Updated: Council Will Request Tax Abatement For Lee and Meadowbrook
Cleveland Heights City Council approved a resolution to officially request a tax abatement from the CH-UH School Board.
This article was originally published at 3:40 p.m. Aug. 20 and was updated after the Cleveland Heights City Council meeting.
The City of Cleveland Heights has selected a developer for the grassy area on Lee Road and Meadowbrook Boulevard that was once a gas station, bank and group of homes.
But before The Orlean Company's development proposal can become an agreement, the city and the developer want the Cleveland Heights-University Heights School Board to approve a tax abatement at 80 percent for 11 years.
Cleveland Heights City Council took action on this at its regular meeting Monday night, and approved a resolution to officially request the tax abatement from the board. Councilman Jason Stein said the item was a late addition to the agenda, as council's original agenda did not indicate this would be discussed.
Mayor Ed Kelley, Vice Mayor Dennis Wilcox and David Orlean, president of the development company, presented the plan to build a mix of about 70 apartments above retail or commercial space to the board at its meeting July 17.
“We either have to move forward, or unfortunately this land will probably be vacant for another three to five to seven years," Kelley said at the meeting.
The plan and next steps
If the school board approves the tax abatement, the city can then offer that as part of a development agreement, but it doesn't have to, said John Gibbon, the city's law director.
If the school board rejects the tax abatement, the city can still offer 50 percent for 15 years without the board's approval, Gibbon said.
The more than $11.4 million project would bring in about $300,000 annually in property taxes abatement-free. If the school board approves the abatement, that number would go down to an average of $70,000 per year.
“Right now it’s netting zero for everybody involved, including ourselves, you guys and the library,” Kelley said.
Wilcox explained at the meeting that the city has also invested much in the property over the years.
"Since that time we’ve invested in building a parking garage adjacent to that property. The city has made a substantial investment in this property and that’s why it’s a unique site,” Wilcox said at the July meeting. “Even with all of those attributes, to get the quality project, the project that we want in our city that we think will really benefit our community and city, we still need some subsidy as was said. You could put up a project quite frankly that we probably wouldn’t be that excited about and that’s really not what we want to do.”
According to a revised version of an impact statement from The Orlean Company included with this article, "The Meadowbrook-Lee development" will include 71, "upscale, market rate apartments" above 13,000 square feet of commercial space.
Orlean estimates that the building will house about 107 residents in studio, one- and two-bedroom units, and projects annual income tax revenues of approximately $111,014.
The statement indicates that Orlean would hire 1.5 full-time employees to manage the property, and estimates that 64 people would work in the commercial/retail spaces below the residential units.
The Orlean Company manages 4,000 units of housing and partnered with Ken Lurie to build The Bluestone Community, a residential development of townhomes across from Severance Town Center on Mayfield Road. They also manage Kenilworth MEWS.
If the school board approves the tax abatement, a development agreement would have to be formulated and approved by council. The project also needs to be reviewed by the Planning Commission, Architectural Board of Review and possibly the Board of Zoning Appeals, Kelley said.
The land is already zoned for mixed-use development.
Kelley said he was "pumped" about the project in a recent interview.
"When you drive up and down the Lee Road area, you see this vacant piece of property. It’s like a missing tooth," he said. "It’s an over $11 million project ... This is just a financial win for everyone involved."
The steps Cleveland Heights took to acquire Lee and Meadowbrook
Gibbon said that the vacant, grass-covered land between Tullamore and Meadowbrook on Lee once was split up into at least five significant parcels, and the city has spent nearly $600,000 over the years to purchase the separate pieces.
Gas stations, Ohio Savings Bank and homes occupied the land before the city acquired it.
Gibbon said the city bought the first parcel from the Clancey Management Corp. for $205,000, and the Cuyahoga County Auditor's office indicates it was transferred in 2001.
"A lot of the (properties) on Coventry were developed that way. We acquired properties when they came on the market and assembled them so that we had a developable lot. This is a technique that we’ve used historically," Gibbon said.
The city also spent $320,000 on three residential parcels, Gibbon said.
The last significant parcel that was once home to Ohio Savings Bank is a more complicated story, Gibbon said.
"Ohio Savings had moved out of its property and had relocated ... because they were getting gas fumes from the ground, so we knew there were substantial problems with the property," Gibbon said.
Ohio Savings sued the gas company (not Clancey's) that previously owned the land, Gibbon said. The city stepped in and "got that ironed out" with a $400,000 grant from the federal government to clean up the land.
Because the city was taking care of the environmental remediation, the deed to the parcel was transferred to Cleveland Heights with no cost to the city, Gibbon said. But the agreement indicated that Ohio Savings could get the property back for anytime at no cost.
"We agreed that we would continue to hold title to the property until Ohio Savings said they wanted it back. Our hope was that we would be able to reach an agreement with the new developer so that we could develop it," Gibbon said.
That developer was Neyer Properties, which planned to build condominiums with retail space on the first floor, Gibbon said, adding that it was sometime in 2007.
The deal was that Neyer would be able to develop on the land, and once the building was constructed, Ohio Savings could move in. The city paid Neyer to build the parking deck behind the Cedar Lee Theatre, which opened in November 2007, according to an article in The Sun Press.
Gibbon said the more than 350-space parking structure was "critical to the development," as tenants would need parking spaces, but that it also "benefits the whole commercial area."
But the rest of the development fell through because of the economy, Gibbon said. Just like it had in 2003 with The Coral Company.
In the past four years, the city has had an appraisal completed for the Ohio Savings parcel, which valued the land at $110,000, Gibbon said. In addition, the Ohio Savings parcel was transferred to the government. The city had first dibs on the land and bought it for $60,000 last year.
In November 2011, the city decided to try to develop the land again, and distributed requests for proposal. Kelley said they received three and interviewed the companies, but the Orlean Company's idea was best.
"We got three good things, but this was the one that had the young energy, the young professionals here that will eventually get married, raise their family, have their kids and buy another house in Cleveland Heights."