By Roldo Bartimole
I’m happy to see Joe Frolik in the Plain Dealer start the “tax abatement” debate. Again, as the headline.
One problem. There never really has been an abatement debate here.
I’m not sure we will have a real debate this time either.
The PD headline about “another debate” probably was referring to the citywide vote on abatement in 1997. That was not a real debate, as I will try to explain below.
The issue has arisen again because of statements by Mayor Frank Jackson who apparently wants to revisit the city’s tax abatement policy.
In 1997, the Cleveland Teachers Union (CTU) collected 33,000 signatures to put the issue on the city ballot. 33,000! That’s a lot of signatures.
However, despite the enormous number wanting a vote on the issue, there was no public debate.
The CTU was outmaneuvered and overwhelmed, ending up with an August election (when teachers were on vacations) via the machinations of Mayor Michael White and then Council President Jay Westbrook, who ironically got his political start as an anti-tax abatement crusader in 1977.
A little background: Tax abatement started in 1977 under Ralph Perk after Squires-Sanders wrote a state law for abatement, and then represented National City Bank. The bank got an abatement, which declined 25 percent every five years. Dennis Kucinich used the issue to win the mayor’s office and abatements essentially ended for a time.
Ironically, downtown building did not stop rising. A number were built without any tax abatements in this period. Medical Mutual, now One Cleveland Center, Eaton Center and two office buildings at North Point were constructed in the 1980s without tax abatements.
This showed that politicians still feared public sentiment for issues Kucinich and his more progressive politics made popular.
Therefore, when George Voinovich defeated Kucinich in 1979 he didn’t revive immediately tax abatements, sensing a remaining public distaste. Even though Kucinich’s lawyers declared the second awarded Perk abatement to SOHIO (Standard Oil of Ohio) unbreakable the abatement was never activated. SOHIO, thereafter BP (British Petroleum), moved the building site from behind Tower City to Public Square. Voinovich and Council President George Forbes didn’t try to transfer the abatement sensing public resentment, particularly since BP also was awash with Alaskan oil profits.
As business elites consolidated sway over City Hall under Voinovich, abatements moved front and center.
In retrospect, however, it appeared that abatements were not the critical item on major office building activity.
A major abatement went to Dick Jacobs at what is now Key Center. It was 100 percent for 20 years. The full 20-year abatement, instead of the sliding scale used by Perk, became the model for Voinovich and Forbes.
However, they also passed in 1989 the same deal for Jacobs for another Public Square building (Ameritrust Bank). It remains to this day a parking lot despite the city’s generous abatement. The market, not abatement, ruled.
As part of the Key and Ameritrust abatement deals, abatements were given to add tax-abated hotels to the developments. At Key, we have the Marriott. Similarly, Forest City got a full abatement for its already planned Ritz-Carlton. After all, it was open house for abatements.
However, since then, a number of hotels, admittedly smaller, have been constructed in Cleveland without tax abatements.
The downtown construction without abatements suggests that demand and the market, not the abatements, rule what will be built or not built.
However, during the 1980 and 1990s under Voinovich-Forbes and White-Westbrook abatements - bolstered by generous (interest-free) loans - continued for many other projects. Further, another form of abatement, TIF (tax incremental financing) also diverted property tax revenue from government to help finance development. It is being widely used presently. This also diverts tax revenue from the schools.
Combined with tax exemption (never will pay taxes) for stadiums and arenas, the tax abatements began to be an issue for schools and teachers. That’s because typically 60 percent of property taxes fund schools. City legislators found it easy to give away another governmental body’s revenue. The board of education, politically controlled, remained silent rather than defend their school budgets.
Now, here is why there was no debate though there should have been back in 1997.
The power forces – public and private – worked in tandem to distort and poison any discussion of the issue with the Plain Dealer typically souring real discussion.
I wrote subsequently in Point of View newsletter in 1997 how the “debate” was skewed against an honest debate and confused voters rejected a reasonable abatement law.
“…Mayor Mike White used the power of the city to do whatever the hell he wanted in opposition of the tax abatement issue. Public money, public facilities, city employees. It didn’t matter. Ministers on the foundation payrolls crying the corporate line. A newspaper with the integrity of Mafia dons showing its colors attacking state representative Dan Brady (a proponent of the new law) but allowing White’s continued use of public employees and funds (to fight against the issue) without editorial comment during the campaign.
“Community groups which receive hundreds of thousands of dollars, even millions of tax dollars, danced to the Mayor’s puppet tune.
The federally subsidized community groups went against the interests of ordinary people by supporting tax abatements for wealthy developers.
The Cleveland Neighborhood Development Corp. (CNDC) ran full-page ads with White and Jay Westbrook against the abatement change. The ad cost a hefty $20,000 in the PD, and it also ran in the Call Post, Free Times and Sun newspapers. It was paid via this umbrella of neighborhood development organizations. They denied that they used federal or foundation money for the ads. The CNDC had some $200,000 from the Cleveland and Gund foundations, but foundation officials said it could not be used for ads. Therefore, the funds must have come from the air.
“The ties that bind community groups to city hall via federal funds are tight and demanding,” I wrote. “Many of the housing advocates are placed in the uncomfortable position of supporting a mayor who is in the pocket of corporate leaders, to say nothing of protecting their own salaries.”
Continuing: “The power to spread tens of millions of dollars around each year, combined with the extraordinary buy-off capacity of Cleveland’s powerful foundations, particularly the Cleveland and Gund foundations, and Cleveland Tomorrow (now Greater Cleveland Partnership), the corporate powerhouse, combined with the corrupt complicity of the Pee Dee…”
It was a brutal onslaught of power against a change in the give-away politics of tax abatements.
If Mayor Frank Jackson examines tax abatement with an open mind – and keeps the community organizations neutral - those forces that easily negated the 33,000 signatures will not be as united this time.
That does not mean, however, that power forces, including the Pee Dee, will not once again try to blunt any meaningful debate.
Money for the schools is a major factor in the abatement issue. If the city could make schools whole, their argument would be strong. Where funds could come from, however, poses a thorny question.
However, the matter of equity plays a crucial but most often neglected part of the argument. It is possibly a hidden negative in the minds of voters.
The last attempt for a levy for the Cleveland schools failed after it became known that the school’s superintendent Barbara Byrd Bennett, in addition to a huge salary, lived in a 100 percent tax abated new home.
That just grates on people’s feelings of what is just and proper.
The powerful inequality issue – particularly for taxpaying residents who endure annual property taxes while others pay nothing - is one that could have powerful influence IF there actually is a tax abatement debate.
Jackson has taken a courageous step even to broach the subject. (More to come).
From Cool Cleveland contributor Roldo Bartimole roldoATadelphia.net
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