Ladies and
gentlemen, if you have money and resources, step right up.
We’re giving
away money by the truckload. Wait, you
taxpayers/suckers... please leave, you’re not eligible.
However, we will send you the bill.
That’s the
message I got from a deal presented by Cleveland Mayor Frank
Jackson with the full and hardy cooperation of a feeble,
led-by-the-nose City Council. Is there a
single council member worth a dime of the $70,000 or so they are
paid? I don’t think so.
Let’s start
this way. RTA is spending some $200 million in tax funds
to redo Euclid Avenue. RTA says...
Since buses
have been operating already along Euclid Ave. for years, I’d say
that most of that $200 million is for the “as well as support…”
Here’s the
breakdown
of the money: $83 million from the feds, $75 million from
the State of Ohio, $21 million locally from RTA, $10 million
from the Northeast Ohio Areawide Coordinating Committee, and $8
million from the City of Cleveland. I know that only adds
up to $197 million, but let’s stipulate it will be a lot more
before the project is completed.
Should that
public subsidy suffice to “support” development, as RTA says?
Apparently
not.
City Council
passed legislation last week that further subsidizes development
for the rehabilitation of buildings in the 600 block of Euclid
Ave. Council approved in a single day a $5.1 million loan
for K & D Group, Inc., the firm that supposedly bought the East
9th & Euclid corner from the County. I say “supposedly”
because I’m waiting for the money to get to the County and
suspect that won’t happen as it should.
The $5.1
million “loan” for the K & D development from the City will be
paid back not by the developer, as you would expect, but by
the City.
Yes, the City
loans the money for the development and then the City pays back
the debt itself. You cannot ask for better loan terms.
The $5.1
million comes from two City funds: Core City 1 for
$2,574,500; and Core City 2 for $2 million; and a third source,
the city’s UDAG repayment fund for $525,000. Ironically,
both funds are financed by bonds backed by revenue from Chagrin
Highlands, another developer-favored (Dick Jacobs) project,
which was supposed to help the City’s finances.
This
rehabilitation project will involve creating 765 apartment units
of housing. But guess what? They all will be tax
abated for 12 years at 100%. Neat gift. The project
will also have a 900-space garage and a 268-room hotel.
The hefty
loans will actually be paid back via future property taxes.
This relieves the developers/investors of repaying the loan.
Since the abatements last 12 years and another two years of free
money will be included in the deal, the payback won’t begin
until 14 years out.
That’s when
the development supposedly will start paying property
taxes.
Typically,
property taxes are divided among the schools, city, county, and
city libraries. However, in this case only the schools
will get the property tax revenue on these properties. The
city, county and city libraries property tax share will be
diverted to pay off the $5.1 million loan. It will take a
long time.
The loans are
for 28 years!
How sweet can
it get?
Oh, it can and
does get much, much sweeter. The sugar in this deal comes
by the ton.
In addition to
the $5.1 “loan,” the project also receives a $14.4 million
Federal Historic Tax Credit. In other words, the
developers, or someone else who buys the credits from the
developers, will get the opportunity to write off $14.4 million
on their federal taxes over five years. Only available to
the very rich.
Oh, that’s not
sweet enough.
The generous,
though fiscally busted State of Ohio will award a $7.4 million
state historic tax credit. Once again, the developer or someone
who buys the tax credit will write off that amount from his or
her state taxes.
But it’s not
quite over.
Because the
developers are doing us such a favor in taking our money, the
three stooges at the Cuyahoga County
Commission will throw them another $800,000 in commercial
development money and another $300,000 in another development
incentive.
Oh, to be
fair, I have to mention that developers Doug Price III and Karin
Harrison, 50% owners each, are not going to let the public carry
the full burden. They’ll be chipping in $500,000 as
equity. At the same time they will TAKE a $1.85 million
developers fee! Isn’t that the kind of deal we’d all
appreciate having?
Does anyone
care how their tax money is spirited away?
I noticed that
our daily monitor, otherwise known as the Pee Dee, spent all of
one paragraph telling the public this deal had been done.
To be fair,
the Pee Dee did have a story about this deal before Council
ratified the gifts. However, the details were rather
meager, as usual.
The sad thing
about this dirty deal is that there isn’t a
single political voice in the city that even attempts to inform
people of what is really happening. I guess a dead city
deserves dead leadership.
The
neighborhoods are dying or dead but they are flushing cash into
downtown, over and over again.
In the book
Free Lunch – How the Wealthiest Americans Enrich Themselves at
Government Expense (and Stick You with the Bill), David Cay
Johnston writes...
public parks to a starvation diet and allowing buildings to
deteriorate, grounds to go to weeds, and activities to grind
to a halt. The number of full-time recreation
professionals fell during the eighties and nineties.
Adjusted for population growth, park staffing by full-time
professionals is below the levels of the sixties. 
stadiums and countless minor league facilities.”