envelope analysis that I have seen, the demand is there (in general) for new class A office in CLE. If you build it, they will come. Occupancy rates are high for class A towers and companies are all excited to become tenants in sexy buildings like this.

 

The problem is market rents ($30-$35 per square foot for the absolute best office space in the city, much lower compared to other places) do not support construction costs. 

Edited by mu2010
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3 hours ago, mrclifton88 said:

 

That would do wonders for the area... Do you think the bigger problem was the financing or the fact that they didn't have enough leasing from potential tenants?  I guess my question is why build this building if its going to be half-empty, at least for the time being.  Though didn't the Ernst & Young Tower lease up surprisingly quickly?  

 

I quoted Whalen as saying that the developer needs an almost fully leased office building AND some unidentified public incentives before they could start construction.

 

How to fund it? Harbor Bay came up with an idea to fund it but the city said "hell no" because of jurisdiction, not because of financial impact. I didn't put this in the article because I didn't want this and future blog articles to be a tennis court net between the city and developer firing volleys at each other. But the fact is, the developer offered the city, schools and metroparks a sales and income tax TIF to completely offset their property tax losses. The schools and metroparks were willing to listen. The city wasn't. It is so hyperfocused on protecting its abatement jurisdiction that it is losing sight of the bigger picture -- private investment and jobs.

 

EDIT: added "and income" between "sales" and "tax TIF."

Edited by KJP
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2 minutes ago, KJP said:

 

I quoted Whalen as saying that the developer needs an almost fully leased office building AND some unidentified public incentives before they could start construction.

 

How to fund it? Harbor Bay came up with an idea to fund it but the city said "hell no" because of jurisdiction, not because of financial impact. I didn't put this in the article because I didn't want this and future blog articles to be a tennis court net between the city and developer firing volleys at each other. But the fact is, the developer offered the city, schools and metroparks a sales tax TIF to completely offset their property tax losses. The schools and metroparks were willing to listen. The city wasn't. It is so hyperfocused on protecting its abatement jurisdiction that it is losing sight of the bigger picture -- private investment and jobs.

 

Ugh such poor

leadership

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15 minutes ago, KJP said:

 

I quoted Whalen as saying that the developer needs an almost fully leased office building AND some unidentified public incentives before they could start construction.

 

How to fund it? Harbor Bay came up with an idea to fund it but the city said "hell no" because of jurisdiction, not because of financial impact. I didn't put this in the article because I didn't want this and future blog articles to be a tennis court net between the city and developer firing volleys at each other. But the fact is, the developer offered the city, schools and metroparks a sales tax TIF to completely offset their property tax losses. The schools and metroparks were willing to listen. The city wasn't. It is so hyperfocused on protecting its abatement jurisdiction that it is losing sight of the bigger picture -- private investment and jobs.

 

This is about the mayor wanting to remind everybody who's really in charge. Does not send a good message to outside Developers. What happens if Sherwin-Williams or anyone else tries to finance through OAQDA ?

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10 minutes ago, freethink said:

This is about the mayor wanting to remind everybody who's really in charge. Does not send a good message to outside Developers. What happens if Sherwin-Williams or anyone else tries to finance through OAQDA ?

Hopefully said mayor is gone soon.

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Good on the city for pushing back on more degradation of home rule. It's too bad a project we all want to get built was the target, but oh well.

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13 minutes ago, Mendo said:

Good on the city for pushing back on more degradation of home rule. It's too bad a project we all want to get built was the target, but oh well.

That's fine, and I'm all about living within your principles. But then you're just going to have to match the offer, no way around it. I guarantee other cities regionally would not turn this deal down.

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58 minutes ago, KJP said:

The schools and metroparks were willing to listen. The city wasn't. It is so hyperfocused on protecting its abatement jurisdiction that it is losing sight of the bigger picture -- private investment and jobs.

 

 

Terrible city leadership!!!  It’s surprising this city has made so much progress lately in-spite of the mayor(s) and city “leadership”.

 

The thing is Harbor Bay(& others) would not have to go to/use the OAQDA or any state tax help if Our city leadership would be active and on the ball trying to bring in new business and find ways to help those that are already here succeed!

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44 minutes ago, Mendo said:

Good on the city for pushing back on more degradation of home rule. It's too bad a project we all want to get built was the target, but oh well.

Thank you! Now all of a sudden UO is anti-home rule? I don’t want the project scaled back either but it’s amazing to me that this is being used as a talking point to attack the city when the precedent that this would’ve set some of you would’ve hated later

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The ones that Harbor Bay had signed were from outside of the area and I believe a couple that they were close to signing were also. But I do agree with you that if tax abatement is considered for an office development, not only should all of the tenants come from outside of the region (or at least accommodate a growing local employer if its new space is X% more than its old space), but also that there be a plan established to make sure the city, schools and metroparks are made financially whole.

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4 minutes ago, inlovewithCLE said:

Thank you! Now all of a sudden UO is anti-home rule? I don’t want the project scaled back either but it’s amazing to me that this is being used as a talking point to attack the city when the precedent that this would’ve set some of you would’ve hated later

Just did some research and now I’m switch and agree with your take. Sorry for the irrational judgment I was just disappointed.

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Home rule for home rule's sake is not sensible. I would expect we'd welcome the state taking control if we lived in East Cleveland but if we lived in Westlake we wouldn't. Cleveland is somewhere in between on the scale of competency and ability to help itself attract and retain jobs. Ultimately, Cleveland should offer tax abatement for new office construction if the developer can meet the kinds of conditions I proposed a couple of posts ago.

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4 minutes ago, AsDustinFoxWouldSay said:

Next update will be this project doesn't happen. It happens every time in this city

Next post from you will provide nothing useful to discuss on this board. It happens every time you post. 

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However I agree that it was wrongful of the city to push this project back even though they gave them well sought out TIF and financing options, I'm not going to attack the city or its leadership because of it. With the last real instance for adding brand new office space being Ernst & Young;  yes was a fast selling point but should you test the waters once more from a build that happened 6 almost 7 years ago? I like to believe that we're just finding reasons to retain our population right now. I'm not saying we're not making any progress, because there's definitely demand for development downtown, but not so much elsewhere. We're just trying more ways to be centralized. We are a boom town, but the amount of development we've had in the past 6 years has been super fast paced, which outranks developments within Columbus, Pittsburgh, and Cincinnati. And in the words of too much of a good thing could become a bad thing, maybe it is time to slow down.

 

But I do hope they atleast phase the development, wait to accrue money from the existing tenants, and directly finance the office space. I don't understand why many companies don't do this in the first place. Instead of going for the gusto and failing, you could potentially build a new empire from a happy little accident.

 

image.thumb.png.006c68c6123bc13865038e210bd095da.png

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1 hour ago, AsDustinFoxWouldSay said:

Next update will be this project doesn't happen. It happens every time in this city

 

Who hurt you? 

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2 hours ago, KJP said:

 

How to fund it? Harbor Bay came up with an idea to fund it but the city said "hell no" because of jurisdiction, not because of financial impact... But the fact is, the developer offered the city, schools and metroparks a sales tax TIF to completely offset their property tax losses.

 

 

I’m not following this. The developer “offered” ... a sales tax TIF? Do you mean they “suggested” it? And how much more sales tax will this retail generate compared to what it generated before they started kicking out tenants from Market Square? 

 

I REALLY hope this project happens. I also think it’s fair to question both substantial tax incentives AND who is controlling those incentives.

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Not bad at all. I can settle for two phases if it keeps the same scale/quality that we've seen from the plans. From an urban and design aspect, I'm glad the apartments are going forward in the first phase. A vacant lot at that corner would be incredibly depressing. From an economic aspect though, I'm disappointed in losing the office building and prospect of new to the region jobs. I do think it speaks volumes for what a turnaround this area (and city in general) has made that the developer of spec office building was able to sign tenants from out of the region. When was the last time that happened here?

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17 minutes ago, Boomerang_Brian said:

 

I’m not following this. The developer “offered” ... a sales tax TIF? Do you mean they “suggested” it? And how much more sales tax will this retail generate compared to what it generated before they started kicking out tenants from Market Square? 

 

 

Yes, suggested. And it was sales and income taxes. The developer estimates that the development would generate about $11.8 million per year in new taxes.

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1 hour ago, KJP said:

Home rule for home rule's sake is not sensible. I would expect we'd welcome the state taking control if we lived in East Cleveland but if we lived in Westlake we wouldn't. Cleveland is somewhere in between on the scale of competency and ability to help itself attract and retain jobs. Ultimately, Cleveland should offer tax abatement for new office construction if the developer can meet the kinds of conditions I proposed a couple of posts ago.

 

No developer is going to agree to those conditions because it will hamstring the tenants they can attract. A limited tenant pool means banks won't touch it with a 10 story pole.

 

There is a certainty a substantial number of tenants here will simply relocate from downtown, if for no reason than that's where all the office jobs are anyway.

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22 minutes ago, KJP said:

 

Yes, suggested. And it was sales and income taxes. The developer estimates that the development would generate about $11.8 million per year in new taxes.

 

With the income tax it makes more sense. How much is Market Square’s current property tax? Did the OAQDA arrangement completely remove all property taxes or just the taxes on the value add, like a typical TIF? (My understanding was the former.) Any idea how much sales tax revenue was being generated prior to tenants being kicked out?

 

This whole thing does make me wonder who is responsible from local government for verifying developer projected economic and tax claims. (E.G. $11.8M in new sales/income taxes, as they claimed here.)

 

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59 minutes ago, Mendo said:

 

No developer is going to agree to those conditions because it will hamstring the tenants they can attract. A limited tenant pool means banks won't touch it with a 10 story pole.

 

There is a certainty a substantial number of tenants here will simply relocate from downtown, if for no reason than that's where all the office jobs are anyway.

 

If a tenant is moving to a new-construction building to grow and will rent X% more square footage for at least 1/3 of the duration of the abatement vs. their previous location, then I think the development is worth abating.

 

2 hours ago, Boomerang_Brian said:

 

With the income tax it makes more sense. How much is Market Square’s current property tax? Did the OAQDA arrangement completely remove all property taxes or just the taxes on the value add, like a typical TIF? (My understanding was the former.) Any idea how much sales tax revenue was being generated prior to tenants being kicked out?

 

 

The OAQDA tax exemption would have been the same as a city tax abatement in that it would apply only to the structures, not the land. The land and buildings are currently assessed about $85,000 per year in city property taxes and about $17,000 per year to the Ohio City Special Improvement District. About 60 percent of the property taxes were assessed against the structures and roughly 40 percent on the land, or about $34,000 per year. That amount would increase significantly even with the exemption/abatement because the taxable value of the land was estimated to quadruple with larger, more valuable buildings on them. And while the OAQDA exemption would have reduced the Ohio City SID assessment, Harbor Bay said it would continue to pay it in full.

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5 hours ago, inlovewithCLE said:

Thank you! Now all of a sudden UO is anti-home rule? I don’t want the project scaled back either but it’s amazing to me that this is being used as a talking point to attack the city when the precedent that this would’ve set some of you would’ve hated later

 

I’ve been ani-home rule for years, thank you very much!

 

Home rule is the reason we have 7,423 cities in Cuyahoga. Home rule is the reason we’re bantering about Sherwin-Williams moving to Brecksville. Home rule is the reason we’re not the 9th largest city in the country, commanding the capital of the 9th largest city in the country, which would get this project built in a jiffy. Home rule is the reason we wouldn’t have a 5-county public transit system sending 1,000s of employees to this project daily. 

 

Heck yes we’re anti-home rule!

 

(oversimplification for emphasis of point, but moral is home role in Ohio is different from home rule in most states and yields too much power to the local government, see viewcontent.cgi?article=3898&context=cas. This Balkanization leads to a cacophony of different, contradictory laws that make this state a nightmare for developers, businesses, and the rest of us—while promoting unequal sharing of wealth to the detriment of us all, see https://beltmag.com/todays-ohio-home-rule/

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6 hours ago, Clevecane said:

 

I’ve been ani-home rule for years, thank you very much!

 

Home rule is the reason we have 7,423 cities in Cuyahoga. Home rule is the reason we’re bantering about Sherwin-Williams moving to Brecksville. Home rule is the reason we’re not the 9th largest city in the country, commanding the capital of the 9th largest city in the country, which would get this project built in a jiffy. Home rule is the reason we wouldn’t have a 5-county public transit system sending 1,000s of employees to this project daily. 

 

Heck yes we’re anti-home rule!

 

(oversimplification for emphasis of point, but moral is home role in Ohio is different from home rule in most states and yields too much power to the local government, see .... This Balkanization leads to a cacophony of different, contradictory laws that make this state a nightmare for developers, businesses, and the rest of us—while promoting unequal sharing of wealth to the detriment of us all, see https://beltmag.com/todays-ohio-home-rule/

 

I agree that would be better off if Cuyahoga county was one government instead 59 cities, villages, towns, and townships. I don’t understand the connection between Ohio Home Rule and Ohio Balkanization. Are you suggesting that without home rule we wouldn’t have this silly Balkanization? How so? Or are you saying that without home rule, the Balkanization would be irrelevant?  I think we mostly agree on this, I’m just trying to understand the connection you’re making. 

Edited by Boomerang_Brian
Typo

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13 hours ago, cfdwarrior said:

^ Home rule in theory is great...if a city actually knows how to "rule" itself...

 

 

Also subject to limitation.   Saying a level of government can't do something is a consistent part of our system of checks and balances, from Supreme Court rulings down through traffic laws.   Saying it must is what's problematic.

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1 hour ago, Boomerang_Brian said:

 

I agree that would be better off if Cuyahoga county was one government instead 59 cities, villages, towns, and townships. I don’t understand the connection between Ohio Home Rule and Ohio Balkanization. Are you suggesting that without home rule we wouldn’t have this silly Balkanization? How so? Or are you saying that without home rule, the Balkanization would be irrelevant?  I think we mostly agree on this, I’m just trying to understand the connection you’re making. 

 

Mostly the latter—that we could overcome Balkanization without the power cities have in Ohio. California also has home rule, but there is a certain level of checks and balances the state and county can exert to keep the local empires from killing each other. Our fiefdoms have no power steering them in the same direction and spend most of their time in civil war. 

 

But also, doesn’t the way our home rule laws are written in the constitution impact the logistics of a city merger? And city-county merger, since our counties basically have no real structure one the land inside them is incorporated?

 

Maybe in misremembering, it’s been 7 years since I was researching this stuff in grad school. This is quickly moving off topic, I assume there’s a better place for this convo?

 

* edited typo in “Maybe”

Edited by Clevecane
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So the developer basically wanted a tax abatement that was never given to any developement in prior history?

 

I get the risk the developer is making, and sometimes you want to give developers additional flexibility because of the results (new residents, office workers, new tax income) that new development will bring to the city...

 

That said, it sort of angers me when developers want to push the envelope with smaller cities and get their ransom, but wouldn't dare ask for such high financial requests to develop in NYC/Toronto/Chicago, etc. 

Edited by troeros

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1 hour ago, troeros said:

So the developer basically wanted a tax abatement that was never given to any developement in prior history?

 

I get the risk the developer is making, and sometimes you want to give developers additional flexibility because of the results (new residents, office workers, new tax income) that new development will bring to the city...

 

That said, it sort of angers me when developers want to push the envelope with smaller cities and get their ransom, but wouldn't dare ask for such high financial requests to develop in NYC/Toronto/Chicago, etc. 

 

Seriously? Compare average office rents for Class A space in Cleveland's CBD ($23.75/sq ft) vs. the CBDs of NYC/Toronto/Chicago ($50-90/sq ft). Then compare the construction costs, which are pretty comparable among metros due to prevailing wage requirements. C'mon people. If you want to see something built in the urban core to provide stronger competition to the sprawl, at least consider the economics involved here.

 

We have two basic choices -- Either have the State of Ohio or a new regional NE Ohio government establish urban growth boundaries some 5-10 miles inside the perimeter of the existing developed fringe and demolish a ton of existing suburban offices to raise rents on the remaining supply (especially in the urban core) or provide some big subsidies to overcome Cleveland's lowly rents. Which one do you think is more doable?

 

EDIT: of course, we could always just wait and hope for the economic behemoth that was Cleveland's economy 50-150 years ago to rise again.

 

 

Edited by KJP
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