Great American Tower: Off the Charts

Yesterday I tried to use my new spreadsheet skills to create a bar chart to show the difference between what Great American Tower actually pays to city and county government from their $3,664,654 semi-annual property-tax payment and what they would have paid if the project were not subsidized by taxpayers.

image (5)

As you can see, my chart is kind of a joke.  Using a normal scale, the amount the building contributes is so minuscule, you can’t even see their little drops in the bucket.  So I asked one of my behind-the-scenes advisers if he could help me with something that made a little more sense and he used a logarithmic scale to take into account the large range in quantities.

image (4)

Now you can at least see what Great American Tower contributed to the public coffers in January and the numbers are accurate if you pay very close attention to what the scale on the vertical axis is trying to communicate.

But it still doesn’t feel right.  It doesn’t do justice to the reality of how we raped our community for the sake of another giant skyscraper on our skyline, how out of proportion the numbers are in relation to the human lives we impacted.

This is the math on PART of the Great American Building, the part on E. Fourth valued at $232,125,850 (this does not include the part of the building that fronts Broadway):

Cincinnati Public Schools:  $21,023 vs. $1,998,349

Let me repeat that again, because this is the number that makes me want to cry.  The Auditor shows that Cincinnati Public Schools got $21,023 for this payment period.  Standard distribution for other commercial properties in the Central Business District would have been $1,998,349.  According to the agreement signed with CPS in 1997, they should get 25% of the payment to the Tax Increment Financing District or $894,196 – but even though I have contacted city accounting, the auditor’s office, the former treasurer of the Cincinnati Public Schools, sent an email to the Superintendent and met with the current president of the School Board – NOBODY can explain this discrepancy.  Nor do they seem to care, at least not enough to ask any further questions.  It’s as though I am bothering them.

County General Fund: $828 vs. $78,689

Public Library:  $366 vs. $34,694

Family Services:  $124 vs. $1,180

Hospital Care for the Indigent:  $992 vs. $94,355

Mental Health:  $849 vs. $17,414

Developmental Disabilities:  $1,513 vs. $174,446

Parks:  $377 vs. $35,367

Crime Info Center:  $110 vs.  $1,037

Children’s Services:  $982 vs. $92,318

Zoo: $163 vs. $15,487

Senior Services:  $460 vs. $43,636

Total:  $27,787 vs $2,588,072

The city would have received the rest of the money from their payment, $988,713 we could have had for basic services like police and fire, picking up trash and filling potholes.

These are the numbers for one SIX MONTH tax period on a PART of this Tax Increment Financing Project.  I refuse to estimate the cost for the entire 30-34 years on both buildings as it would make me puke.

This was not a subsidy we underwrote in order to bring new jobs to Cincinnati, jobs that might generate additional income tax revenue someday.  The vast majority of the space was leased by companies moving out of other buildings in the Central Business District, buildings that then experienced a precipitous decline in their valuations and the property tax revenue generated by those parcels.  Instead of going to services crucial to the long-term health of our community, this money now goes to pay down the debt on a 41-story office tower, subsidizing the rents of corporations so that they can enjoy an upgrade in facilities at a lower cost.

These property-tax levies are the heart of our community.  Literally.  We voted on them.  We decided our children, our old people, our libraries and parks and mental health services are important to the kind of city where we want to live.  But citizens have never been given the chance to vote on Tax Increment Financing projects and whether or not they are worth it.

Before City Council votes on the next 30-year property tax deal, I hope we all get out our pencils and do the numbers on what these agreements really cost the citizens of Cincinnati.

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13 thoughts on “Great American Tower: Off the Charts

  1. throughthecatchfence

    Your premise is based on a false assumption – that the development would have taken place without a subsidy. Note that I said “a subsidy” not “the subsidy” it actually received. The issue to be considered is balance between the amount of subsidy needed to make the development feasible vs. the loss to the city as a result of the subsidy vs. the cost of the status quo. I certainly can’t argue with the numbers and the subsidy appears to result in an unfair balance. Another question to be considered is whether these subsidies result in an unfair playing field to the detriment of the developers who may not be politically well placed as the developer in question. Just how does one go about getting one of these subsidies?

    The movement of tenants from older buildings to newer developments is really nothing more than the gradual change of A space becoming B space and B becoming C. In addition to fulfilling a need for new A space this supplies the demand for B and C space. A problem only arises when the new development is unnecessary for the provision of A space and prematurely degrades existing A space. This can be part of that potential unfair advantage the subsidy provides to the new developer.

    Reply
  2. executivedreamer Post author

    This has got to be an UrbanCincy reader (or writer). Smart, tight argument. — Let’s start with the first question: Would the development have taken place without the subsidy? The (parking) lot was owned by a developer who definitely planned to develop the property. And the owner had all the cash to do the deal as they bought 100% of the bond issue used to fund the project. The building was designed in the mid 80s and they shopped the project to more than one location until they found one that could get a subsidy green light. Why bring up all this stuff now, when it’s done and there is no turning back? This same developer has 2 more new construction projects coming up soon and I want our city to negotiate a better deal.

    OK, Urban Planners, I get the benefits of moving the tenants up from class B or C space to Class A. But maybe, maybe is there wiggle room in the terms of the deals we do? Do we have to do 34 years? Do we have to pay for 20% of the building costs? Can we ask for more bike infrastructure or streetcar operating-cost funding (yes, I know the ordinance was passed in November – hooray – times are changing) or affordable housing?????? And more than anything what impact is all this development having on schools? In 10 years the ratio changed from 50-50% to 40-60% pay-in – with commercial property owners contribution dropping. Middle class homeowners can’t carry this. And we can’t afford to short-change the next generation.

    I do talk to lots of small to medium sized developers who feel shut-out of the goodies that have been given out in the last ten years.

    I’m not saying no incentives, no subsidies. I’m saying let’s make sure we are measuring actual impact and – let’s improve our methods to make sure we get what we really want. I’m saying, ‘Let’s talk about it” – instead of trusting standard operating procedures.

    Reply
    1. Travis Estell

      Kathy, thanks for the UrbanCincy mention. I believe that when we met, we talked about how new Class A office space would cause businesses to move up (from Class B to Class A, from Class C to Class B, etc.). Ultimately this would allow some buildings at the bottom of that shuffle to be renovated into residential, which is in very high demand in the urban core. We are now seeing this happen with the 580 Building and other proposed residential conversions.

      With that being said, I am not a fan of so much subsidy being given to projects like QCS with little to no public debate. Our city is full of vacant historic buildings in desperate need of rehab. If we put the public money given to QCS into historic preservation grants instead, imagine how many buildings could have been rehabbed. In the long run, restoring our historic neighborhoods is going to have a MUCH bigger positive financial impact on our city than simply building one new skyscraper.

      Reply
      1. executivedreamer Post author

        Travis, I really do get it – why it’s good to shift the B and C class space to residential/hotel/alternative usage. — But with 2 more major construction projects from this developer in the near future – I will repeat what I said to Zach – I want your brain in that conversation. You have volunteered your time and energy to help create the kind of community where I want to live. And you have a longer term perspective. Nor do you earn your living off of real estate development. I trust your judgement. — All that being said, I think we’re making some progress. Thanks, UrbanCincy for reporting on the Baldwin Building deal with the 7.5% going to the neighborhood development.

  3. throughthecatchfence

    You seem to “profile” commenters with no basis. For the record I neither read nor write for UrbanCincy. In fact I had to Google it to find out what it was. My comment neither agreed or disagreed with your analysis. What I stated was merely my analysis. My analysis may be as incorrect as yours. I based mine on 50+ years of residency in Cincinnati and 30 years of professional experience in public finance and urban development. All I can say is it’s a good thing you don’t live in Chicago.

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    1. executivedreamer Post author

      I’m sorry. I meant the UrbanCincy profile as a compliment. Those guys know their stuff. — Since you have 30 years of professional experience – and I’m just trying to learn – what does that mean, that it’s a good thing I don’t live in Chicago? The entire point of what I’m writing is that it’s a lot of money, and these developments last a long time. Since you’ve been in public finance and urban development I have to assume that’s been in Cincinnati. Are you content with past performance of our public investments. I’ve also lived here a long time and I don’t see consistent results we can measure. In fact I kind of remember some disappointments. Can we improve our results?

      Reply
    2. executivedreamer Post author

      Bill – now that you’ve admitted to being a professional – I’d love it if you would explain to me why we had to subsidize Queen City Square/Great American Tower when the garage/parking lot was bought by a professional developer for development purposes, they clearly had the cash to finance the entire project themselves, and it was not in a blighted area or for any other definition of public good. I’m a taxpayer. Not a public finance professional. I honestly don’t get it – why the public should have to step in and reduce the risk for these huge projects and make up the difference in taxes for basic services. (And I’m trying to say this nicely – so please do not take it as an attack – This is probably a place for one of those smiley faces.)

      Reply
      1. throughthecatchfence

        Let me be a little cynical. The first job of business is to make money; the first job of government is to (pardon my french) piss it away; the first job of politicians Is to get re-elected; the best way to get re-elected is to get business to donate scads of money to your campaign. This perfect storm is what causes deals like this to happen. Am I satisfied with the city’s return on its investment? Certainly not, but the politicians who get elected certainly seem to be because they keep repeating the same mistakes. Einstein defined insanity as doing the same thing over and over again and expecting a different result. Why do I say you should be happy you don’t live in Chicago – because if you think it’s bad here you should experience it there. For example I once witnessed a discussion between a Chicago developer and a development officer in a SW Ohio government agency. The developer asked the official “Who do I have to pay to get the building permits?” The officer replied that building department was right down the hall. The developer smiled and said “You don’t understand, who do I have to PAY to get the building permits?” The officer replied exactly as she had previously. The developer shook his head and said “OK, now I get it. How much do I have to pay you to tell me who I have to pay to get the building permits?”

  4. barthornton923@aol.com

    I don’t really understand completely all this data but what if you sent this to a watchdog group or a beat reporter (if we have any left in Cincinnati) or the local news…???

    Reply
  5. Zachary Schunn

    Kathy, have you researched media coverage at the time it was re-proposed? Or the public reaction? I can’t really recall what it was. I would assume people were so excited to see new construction (and the jobs that came with it) that it went through without much trouble.

    And I have to say, I’m pro-development, but you’ve enlightened me to how troubling the extent of the subsidy on this project really was. I agree with the above poster about building A to open up B and C space. But you do that when the market is expanding… not at the beginning of a 6-year downturn (and perhaps the worst in 80 years, at that). We are just now starting to correct for all the space this tower created. Average CBD office vacancy in metros across the country is about 12.5%. Cincinnati is sitting at 19%. (Both numbers from Integra Realty Resources.) Integra predicts it will take another 5 years to balance our class A office, and another 8 years to balance our class B office, downtown. At the time Queen City Square was built, it seemed strange; now it just seems insane.

    Reply
    1. executivedreamer Post author

      Zach – you are what gives me faith in the future of my city. — Your insights are always practical, balanced, and economically realistic. — What bothers me most about my conversations with real estate/development professionals (aside from yourself) is the assumption that development deals are binary. You either do the deal or you have a great, big ugly parking lot in the middle of your city forever. Can’t we be a little more nuanced? Can’t we negotiate harder as our market improves? Can’t we have a public conversation about what we subsidize as a community and whether or not that’s a future that is attractive? I just want us to think more critically about what we are doing before we do any more of it and I want more than a handful of insiders deciding. I want Zach Schunn in the room asking intelligent questions.

      Reply

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