Tom Stapleton (Senior VP from Eagle Realty) and I exchanged a few emails recently and I happened to mention that I thought Great American Tower was the first use of TIF project bonds in Cincinnati and “there is no other way for citizens to critically examine this financing structure without citing specifics about Great American Tower.”
Tom responded, “What do you mean by the statement “this was the first use of TIF project bonds”? Project-specific TIF financing has been around for a long time, so I don’t understand your comment.”
He was kind enough to follow up with a link to the Ohio Development Services website that lists all the active Tax Increment Financing Districts and Projects in the state. Tax Increment Financing is a type of financing structure that uses tax payments (that would have been used for basic services like police and trash collection) to pay down debt associated with a specific building project instead.
Of course, Tom’s right. He’s the pro. TIFs have been used for quite some time, 32 currently active within city limits. 19 of those are Districts that benefit a wide variety of businesses. The other 13 were established for specific projects, usually pretty big ones.
Our oldest TIF was for Fountain Square South parking garage in 1980.
In 1984, we used the TIF tool to build Hyatt/Saks. Partners that owned the Hyatt filed for bankruptcy protection in 1994 and a foreclosure action was sought on the property in 2008. The hotel was sold in 2009 at sheriff’s auction after years of financial woes. The TIF, however, remains outstanding and benefits the current owner of the property.
10 years later in 1994 we used another project TIF to finance the square and parking garage at Fountain Square West.
A TIF was used again in 2001 for the Center of Cincinnati Milicron project in Oakley, a Neyer development.
In 2004 we established a project-based TIF for the first phase of Tom’s project: Queen City Square, now owned by the Port Authority with Western & Southern named in the Master Lease Agreement. The second phase was established in 2008. Total financing amounts to over $323 million. Redirection of property tax payments to pay down the debt of both buildings and their garages will continue until all the bonds have been paid off, probably around 2038. (Cincinnati Public Schools still receive 25% of the payment and another part of the payment goes to finance other development.)
The Baldwin Building just purchased by Neyer was originally granted a TIF project in 2007. They will most likely continue to benefit from the arrangement as they reconfigure the property into apartments.
Neyer was awarded a project TIF to develop the Keystone Park Project, a $100,000,000 office campus in Evanston in 2008.
The dunnhumby garage received the benefits of TIF financing in 2013. 3CDC holds the master lease on the $70,000,000 garage. (The headquarters portion of the building will receive a 15-year Community Renewal Act abatement.)
5 new TIF projects have also been recorded as of 03/02/2015: 3D Color Project Development, Centennial TIF, Emery Pineapple Project Development Public Improvement, P&G June Street access, and Rumpke Project, Public Improvement. No details have been provided for any of these new Tax Increment Financing deals.
So – Tom – thank-you for correcting me. Tax Increment Financing has been used for projects in Cincinnati since 1980. But it’s been a fairly rare occurrence, Queen City Square/Great American Tower was the largest private financing to date three times over, and we have used this 30-year arrangement for only a handful of companies. I stand by my statement that your financing structure is one-of-a-kind – no other building is owned by the Port Authority with the developer holding a master lease – and it is important for citizens to study this particular example and understand it.
It’s especially important right now, as the use of this highly advantageous, 30-year tax subsidy is apparently gathering steam in the city of Cincinnati – all this while we project at least another five years of budget deficits. Let’s hope our elected officials don’t get so greedy for growth that they forget what can go wrong and cripple the next generation of hard-working middle-class taxpayers who will have to cover the costs of their great expectations.