After six years of negotiations, the Cleveland Heights-University Heights School Board and South Euclid city officials have agreed on how to deal with property taxes coming out of the Cedar Center North project.
For 10 years, the district will receive less than it would normally get — 25 percent of what it's owed in property taxes. After that 10-year period, CH-UH will receive the normal portion of property taxes from the development.
At issue was South Euclid’s proposal for tax increment financing, which would allow the city to use money from future property taxes to help pay down the debt from its purchase of Cedar Center. The city bought the 12-acre property on Cedar Road just west of Warrensville Center Road for $16.4 million, said Keith Benjamin, director of community services for South Euclid.
During December council and school board meetings, each panel approved legislation for a 30-year TIF with several exceptions and terms.
For 10 years, 75 percent of the property taxes that would have gone to the CH-UH school district will be diverted to help pay off South Euclid’s debt on the property, said Scott Gainer, the schools' chief financial officer. In exchange, South Euclid will give the district half of its payroll tax revenue from Cedar Center employees.
Then, for the following 20 years, the school district will receive its normal share of the property taxes.
The school district has the final say on that type of long-term plan and discussed various options throughout the years, Gainer said. The district wanted, at the very least, what it would have received in taxes before the development — about $320,000 each year.
The scope of the project changed several times and was based on different proposals from different developers for different uses, which required South Euclid to request multiple extensions from the district.
“Our position was we want to be no worse off than before (South Euclid) decided to tear (Cedar Center North) down,” Gainer said. “We have always been sensitive to the situation South Euclid was in, in terms of the economy and the price they paid for the property. We really wanted to come up with some kind of solution that made financial sense for us but also helped the city."
South Euclid could have created a 10-year plan where 75 percent of the property taxes went to pay down the debt without the school’s permission. But they have finally come to an agreement that both parties say they are satisfied with, and Gainer called a "win-win."
“I think the residents will be pleased. I think they’ll see the district was fiscally responsible. We made sure that we were kept whole, but we also worked collaboratively with a neighbor in terms of regionalism,” Gainer said. “I think everyone wants to see that property developed. People will be happy to see something there that will bring tax dollars in for everyone.”
The timing was essential, Gainer said. He wanted to come to an agreement before the end of 2011 so the district would receive all of the new taxes from the 6.9-mil levy passed in November.
Neither Gainer nor Benjamin had an exact number in terms of what the school would receive in future property taxes.
The Cedar Center North land has been vacant for years, but now buildings are beginning to pop up. The newest are Gordon Food Service and Bob Evans.
Benjamin said the city sold 1.3 acres to Gordon Food Service for $2.3 million, .7 acres to Bob Evans for $900,000 and 7 acres to The Coral Company and DeVille Developments (known as Cedar Center North LLC) for $1.4 million.
Though plans are still being finalized, Coral Co. announced it expects about 15 new businesses, including Five Guys Burgers and Fries, Jimmy John’s, Chipotle and Panera Bread.
“This was obviously a very long process through some very challenging and tough economic times. And between the economic downturn and the budget cuts we’ve seen over the last four to five years, it is so critical that we work to both create and maintain our tax base and revitalize Cedar Center,” Benjamin said.
When the city bought the old Cedar Center plaza, the strip shopping center was about 40 percent vacant, and some tenants were repeatedly violating building and safety codes, Benjamin said.
Before the city sold portions of the property, it owed $19.5 million as additional costs, including brownfield remediation and interest, raised the amount, Benjamin said. Now, the city owes about $15 million, which it will pay down using future property taxes from the site and by selling the three remaining acres.
“It is critical to recognize that there also was a cost associated with doing nothing at Cedar Center,” Benjamin said. “The redevelopment of Cedar Center moving forward is going to assist in playing a major role in not only stabilizing our tax base, but also playing a significant role in the revitalization of our adjacent neighborhoods, which have been some of the hardest hit since the foreclosure crisis.”