Posts Tagged National City Bank
Tax Reform Should Go Beyond Corruption Issue
Posted by Roldo Bartimole in Economic Development on September 23, 2009
If there’s going to be an investigation of the integrity of commercial property appraisals here, we ought to also probe tax reductions awarded to downtown property owners by official County and State of Ohio agents.
County Treasurer Jim Rokakis, concerned about the validity of commercial property appraisals because of the corruption charges involving County Auditor Frank Russo, has requested a probe by state officials. Rokakis apparently doesn’t trust the values on commercial properties. Who would?
The values given properties, of course, provide the measure of the taxes property owner’s pay. The lower the value the lesser taxes are due to be paid.
Commercial property owners are expected to seek large reductions in property values next year. They have lawyers and ability – far greater than ordinary homeowners – to pursue reductions. This could have a serious impact on Cleveland schools and the city. Cleveland schools get the majority share of property tax revenue.
It will be most important for the news media, particularly the Plain Dealer, to closely follow and report request by the big property owners for reductions. The slow economy suggests that many commercial entities will seek reductions by claiming tough economic circumstances.
A watchful eye provides needed oversight of both public agencies and private interests.
In recent writings, I’ve been pointing out that owners at the Tower City complex and the Ritz-Carlton hotel – both controlled by Forest City Enterprises businesses – have been requesting value reductions this year as they have in past years.
Other downtown property owners have also made appeals. Amtrust (Ohio Savings) has requested a $2.6 million reduction in its property tax valuation for 1801 East 9th Street. National City Bank’s new owners are seeking reductions of $2.97 million on its building at the corner of E. 9th & Euclid. Cleveland Catholic Diocese is even seeking a $557,940 reduction in the property value for a parking lot on Rockwell Avenue.
I requested information from the Board of Revision only for a portion of downtown for these reports.
MORE TOWER CITY TAX REDUCTIONS SOUGHT
Here’s another batch to add to the previous listing of requests by Tower City for reductions that I previously posted. They were all made to the Board of Revision in March. None have been acted upon to this date. The property numbers and request for reduction follow:
- 101-23-085C: $9,832.
- 101-23-108F: $71,952.
- 101-23-103F: $63,752.
- 101-23-101F: $105,736.
- 101-23-085D: $20,151.
- 101-23-085B: $365,889.
- 101-23-085A: $1,297,634.
- 101-23-072F: $19,925.
- 101-23-072B: $160,296.
The reductions total to $2,115,117 for Tower City properties. I previously reported $850,529 in tax reduction on other Tower City properties, not including one devaluation request of only $17 on a piece of Tower City property.
You can add reductions in value asked by Forest City interests at the luxury Ritz-Carlton hotel – recently coming off 20 years of 100 percent tax abatement – of $241,440. Yes, back on the tax rolls finally. But seeking new reductions in taxes already.
The grand total comes to more than $3 million in reductions requested at Tower City.
Yes, the beat goes on.
We really need – as a community and as a state – to look not only to rigged tax valuations because of outright corruption reported in recent days but to the practice of giving wealthy interests lower and lower valuations on the properties. They have access to lawyers who can pursue these deductions.
CLEVELAND SCHOOLS HURT MOST BY DOWNTOWN CUTS
These efforts result in lower taxes for big property owners and thus less revenue for our schools, counties, cities and libraries. This also means others – homeowners – have to pick up the tax burden by paying higher property taxes. Because of the concentration of properties in downtown Cleveland the reductions hurt Cleveland schools the most. Some 55 percent of property tax revenue goes to the Cleveland schools.
The public also should DEMAND an end to tax abatements and tax shifting of the TIF program. TIF (tax incremental financing) is a form of abatement by which the taxes are paid normally but are diverted to be used for development, usually of the taxpayer’s project. That means tax revenue goes for private uses instead of public.
At minimum there should be a state law that makes it illegal for one community to give a tax abatement to a business to attract that business from another community in Ohio.
I’ve been examining the desire of leading downtown interests for tax breaks, either through tax abatement or lowering the value of their properties for taxation.
The above requests for valuation reductions are nothing new for Forest City at Tower City.
TOWER CITY WON REDUCTIONS AS ITS OWNERS CLAIMED GAINS
In 1994 in negotiations over the taxes due from Tower City officials agreed to hefty market value reductions for the years 1990, 1991, 1992 and consequently 1993, by the following percentages:
In the year 1990: 21 percent; in 1991: 20 percent; in 1992: 17.3 percent and in 1993: 12.4 percent.
Tower City opened The Avenue shopping complex in 1990 and had two new buildings – the Skylight Tower and the Chase Financial Tower (which includes the Ritz hotel) opened in 1991. These improvements resulted in higher property values.
The same week in 1994 that I reported the 1990-1993 reductions in my newsletter, Point of View, a Pee Dee story was headlined: “Tower City could add 2 anchors to complex.” The Pee Dee reported that Forest City Enterprises chairman Albert Ratner “said he hopes to add two new department stores to the Tower City complex soon.” (Such is the nonsense of our leaders and the vigor with which the Pee Dee takes is responsibility to report honestly. Of course, Dillard’s vanished and the building remains essentially unused.)
Then at the same time, it quoted Sam Miller, advisor to mayors, that the commercial real estate industry here “is well on its way back to once again become the darling of the investment community.” (You may have noticed all the skyscrapers going up in Cleveland since 1994, haven’t you?)
“The better news is that it is going to stay back for a long time,” said Sam. (He can get the Pee Dee to report just about whatever he wants.)
Despite the then rosy economic outlook expressed of the corporate executives, the same executives were seeking reductions in property values at Tower City going back to 1990, claiming economic problems.
For the year 1990, the total market value of Tower City was $152 million (rounded off) and the reduction was $32 million, a reduction of 21 percent.
For 1991, the total market value of Tower City was $241 million and the reduction was $49 million for a reduction of 20 percent.
For the year 1992, the market value of Tower City was $262 million and the reduction was $45 million for a reduction of 17.3 percent.
For the year 1993, the market value was $274 million and the value was adjusted by $34 million for a reduction of 17.3 percent.
It’s time the big boys paid their taxes just like everyone else.
Park Building – From Tax Reduction to Tax Abatement
Posted by Roldo Bartimole in Economic Development, Politicians on August 5, 2009
August 5, 2009… I was passing by the Park Building on Public Square and Ontario Street recently and stopped to ask about the new condominiums promoted for the old office building.
The Park Building is historic in many ways.
Its handout says, “The Park Building, one of the most elegant buildings in Cleveland, offers the only residential units on Public Square in over 100 years. The Cleveland landmark features 25 exclusive condominiums, including four stunning two-floor penthouses with large ‘window walls,’ and balconies with inspiring views that take in Public Square, Lake Erie and the entirety of Cleveland’s downtown.”
The condos range in $269,900-$359,000 price to an offer of a custom penthouse “starting in the $700,000’s,” a flyer says. Pricey, no?
As long ago as 1919, the Park Building had a special place In Cleveland.
“The southeast corner of Ontario Street and Public Square, the land on which the Park Building and adjacent structures stood was the most valuable acre in Cleveland, being assessed at $2,178,000…” wrote William Ganson Rose in his Cleveland history, “Cleveland – The Making of a City.”
The building, and its one-time owner David Swetland, had an even more significant impact on property values and taxes for the entire State of Ohio. Swetland sued the County, claiming in essence that his office building should not pay more taxes proportionally than his home.
Indeed, that ALL property should be taxed at the same value.
In that historic Ohio Supreme Court case – known as the Park Investment case – in the late 1950s, the whole system of taxing property was changed significantly. Homeowners paid the price. The change helped commercial and industrial properties to shift more of the burden of taxes from real estate interests to homeowners.
The Ohio Supreme Court ruled for Swetland that property should not be taxed at different rates. Commercial and industrial properties – because they involved profit – had been paying taxes at a higher level than property used to house families. Taxes are paid on 35 percent of the market value as set by County Auditors.
The Park Investment case tipped taxes from real estate interests to the owners of homes.
Commercial and industrial properties had been taxed at 49 percent of their market value. Homes were taxed at 35 percent of market value. The Court leveled the payments for both classifications at 35 percent. So, commercial and industrial property owners enjoyed a 14 percent reduction in their taxes.
What does that mean? Well, the value for 2009 property taxes of commercial and industrial properties in Cuyahoga County is $8.4 billion, according to the County Budget department.
A 14 percent savings is $1.176 billion. That’s for one year! Multiply that by the years since 1959 and you see that it’s a whole lot of money.
Without tax abatement. However, since the late 1970s, tax abatements have been generously given to property owners.
The Ohio Supreme Court, as might be expected, gave those with wealth a big financial break. It’s a gift that keeps on giving, year after year.
One might say that this ruling sets a precedent that communities should not be able to offer tax abatement since they allow properties to be taxed at different levels. It gives an unfair preference to newly develop property. Sometimes that unfair preference is very significant, as properties are abated at 100 percent for 20 years.
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Note: I recently reported on the cost of tax abatements for just for two years on eight Cleveland properties. The cost came to $48 million. That was just for the most recent two years. The detail of each property is published here at ReadRoldo.com. Simply click here to reference.
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The abatement subsidy started in the late 1970s when Squire, Sanders & Dempsey, acting for major property owners, wrote the state law that passed in the Ohio legislature.
It promptly became an issue in the 1977 Cleveland mayoral election when Mayor Ralph Perk bestowed a tax abatement for a new National City Bank building at the southwest corner of East 9th & Euclid Avenue and one for Sohio (at the time) for a new building behind Tower City. (When Sohio moved to Public Square it didn’t ask for tax abatement since it was drowning in North Slope cash. Sometimes unseemly does win.)
Dennis Kucinich beat his general election opponent Edward Feighan on the head over tax abatement since Feighan had voted for the legislation as a state legislator. Kucinich opposed abatements and gave none.
Abatement thus became a hot political issue and it took a few years before local politicians to believe it cooled enough to restart the give-aways.
Mayor George Voinovich and Council President George Forbes revived the practice with hefty abatements for major projects. It grew during the White administration and expanded even more when Mayor Michael White and County Commissioner Tim Hagan took it a bit further with tax EXEMPTIONS for stadiums and arenas. Multi-millions of dollars in tax revenue went down the drain.
Giving away tax revenue became so pervasive that the Cleveland Teachers Union, under Rich DeColibus, decided to do something about it in the late 1990s.
The rub was the city gave the tax abatement; the schools lost the most revenue.
The mayor and city council enacted tax abatements but the Cleveland school system lost the bulk of the revenue, usually near 60 per cent. Presently, the schools lose slightly more than 55 percent while the city loses slightly more than 15 percent.
Abatements thus don’t much disturb city finances. In fact, they may enhance city revenues since the city alone gets payroll taxes, which may increase from jobs and new residents. They do great damage to the schools, however, which don’t share in any income related taxes.
That’s the way it stood until the summer of 1997 when the Teachers Union got 33,000 signatures to put an issue changing tax abatements on the ballot.
The Park Building, as we’ve seen, played an important part in lowering property taxes for commercial interests. Not much has changed. The Park Building Condominiums are offering 12-year tax abatements, 75 percent the first five years; 50 percent the second five; and 25 percent the final two.
Some things never change – for the better.
I’ll talk about that vote in subsequent comments.