Tax Abatement for New Development

The jumping off discussion area for the rest of the Deck. All things Lakewood.
Please check out our other sections. As we refile many discussions from the past into
their proper sections please check them out and offer suggestions.

Moderators: Jim DeVito, Dan Alaimo

Bridget Conant
Posts: 2806
Joined: Wed Jul 26, 2006 4:22 pm

Tax Abatement for New Development

Postby Bridget Conant » Thu Dec 05, 2019 9:13 am

This issue deserves its own thread.

http://lakewoodobserver.com/forum/viewtopic.php?f=7&t=25560

Council approved tax abatement on the three new housing and mixed use developments in return for the developers reserving 20% of the units for lower income residents.

Not much more detail on how much that will cost the city, I mean us taxpayers.

We deserve details.

From my post in the above thread:

In return for tax abatement, the developers must set aside a number of units and offer them at a rate affordable to people earning 80% of the average median income in the area.

Lakewood’s AMI, from several sources, appears to be $48,70, lower than the average AMI in Northern Ohio.

If you were earning 80% of AMI you’d have an income of about $38,900. Assuming they’d calculate 30% of your gross income as available for housing, (which is the common figure used by HUD) your rent should not exceed $972.50.

So assuming the the “market rate” is around $1400 per month, the developers would be forgoing about $500 PER MONTH, per number of units in the program, which is supposed to be 100.

That comes to 50 grand per month, or $600,000 per year.


Perhaps Dan O’Malley or Tristan Rader can tell us more.

What are the expected property taxes on the development?

Are the developers willing to forgo $600,000 in rental income in return for tax abatement? If so, the tax abatement must certainly need to be in the same range as the loss of rental income to make it worthwhile.

What dollar figure did the city calculate it would lose in property tax by offering this rebate?


Mark Kindt
Posts: 2150
Joined: Sat Dec 03, 2016 11:06 am

Re: Tax Abatement for New Development

Postby Mark Kindt » Thu Dec 05, 2019 4:02 pm

Here is the Resolution that has been proposed and referred to the Housing Committee.
Attachments
City Council Resolution 2019 - 08.pdf
(1.6 MiB) Downloaded 94 times


Mark Kindt
Posts: 2150
Joined: Sat Dec 03, 2016 11:06 am

Re: Tax Abatement for New Development

Postby Mark Kindt » Thu Dec 05, 2019 4:29 pm

I need to fix this PDF. I think I missed page 4.

Stand-by for correction.


Mark Kindt
Posts: 2150
Joined: Sat Dec 03, 2016 11:06 am

Re: Tax Abatement for New Development

Postby Mark Kindt » Thu Dec 05, 2019 5:48 pm

Corrected copy.

Pages should now be in order. Page 1 thru Page 8.
Attachments
City Council Resolution 2019 - 08 - corrected.pdf
(1.6 MiB) Downloaded 82 times


Mark Kindt
Posts: 2150
Joined: Sat Dec 03, 2016 11:06 am

Re: Tax Abatement for New Development

Postby Mark Kindt » Thu Dec 05, 2019 5:54 pm

Full Text of Page Three.
Resolution 2019 - 08 3.jpg
Resolution 2019 - 08 3.jpg (385.73 KiB) Viewed 3048 times


Mark Kindt
Posts: 2150
Joined: Sat Dec 03, 2016 11:06 am

Re: Tax Abatement for New Development

Postby Mark Kindt » Thu Dec 05, 2019 5:57 pm

Full Text of Page Four.

Resolution 2019 - 08 4.jpg
Resolution 2019 - 08 4.jpg (398.58 KiB) Viewed 3048 times


User avatar
Jim O'Bryan
Posts: 13255
Joined: Thu Mar 10, 2005 10:12 pm
Location: Lakewood
Contact:

Re: Tax Abatement for New Development

Postby Jim O'Bryan » Fri Dec 06, 2019 7:37 am

Section 3. "The Community Reinvestment Area #1" includes the entire City of Lakewood.

OK Now the entire City has tax abatement for new development. This from a City that at one time did not believe in buying friends and neighbors.

Now we get into the School Board, you know the one that sat quietly for 4 years with the exception of Linda Beebe who was all for tearing down the hospital for whatever was coming. The School Board has to sign off and approve all TIFs and abatement. Which means in the year they are coming to Lakewood residents, many if not most that cannot afford any of this new housing, are going to have to pay for these, not just with their taxes, which will cover all services for the new residents, but also their children will have to pay with reduced resources for the kids.

PLEASE NOTE, this is not a reason to vote against the levy, but a damn good reason to vote against the School Board. Of course School Board member Ed Favre was against the gutting of the hospital for reasons just like this.

Yesterday I had lunch with a person that understands these things far better than I, and I will try to speak with them again. It was pointed out that this form of incentives is common and fair throughout the county. At the same time he admitted it was a very slippery slope. Which is the very thing we warned against 10 years ago here. How many Lakewoodites are so desperate for neighbors that they are willing to pay more taxes while their new neighbors pay nearly none for up to 15 years? I am willing to bet knowing my friends and neighbors, none.

This is what a desperate city needs to get people interested in coming in. This is how they developed Hough, Glenville, Detroit, etc. This is not how one develops one of the hottest communities in Northern Ohio. Of course that could all be hype too.

.


Jim O'Bryan
Lakewood Resident

"The very act of observing disturbs the system."
Werner Heisenberg

"If anything I've said seems useful to you, I'm glad.
If not, don't worry. Just forget about it."
His Holiness The Dalai Lama
Bill Call
Posts: 3215
Joined: Mon Jun 06, 2005 1:10 pm

Re: Tax Abatement for New Development

Postby Bill Call » Fri Dec 06, 2019 12:45 pm

Does it make any sense to give up millions in tax revenue so 50 people can have lower rent?


Bridget Conant
Posts: 2806
Joined: Wed Jul 26, 2006 4:22 pm

Re: Tax Abatement for New Development

Postby Bridget Conant » Fri Dec 06, 2019 1:27 pm

Bill Call wrote:Does it make any sense to give up millions in tax revenue so 50 people can have lower rent?


This is the problem.

We do not have the numbers. How can we decide if this is the way to go when everything is so vague?

How much will the taxes be on the property?

How much will we lose each year in tax revenue by offering the tax abatement?

Only then can we determine if it’s economically rational decision.

You’re looking at about 100 apartments so say 100 people or family units. Would it be cheaper for the city to offer direct subsidies to people who apply for these rental units?

If subsidizing then directly costs less than the loss of revenue, then we are losing YET AGAIN.

It looks like the entire development gets the abatement. Why isn’t us prorated? So if they are offering 20% of the units at below market, then why don’t they get abatement if 20% of the tax bill, not the entire thing!

That literally is just helping the developer, not the people who need rent subsidies.


Mark Kindt
Posts: 2150
Joined: Sat Dec 03, 2016 11:06 am

Re: Tax Abatement for New Development

Postby Mark Kindt » Fri Dec 06, 2019 1:52 pm

Here we have a complex proposal pending before city council and the public has seen NO supporting data.

No rational intelligent decision can be made here without a clear understanding of the fiscal impacts.

Yet, this appears to me a MAJOR policy change.


willskora
Posts: 6
Joined: Sat Mar 24, 2018 2:13 pm

Re: Tax Abatement for New Development

Postby willskora » Fri Dec 06, 2019 5:33 pm

I hesitate to post this because it can be a strawman argument, but I've had this same conversation with people when I ask why parts of Cleveland, like Ohio City - still needs an abatement. I'm personally against them as it stands in Lakewood.

Nonetheless, I've heard from supporters (of such tax abatements) that:
the temporary loss of property taxes will eventually be made up from revenues of income taxes of the new residents;
increased property values (and property taxes) to properties nearby the developments;

Council,
This definitely deserves much more scrutiny before approving and finding a lit review (essentially a cliff's notes of academic studies on particular topic) on this.

(A quick search found one study of Philadelphia's abatement program (which, admittedly, is very different economic conditions than Lakewood and may not be that relevant but may be worth reading - https://journal.policy-perspectives.org ... view/19292). I'm sure there's others out there and you even contact a student at the Levin school to help you find analyses of such policies if you feel overwhelmed or in need of assistance to find them.


Amy Martin
Posts: 480
Joined: Tue Jun 10, 2014 9:30 am

Re: Tax Abatement for New Development

Postby Amy Martin » Fri Dec 06, 2019 5:41 pm

This is NOT a proposal, it was already voted on UNANIMOUSLY by City Council in November


User avatar
Jim O'Bryan
Posts: 13255
Joined: Thu Mar 10, 2005 10:12 pm
Location: Lakewood
Contact:

Re: Tax Abatement for New Development

Postby Jim O'Bryan » Fri Dec 06, 2019 5:49 pm

Will

It is funny, this is one of the hottest topics since TIFs and abatement happened. It is right thee with gentrification.

Everyone enjoys nicer neighborhoods and redevelopment and new is part of the churn. But at what costs to the current residents, and essence of the town.

I also worry as the Schools need a levy, and it is harder to sell a levy after raised salaries and tax abatement.

The theory is the underlining concept of TIFs and various abatement. That eventually it pays off. But that is a massive gamble, just as it is with paying corporations to move to your city. For ever success story there are hundreds of stories of companies taking the benefits then running to the next offer, so the payoff never happens. Likewise with every unit that is built in theory, all other units become less valuable, especially if the bubble burst. With a lack of jobs coming in, and more going out, along with Cuyahoga resident numbers dwindling, it does not take a wild imagination to see a bubble bursting or correcting.

BOTH would kill the gamble, in a community that did not need to gamble.

Many will not remember or remember Lakewood was hot all the way back to Madelin Cain days and before. This is not anything the recent administrations have done. So why take the gamble instead of working with developers on sound developments that add to the flavor of the community not drastically change it.

Will what if the people voting in the TIFs are also part of and/or connected to those buying before the build for the investment, TIF and turn? This was very much the case on Highland Avenue at Lake and Edgewater, most units sold to insiders before first brick placed. Nearly all resold within 3 years for big profits.

A lot to think about, discussion is good. Thanks for jumping in.

.


Jim O'Bryan
Lakewood Resident

"The very act of observing disturbs the system."
Werner Heisenberg

"If anything I've said seems useful to you, I'm glad.
If not, don't worry. Just forget about it."
His Holiness The Dalai Lama
Bridget Conant
Posts: 2806
Joined: Wed Jul 26, 2006 4:22 pm

Re: Tax Abatement for New Development

Postby Bridget Conant » Fri Dec 06, 2019 7:55 pm

This is not how one develops one of the hottest communities in Northern Ohio. Of course that could all be hype too.


I’ve noticed the market has softened. Even Zillow has downgraded the Lakewood housing market from Very Hot to merely Warm.


Bill Call
Posts: 3215
Joined: Mon Jun 06, 2005 1:10 pm

Re: Tax Abatement for New Development

Postby Bill Call » Sat Dec 07, 2019 6:53 am

Mark Kindt wrote:Here we have a complex proposal pending before city council and the public has seen NO supporting data.

No rational intelligent decision can be made here without a clear understanding of the fiscal impacts.

Yet, this appears to me a MAJOR policy change.


Are you writing about the Hospital deal?



Return to “Lakewood General Discussions”

Who is online

Users browsing this forum: No registered users and 36 guests