By Roldo Bartimole
If Mayor Frank Jackson wants to pass a school levy in the near – or maybe foreseeable – future, he will have to end tax abatement as we know it.
Does that have the sound of President Bill Clinton’s promise to “end welfare as we know it?”
Exactly! If the poor shouldn’t get something for nothing, it’s time welfare for those who can afford $200,000 and $300,000 homes and condos face the end of welfare too.
The city of Cleveland, however, offers abatements of 100 percent for 15 years. The developers are gaga.
How does this sales pitch strike you?
“Does tax abatement sound good to you?
“The city of Cleveland thinks it will and is exactly why they are offering 100 percent property tax abatement for 15 years,” says a web pitch from Zaremba builders.
It goes on: “All new residential projects, like the Avenue District, and other redeveloped properties are eligible for this incentive. Now is the best time to purchase your dream townhome or loft.”
Moreover, see what you get, says the developer/builder.
“Based on 2004, new downtown property costing $300,000 would save the buyer $5,970 a year, nearly $500 a month and $90,000 on the life of the incentive,” goes the pitch.
WOW. What a gift!
What Zaremba and the city do not address are the suckers, Cleveland homeowners (and really renters) paying the full freight, year after year after year. Yes, thousands and thousands of dollars, not forgiven, but PAID in taxes.
There should be no abatement. There cannot be a little of abatement. Because if you give a little it will always spiral out of control, as it has done. City fights city, city vs. suburb, suburb vs. suburb, state vs. state, region vs. region. The losers: taxpayers and government. Winners: Corporations and developers.
Developers entice people with the lure of tax abatement. If you only pay a couple of hundred dollars a year for 15 years with a 100 percent tax abatement instead of the thousands of dollars each year for 15 years, you’ll be pretty interested in that kind of deal.
My suspicion is that you will be taken on the price of the purchase. The developer, passing the abatement on to the buyer, will merely up the price of sale. In other words, some, possibly most, of that abatement savings will be slipped onto the cost of the condo or home.
Developers aren’t in business to give away money and abatements mean money.
Making newcomers to Cleveland a Special Class with enticing abatements divides the community. Those who lived in Cleveland for years become second-class citizens who pay hefty taxes.
Why shouldn’t people who have lived in Cleveland for years, paid their FULL taxes and gotten poor to bad service feel resentment?
Cleveland voters dumped levies in November 2004 and in August 2005 for $68-million and for $48-million a year, respectively. The 2004 election was a Presidential year with a 50 percent plus turnout; the 2005 vote was in August with a 13 percent turnout. Seems the voters are saying, “No.”
Jackson, I believe, understands this. It’s still a gamble for him to suggest a change in the city’s abatement policy. He will have to go against the downtown cabal and the Pee Dee, always in favor of give-aways to developers. However, I think he can use the issue of growing resentment about the unfairness of abatements to offer policy changes.
Likely, the Pee Dee will front a compromise deal, keeping the 15 years at 100 percent but favoring payment of any NEW taxes. Now, if a new property tax levy is passed, those abated do not pay. They are shielded from future taxes, too. How sweet.
That kind of compromise would be deceitful. What’s new?
The market has put a delay in new abatements for major buildings, as the Key Center and Marriott hotel, fully abated in 1989. Cleveland has not been attractive to new major office structures. However, many TIFs have been active downtown. TIF, or tax incremental financing, shifts property taxes to developments. In this deal, buildings pay the full taxes, however, instead of the revenue going to the schools, city, county and city libraries, the money finds its way back into projects for various needs, such as new streets and infrastructure usually paid by the developer.
As I wrote last week, when George Voinovich became mayor in 1979 he still feared the Kucinich vote, which was anti-tax abatement. Voinovich and George Forbes, Council President, finally figured it was safe by 1986 to dip into the abatement waters again. (Dennis Kucinich rode to City Hall on an anti-abatement campaign after Mayor Ralph Perk gave National City Bank, then the most profitable bank in the nation, an abatement at E. 9th & Euclid on property the bank had been assembling for years. Where else was National City going to locate at that time?)
Voinovich, still cautious, made the first abatement for only seven years. It was an example of the poor use of abatements. He gave it for the Triangle development in University Circle. (They also spiced the deal for Associated Estates with a $421,000 land write-down and a $5-million urban development action grant (UDAG).
I wrote then: “Though this strategic triangle property should be carefully developed as a focal point in the Circle it appears the city has jumped at the first development offer – a poor one at that.”
Now, exactly 20 years later, Case has purchased the triangle property, hopefully to develop something appropriate.
After the National City Bank abatement, Mayor Perk and Forbes gave another abatement to Standard Oil (SOHIO) but as mentioned last week the oil company awash in dough from the North Slope moved its headquarters site to Public Square for more exposure. Therefore, it did not get the abatement.
The contrast between the National City abatement and the lack of abatement for SOHIO is instructive. SOHIO became BP, as the building became known.
I check in 1990 when the BP building was five years old. The property taxes paid for those five years were $17,750,828, some $10-million of that to the schools. Between 1978 and 1990, National City had escaped $10,630,245 in property taxes.
“This is a tale of two downtown buildings that after a decade reveal the true impact of tax abatement,” I wrote.
In a period of time when National City bank escaped $9,876,688 in taxes, its PROFITS totaled $678-million.
There is just something obscene about that.
What people also do not know or have forgotten is that commercial and industrial properties were once taxed differently (higher) than homeowner property. Commercial and industrial properties paid at a higher rate than residential. In 1959 in the Park Case, brought by the David Swetland family, owners of the Park Building on Public Square, the Ohio Supreme Court ruled that both commercial – profit-making – property and your home should be taxed at the same rate. That shifted a tax burden from the profit-makers to the homeowner.
So, thanks to the big law firms, commercial enterprises already got their tax abatements before tax abatement. Further, commercial owners use their financial ability to hire lawyers constantly to seek, and get, their property values and taxes reduced, again adding to the homeowners’ tax bill.
It’s time to end the party.
Note: The Zaremba project (Link) at E. 12th & St. Clair is on city land that dates back to the Locher Administration under urban renewal. Marc Lefkowitz has mentioned the Zaremba project in discussing tax abatements in a new web site (Link). The addition of web and blogger activity on this issue could provide the “echo” factor so crucial in informing a public through debate. Throughout the years with Point of View, it never has had that important “echo” factor that can make public issues resonate. This is a significant role that blogging provides. It allows people to speak, comment, and discuss public issues.
Convention Facilities Authority On Vacation
The Convention Facilities Authority, which has now spent a couple of years diddling away time and money trying to fake a valid study whether Cleveland needs (or can afford) a new convention center, is taking a break.
What a crew of bumblers.
As its members rest, unable to come to decisions, they want to divert much of the CFA’s budget to the Convention & Visitors Bureau, where it originated, and can be as adeptly wasted. The Bureau already manages to slurp up more than $6 million a year of public funding via the bed tax. That’s a hell of a lot of public subsidy for a private industry.
CFA, the Plain Dealer reports, wants $25,000 a month, not a shabby amount, shifted from it to the Visitors Bureau. As if it’s CFA money. It is not. It belongs to Cuyahoga County taxpayers, $300,000 a year.
There aren’t any more important needs than this Commissioners Dimora, Hagan and Jones?
The CFA will keep some $8,000 a month, or $96,000 a year, for administration, audit and public relations. What’s to administer and audit? And expensive public relations for a dormant CFA? Lesic & Camper already has too much business. �Surely, the CFA does not need any more public relations than the service gets from the Plain Dealer.
From Cool Cleveland contributor Roldo Bartimole roldoATadelphia.net (:divend:)