PHOTO BY DEBORAH ROSE SADLON

Tuesday, March 21, 2023; Lakeview Community Center, 1290 W. 25^th Street: A plan called Lakeview Connects hopes to establish links between the Cuyahoga Metropolitan Housing Authority’s Lakeview Terrace community and the surrounding Ohio City neighborhood.

by Chuck Hoven

     It has become a trend in Cleveland for big projects to now request 30-year non-school Tax Increment Financing (TIF) for developments. For years the City of Cleveland has given 15-year tax abatements for residential developments. Now the 30-year non-school TIF offers another way to subsidize developments.

     The City of Cleveland Economic Development Department Director Tessa Jackson said at this year’s budget hearings that she wants to review the long-term financial implications City of Cleveland development incentives.   However, presently the Economic Development Department is still recommending 30-year non-school TIFs for large projects. Tax Increment Financing allows the developer to divert a portion of the property taxes they would ordinarily pay on the development towards paying off the financing for the project.

NEWS ANALYSIS

     (April 2023, Plain Press) The Finance, Diversity, Equity and Inclusion Cleveland City Council Meeting of March 13, 2023 reviewed and approved two requests for 30 year TIFs. One request was for the Bridgeworks Limited Liability Corporation (LLC) project at the site of the former County Engineers Building on Superior Viaduct just South of St. Malachi Church. The other was for 1900 E. 6^th LLC.

     The Bridgeworks LLC project is to include 140 residential apartments, a 132-room hotel, 246 space parking garage, a 120-seat restaurant and bar, and 12,000 square feet of office space. The estimated cost of the project is over $103.7 million. The project is heavily subsidized with a City of Cleveland awarding 15-year tax abatement for the residential portion of the project in addition to the 30-year non-school Tax Increment Financing. The project is also seeking a 2-million-dollar economic development loan from Cuyahoga County. Developers of the project are Graham Vesey and Marika Shiori Clark, who have undertaken several development projects in the Hingetown district of the Ohio City neighborhood.

     The second project approved for a 30-year non-school TIF, 1900 E. 6 LLC involves investing $63.4 million converting the Baker Building in downtown Cleveland into 97 room hotel. The firm investing in the project is NouvoRE, a Denver-based firm that Crain’s Cleveland Business in a September 8, 2022 article titled “NuovoRE, developer tied to the Walton family (family behind founding of Walmart), details plans for downtown Cleveland hotel” says has ties to the “uber-wealthy Walton Family.”

     According to the Crain’s Cleveland Business article the project will be called the Fidelity Hotel. The Crain’s article outlines some of the Cleveland-Cuyahoga Port Authority’s involvement in subsidizing the project, including a way the project is using its connection to the Port Authority to avoid paying Cuyahoga County sales tax on construction materials.

     While City Council members asked some good questions, it was clear from the discussion at the Committee meeting that City Council members were willing to approve the projects without having full knowledge the benefits and costs of the project.

     For example, in the first hearing when questioning Graham Vesey of Bridgeworks LLC, Cleveland City Council President Blaine Griffin, who also served as the Chair of the Finance, Diversity, Equity and Inclusion Committee seemed to be praising Vesey for having 70 of the 140 apartments with rents affordable at 100% of the Area Median Income (AMI) rather than the 80% other developers were doing. Griffin said, “As my colleague Councilwoman Santana reminds me 80%AMI is not always affordable, 100% AMI is a little bit of a sweeter deal.”

     It may be a sweeter deal for the developer, but not for potential renters. 100% AMI, as measured by the federal Housing and Urban Development Department, refers to the median income for the Cleveland-Elyria-Mentor Ohio Standard Metropolitan Statistical Area (SMSA). In 2021 the AMI for the Cleveland SMSA was $62,315 a year. This means a household would have to have a household income of at least $62,315 a year to afford to rent one of the apartments at Bridgeworks. At 80%AMI a household would have to have an income of $49,852 to afford to rent one of the apartments at Bridgeworks.

     Ward 8 City Council Representative Michale Polensek did ask how the 100%AMI translated into monthly rent costs. Developer Graham Vesey said at 100% AMI the workforce affordable apartments would have rents starting at between $1,500 and $1,700 a month.

     Using the HUD definition of affordable units does little for most Cleveland residents being able to afford units in Bridgeworks.  The median household income in the City of Cleveland is $33,678. Also, 31.4 percent of Clevelanders are living below the poverty line which means a household of three with income less than $24,000 a year.

     City Council members did not dial down and determine how much the TIF for Bridgeworks would cost the non-school government entities losing property tax – the City of Cleveland, the Cleveland Public Libraries, the MetroParks and Cuyahoga County.

     Ward 16 City Council Representative Brian Kazy did ask how much the TIF for the 1900 E. 6^th project would cost per year. The City of Cleveland’s Economic Development Department staff person said the developer would be paying $495,000 in new taxes to the Cleveland Metropolitan School District each year, and $328,000 per year in taxes they would have owed would now go toward paying off the financing of their project through the TIF.  That amounts to $9,840,000 over the 30 year TIF.

     Kazy also tried to get some information about who was behind the ownership of the 1900 E. 6^th LLC. While the representative for the project indicated the NouvoRE company out of Denver and even mentioned the name of its Chief Executive Officer, he did not reveal the company’s connection to the Walton family. Clevelanders giving up their future tax money for this project might want to know why Cleveland City Council in one of the poorest cities in the nation is allowing its tax money to be used to pay back a loan that benefits the Walton family, one of the wealthiest families in America. What’s worse is the Crain’s Cleveland Business reports that “port records identify the construction lender on the Fidelity Hotel project as Arvest Bank, an Arkansas-based financial institution owned by the Waltons.”

     While Cleveland City Council members did some questioning before giving away our future property tax dollars, it is clear the City of Cleveland and Cleveland City Council need to be better prepared when developers come before them. They should be hyper aware of who is benefiting from a project and who is paying. They should know what rents or hotel room costs would be without the subsidy. They should study the economic impact of new apartments, new hotels and new restaurants on existing apartments, restaurants, and hotels. In a market with a shrinking population are we simply shifting jobs from older businesses to newer ones?

     Most importantly, how will the development make any difference to Cleveland residents? How many Cleveland residents will be hired? What will the prevailing wages be? Would the project go forward and create these jobs without the subsidies? Will the developers share their numbers to prove their benefit to the community outweighs the community’s need for increased property tax revenue? What could be funded by property tax dollars that the City of Cleveland, the Cleveland Public Library system, the MetroParks, and Cuyahoga County are giving up?