nuCLEus – CMSD Community Dialogue


Hello and welcome to this community
dialogue about the nuCLEus project. Thank you for joining me today. I want to
review four things with you. First, the project description its economic impact
and project location. Next, a proposal that the board of education has received from
the developer of the project. Thirdly, an analysis of the proposal, its pros and
cons and finally the question before the board and the place where we need
community input. First the project description including its economic
impact and as project location. This is the nuCLEus project, a high-rise
multi-use facility being planned for downtown Cleveland. The project is
intended to be a mixed-use building at the center of downtown with about
125,000 square foot of retail and restaurants about 200,000 square foot of
office space a 120 room luxury hotel, 406 apartments, 36 condominiums and a 2100
parking garage and surface parking space. It’s intended to bring 3,000
construction jobs between now and 2021 when the building would be complete
would have 900 high compensation office sector jobs would include 300 retail and
service sector jobs in the restaurants and shops and attract 360 new residents
living downtown. The project has also already identified anchor tenants that
would move in when the building opens and is anticipated to drive increases in
residential and commercial rental rates in the downtown area. The project is
located right downtown. It sits behind Progressive Field and the Q. The 9 is
close by as well as the arcade and the casino. A closer look, it is situated
between Huron and Prospect between Ontario and East Ninth. nuCLEus is
expected to cost about 542 million dollars to build but when it opens in
2021 it’s expected to only be worth 250 million dollars. That may
that the developer will need to make up the gap between 250 million dollars and
542 million dollars and that’s why the developer is approaching the school
district. So what is the developer asking? This is a developer’s request and
proposal. The developer is requesting something called a TIF or a tax
incentive funding agreement. Because nuCLEus will only be worth 250 million
dollars when it is completed. The funder has to fund the gap between the 250
million it will be worth when it’s completed and the 542 million it will
cost to build it and the funder needs to be able to essentially pay off the
mortgage like your home mortgage. So the developer is seeking what is called a
tax increment financing or TIF tax relief both from the City of Cleveland
and from the Cleveland metropolitan school district in order to close the
funding gap and essentially pay the mortgage for the nuCLEus project. So the
way TIFs work there are two different taxes that we pay as residents. One is to
the City of Cleveland, this pays for our garbage service, our police, our Fire, EMS
those sorts of things and the others to the school district for the operation of
the school’s. Most times Cleveland TIFs have been would have been called school
friendly TIFs meaning they’ve only focused on the city tax a TIF from the
city’s fire, police, refuse that sort of thing. This developer doesn’t believe
that he can pay the mortgage for nuCLEus on only the city portion of the tax
instead he is requesting a TIF from both the city and the school district, meaning
that both of us would contribute to paying the mortgage
during this 30-year period. And if he was granted it then the taxes that were
generated off of the nuCLEus building itself, instead of going to the city and
the school district, would go to the mortgage payment for the next 30 years.
Keep in mind that this does not change any other taxpayers taxes. As a resident
of Cleveland my taxes will not go up and will not go down regardless of
whether this TIF is approved. And that we will continue to collect the property
tax for the property nuCLEus will be built on but we would not collect the
taxes generated by the new building. It’s very important to understand that if the
TIF is granted or not this developer would not get any taxes from any other
taxpayer in the school district our taxes as residents and taxpayers will
not change and the developer does not get any of our taxes. All the developer
would get if a TIF were granted, is the dollars generated by the building
nuCLEus itself and instead of those dollars going to the School District
they would go to paying the mortgage of the new building. This developer is
requesting a 30-year TIF from the year 2017 today through 2046. Essentially a
30-year mortgage on the building with the taxes generated from the building
paying that mortgage over the 30-year period. That means if the TIF is approved
the school district would not collect any new money from our existing levies
until 2047. Then in 2047, the value of the building would would go on the school
districts tax duplicate and we would then begin collecting money. If the TIF
is not approved the developer has stated that the building cannot be built, that
the building is dependent upon both the city and the school district to help pay
the mortgage of the building. So the developer is offering a five element
deal to the school district in exchange for the requested TIF. So in a TIF the
district could simply say yes we’ll do a TIF and we would get nothing in this
case the developer is actually offering five elements to make the district whole
for the request. First, the developer is offering to pay a one-time payment that
would be paid in 2018 of eighteen million dollars given to the district in
a lump sum and the notion here is just like the lottery when you win the
lottery, if we ever do, when you win the lottery you get to
choose do you want to get paid every year for the rest of the life like 30
years or do you want an upfront one lump sum payment. If you take the lump sum
payment it’s always smaller because the theory is you will then put it in the
bank and grow it yourself. So this is like the one-time cash payment option in
the lottery instead of collecting money over 30 years, we get 18 million dollars
that we could do what we want including invested for 30 years if we
wished. The second thing the developer is offering is that if the building turns
out to be worth more than he thinks it is, the 250 million, then there will be
more taxes generated and so the developer is proposing that the district
and the developer would split those additional taxes. So for example, if the
building was worth 300 million dollars we would have 50 million dollars worth
of value that would be taxed we would get half of that taxed the developer
would get the other. The theory in the split is that the developer is taking
all of the risk and so should get some reward if in fact the building’s worth
more but that we also should get some reward because we are the taxing agency
and so the proposal is an even split 50% for both parties. The third is that the
TIF would only be for existing taxes. So if the district were to issue new levies
in the next 30 years, as we would suspect the district would likely have to do, the
new levies would be taxed at their full taxation rate and the district would
collect that money. That does not, however, count for a levy renewal like issue 108
where we asked voters just to continue the existing levy. So existing levies do
not generate any new revenue but any new levy let’s say that the that we ask for
a 5 mill levy in next year would then be able to be taxed. The fourth is that the
developer will hold the district harmless if the building does not meet
its potential 250 million dollar value. So if the building doesn’t meet 250
million dollars we don’t have to give any of our 18 million dollars back. So
the developers not getting as much money as he expected to get but we are not
being harmed by that. That includes also if the 18 million is given to us the
building gets been started and then it never gets completed and the developer
is unable to finish the project we are held harmless of any of the things that
could happen if the building doesn’t meet expectations. And then finally, in
2024 after the building has been built and operating for three years there
would be an audit by the district to see if any additional money is owed to the
district. This would be for a couple of reasons, if the building is built faster
than expected and started generating tax revenue faster that means the developer
would be collecting more than was agreed to and so the district would be owed the
difference or if the property is valued at a different level than we expected
then we would look at those values and get the additional dollars. All of this
again presuming that the district does grant the TIF. So these are the five
elements that the developer is proposing for us again 18 million dollars up front,
a hold harmless if the project does not work, split of any additional dollars
that would be raised, new levy dollars being taxable and finally this audit to
make sure the district was in truth truly given all resources it was due. So
the district hasn’t analyzed this proposal and we want to share with you
what we have discovered in this analysis. First, the current property that I showed
you, between Huron and Prospect, generates
about three hundred sixty thousand dollars in taxes for the district each
year that’s because it’s a parking space it doesn’t have a building on it. The
community will continue to collect those taxes either way. If the TIF is granted
we will still get the property tax but not the building tax. If the TIF is not
granted we still will get the property tax. So the district doesn’t lose any
money either way and again taxpayers taxes don’t change either way. Second, if
the building were to be built without a TIF
the district could potentially generate 121 million dollars in new tax revenue
over the 30 years. So if the building had been built the instead of getting the 18
million lump sum one-time cash payment in our lottery if we said no pay it over
30 years there’s about a 121 million dollars accumulated over 20 years. So
understanding that impact is important for the district. We looked at that and
if the district were to invest 18 million dollars in the bank for 30 years
we would need to earn six point seven five percent interest each year in order
to generate that same 121 million dollars. In fact, if we were collecting
the money each year we’d be able to spend it each year and to generate
enough money to spend the money along the way and still get 121 million
dollars we’d be talking as much as 12 and a half percent interest. The average
interest rate for the past 30 years was only five percent over 30 years and at
five percent we would only earn about seventy eight million dollars if we just
left the money in the bank and didn’t spend it along the way. The district
could put that 18 million dollars into our Capital Improvement Fund and unlike
your home districts have to funds your general checkbook that you pay the bills
and you invest in and a separate one that’s for your building your house and
renovating your house that’s called our Capital Improvement Fund. Our Capital
Improvement Fund is matched by the state of Ohio at a two-to-one match
so the state pays two-thirds of the cost we pay one-third of the cost. So we could
put the 18 million dollars into our capital fund match it with the state’s
two-thirds match agreement and turn that 18 million into 56 million dollars
upfront for the district. However, doing that means we can only do it with the
state construction and renovation plan we would not be able to put it in our
general checkbook. If we did that at 5% interest it would generate about 242 million dollars. So we do have a way using our own mechanism
to turn 18 million dollars of investment into a bigger upfront investment. And if
we were to put it in the bank would generate more than we would have gotten
had we just collected the taxes. Remember again it’s in the Capital Improvement
Fund we would instead actually physically put it into new buildings or
building renovation. There is some things to think about about that. First, if we
put it in there it can only be used for state approved school construction or
renovation. So there are some things that the state will not match. We could not,
for example, use it to build football stadiums or auditoriums in our schools
those things are not matched by the state and therefore would not triple the
value. Instead, it would be brand new school buildings similar to those that
Issue 4 is building for us and renovations that are approved by the
state like was done at Rhodes high school in John Hay high school. There are
three potential risks of considering the capital program.
One is that Ohio could end the school construction program it is their program.
We believe that risk is low the program has been in place for many many years
as part of the larger capital budget and as a statewide school Assistance Program
that we do not believe the state intends to end but there is risk that it could.
The second is that the district’s enrollment could limit our eligibility
for the program. The the state has projected that our enrollment
will continue to go down over the next several years and that we may not need
any more school buildings therefore they’re not willing to make that match.
We know that this is also fairly low risk because the district’s enrollment
has actually gone up in the last three years and the state of Ohio is now
reexamining our enrollment assumptions because they are projecting decreases
while we are seeing gains. And the third is the construction program has very
clear rules for how the money can be used so this is the risk that has the
higher impact and again we would not be able to simply add auditoriums to
schools build stadiums to schools but we would have to physically build new
schools like the schools that we have built, Orchard,
Paul Dunbar, Max Hayes or renovate schools like we’ve done at Rhodes and
John Hay as examples. So the question before the board is we are being asked
to consider granting the approved TIF under the terms outlined above, those
five elements, and the board really has two options that they are considering.
First is accept the TIF but put the 18 million into the Capital Improvement
Fund so that it generates 56 million up front and limits it to our capital
program. The board is not considering accepting the 18 million in general fund
because it does not make the community whole at the end of the day. Or, reject
the TIF, knowing that the building may not be built will still collect taxes on
the part of the property that is currently parking and hope that
potentially it might be developed by another developer at another time. So if
the board approves the TIF again we would continue to collect three hundred
sixty thousand dollars a year on the building as we are already today. And we
would generate 56 million for the construction and renovation of schools
with the limits of the Ohio school construction program in place. We would
also collect additional tax revenue from the building on any new levy that would
be approved after 2017 and in the next 30 years we would presume that at some
point the district will need to seek a new levy, although one is not currently
projected on the ballot. We would not collect any tax revenue from the
existing levies on the new building until 2048. And that’s of course unless
the building has a higher than anticipated value one of the elements is
then that we do get 50% of any extra taxes generated. For those of us who’ve
lived in Cleveland for a while, this deal is similar to the Key building where the
Key building was under a TIF and just exited that TIF and began paying the
value to the school district. If the board rejects the TIF, again we still
collect the 360,000 dollars so that is a stable in either
choice. However, we believe the project will not likely be built, therefore the
district wouldn’t expect any additional revenue unless a different project were
to be built on this site. We would not project a new property on this site in
the near term because the developer actually owns the land and so the
developer probably wouldn’t sell it to somebody else to build a different
building when he was not able to build his own. We also need to understand that
if the board rejects the TIF, by state law Cleveland City Council could still
approve it. And if they did approve it, the deal does not exist. So what state
law says is that first the district has to have a right of refusal, the question
we’re asking now do should we do the TIF or shouldn’t we do the TIF, and we have
the opportunity to try to bring the best deal to our community, the five elements
you’ve seen. But if we say no, the ultimate authority lies with Cleveland
City Council by law, so council could if they chose vote to approve the TIF
anyway, but the deal doesn’t exist we simply don’t collect the taxes they go
to the mortgage. We do know that City Council will have to consider a TIF for
the city portion of the taxes as well and I obviously can’t say what decision
City Council would make regarding the schools they obviously are interested to
know what decision the school district will support. So this is the input that
we need from our community and also the timeline and process we will use. During
the month of July, we will work to inform and educate residents district-wide
about this requested TIF through presentations like this one, district
mailings and telephone outreach to district residents, publication of
stories and community newspapers and The Plain Dealer, district website
information, a social media outreach and a number of live community meetings and
information sessions. And we will spend the entire month of July making sure
that the citizens understand the question that we’re being asked before
we ask to what the answer should be. We will also host public hearings to
gather community feedback about the requested TIF. They will be from Saturday
July 29th through Sunday August 6th. We will have both weekend meetings in the
afternoon and evening meetings during the weekdays.
We’ll have meetings in all parts of the city where we will have this information
session and question-and-answer opportunity available for our citizens.
We are seeking input from our residents on three specific questions. First, what
benefits do you see in the board granting this TIF request if any? Is
there any value for the Board to considering this and if so what is it.
Second, what risks do you see of the Board granting this TIF if any? So what
would you want the board to be cautious about in making this decision. And then
finally, knowing that residents are not necessarily Board members but if you
were a Board member how would you vote? Would you vote to approve the TIF or
would you vote to reject the TIF? Resident feedback will be collected on
through an online survey available on the district’s website until Monday
August 7th. The Board of Education will then hold a Board Work Session on
Tuesday August 8th to review and publicly discuss the feedback that we
receive from our residents. The Board will also hold a Board Business Meeting
on Tuesday August 22nd and that the business meeting will choose to either
approve or reject the TIF based on the feedback that they receive. To learn more
about this proposed TIF you can visit ClevelandMetroSchools.org /nucleus
where all of these materials will be available through August 7th. If you have
questions that were not answered today or not answered in the materials on our
website you may submit them to [email protected] You will receive a reply within two business days acknowledging your question and
providing answers if they are available or acknowledging your question and
pledging when you will have answers and we will use those to update frequently
asked questions which will be listed on the
districts website. If your questions are answered and you’re ready to provide
feedback to the board, please visit ClevelandMetroSchools.org/nucleus and complete our online survey. And thank you for taking the time to
learn about and provide feedback on this very important community issue.

One comment on “nuCLEus – CMSD Community Dialogue”

  1. thedjekim says:

    This is such a crock of shit. Lets just give the rich all the tax money…. A run down city like Cleveland doesn't need it… Greedy fucks.

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