Cleveland's New Tax Abatement Policy

I'm going to direct you to the City Council Press Release on this, but wanted to quote or highlight a few items here.

First: "....Council is in agreement with Mayor Frank G. Jackson regarding the classification of downtown as a neighborhood. As a result, the new policy contains no distinction between downtown and the neighborhoods, which eliminates tiered abatement downtown...."

Second: ".... Understanding the need for energy efficiency and its impact on the future of the City and the environment, Council convened a green building working group, which determined it would be reasonable to expect the development community to prepare for a higher standard for development by 2010. Therefore, on January 1, 2010, new construction will be required to meet energy star standards...."

Would have loved for a Transit Oriented Development (TOD) component to be recognized in a new abatement policy. Revisiting it again in 2010 is much smarter however than the 20 year plan first put into effect. Just my two cents. Anyway, here is the entire press release. Peace Out - 3C

Perspective on Tax Abatement Policy: A Knee Jerk Reaction?

Roldo Bartimole of Lakewood is a writer who is featured on Lakewood Buzz, a cool local website if you want to learn about the goings on in that city. He said something that rang true for me. Mayor Jackson proposed a change to the tax abatement policy - not an elimination of it. Regardless of how people vote on this issue, it seems to me we avoided healthy dialogue by 'side taking' early in the game.

Read what Roldo has to say here. My thinking goes like this: for us to come up with creative ideas to move Cleveland forward, we need to not be so quick to stop dialogue. Just my two cents.

It's almost June, and probably there will be an extension of the current policy. I just get tired of things becoming a 'for' or 'against' on issues like this...important issues that need discussion. UrbanOhio (The Forum) is one of the few places I've seen a healthy discussion on the topic. If you are interested, check it out here.

Tax Abatement Changes Proposed By Mayor Jackson and the City of Cleveland

Apparently the Cleveland Community and Economic Development department has made a recommendation to Mayor Jackson that some changes be made to the tax abatement policy.

Instead of a 100% across the board abatement, it would be more like this:

• 100 % Abatement for 7 Years on new construction
• Increased Abatement Policies on Rehabbed Homes
• Homes Meeting Certain Energy/Green Standards Could Receive an Additional 5 Yrs of Abatement

I'm personally in favor of the increased abatement on rehabbed homes. And a 7 year abatement sounds like a reasonable compromise. I may be in the minority on this, I'm not sure. There are arguments about how suburban 15 year abatement might now win residents over Cleveland. But we certainly can't afford to keep giving blanket abatement. Just my opinion. For example, taxes are lower in Cleveland anyway, so 7 years at 100% and then a lower tax than some of the suburban communities....that has to still be enticing.

I would have liked to see longer abatement for some of the still 'needy' neighborhoods...identified in the Mayor's CIP Plan as fragile. Maybe there is more news on this as the plans - proposal becomes available to the public.

Joe Cimperman, whose district has benefited greatly from abatement, has lent a disapproving comment or two about this. To read more about it, check out the story by Jay Miller in Crains Cleveland.

It would be nice to see the economic figures to back this proposal up....can they show that the tax monies received will outweigh a potential loss of new residents due to the lower abatement period? Inquiring minds want to know. At least I do! I know the CSU study was very bullish on abatement. Peace Out - 3C

April 17th Update: Local WKYC news showed a reporter ( I could not catch the name) taking a straw poll of sorts, asking Cleveland's Councilmembers if they wanted to continue the current abatement program or support Mayor Jackson's plan and there seemed to be no hands up in support of his plan.

Steelyard Commons Walmart to Participate In Job Opportunity Zone

The latest word is that the Steelyard Commons Walmart decided they want to play nice (actually very nice) and not take their allowable tax abatements for the new Steelyard Commons store. Instead, they are looking to set up a Job and Opportunities Zone in Tremont, setting aside grant money and advertising money to help local businesses in Tremont thrive, grow or start up. For more information, see my Active Rain post here.

Update: here is an audio podcast of Mayor Frank Jackson explaining the significance of Walmart opting out of the tax abatement (ten year) available to them. The podcast is courtesy of Cleveland.com.
Peace Out - 3C

Steelyard Commons: Tax Money Trouble In Paradise?

While everyone basks in the glow of the new Steelyard Commons, a glitch has been discovered. Susan Vinella reports in the Plain Dealer this morning that the tax monies Cleveland was expecting from Steelyard Commons may not be there after all, at least for the next ten years. When you participate in Brownfield Remediation of a site, the State of Ohio allows you to receive a tax break for doing so. It's not that this is a bad thing, but my immediate reaction is, how could our City Government not know this ahead of time when they are formalizing agreements to plan development projects? According to the PD article, Mitchell Schneider, the projects developer is working with the City to try to get some of the tax monies to the City. But many of the stores (Target, Walmart) are already on board with the abatement available to them. By the way, this money was earmarked for continued improvements to the Towpath and Bike Paths, among other things.

I guess this adds to the discussion about the value of tax abatement to cities like Cleveland. In this case, brownfield remediation would be a smart reason to allow them. It amazes me that Cleveland could be blindsided in this way. I'm a layperson and if I am aware of tax abatement available for remediation then why would those hired to work on City Planning not be more aware? Shouldn't this have been part of the negotiations up front? Again according to the Vinella article, Cleveland claims to have discovered the loopholes/ramifications of this issue 'late last year.' That means just a few months before Steelyard Commons is ready for business?

Peace Out - 3C

Tax Abatement: Does it Help More Than it Hurts the City of Cleveland?

The City of Cleveland authorized a Tax Abatement Program for new construction and rehab projects in 1991. 100% tax abatement on a 'for sale' property has been alluring to buyers, something I have seen first hand. In 2006 I had several clients move here from other States and they specifically chose homes that included the 100% abatement over others that were similar but lacked the tax relief. The question comes up for debate again because City authority for this Abatement Program ends this July; they have to decide if they are going to continue it, change it or end it.

City Council is holding a series of hearings on the issue. Last week's hearing brought out some of the prominent builders in the area. Developers like Sutton Builders, Rysar Properties, Zaremba and The Ferchill Group all asked the City to continue the Abatement Program. I thought the most telling comment came from Chris Ferchill of The Ferchill Group. The Ferchill Group developed The Villa Carabelli Town Homes which occupy space in both Cleveland and Cleveland Heights. He pointed out that "....the six units within City of Cleveland limits sold quickly [and they had 100% tax abatement for 15 years]. ...the fourteen units in Cleveland Heights took two years to sell...." and the tax abatement for those units was 65% for 7 years. (quote is from the Crain's article linked above)

Councilwoman Fannie Lewis discussed the fact that tax abatement had helped turn her neighborhood around (although Fannie Lewis deserves a lot of credit herself, she is a dynamo for her neighborhood, IMHO). And Councilman Cummins from the Old Brooklyn neighborhood pointed out that his area doesn't have much land to assemble for new construction projects, but that rehabbed and new homes on vacant lots should get 12 % abatement. This discussion, regarding whether or not the abatement amount should change, was a key part of the hearing. Overall it sounds like the majority of the builders requested that The City give them a year at the status quo while they rethink a strategy.

Personally and professionally, I see the advantages of tax abatement, and stories like Fannie Lewis' tell me we need to keep some form of it. But the City of Cleveland is losing money on the type of abatement structure set up currently. It was necessary, but now I'm thinking a change in focus might be good. Why not apply the total 100%/15 year tax abatement to Smart Growth rehabs or new builds; or homes that are built near public transportation (TOD's)? Or reach a certain level of energy efficiency? Other layers of abatement could still be applied but at smaller percentages for different types of rehab projects. The storefront abatement program seems like a winner to me too. I would tell you to keep an eye on the City Council website for information on more public hearings, but I will have to call on Monday to find out -- the City Council website seems to be in 'reconstruction' mode this week. I will edit this or add a short blurb in a new post when I find out details. Peace Out - 3C

2/27/07 - I have an update - Cleveland State University did a study involving 400 homebuyers who purchased homes in Cleveland over the last few years. The majority of them (60%) said tax abatement was a big reason they chose Cleveland over someplace else. I think that's great, it just proves abatement works. What it does not do however is prove it should stay in the same form it is in right now. Regardless, here is the Crain's Cleveland Business article in it's entirety.