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Nov 20

The Tuesday Top 5: November 20, 2018

Posted on November 20, 2018 at 4:13 PM by Laura Oldham

Welcome to the Tuesday Top 5! Your source for the latest info on what is going on in Grandview Heights.


In a variation of the Top Five blog this week, I thought I would address some of the rumors circulating around our community after the recent passage of the Grandview school levy and ongoing negotiations to expand the Grandview Yard development agreement to include land south of Goodale Boulevard.

1. Do single family homes and multifamily projects in Grandview Yard pay property taxes?

Some folks have written on various public forums that homeowners in the mixed-used Grandview Yard development don’t pay real estate taxes. The truth is, owners of single-family properties pay 100% of the property taxes on the valuation of their home, the same as everyone else throughout the community. This includes the existing detached housing on Pullman Way and the Homes at Grandview Yard that M/I Homes is preparing to build at First Avenue and Bobcat Avenue. 

Pullman

With that said, multi-family properties (condos and apartments) are abated at 50% for the first 15 years. After that period, those properties will generate the full property tax amount. Some communities abate 100% of multi-family property improvements (that is, construction costs) for 10 to 15 years to encourage development.  For example, Columbus extended abatements to developers in downtown Columbus, the Short North, and many of the residential units built in the Columbus portion of the Tri-Village area.  Property tax money is paid into a PILOT fund from which money is distributed to the school and the bond holder. (See PILOTS below)

Grandview Heights does not provide a 100% abatement in its agreement with Grandview Yard developer, Nationwide Realty Investors (NRI), because funds from the property tax, in addition to a portion of the city income tax, are necessary to pay off the capital improvements bonds that have been sold to build the streets, the underground utility lines, and many other public infrastructure serving the 90 acre re-development area.

A bit of a history lesson may help those of you who are newer to the community or never drove through the Grandview Yard area prior to its transformation. Through the early 2000s, that area had served as an industrial area, with fabrication and distribution facilities dating back to World War II. By the turn of the 21st century, much of that area was blighted: many of the facilities had fallen into disrepair and become under-utilized, and the city did not have the resources to upgrade roads and utilities in the area. The industrial district took its biggest hit in 2003 and 2004, after the Big Bear grocery chain’s administrative headquarters and distribution centers shut down and vacated its extensive operations. This resulted in a loss of almost $1MM in annual income tax revenue to the city, and the declining real estate and condition of the remaining buildings negatively impacted property tax revenue.

In 2006, NRI, the real estate investment and development arm of Nationwide Mutual Insurance, and other Columbus developers began assembling the properties that made up the Big Bear complex and nearby properties to propose a mixed-use development. Mixed-use refers to a combination of office, retail, residential and other uses that co-exist to maximize land use and revenue opportunities while serving the community.  The developers and the city then entered into a private-public partnership, investing tens of millions of dollars into the neglected infrastructure in order to attract hundreds of millions of dollars in development of commercial office and retail projects as well as residential components.

Big Bear site

The unsecured bonds were sold with only a pledge to use a portion of the income taxes generated by new jobs in Grandview Yard, and a portion of the property taxes from the Grandview Yard area, as the sole sources of repayment. No money generated from other areas of the city was pledged or used for the debt repayment.  This unique financing plan enabled a small city to successfully take on a new project of such a grand scale.

Since that time, and in spite of the 2008 recession, Grandview Yard has continued to thrive because it has remained a flexible project. In 2014, Nationwide Insurance proposed a revised redevelopment plan, pledging to build three large office properties in the Yard and relocate over 3,200 good-paying jobs from around the region into the Yard. It has also built a second hotel, a conference facility, more speculative office space and apartments, for-sale residential units and finished the public infrastructure. 

Redevelopment of Grandview Yard

 

2. If the pace of redevelopment has gone so well, why hasn’t the flow of tax revenue made its way into the Grandview schools’ coffers?

This goes back to the history lesson above. In 2004 when I first took office, 60 of the 90 acres of what is now the Yard were vacant or not fully activated as commercial or industrial properties. The county appraised value of the blighted property started to be lowered thereby reducing the property taxes collected and resulting in reduced property taxes to the school.  

 

With that in mind, the initial economic development deal between NRI and the city and the city and the school, included a promise not have the school property tax revenue reduced below what was collected in the 2009 County appraised value. It also included paying the school district an amount equal to any loss in county tax revenue first from any tax property proceeds that came off the property from the “PILOT” money, essentially making the school district whole. (See below) This was important to the school district during negotiations. The district is, and still is, first in line to receive money from Grandview Yard, ahead of the library and the holders of the infrastructure bonds. For the school to be in the first position in receiving tax proceeds, even ahead of the bondholders, shows the level of commitment and contemplative thought placed on those who will be impacted. (Keep in mind, this commitment was made when barely 25% of the Yard was even conceptualized, and this was a decision that was made knowing it would mean a long-term benefit for the district.) In fact, during the first few years of the Grandview Yard redevelopment, the only entity to receive money from the Yard project was the school district. The school compensation agreement also allowed the district to experience upside sharing a percentage of the new property taxes generated by the new construction.

 

Any property tax generated at Grandview Yard above the base value established by the County in 2009 is collected into a fund known as a PILOT (Payments in Lieu of Taxes) Fund. These are the property tax dollars used to pay for infrastructure improvements at the Grandview Yard and to pay the School District.

 

The School District share of PILOTS, after the make-whole amount, varies from an increase of 11% for retail and commercial projects and up to 30% for residential projects. The residential percentage starts at 15% and increases by 5% for every additional few hundred units. The residential percentage also increases by 10% every 15 years initially and then every 5 years after that. 

Under this tiered and somewhat complicated system, the school has received over $2.6 million in additional funding above the make-whole amount. Unfortunately, these increases were offset by unilateral reductions in state funding to the school district, which brings us to:

 

3. Why the attempt to renegotiate the school compensation agreement now?

The great success of the Yard re-development, from a blighted brownfield industrial zone with almost no public infrastructure, into a thriving mixed-use project that has full occupancy, allows us at this time to look at bringing additional funds to the district while capturing the momentum of redevelopment in the Yard and nearby redevelopments, such as the White Castle headquarters site on Goodale Street in Columbus and the former W.W. Williams Co. site on Goodale Boulevard in Grandview. 

 

The current proposal would increase the amount the school district receives from the PILOT Fund to 45% of all money collected. This is based on all the property taxes collected in the PILOT, including not only school levies, but also city, library and various county agencies. Negotiations between the city, the school district, and the developer toward that end continue, and, if successful, could conclude in a few weeks. This would bring tens of millions of dollars to the school over the remaining life of the bonds.

Thanks for reading this background information as the City and Grandview schools work toward a financial arrangement that will more cash for the schools, even as the City encourages development south of Goodale Boulevard.

Next week, I’ll write more about the launch of the holiday happenings in the Heights and the city’s budgets.

Happy Thanksgiving and best wishes to all of the residents of Grandview Heights.

Tuesday Top 5 is a weekly update from Mayor Ray DeGraw and the City of Grandview Heights. For more information, visit GrandviewHeights.org.

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