Tag Archives: Tom Stapleton

The History of Tax-Increment-Financing in the Queen City (Oh my!)

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.

One Small Step for Cincyopolis – one giant leap for transparency

Yesterday’s letter from Tom Stapleton, Senior Vice President of Eagle Realty Group, marks the beginning of a new era in Cincinnati.  The tone was co-operative, the information, a helpful and specific record of the logic behind public subsidy on one of the biggest for-profit projects Cincinnati has ever under-taken.  My only frustration is that it took 9 months of relentless arm-twisting to get to these numbers in a format that is easy to understand and can be shared.

Yet Tom and his boss, Mario San Marco, would tell you that those 9 months were completely unnecessary.  “Why didn’t you just ask us?” Mario said during our conversation last week. And maybe he’s right.  Maybe I should have just picked-up the phone and asked.

Except for two things:

(1) There’s a steep learning curve involved in commercial real estate development, especially the financing part of it – and in the beginning I didn’t even know what I didn’t know, much less what questions I needed to ask.

(2) You don’t really want to ask the people who are making the money off the project for independent and complete analysis of their building.  I thought the government entities that facilitated this mega-Tax-Increment-Financing Project should – in a perfect world – be the keepers of record and my best source of verifiable data.

But the world is not perfect, Citizens. The only page on the internet dedicated to public involvement on Great American Tower is on the Port Authority web site, a couple of paragraphs that are more public relations material than accurate and complete financial data with measurable benefit-expectations clearly spelled-out.  When I pushed for more information about the “whys” of city involvement early on, one of the most knowledgeable public employees associated with Queen City  Square admitted, “We did it because City Hall told us to do it and you’ll have a hard time finding anybody there to talk to since those people are all gone.”  This is a building that opened 4 years ago – not 30 – and we should have a written, on-line record accessible to the public in a format that is easy to understand – not 50,000 pages of documents in boxes in storage.

Let us rejoice, Cincinnati.  In the scope of world problems, this one is relatively easy to solve.  It’s not poverty.  It’s not the Middle East or global warming.  This is numbers on a page and all it takes to fix it is commitment and some focus.  We’ve even got a model to use – not a perfect model – but a darn good start:  3CDC dedicates a page to every single one of their projects complete with financing details and links to informational videos for people who want to learn more.  (Wouldn’t it be nice if they could add information about how these deals impact property taxes?)

Screenshot 2015-04-09 at 8.55.38 AM

Tom and Mario, I have a lot to learn about how a city gets built – but here’s one thing I know for absolute sure:  If we discipline ourselves to do our homework and ask the important questions before we make investments that will be with us for generations, and if we put our assumptions out in public where everybody can see what we are doing and why we are doing it – we will make better decisions.  I learned that as a financial consultant and the principles of good investment are the same for families as they are for cities.  Public scrutiny is not a cumbersome evil to be avoided.  It’s a crucial step in the decision making process that will help politicians, public administrators and – yes!  – even private, for-profit developers build a really, really great city where everybody wants to live.

“Guess who this is? . . . It’s Mario.”

SAN_MARCO_MARIO_Eagle_WS_0662

My friend, Mario San Marco

Mario San Marco, President of Eagle Realty Group, and I have a history.  It started in 2011 when I concocted an extravaganza called “Cincinnati Dreams Italy” in conjunction with the Taft Museum. Even though I’d never met him before I wrote Mario a letter asking if we could use a few of his buildings and – the crazy Italian – he said ‘yes.’  It was a ridiculous undertaking that included over a hundred local artists, 3 locations, and the installation of a bocce court in the middle of Lytle Park – all in less than 6 weeks.

A few days before the opening, my phone rang and it was the president of the United States Bocce Federation.  “It’s been brought to our attention that you intend to hold a tournament without official sanction from our governing body,” he said.  I tried to be polite.  I explained that the tournament was about building community, that I didn’t really know anything about bocce or the Federation or sports in general.  The conversation went on for several minutes before Mario finally identified himself.  I’d been punk’d by the best.  He was en route to a family vacation with one of his sons riding shotgun, the whole exchange broadcast on speaker.

So when I answered my cell phone the other day my first reaction was to assume someone was playing a joke on me.  But it was really Mario.  He wanted to get me together with Tom Stapleton, Eagle’s senior vice president, so they could clarify the facts regarding Great American Tower.  We agreed to meet the following afternoon at his office in the Guildford Building.

Am I brave?  Or ridiculously foolish?  Our meeting was on Good Friday and the front door was locked when I arrived.  I had to call upstairs for somebody to come down and let me in, the whole place dark and empty, me, alone, with these two powerful, important men on their home turf.

Mario was very serious.  He communicated that Western & Southern cared deeply about its reputation and readers of my blog were getting the impression of wrong-doing, particularly related to my focus on their Queen City Square development. The real purpose of our emergency pow-wow was to hand-deliver a formal letter of clarification Tom had prepared.  Until Mario handed me my copy of the document, I hadn’t even noticed the blue folder sitting in the middle of the conference table.

Mario and Tom said they seldom grant interviews because the media so often gets the facts wrong. In order to avoid any possibility of mis-interpretation, this is the original text of that letter in its entirety:

W&S page 1

W&S page 2

As we shook hands before I left, Tom smiled and handed me his business card.  “Call me with any questions,” he said – and he sounded sincere.  So let’s call this the start of a new version of public-private partnership in developing Cincinnati, one where citizens and for-profit developers work together in a spirit of trust and cooperation to create a great place to live.  Tomorrow I’ll share a few comments about Tom’s letter and my first steps towards team-building.

"Guess who this is? . . . It's Mario."

SAN_MARCO_MARIO_Eagle_WS_0662

My friend, Mario San Marco

Mario San Marco, President of Eagle Realty Group, and I have a history.  It started in 2011 when I concocted an extravaganza called “Cincinnati Dreams Italy” in conjunction with the Taft Museum. Even though I’d never met him before I wrote Mario a letter asking if we could use a few of his buildings and – the crazy Italian – he said ‘yes.’  It was a ridiculous undertaking that included over a hundred local artists, 3 locations, and the installation of a bocce court in the middle of Lytle Park – all in less than 6 weeks.

A few days before the opening, my phone rang and it was the president of the United States Bocce Federation.  “It’s been brought to our attention that you intend to hold a tournament without official sanction from our governing body,” he said.  I tried to be polite.  I explained that the tournament was about building community, that I didn’t really know anything about bocce or the Federation or sports in general.  The conversation went on for several minutes before Mario finally identified himself.  I’d been punk’d by the best.  He was en route to a family vacation with one of his sons riding shotgun, the whole exchange broadcast on speaker.

So when I answered my cell phone the other day my first reaction was to assume someone was playing a joke on me.  But it was really Mario.  He wanted to get me together with Tom Stapleton, Eagle’s senior vice president, so they could clarify the facts regarding Great American Tower.  We agreed to meet the following afternoon at his office in the Guildford Building.

Am I brave?  Or ridiculously foolish?  Our meeting was on Good Friday and the front door was locked when I arrived.  I had to call upstairs for somebody to come down and let me in, the whole place dark and empty, me, alone, with these two powerful, important men on their home turf.

Mario was very serious.  He communicated that Western & Southern cared deeply about its reputation and readers of my blog were getting the impression of wrong-doing, particularly related to my focus on their Queen City Square development. The real purpose of our emergency pow-wow was to hand-deliver a formal letter of clarification Tom had prepared.  Until Mario handed me my copy of the document, I hadn’t even noticed the blue folder sitting in the middle of the conference table.

Mario and Tom said they seldom grant interviews because the media so often gets the facts wrong. In order to avoid any possibility of mis-interpretation, this is the original text of that letter in its entirety:

W&S page 1

W&S page 2

As we shook hands before I left, Tom smiled and handed me his business card.  “Call me with any questions,” he said – and he sounded sincere.  So let’s call this the start of a new version of public-private partnership in developing Cincinnati, one where citizens and for-profit developers work together in a spirit of trust and cooperation to create a great place to live.  Tomorrow I’ll share a few comments about Tom’s letter and my first steps towards team-building.