IN CLEVELAND BUILDINGS ARE ON WELFARE

September 22nd, 2016

The article announcing the sale of Cleveland’s historic Terminal Tower by Forest City may start a new merry-go-round of tax abatements and other subsidies downtown.

Not that there’s been a slow down.

But we see a second round of tax gifts on the same building from back in the early 1990s.
Subsidies have been flowing to developers. And no one’s adding up the count.

Talk of the 57-story Key Center sale would include the Marriot Hotel, a 900-space garage beneath Mall A (city property), all of which received tax abatements in the 1990s. Question: What kind of subsidy could a new owner now squeeze from the city? (See old subsidies below).

Round and round we go with little attention paid to public revenue losses.

We don’t have a free press in Cleveland because we have a subservient press in Cleveland. Or should I just say a corporate press. Or a sleepy press. A sleepy press is a dangerous press.

It should be the responsibility of a vibrant press to tote up the score so that the public can determine whether there is fairness in the taxing system.

I fear there isn’t. I know there isn’t.

It’s rather amazing how commercial property downtown sheds property taxes so that homeowners will pay more to keep the county, city and city schools financed. (As I have said before, in the 1950s commercial/industrial property, which was taxed more heavily, became equal to homes. It means business already had property taxes reduced. This was before the state tax abatement legislation of the late 1970s. And you don’t get to depreciate as business does.)

Subsidies add the frosting.

Mayor Frank Jackson, a reliable source tells, has told business leaders that he’s the guy who can keep these gifts flowing. So a vote for his payroll tax increase and school levy will be a vote for hapless Jackson to run again in 2017.

The conversion of building after building from offices to housing typically earns developers an abatement and/or a Tax Incremental Financing. Under the TIF, the building owner does the property tax. However, the tax revenue is diverted from public use to private use.

Michelle Jarboe, the Plain Dealer‘s real estate reporter does a superb job of covering that beat. However, she and no one else seem to be willing to add up the cost of our so-called downtown resurgence. Public dollars have floated those advances for decades now. The PD provides little information.

Even the acclaimed new Public Square rests upon subsidies from a TIF fashioned by Cuyahoga County, the casino (old Higbee building gifts) and the city. Former Mayor Jane Campbell executive Deb Janik, now with the Greater Cleveland Partnership, proclaimed, “All three partners had to say we’re in agreement, and this moves forward.” That was when the Square was a $32 million project. It became a $50 million plus deal eventually. Nothing is new, as you’ll see.

This Public Square gift to Cavs owner Dan Gilbert (a welfare king), situated right in front of his casino, foretells more grasping. Gilbert is pushing a massive tax subsidy gimmick for Detroit. .

Ohio’s Republican legislature would greet him with open arms.

The history of these generous tax breaks goes back a long way.

Abatement and TIFs are not the only way downtown commercial owners lower their property taxes. They have lawyers who hack away at the County assessed value of commercial buildings to lower the value, thus reduce the tax.

I go back to September 1991 when I wrote in Point Of Viəw

The Government-Corporate Complex (as in military-industrial) has racked up significant subsides, siphoning off tax receipts of at least $250 million on Public Square, $90 to $100 million at Tower City, $50 million (TIF) or so for the Rock And Roll Hall of Fame and, thus far $373 million for Gateway, to say nothing of abatements and Urban Development Action Grants in other parts of downtown. That’s about three-quarters of a billion dollars, not considering the ordinary city services that are and will be extended to these businesses.

I also noted, “Tower City, developed by Forest City Enterprises… seeks tax reductions totaling $25.5 million on Terminal Tower properties. At the present Cleveland tax rate that would translate into an annual tax reduction of $547,000.

The lawyers do their work. And win reductions.

The Halle building, also a property of the Ratner-Miller family, principals of Forest City Enterprises, has various requests before the board of revision for tax reductions going back to 1989, of some $15.2 million for a tax reduction of $326,000 a year.

“Erieview Joint Venture, principal development of the Jacobses, has a request for a reduction of $12 million, about one-third the value of its Galleria property for what its filing says is “economic obsolescence with respect to the Galleria portion of its property.

At that 1991 date, I wrote: “We are being told that Cleveland is the Comeback City. We are being told that downtown Cleveland has come back.”

Yet, the big boys are saying, “Not true” with demands of lower values.

Here are some of the gifts of the 1980-1990 period:

TERMINAL TOWER:

– Tower City (retail UDAG)—$10,000,000
– Tower City III (UDAG)—$2,700,000
– Tower City IIIA (UDAG)—$2,036,000
– Tower City, Old Post Office Bldg.—$9,200,000
– RITZ HOTEL (UDAG)—$7,900,000
– RITZ HOTEL—$34,500,000 (15 year tax abatement estimate)

OTHERS PROJECTS:

– HALLE’S BLDG (UDAG)—$7,000,000
– HALLE’S BLDG – OHIO LOW INTEREST LOAN—$6,000,000
– HALLE’S – OHIO INDUSTRIAL LOAN—$10,000,000
– HALLE’S – HISTORIC DESIGNATION SUBSIDY—$5,000,000
– JACOB’S GALLERIA (UDAG)—$3,500,000
– JACOB’S KEY CENTER (UDAG)—$10,000,000
– JACOB’S MARRIOTT (UDAG)—$7,729,398
– MARRIOT/KEY ABATEMENTS—$120,000,000
– MALL A PARKING GARAGE (UDAG)—$2,500,000

And Jackson wants a city tax increase and City Council goes along, even those who want to oppose him as mayor next year.

Santa Clause comes early again.

By Roldo Bartimole…

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