Cincinnati City Council Pumps Brakes on CPS Deal

Several council members weren't ready to approve a new deal between the city and the district around the city's tax incentive policies. CPS says it needs a higher level of compensation from developers for those deals, but the city has its own numbers.

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click to enlarge Cincinnati City Hall - Nick Swartsell
Nick Swartsell
Cincinnati City Hall

A deal announced by Mayor John Cranley and Cincinnati Public Schools around the city's tax abatement policies hit some skepticism today in Cincinnati City Council's Budget and Finance Committee.

That committee refused to advance legislation cementing a new deal between the district and the city for consideration at council's Thursday meeting because they say some long-lingering questions aren't answered.

Council must approve any deal replacing a 20-year bargain between the district and the city that expired at the end of last year. That previous deal, struck in 1999, let the city offer more generous property tax abatements and tax increment financing (TIF) arrangements to developers looking to build or rehab in the city. 

But discussion about the proper compensation for the school district, which is mostly funded by property taxes, has veered into some murky waters. The city has said the district should only get a payment from developers equal to 5 percent of the tax owed on property improvements developers make thanks to a complicated state funding formula that allegedly makes up the rest of the difference.

The district, meanwhile, says it should receive 33 percent payments — the same millage it would receive from unabated property via fixed-rate levies that fund it. The district also gets a fixed amount from other levies, which don't enter into this deal. CPS officials say that the state's funding levels won't change for the next two years and that the formula is expected to change "radically" after that.

Cranley's deal with the district would provide those 33 percent payments from developers for the next decade. Cranley has said that is more than what is needed to compensate the district, but that it's worthwhile to support the city's public schools. Last week in unveiling the deal, Cranley said he believed he had five votes from council to approve it. But council's committee meeting today showed that passing the new deal won't be quite that simple.

Under the previous deal, CPS received 25 percent payments on property tax abatements and 27 percent payments on TIFs, plus a $5 million a year lump-sum payment. Even with that deal, the district claims it lost millions of dollars a year to abatements and TIFs. Without the deal which expired Dec. 31, the city is more constrained on the abatements it can offer and TIFs it can create. 

The argument over the proper amount of compensation for the district from developers hasn't reached a satisfactory conclusion, some members of council said today. They'd like to see a third-party analysis of the proper payments due to the district. 

Councilmember P.G. Sittenfeld called the distance between the city's numbers "an honest disagreement" but said he wanted "more mulling" before council approved any deal between the two. 

Some council members want that mulling to come in the form of an analysis funded by Cincinnati's business organizations. Council member Jeff Pastor introduced a motion to that end, which five other council members have signed onto as well.

The school district has pushed back against that suggestion in the past, saying its numbers are correct. 

District officials were not happy with the delay.

"I'm disappointed in Council not trusting our 33% & asking for 'expert' analysis," Board of Education member Mike Moroski tweeted today. "1) CPS Treasurer, Jen Wagner, was recognized for Financial Reporting in 2017 2) She was assisted by person who co-authored Cupp-Patterson bill to equitably fund public schools in OH Those are experts."

Another concern from some members of council: how the deal would impact funding for affordable housing and neighborhood improvement via a program called Voluntary Tax Incentive Contribution Agreements. Currently, developers outside of Over-the-Rhine and downtown agree to pay 15 percent of the value of their abatements into a fund for housing and improvements. But the new deal would increase payments developers would need to make to the district, possibly cutting into VTICA. 

One possible solution to the stalemate could come in the form of a shorter deal. Council member Greg Landsman suggested a five-year deal at 33 percent between the district and the city at the 33 percent payment level. It's unclear if that idea would get the five votes necessary to move it forward, however.

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