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Cleveland: Ohio City: Market Square / Harbor Bay development

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I confess I had never heard of the Ohio Air Quality Development Authority before now.  From a little digging, I wonder if the developer is proposing financing the project through OAQDA, which would mean [I think]  OAQDA acquiring title, financing the project, and  leasing the development back to the developer. This would make the development exempt from local property taxes for the life of the revenue bonds OAQDA would issue. Might also exempt building materials from state/local sales taxes.  Seems like a pretty ambitious stretch of the normal purposes of OAQDA, and I wonder if the city/schools are objecting to state action that would completely remove the development from the tax rolls. 

 

It could also be that the developer is proposing something more modest, like financing only certain equipment or something. Not much info available at this point. 

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8 hours ago, StapHanger said:

It could also be that the developer is proposing something more modest, like financing only certain equipment or something. Not much info available at this point. 

 

BTW note in the press releases posted at the OAQDA website that OAQDA has already approved some significant financing requests this year, including $100 million for a utility project and $350 million for an industrial expansion. So it's possible that Harbor Bay's request could be in that same neighborhood.

 

Think about other governmental bodies that also would be affected by a 30-year property tax exemption....


"The boss rolls up in a new Lamborghini and tells his staff 'The greatest part about America is that hard work breeds wealth. So if you work hard and dedicate yourself tirelessly to the task at hand, I can get another new Lamborghini next year.'” -- Overheard in a Cleveland bar.

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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. 

Edited by KJP

"The boss rolls up in a new Lamborghini and tells his staff 'The greatest part about America is that hard work breeds wealth. So if you work hard and dedicate yourself tirelessly to the task at hand, I can get another new Lamborghini next year.'” -- Overheard in a Cleveland bar.

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Financing apartment and office buildings seems to be outside the scope of what OAQDA was intended to do and what it normally does.  From the OAQDA website:

 

The role of the Ohio Air Quality Development Authority is to provide for the conservation of air as a natural resource of the state to prevent or abate the pollution of the air, to provide for the comfort, health, safety and general welfare of all citizens of the state and to assist in the financing of air quality facilities for industry, commerce, and research.

The Authority’s power is drawn from its enabling legislation, found in ORC Chapter 3706. OAQDA has the authority to:

1) issue air quality revenue bonds, notes and refunding bonds;

2) make loans and grants to governmental agencies for the acquisition and construction of air quality facilities

3) make loans for air quality projects for industry, commerce, distribution or research, including public utility companies;

4) acquire, construct and operate air quality facilities itself; and,

5) engage in research and development with respect to air quality facilities.

 

Its primary purpose is to contribute to cleaner air in Ohio by assisting Ohio businesses to invest in air quality through the provision of conduit financing for the purchase, construction and/or installation of air quality facilities.

 

Most of their grants are to relatively small businesses: lots of grants to buy new paint booths at Auto body shops, grants to replace old HVAC equipment, etc.  Based on that and the resultant long term tax abatement I can see why this is causing a lot of pushback.  You wonder if the developers are just being opportunistic or if this approach was key to the development...

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Yes, this is a new direction for OAQDA. But from what I understand, the wood frame construction of these two buildings substantially reduces the heating and cooling costs associated with them. The operation of residential and commercial buildings is a large contributor of carbon to the atmosphere in Ohio's cities. In this case, the numbers can be quantified related to the building's operational cost savings. There are also air quality benefits from growing the trees to maturity for construction vs. producing steel frames, plus concrete and steel reinforcing rods for more common construction. And of course there is the benefit of this being a transit-, bike- and pedestrian-supportive development. Note that this would be the largest single development located on new Red Line Greenway, putting more eyes on the trail and thus increasing its safety.

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"The boss rolls up in a new Lamborghini and tells his staff 'The greatest part about America is that hard work breeds wealth. So if you work hard and dedicate yourself tirelessly to the task at hand, I can get another new Lamborghini next year.'” -- Overheard in a Cleveland bar.

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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?

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On 8/19/2019 at 10:38 PM, Sapper Daddy said:

Sooo, I don’t come to UO to debate politics.  The option is there and I’d rather not.  However, I feel with politicians there’s always going to be a peacock show of “what’s in it for my constituents” that seems to hamper these type of developments.  The resistance is part of the political show and what’s feasible will still come to fruition.

 

Ummm....urban strategy is one of the most political things there is.   There's always going to be political shows because no proposal is going to please everyone.  Politicians are constantly attempting to predict the numbers on support/opposition, and how strong 

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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.


"The boss rolls up in a new Lamborghini and tells his staff 'The greatest part about America is that hard work breeds wealth. So if you work hard and dedicate yourself tirelessly to the task at hand, I can get another new Lamborghini next year.'” -- Overheard in a Cleveland bar.

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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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"The boss rolls up in a new Lamborghini and tells his staff 'The greatest part about America is that hard work breeds wealth. So if you work hard and dedicate yourself tirelessly to the task at hand, I can get another new Lamborghini next year.'” -- Overheard in a Cleveland bar.

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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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"The boss rolls up in a new Lamborghini and tells his staff 'The greatest part about America is that hard work breeds wealth. So if you work hard and dedicate yourself tirelessly to the task at hand, I can get another new Lamborghini next year.'” -- Overheard in a Cleveland bar.

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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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"The boss rolls up in a new Lamborghini and tells his staff 'The greatest part about America is that hard work breeds wealth. So if you work hard and dedicate yourself tirelessly to the task at hand, I can get another new Lamborghini next year.'” -- Overheard in a Cleveland bar.

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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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"The boss rolls up in a new Lamborghini and tells his staff 'The greatest part about America is that hard work breeds wealth. So if you work hard and dedicate yourself tirelessly to the task at hand, I can get another new Lamborghini next year.'” -- Overheard in a Cleveland bar.

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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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"The boss rolls up in a new Lamborghini and tells his staff 'The greatest part about America is that hard work breeds wealth. So if you work hard and dedicate yourself tirelessly to the task at hand, I can get another new Lamborghini next year.'” -- Overheard in a Cleveland bar.

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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.


"The boss rolls up in a new Lamborghini and tells his staff 'The greatest part about America is that hard work breeds wealth. So if you work hard and dedicate yourself tirelessly to the task at hand, I can get another new Lamborghini next year.'” -- Overheard in a Cleveland bar.

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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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