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Government & Politics

Cleveland City Council Extends Flats East Bank Tax Deal for 30 Years

Flats East Bank apartments in Cleveland
George Hahn
/
ideastream
What once was a strip of bars and nightclubs has been turned into a mixed-use neighborhood, including the Flats East Bank apartments at the northernmost end of Old River Road.

Cleveland City Council approved a 30-year extension to a deal with Flats East Bank developer the Wolstein Group, which had fallen behind on loan payments to the city.

The move lengthens the tax-increment financing (TIF) deal’s lifespan to 60 years, enabling the developer to use the additional three decades of property tax payments to refinance debts on the project.

The Cleveland Metropolitan School District will receive its portion of property taxes during the 2040 to 2070 segment of the TIF.

The measure passed 14-2, with Ward 15 Councilwoman Jenny Spencer and Ward 16 Councilman Brian Kazy voting against it.

The developers are $6.5 million behind on repayments to the city, which helped finance the deal with a $30 million loan from the U.S. Department of Housing and Urban Development.

The alternative to extending the TIF: taking the developers to court to extract what’s owed to the city.

“If you go to the Flats, you look at two great buildings, and you look at two parking lots that are in great locations that you would like to see developed,” Cleveland Economic Development Director David Ebersole. “And if you litigate to collect on this debt, then you substantially reduce the impact and the feasibility of future development on those lots.”

The debate in Wednesday’s committee meeting divided newer council members and longer-tenured ones, with newcomers questioning the wisdom of doubling the life of the TIF deal.

If the city backs down so easily from litigating unpaid debts, it risks not being taken seriously by developers, argued Ward 17 Councilman Charles Slife, who has been on city council for about a year.

“If we’re not willing to act on that, what’s the value of it as collateral?” Slife said. “We might as well be taking Beanie Baby collections as collateral on major economic development loans.”

Ebersole and longer-serving council members said the project—which was announced in 2005, temporarily suspended, eventually developed even through the 2008 financial crisis, and saw construction begin in 2010—carried some risks but ultimately delivered new development in an underused part of the Flats.

“We had a pretty thin margin for error, and we came down a little bit on the wrong side of that,” Ebersole said. “But it was a risk well worth taking, given the, I think, amount of positive development on that project.”

Retail and apartment occupancy in the development stands in the mid-80-percent range, but parking revenue has lagged behind expectations, the developers’ financial advisors told city council. The Wolstein Group owes the city $23.5 million on the project, Ebersole said.

Council needed to pass the measure before the end of the year to take advantage of a provision in state law allowing for such extensions, City Council President Kevin Kelley said.

Spencer, who was sworn in Nov. 18 and replaced Councilman Matt Zone, said the Jackson administration should have given council more time to review the extension proposal.

“I take you at your word that you’ve looked at options and that this is the best option being recommended,” Spencer said, noting that Columbus City Council took similar actions in November. “So clearly there’s been some notice, and there would have been some time to be a little more thoughtful. So I’m not clear why this is a fire drill.”

Ward 12 Councilman Tony Brancatelli, chairman of the city’s development and planning committee, said it took time for the city to review all its funding options and that the end-of-year deadline had come as a surprise.
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