City of Cincinnati Could Seek Extension on Expiring Abatement Deal with Cincinnati Public Schools

With the impasse between the city and CPS showing no sign of letting up soon, some councilmembers are looking for a 90-day extension of the current 1999 deal on tax incentives.

Dec 16, 2019 at 5:41 pm
Cincinnati City Hall - Nick Swartsell
Nick Swartsell
Cincinnati City Hall

The City of Cincinnati wants more time to work out a deal with Cincinnati Public Schools around a replacement for an expiring 20-year-old agreement on the way the city writes tax incentives for developers. 

Cincinnati City Council could consider a 90-day extension on the current deal between the two. Councilmember David Mann indicated today (Dec. 16) he would introduce a motion to that effect. Mann wants to select a third party to analyze the impact property tax-based incentives have on the school district so that the city can compensate schools at the proper level. 

The negotiations around that agreement have sparked big debates between city officials, the school board and education advocates about the role incentives like property tax abatements and property tax increment financing (TIF) districts should play in development deals. 

Community Reinvestment Area tax abatements allow the city to forego property tax revenue on improvements made via new construction or renovations of commercial property. TIF districts take that revenue and funnel it into public projects in a defined, 300-acre district. Another tool, project TIFs, funnel would-be property tax revenues back into the projects the TIF is awarded to.

Under state law, the city is limited when it comes to the duration and extent of abatements and TIFs it can offer without consent of the school district. So no deal between the city and CPS could mean fewer development deals down the road. At least, that's what the city's Department of Community and Economic Development says. 

But tax incentive opponents say that the deals hurt the school district's revenues and can amount to give-aways or "slush funds" for developers.

Under the current deal, the city pays CPS $5 million a year up to $100 million to offset tax abatements given to developers to incentivize new projects in the city — a deal reached in 1995 as part of the development of Cincinnati’s two riverfront stadiums, which are tax abated.

Developers are also required to provide payments in lieu of taxes (PILOTS) on roughly 25 percent of the valuation of their project for tax abatements and 27 percent for tax increment financing deals. In return for those payments, the city can offer 15-year property tax abatements on up to 100 percent of the value of improvements or new construction and similar terms for TIFs.

Without the deal, the city’s options are more limited: tax abatements at less than 50 percent for up to 15 years, as well as limitations on tax increment financing districts — where tax money is diverted into an account that helps pay for improvements to the area around a property — and payroll tax abatements.

The city says that abatements actually net the school district more revenue because, under a complicated state formula, the state kicks in more funding when properties are abated. The district, however, says that isn't true. 

The district says it would take payments of 33 percent to make up for the abatements the city grants. The city, meanwhile, has said that the compensation needed is closer to 5 percent.

Councilmember Greg Landsman previously offered up a compromise as negotiations ground on: the same 25 percent payments to the districts for abatements and 27 percent payments for TIFs, with the remaining 8 percent the district wants going to affordable housing and anti-poverty efforts aimed at alleviating challenges students face outside the classroom.

The district has rejected that offer after Cincinnati City Manager Patrick Duhaney presented it to CPS. In a statement, CPS Superintendent Laura Mitchell called it "disappointing." 

"Over the past decade, the city has broken its promise to pay for crossing guards and school nurses, which was in our original agreement," Mitchell said in a Dec. 13 statement. "Now the city wants to circumvent taxpayers by deliberately diverting money from supporting classrooms toward the city's pet housing projects."  

Like Mann, Landsman also wants an outside accounting of the way tax incentives impact school funding. If that analysis finds that the 33 percent the district wants is the amount that makes up for the city's tax incentives, Landsman says he'll support that.

"Why is the exact number or percent important?" Landsman asked in a statement he read in council's Budget and Finance Committee today. "Because it's what the schools need, and any less would hurt them, and any more would undermine our ability to attract investments and invest in better jobs and more affordable housing." 

As the current deal ticks closer to expiration, the city has hurriedly worked through a number of abatement deals at the currently-allowed rates — more than 20 will come before council this week alone. Council Wednesday will also consider creating 15 more TIF districts in addition to the 20 that already exist in the city before the deadline.