Dear Ms. Holwadel:
Thank you for writing me about the Oakley Station Parking Garage. I have received a few emails on this subject and I’d like to take a moment to clear up some misconceptions about the project and share with you why I support it. . . .The garage is a 383-space garage and will cost $6.2 million to construct. The developer, Vandercar Holdings, is contributing the land, valued at $700,000. The developer will have an option to purchase the garage from the City for the cost of construction, less depreciation. The developer will lease and manage the garage for 35 years and has the option to purchase the garage at the end of the 35-year term for $1, when it is fully depreciated.
That’s true, Mayor, except that the land has to be in the city’s name or it can’t qualify for the 35-year property tax-exemption that comes with Tax-Increment Financing, tax payments that would usually be made to fund basic services but will now be used to pay for this garage. What’s the dollar value of the tax exemption to the developer over 35 years? The city doesn’t get any benefits from depreciation like a for-profit company would since Cincinnati doesn’t pay any taxes. Do our buildings really only have a 35-year usable life? Such a waste of resources, both financial and environmental, is sad.
It’s also interesting that if the building is ever sold, it’s my understanding that the developer receives 100% of the proceeds, including the garage – and holding periods usually end up being much shorter than that stated in the master lease agreement. Even if the property is sold, those tax benefits will be passed to the new owner for the entire period.
I support this project for one big reason: It will create jobs and economic growth in Oakley.
But, Mayor, according to the city’s own ordinance this particular office building will not result in ANY new jobs to the city.
F. Developer intends to lease the Private Improvements to Community Insurance Company (the “Tenant”) for a term of not less than 10 years and 6 months, which Developer represents will bring approximately 400 jobs to the building site of which 0 shall be new jobs to the city and 400 shall be jobs retained from the Tenant’s prior location within the city.
The city projects income taxes from the temporary construction jobs to be $84,000. Building a $6.9 million garage in order to generate $84,000 in new income taxes to the city – wow, I don’t mean to be critical – but can’t we do any better than that?????
According to an economic impact study done by the University of Cincinnati, development of the Anthem office building and parking garage will support 82 new jobs during construction, and Anthem employees will bring annual purchasing power of $4 million to area restaurants and retail. Through our agreement, Anthem must retain at least 400 jobs in the City with $15 million in payroll. Construction of the office building is expected to create 111 construction jobs with an annual payroll of $4 million during construction.
Mayor Cranley, would you mind if I asked who paid for that economic impact study? Usually it’s the for-profit developer. Haven’t we had a few problems in the past with overly optimistic projections?
As far as the agreement with Anthem is concerned, you must be referring to the Property Investment Reimbursement Agreement the city signed in 2013 (Ordinance 206-2013) to fix up their current building at 1351 William Howard Taft. We gave them a forgivable loan of $300,000 outright. And another $1,250,000 over the next 5 years if they retained 325 jobs and created 75 new ones. This agreement didn’t have anything to do with the new building, but I can see where you might get confused. It’s hard to keep all these job-creating deals straight isn’t it? 75 jobs cost us $1,550,000 or $20,666 per job. It will take more than 26 years to break even on that investment. (the city assumes an average salary of $37,500 and we tax at 2.1%)
Again, thank you for writing me about this important issue. I always enjoy hearing from thoughtful, engaged citizens like you. Please feel free to contact my office if I may ever be of further assistance.
Mayor, City of Cincinnati
Thanks for taking time to write, John. But while all the talk about jobs always sounds great, the reality is that we can’t afford to give away more than we can ever hope to take-in. That’s Economics 101. Current policy only makes sense for developers who build big buildings and tenants savvy enough to sign the taxpayer-subsidized lease.