After almost a year of debate between multiple parties, a deal could be at hand between the City of Cincinnati and Cincinnati Public Schools around tax incentives the former can grant to developers.
The city's last agreement with the district, struck in 1999, expired at the end of last year.
Council's Budget and Finance Committee today approved a full-council vote on a new deal that would compensate CPS at a higher rate than the previous agreement, but eliminate a yearly lump-sump payment and last for five years instead of 20. In addition, the new deal preserves contributions to a program that funds affordable housing and neighborhood development and requires a yearly audit, though payments won't be adjusted based on those audits until the five years is up.
Tax abatements write off the taxes developers would owe the city and district on the increased value of their properties due to development projects like new construction or rehabs. TIFs take money that would have been paid in taxes on property improvements and put them in a special fund to be used for improvements within a district near the development.
Those incentives have been worth millions under the previous 20-year deal the district and the city struck around the construction of the city's two professional sports stadiums on the riverfront. But CPS, which is mostly funded via property taxes, said it has lost millions of dollars due to those abatements and wanted adjustments for more fair compensation.
Under the previous deal, the city could max out 15-year tax abatements and 30-year tax increment finance districts without going to CPS for approval of each one. In return, the district got $5 million a year to replace property tax payments from the stadiums and 25 percent of the value of tax abatements and 27 percent of the value of funds diverted into TIFs.
The new deal would axe the $5 million stadium payment — which sunset last year anyway — and increase the payments developers make to the district in lieu of taxes from 25 percent of an abatement to 33 percent. The new deal would end on Dec. 31, 2025.
Language in the new agreement also protects developer payments to a program called Voluntary Tax Incentive Contribution Agreements, or VTICA, which asks developers to contribute 15 percent of the value of their abatements to a fund that pays for affordable housing development and neighborhood improvements. For developments in downtown and Over-the-Rhine, VTICA helps fund the streetcar.
Negotiations between the city and the district got bogged down in a debate about a complex state funding formula and the effect abatements had on state compensation to the district. The city held that due to the state's funding formula, the district should only get five percent of the value of abatements given to developers. The district held that 33 percent was the right number.
In the end, the city and district agreed to disagree.
Last month, Mayor John Cranley announced that the district and city administration had come to an agreement that would have given the district the 33 percent number for 10 years without the yearly $5 million payment. That deal, however, hit turbulence in city council.
Not everyone is sold on the deal coming before council just yet.
Councilmember Jeff Pastor wants the city to pay a pro-rated amount to the district while it tapped a third-party audit in order to find the right number. Pastor argued that it was "bad government" to move forward without knowing the proper percentage that exactly compensates the school district for revenue lost to abatements.
The district has pushed back against those suggestions.
"We will not accept an extended amount of time for a third party to come in," CPS Board President Carolyn Jones said in committee today. "We have to move forward. We started this process with council almost a year ago. It doesn't help us move forward with our long-term financial plan."
Without a deal, the city would be much more constrained in the deals it can offer developers — 50 percent of the value of taxes due on property improvements for 15 years.
Full council will vote on the proposal tomorrow (Feb. 5).