«MEMORANDUM TO: Members of City Council CC: Mayor Earl M. Leiken Jeri E. Chaikin, Chief Administrative Officer FROM: Tania Menesse, Director Economic ...»
TO: Members of City Council
CC: Mayor Earl M. Leiken
Jeri E. Chaikin, Chief Administrative Officer
FROM: Tania Menesse, Director Economic Development
DATE: July 25, 2016
RE: Recommendation of Cuyahoga County’s Tax Incentive Review Council
The City of Shaker Heights Tax Incentive Review Council (TIRC) held its state-required,
annual meeting this past June. By statute, the TIRC must meet and review any active agreements. The City currently has one such active incentive program, per Chapter 725 of the Ohio Revised Code, Urban Renewal Areas. Chapter 725 projects usually involve the collection of payments in lieu of taxes (also referred to as PILOTs); this is why such projects are categorized as “tax exempt” or “tax incentive” programs. Each project has a controlling Development Agreement that spells out various terms and conditions, including the collection of PILOTs. There are five active development agreements under this program where PILOTs are being collected: Sussex Court and Avalon Station (Phase I of the Shaker Town Center development); CVS, Library Courts and Compass Storage (will not see PILOT payments until 2017 for 2nd half 2016). After a thorough discussion with City staff and an opportunity for questions, the TIRC reviewed the active agreements and financial statements and recommended continuation of these agreements.
The City’s Tax Incentive Review Council met on June 16 at the County Administration building. The TIRC, is charged with reviewing current tax incentive agreements and ensuring transparency and accountability on the part of the City and developer in the management of each of the agreements. The meeting and activities of this state-mandated body are controlled by the Ohio Revised Code per Ohio Revised Code §5709.85, and City Ordinance. The majority of the TIRC members were appointed by the Cuyahoga County Executive Armond Budish. Neil Dick and Patricia Barz, appointed by the Mayor and approved by City Council, represented the City as well as City Directors Tania Menesse and Bob Baker. The School Board was represented by Treasurer Bryan Christman.
Shaker’s active agreements were reviewed. The City is a party to each of the development agreements, along with the developer for each project. While the original agreements for Sussex Court and Avalon Station were more complicated, at this point, the
CITY OF SHAKER HEIGHTS I ECONOMIC DEVELOPMENT DEPARTMENT3400 LEE ROAD I SHAKER HEIGHTS, OH 44120 I TEL 216.491.1334 I FAX 216.491.1465 I OHIO RELAY SERVICE 711 I WEB shakeronline.com major obligation of each developer and/or current owner of the property is to ensure that PILOT payments are made per the terms of the Agreement, which are then distributed to the City to assist in the payment of debt service on the bonds that funded the public improvements in the district. The agreements for Library Court, CVS and Compass Storage also contain similar provisions that the developers/owners agree to pay PILOTs which are also distributed to the City to fund the annual debt service requirement, as these projects continue to benefit from the public improvements made in the district.
In 2016, the City expects based on full year collections, to receive $799,784 in PILOTs towards project related debt service of $1,353,700. The debt service associated with the Fire Station of $303,694 and the remainder of $248,222 will be paid out of the City’s General Fund. As more projects in the 725 area come on line and PILOTs increase, the City’s subsidy will be reduced accordingly.
After presentations by City staff, including a thorough budgetary review by Mr. Baker and discussion by TIRC members, the TIRC voted and found that the City is in compliance with its agreements. The TIRC then voted that the City should continue the agreements without modification and convey such recommendation to Council. Both votes passed unanimously.
Finance Committee approved the recommendations by the County’s Tax Incentive Review Council to continue the existing development agreements currently in place. State law mandates that City Council accept, reject, or modify any or all portions of the TIRC’s recommendations within 60 days of receipt of the TIRC’s recommendations. Thus, Council has until Wednesday, August 17 to act upon the TIRC’s recommendations, pursuant to the requirements of Ohio Revised Code Section 5709.85. Therefore, the Economic Development Department requests that the County recommendation is approved on first reading and as an emergency to meet the statutory requirements.
Shaker Heights Urban Renewal Bonds (ORC 725) Summary of PILOTs and Debt Service
TIRC Members Present:
Lisa Rocco, Chair, County Fiscal Office Joseph Micciulla, County Auditor Representative Joe Farris, Cuyahoga County Treasurer Neil Dick, Citizen Member Patricia Barz, Citizen Member Bryan Christman, Shaker Heights Board of Education City of Shaker Heights Earl Williams City Council Tania Menesse, Economic Development Director Bob Baker, Finance Director * * * * * * The Shaker Heights Tax Incentive Review Council (TIRC) met on the above date at 3:45pm.
* * * * * * Mr. Micciulla stated that the City of Shaker Heights membership consists of two mayoral appointments approved by Council, and asked that the membership be reflected in the minutes.
Mr. Micciulla agreed that the minutes from 2015 and 2016 would be approved at the following year’s TIRC.
Mr. Micciulla stated that Shaker Heights wishes to solidify their property stock by initiating an Ohio Revised Code - Chapter 725 incentive, whereby 75% of the increase in value is directed towards bond repayment used for public improvements.
Tania Menesse, Director of Economic Development, stated that Sussex Courts on Chagrin Boulevard near Warrensville was where a developer did tear down 4 homes and replaced them with 46 single-family attached townhouse units. These were built in 2005 and the projected investment was $4,000,000 with the actual investment of $3.7 million. They sold out immediately. The Avalon Station condo development came on line with the beginning of the 2008 recession but with capital improvements made to building, units are again beginning to sell.
Bob Baker, Finance Director, stated that the financial summary is basically the same format as in past years. The City began to issue bonds in 2003. The summary lists the names of the different bond issues. The 2003 bonds issued funds for the fire house, Sussex improvements, and Shaker Town Center. The idea being that service payments would cover the annual debt charges each year. The City issued general obligation bonds for these improvements. There was a second round of bond issuance in 2009 for more improvements around Shaker Town Center. In 2012 the 2003 bonds that had been issued were refunded. Starting in 2014 we only had debt service on two bond issues: 2009 and 2012. The average annual debt service combined is about $1.3 million. Hitting against that are Payments in Lieu of Taxes (PILOT), or service payment revenue. You can see how the project performed in 2015, with PILOTs of $799,784. We have a line to demonstrate the estimated debt service attributable to the fire house construction, a publicly-owned property, to give us a true sense of how the PILOTs are supporting the debt service for the actual development project. For this reason we factor out the debt attributable to the fire house construction. The City originally issued $5 million in bonds in 2003 for the fire house construction, which were wrapped up in the refunding in 2012. In 2015 for this review we are backing out the debt service for the fire house, which is $301,567. That gives us a sense of how the project is supported against the service payments. The last line in the summary shows the City’s General Fund did cover $246,550 of the total debt service in 2015. That is an improvement compared to 2014.
Director Menesse shared that the City has signed a D&U agreement with Knez Home Builders to build up to 70 townhomes on Avalon Station II in 2017-2018. If the project moves forward after the due diligence period then the City would no longer need to subsidize the 725 debt payments Director Menesse provided an overview of the Van Aken district TIF agreements that the City and Schools have entered into. PILOTs will not be collected on the Shaker Plaza TIF until 2017 and on the main development project until 2018 or 2019.
Mr. Micciulla asked how the schools feel about the stewardship of the Shaker Heights projects.
Bryan Christman stated that the schools are absolutely, positively satisfied.
Mr. Micciulla asked for a motion of compliance for the terms of the reporting for the Chapter 725 incentive offers within the City of Shaker Heights.
It was moved by Joe Farris and seconded by Lisa Rocco,that Shaker is compliant for the projects reported.
Mr. Micciulla asked for a motion to recommend to Council to continue, amend or terminate this incentive.
It was moved by Joe Farris and seconded by Lisa Rocco to continue the agreement for the City of Shaker Heights.
Mr. Micciulla asked for a motion to adjourn the meeting.
It was moved by Joe Farris and seconded by Lisa Rocco to adjourn the meeting of the Tax Incentive Review Council for incentives being offered by the City of Shaker Heights.
The meeting was adjourned at 4:05 p.m.
Tania Menesse, Director of Economic Development
Accepting the recommendations of the City’s Tax Incentive Review Council (“TIRC”) to continue the existing development agreements for tax exemption and payments in lieu of taxes (PILOTs), pursuant to Ohio Revised Code Section 5709.85, and declaring an emergency.
WHEREAS, Shakergate Investments LLC entered into an Amended and Restated Development Agreement with the City dated December 17, 2001, as authorized by Ordinance No. 01-131, enacted on November 26, 2001, which agreement provided for the redevelopment of property in accordance with the Sussex Area Revitalization Plan, which involved the construction of a housing development known as Sussex Courts Condominiums on Chagrin Boulevard at Lomond Boulevard; and WHEREAS, Heartpoint Devco LLC entered into a Development Agreement with the City on July 3, 2002, as authorized by Ordinance No. 02-66, enacted May 28, 2002, which agreement provided for the redevelopment of property in accordance with the Shaker Towne Centre Community Development Plan, which involved the construction of a residential building known as The Lofts at Avalon Station, located at 16800 Van Aken Boulevard; and the parties entered into an Amended Development Agreement on November 22, 2005, as authorized by Ordinance No. 05-64, enacted June 27, 2005; and the parties entered into a First Amendment to the Amended Development Agreement on August 30, 2011, as authorized by Ordinance No. 11-87, enacted on August 22, 2011, and said First Amendment resulted in, inter alia, a change of ownership to The Residences at Avalon Station LLC; and WHEREAS, Blue Water Capital Partners, LLC entered into a Service Payment Agreement with the City on December 3, 2009, as authorized by Ordinance No. 09-111, enacted November 23, 2009, as part of the development of a CVS pharmacy at 17120 Chagrin Boulevard, in accordance with the Shaker Town Centre Community Development Plan Area, which was adopted in May, 1988, and was amended in November 2001 and May 2002, as part of the City’s long-term revitalization efforts; and WHEREAS, Library Court Senior Housing LP entered into a Development Agreement with the City on March 29, 2010, as authorized by Ordinance No. 10-23, enacted March 22, 2010, in accordance with the Shaker Town Centre Community Development Plan Area for the construction of Library Court Apartments, providing senior housing at 16301 Chagrin Boulevard; and WHEREAS, Amsdell Storage Ventures XVIII, LLC, DBA Compass Self Storage, LLC entered into a Service Payment Agreement with the City on February 4, 2015, as authorized by Ordinance No. 15-46, enacted May 26, 2015, in accordance with the Shaker Town Centre Community Development Plan Area regarding the development of a Compass Self Storage business at 16500 Chagrin Boulevard; and WHEREAS, each of the development and service payment agreements named herein was entered into pursuant to Ohio Revised Code Chapter 725, and authorizes tax exemption and payments in lieu of taxes (“PILOTs”) which are used to pay for the debt service on urban renewal bonds issued to fund the City’s infrastructure improvements and other development in the Plan areas; and WHEREAS, the City’s Tax Incentive Review Council (“TIRC”), established pursuant to Ohio Revised Code Section 5709.85, is required to annually review all agreements granting exemptions from property taxation, to determine with regard to each such agreement whether the owner of the exempted property has complied with the agreement, and to submit to City Council written recommendations for continuation, modification or cancellation of the agreement; and WHEREAS, at its meeting on June 16, 2016, the City’s TIRC voted unanimously to recommend that this Council should vote to continue the City’s existing development agreements for tax exemption and PILOTs with Shakergate Investments LLC, Heartpoint Devco LLC, now The Residences at Avalon Station LLC, Blue Water Capital Partners, LLC, Library Court Senior Housing LP, and Amsdell Storage Ventures XVIII, LLC, DBA Compass Self Storage, LLC, and such recommendation has been reported in writing to the Clerk of Council in the Minutes of the TIRC Meeting of June 16, 2016, and in a memorandum of the Director of Economic Development to this Council dated July 25, 2016; and WHEREAS, this Council has determined that it is in the best interests of the City and its citizens to continue the existing development agreements for tax exemption and PILOTs as described above.
NOW, THEREFORE, BE IT ORDAINED by the Council of the
City of Shaker Heights, State of Ohio: