Updated at 10 a.m. Tuesday
The Cleveland Heights-University Heights School Board unanimously approved an 11-year, 80 percent tax abatement for the City of Cleveland Heights and developer The Orlean Company for the proposed residential and commercial building on the Meadowbrook and Lee property at its regular meeting Monday night.
Cleveland Heights City Council members, the city's planning and development director, the law director, the acting city manager, Orlean Company president David Orlean and other officials attended the meeting and answered questions from school board members.
Superintendent Doug Heuer and Chief Financial Officer Scott Gainer recommended that the board approve the resolution for a tax abatement for the Meadowbrook and Lee property.
"The analysis does indicate a positive financial gain for the district in comparison to the status quo condition of this property. Additionally, we share the political opinion that cooperation with the City of Cleveland Heights on the request will contribute to future, mutually beneficial collaboration between the Cleveland Heights-University Heights City Schools and the City of Cleveland Heights moving forward," the letter stated.
The more than $11.4 million project, with the abatement, will bring in an average of $70,000 in property taxes each year during the 11 years. Without the abatement, it would have produced $300,000 in property taxes annually.
Nancy Peppler, school board member, said because the school hasn't received money on the Meadowbrook and Lee property in years, it would be beneficial to approve the abatement because the district isn't losing any money now — only gaining.
The school board also approved a compensation agreement involving the value of the Cedar Lee parking deck.
The city recently had the parking deck appraised and determined that it has no real market value, said John Gibbon, the city's law director. The Board of Revision reduced the value from approximately $3.8 million to $2.4 million. Instead of appealing this decision to argue that the market value is zero or less, the city and school board have agreed to lock the value of the deck at $2.2 million during the term of the abatement so that the board continues receiving property taxes from that structure.
After the 11 years is up, the Meadowbrook and Lee development is expected to bring in an average of $440,000 in property taxes each year, according to the Orlean Company. The developer also said more residents would help the local economy and presented figures about how much revenue they'd bring in through income taxes, parking fees and other means.
Cleveland Heights Planning and Development Director Richard Wong also said it would contribute to the aesthetics of the Cedar Lee Business District and neighborhood.
"It's a beautifully functioning district with a hole right in the center, and we have this project to connect. So it connects north, south, encourages pedestrian activity and, in my opinion, it's beautiful," Wong said.
The four-story, 77-unit building would house studio, one and two bedroom apartments ranging from 513 square feet to 1,138 square feet, according to early proposals. Though Stuart Friedman, spokesman for the Orlean Company, said it's too soon to talk exact rent prices, rates will likely be "a little bit north of a $1.50 a square foot."
Current estimated rental rates range from $950 to $1980 a month.
The drawings include a bike storage area, fitness room, theatre and a courtyard with green space. Photos of other Orlean Company projects show kitchens opening out to living room and dining room spaces, hardwood floors, tear drop and spotlight fixtures and stainless steel appliances. Friedman noted the buildings would have features that older Cleveland Heights buildings do not, like air conditioning, and will follow green zoning standards.
The ground floor units would house commercial and retail space.
Board members asked what some of the risks associated with the project were — what if the market doesn't support the luxury apartments being proposed?
Some of the handful of residents who came to speak in opposition to the project voiced similar concerns, citing vacancies in the area and much lower rent rates in the city.
Cleveland Heights resident Garry Kanter spoke at the meeting and said there is no evidence the apartments will do well in Cleveland Heights or analysis of the risks of the project.
Council member Cheryl Stephens, who works for the Cuyahoga County Land Bank, said that "one of the most positive things about this property is that it is located in a 'supercluster,'" or within the proximity of educational and medical institutions.
She said between 2010 and 2015, approximately 3,000 jobs will be created.
"All we need is 100 people to move in to make it work," she said.
Based on her studies, the estimated occupancy rate will be about 93 percent.
"We can't do urban development without some sort of investment on the public sector's part anymore," she said.
"In this business district, most of the buildings are mature, and they have become functionally obsolete. They no longer attract either a young commercial tenant or residential tenant ... We have to have something more upscale."
Orlean Company president David Orlean said if this fails, his company assumes the greatest risk. He said though these units are not typical in Cleveland Heights, they are in other areas such as Downtown Cleveland and University Circle. And they are appealing to younger renters — the kind Cleveland Heights is trying to attract.
"As we all saw five years ago, the 'worst case' can be far more extreme. We developed Bluestone and faced those very severe issues, and that's the risk that we face as the developer. That's why it is so important to get some form of assistance," Orlean said.
Cleveland Heights resident Fran Mentch spoke at the meeting and asked why the developer needed an 80 percent abatement — why they couldn't get a lower abatement that wouldn't need approval the CH-UH School Board.
"It is clear that the decision tonight was based on the relationship between the city council and the school board and that the citizens and their money were irrelevant. Citizens who watch the proceedings on video will see that the city council and school board bargained about the taxes to be paid on the parking garage and future support of the bond issue. The Meadowbrook-Lee project was handed over to the developer," Mentch said.
School board member Kal Zucker said though the abatement is a short-term win for the school district, which will now receive money on the property, he asked the city "not to accept this as a precedent."
"Cities will come to school boards asking to abate ... And I think the overwhelming reason cities come to us is they're saying look, we have the opportunity to advance this community. We have the opportunity for economic development in this community, and you hold the keys. Please invest in this community," Zucker said. "I think this board seems wiling to invest in the community, which is not true of all of them. The reason this is a difficult decision for us, is we're asking you to invest in our students. So when you say invest in our city because it will develop this area, we're saying invest in our students who will develop this area, this country this state in this world."
Cleveland Heights Mayor Ed Kelley thanked the board after members voted 5-0.