Mayor John Cranley and Cincinnati Public School officials today announced a potential end to a months-long battle over the city’s ability to grant tax incentives to developers who are building or rehabbing commercial projects.
Next, Cincinnati City Council will need to approve the deal — a vote that may hinge on a program that is meant to fund affordable housing and neighborhood improvements.
Tax abatements and tax increment financing districts have been worth millions under a 20-year deal the district and the city struck around the construction of the city’s two professional sports stadiums on the riverfront. That agreement lapsed at the end of 2019.
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.
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.
Without it, the city is much more constrained in the deals it can offer developers — 50 percent of the value of taxes due on property improvements for 15 years.
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. That deal would end on Dec. 31, 2030.
That is mostly what the district asked for. Both Cranley and Cincinnati Board of Education members noted that the district’s enrollment has been growing and that it is the top-rated large urban district in the state.
“Our communities for a very long time have asked for fair funding,” CPS Board President Carolyn Jones said today, noting that there was more work to be done before a finalized deal. “I’m sincerely grateful that we’re at this point.”
The city and CPS got caught in a morass of details and rhetoric around the agreement, including the opaque role abatements play in a complex state school funding formula that contributes to CPS revenues.
Some activists railed against the city for the tax deals it cuts with developers, sometimes crowding council chambers to speak against them and saying they took money from schools. Critics of the abatements also say they go to developments that create expensive luxury residential developments in neighborhoods that have been historically low income.
Some in the business community, of course, have a different perspective. The Cincinnati USA Regional Chamber released a statement calling activists’ talking points “anti-development.”
“If — and it remains to be seen — today’s announcement results in a long-term arrangement that allows for a consistent and pro-growth approach to development, then we believe that is a positive step,” that statement reads, before echoing points made by a report released by city administration about the role of abatements in development. “We are competing with other cities for talent and growth. Rebuilding a city and creating an economic climate that benefits everyone will require us to have a competitive growth policy. We think the anti-development rhetoric in this debate was antagonistic and short-sighted.”
In his remarks announcing the deal, Cranley said developers would pay more than is necessary to hold CPS harmless — that is, what the district would have received if the city didn’t do tax incentives. That’s something the district flatly denies.
The city says that when the state funding is included, the district only needs 5 percent payments, not the 33 percent the district wanted. But both sides have agreed to disagree on that detail, they say.
“I’m here to say, ‘Yes, I accept the recommendation of 33 percent,’ ” Cranley said today. “By agreeing to this number, we are asking developers to pay a premium over what is required to hold CPS harmless… the school board may not agree with that statement. But I’m okay with it. Development has been good in the city, thank God. All of us have been trying to build an inclusive capitalism that lifts more boats and expands opportunity. So I think it’s more than appropriate for developers to pay up a little bit more to the next generation.”
Cranley says the increase from 25 percent to 33 percent makes up for the loss of the $5 million annual payment to the district over the life of the deal. While the new deal only generates about $1 million over the 25 percent level in year one, according to numbers generated by the city, it will increase in value over time and average $5.6 million more than what the district would get at 25 percent over the next decade.
Whether council will support the deal could depend on the fate of another incentive program. The Voluntary Tax Incentive Contribution Agreement program asks developers to contribute 15 percent of the value of tax incentives they receive from the city for use on affordable housing and community improvements in neighborhoods outside of downtown and Over-the-Rhine, where VTICA funds the streetcar.
Councilmembers Greg Landsman, David Mann and P.G. Sittenfeld drafted a motion seeking to make sure that payments developers make to VTICA aren’t affected by the deal between CPS and the city. Mann’s office says he is considering the deal and agrees with the 33 percent so long as it doesn’t cut into VTICA contributions.
Cranley, meanwhile, said today that VTICA contributions are negotiated by developers and the city on an individual basis and that nothing in the agreement between CPS and the city necessarily affects them.
If developers were required to pay the usual 15 percent to VTICA, their maximum abatement on property improvements under the new deal would effectively be 52 percent, down from 60 percent in the previous deal.
This article appears in Jan 8-21, 2020.
