|NuCLEus SURVEY RESULTS|
|Support the TIF||79||42||121
|Reject the TIF||59||24|| 83
PUBLIC NOTICE OF BOARD AGENDA CHANGE
NUCLEUS RESOLUTION REMOVED
While completing additional due diligence regarding the nuCLEus project, the Cleveland Metropolitan School District (CMSD) has learned that a meeting is currently being scheduled between City and County officials and Stark Enterprises to ensure all parties have a clear understanding of the funding of the complete nuCLEus project. CMSD has requested to be included in this meeting of the relevant public agencies to ensure that the District has all relevant information about this project before voting on the proposed Tax Increment Financing (TIF) request presented to the Board of Education. This item has therefore been removed from the agenda of the Board of Education’s August Business Meeting, scheduled for this evening at 6:30 pm. The Board will not be discussing the nuCLEus project or voting on any related resolution at tonight’s meeting. Once the meeting of public stakeholders and Starks Enterprises has occurred, District officials will update the Board and community of the potential of reintroducing the nuCLEus project TIF request resolution.
Before the Board of Education votes on tax increment financing, or TIF, for a development project, CMSD will inform the public and collect feedback that will guide the decision.
The board will vote Tuesday, Aug. 22 to accept or reject tax increment financing for nuCLEus, a proposed downtown development that would include retail shops, restaurants, offices, a hotel, condominiums and apartments.
The TIF would allow use of additional property taxes from the project over 30 years to pay development expenses.
CMSD will spend the rest of this month and early August explaining the pros and cons of the request through community meetings, mailings, telephone calls, social media and information posted on the District website.
The school board will conduct eight public hearings, beginning July 29 and ending Aug. 6. The District is also conducting an online survey through Aug. 7.
The board will review the proposal at a work session on Tuesday, Aug. 8 and vote two weeks later.
Frequently Asked Questions
nuCLEus is a proposed mixed-use, high-rise building that would include 125,000 square feet of retail shops and restaurants, 200,000 square feet of office space, a 120-room hotel, 406 apartments, 36 condominiums and parking garage/surface lot with 2,100 spaces.
The high-rise development would be located near Progressive Field and Quicken Loans Arena on a site bounded by East 4th Street, Huron Road, and Prospect Avenue.
Stark Enterprises, a local developer, is proposing the project. Cleveland City Council and the Cleveland Board of Education (The Board) would vote separately on the proposal. Ultimately, the decision rests with Cleveland City Council.
The TIF package would allow use of additional property taxes generated by the project to be applied to construction costs. Stark has requested a TIF because the high rise will cost an estimated $542 million to build, but have a likely market value of only $250 million when completed; the financing would help fill that gap.
Your property or city taxes would NOT be impacted.
Do both The Board and Cleveland City Council have to accept or reject the proposal, or will it go forward if only one body agrees?
Cleveland City Council has the final say and can approve the proposal without The Board’s consent.
The Board, as a matter of practice, solicits public input on major decisions. In the past, The Board has sought comment on citywide education reform and its continuing Districtwide construction and renovation program.
CMSD would begin collecting the additional taxes in 2048. If the building is worth more than projected when completed, Stark Enterprises would immediately begin paying taxes on the additional value.
Stark Enterprises will pay the District $18 million upfront. The District would put the money in its continuing building construction and renovation program and get $38 million in matching funds from the State.
CMSD is guaranteed to receive the $18 million and can still use that amount to leverage $38 million from the State for new construction and renovation projects.
The District will host eight information sessions, starting on Saturday, July 29 and ending on Sunday, August 6. Residents will be notified via direct mail, social media and media stories. All information will be posted on the District’s website. Feedback can be given in-person, online or via phone.
If both Cleveland City Council and The Board say no, the District continues to collect $360,000 a year in property taxes currently paid on the parking lot, and the building will not be built.
What happens to the $18 million offered to CMSD if Cleveland City Council approves the TIF? -REVISED 8/9/17
NOTE: THIS WAS CLARIFIED EFFECTIVE WEDNESDAY, AUG. 9. Should the CMSD Board not respond to the notice letter issued by the City, the City Council could proceed to approve a 30-year, 10 percent exemption without any compensation to CMSD, other than to potentially share 50 percent of payroll taxes for new employees. Should the CMSD Board reject the proposed TIF, then City Council is limited to approving a 10-year, 75 percent TIF that does not require school board approval.
The Board will review the TIF and a summary of public feedback on Tuesday, August 8 and vote to accept or reject the TIF on Tuesday, August 22.
Will affordable housing be included in the residential portion of nuCLEus or will it be only market rate housing?
The residential portion will include only market-rate apartments and condominiums.
The CMSD portion of the TIF would pay 5 percent of the mortgage. The total CMSD portion equals $36 million of $340 million in construction financing. But CMSD will receive $18 million of the $36 million at the closing of financing, leaving $18 million or 5 percent of $340 million.
Stark Enterprises is not seeking issuance of bonds by a public entity such as the City of Cleveland or the Cleveland-Cuyahoga County Port Authority in regard to the proceeds from the TIF. Stark will use annual revenue from the TIF to pay debt service on the mortgage. The TIF and proceeds create a future source of revenue to borrow against. Separate financing from Cuyahoga County may involve the issuance of bonds by the county for the project.
Key Tower had a 20-year, 100 percent tax abatement.
Stark Enterprises initially offered immediate payment of $2.7 million, plus payments of up to $180,000 per year and a scholarship program of $100,000 per year.
The 406 apartments are expected to initially generate total gross rental income of $12,964,488 per year, beginning in 2021. Stark Enterprises documents price the condominiums at more than $1.2 million each, but revenue depends on sales. The company can lease unsold condominiums.
The council has not yet scheduled any meetings to specifically discuss the TIF.
48 floors for occupancy.
Stark would receive 100 percent abatement of property taxes for 15 years on the residential portion of the development.
The property is currently a surface parking lot with 650 spaces. The new facility would have 2,100 spaces.
In Cuyahoga County almost 63% of property taxes go to school Districts.
CMSD is a school choice district. Students can go to any school in the city if space is available or, in a few cases, they meet admissions criteria. Downtown schools include three high schools, Campus International, Davis Aerospace and Maritime and Cleveland High School for Digital Arts.
The District can spend the money anyway it chooses, but the board would put the money into the District’s construction program and use it to build or renovate more schools. The state would provide $38 million in matching funds, for a total of $56 million.
They are a privately held corporation.
The District did not conduct a cost/benefit analysis of the total tax revenue generation of the project, but rather focused its analysis on the District’s revenue. The District did not request to review this deal. The developer asked the District to consider the deal.
The District would work with the developer to implement a proactive strategy as called for in its Community Benefits Agreement policies.
Every three years the county conducts a comprehensive assessment of all real estate in the county. It is a multifaceted process that includes recent sales comparisons.
The City of Cleveland provided notice to the District that it needed to respond to the city in approximately 30 days.
The Westlake schools approved a 30-year, 100 percent TIF for the portion of the Crocker Park project that includes the American Greetings headquarters. While the schools forgo taxes, they receive payments of at least $455,000 a year as compensation. The amount represents 25 percent of the taxes the schools would have received without a TIF and is to rise with valuation. There is a similar TIF agreement on a much smaller portion of the development. The majority of Crocker Park is not under a TIF. The Orange school district receives its entire share of property taxes for the ETON Chagrin Boulevard development in Woodmere.
At the end of the first quarter of 2017, vacancy rates were 16.5 percent in downtown commercial spaces and 19.7 percent in all available city commercial spaces.
In 2005, CMSD approved a 100 percent, 30-year TIF for the development of Flats East. Under a compensation agreement for Phase 1 (office, Aloft Hotel, parking garage) CMSD receives 30 percent of the revenue it would receive in the absence of a TIF. For Phase 2, CMSD receives 100 percent of the revenue it would receive in the absence of the TIF. CMSD receives 100 percent of the taxes for any new levy. In 2006, the CMSD board approved a TIF for Veterans Development LLC for new construction (parking garage, offices) off East 105th Street adjacent to the Louis Stokes Cleveland VA Medical Center. Under a compensation agreement, CMSD is to receive 50 percent of the revenue it would receive without a TIF.
Is CMSD able to use its leverage to get the developer to make a community benefits agreement part of the project?
This is not part of the proposal currently being offered by Starks Enterprises. And because the District has to respond to the proposal on the table by the end of August, it is unlikely that the District will be able to include these additional opportunities at this time.
Isn’t it true that we lost the opportunity to leverage a community benefits agreement when we gave a TIF to the Q?
No TIF was given in the Q deal, and the District was not part of any negotiations on that deal.
Nothing. We continue to pay our property taxes. When the 30-year TIF expires, the owners of the nuCLEus property will continue to pay the taxes their property generates to be distributed to recipients that include CMSD, City of Cleveland, Cuyahoga County, Cleveland Public Library and Tri-C.
Yes, City Council could negotiate a community benefits agreement as part of its negotiations with the Developer.
Have any studies been done to determine whether the value of property in Cleveland rises when projects like this go up?
New construction and economic development positively impact the value of other downtown property and can lead to other new development. The development is undertaken in response to demand for new housing, offices, retail and a hotel. Increases in the valuation of downtown property in Cleveland are modest relative to other markets.
The property tax revenue from the hotel, as with the office, retail, and residential components, is included in the tax increment financing to be used to develop the property and to calculate the initial $18 million payment to CMSD and potential future payments.
The schools do not collect sales or income taxes. We collect only property tax.
The mayor has not weighed in with regard to the Board’s decision to accept or reject the TIF. If City Council votes to approve the TIF, it will be sent to the mayor. The mayor could either accept City Council’s vote or and reject it by vetoing the Council’s vote.
Do you see a risk to CMSD's chances of getting another levy renewal if this proposal for tax abatement goes forward?
As with all levies, the District will have to thoughtfully educate taxpayers on any future levy and will need to include in that education information about the impact of this proposal, should it be approved.
J Dek is an investor. Miscellaneous investors will contribute cash for the equity contribution. Stark Enterprises has not identified those investors and is not required by law to do so.
Additional input from the community can be provided to City Council, which is initiating the legislation for tax increment financing for nuCLEus and would create the TIF. CMSD is exercising a right under Ohio law to approve the TIF and enter into a compensation agreement or reject the TIF. Council approved legislation may be subject to referendum.
Stark Enterprises is not asking a public entity to issue bonds that would be repaid with proceeds from the TIF. That does not rule out separate financing from Cuyahoga County.
Have a question or want to leave a comment?
Email us at nuCLEus@ClevelandMetroSchools.org or call 216-838-2990.