City Commission - workshop

Order clerk call the roll.

Mr. Ricketts.

Here.

Mr. Rigsby.

Here.

Mrs. Tackett. Here. Mr. Wallace. Here. Mr. Rue.

Here. Acting city manager.

Yes, tonight we have a work session on the Community Reinvestment Area Act led by Cassie Scott, our Economic Development Manager and Assistant City Manager and Director of Economic Development, Tom Franzen.

Thank you so much. So tonight I will be presenting on the community reinvestment area program. First, I'll give an overview of what the program is and what it does. Then I will highlight some impacts of the program. And finally, I will propose three changes we'd like to make to the program. So first, what is the CRA program? This is a tax abatement to assist property owners who build new or significantly improve existing structures. So something about this program, people often think, oh, they pay no taxes. That is not the case. You continue to pay taxes on the existing structure, if there is one, and then you continue to pay on the land. So you pay on the dirt itself. And the great thing about this program is that it can apply to commercial and industrial. It can apply to mixed use projects, as well as new construction for residential and rehab. So it really can benefit both your big developer, your property owner, and also your homeowners. So the little guy. And that's what I especially like about the program. And the abatement only applies to the improvements to the property. to be eligible for the program it must be within the boundary so as you can see based on this map the boundary currently covers much of the city and that is due to an expansion that we had in 2019 and later in 2020 so CRAs have been in Ohio for a long time and we purposefully expanded the boundary to incentivize development in our city And what did we see? We saw that it worked. So this map shows the amount of development happening in Springfield right now. And you can see it's happening all across our city. And that's really exciting. We have about 3,300 units in the pipeline right now, and over 2,400 of those are making use of the CRA program. I think it helps to show a few examples of how the program is used. So a great example is Mother Seward's. They have a commercial CRA in place. That means they continue to pay taxes on the existing structure. So it used to be an old industrial building. And they receive abatement only on the improvements that they made to this. so the city gives up a little we give up 60 percent of the taxes on the improvements and in return we get a great asset that really adds to the culture and vibrancy of our community and this will be fully taxed once the abatement ends one of my favorite examples um the wren building so you all are probably very familiar with this project it's a mixed-use project so the developer is taking an existing historic structure and they are adding modular units to it in return we will have 74 luxury apartments in springfield with some commercial on the bottom and yet again this is an example of a negotiated agreement So this is something that the commission votes on and approves based on the benefit that it gives to the community. The Center Street Townhomes. I like this one because it is an existing, it was a brownfield and we turned it into housing. So there are 34 townhomes on this land. And this is a really awesome example because that benefit goes to the homeowner. So it's not the case that it's just going to a company or so on and so forth. Those homeowners actually see the benefits of this program. key thing to keep in mind with this program, this is a temporary incentive for a permanent asset in our community. So with the center street town homes, this isn't an example of just one lot before the investment, the land was worth $30,000 after it was worth close to 200,000. So you multiply that by 34 and we see over $6.5 million in new investment in our community. A common myth with this program is that no taxes are paid. I like this example because it shows that for this actual real world example, the taxes paid are actually higher than those that are abated. So it's not always the case that the benefit is greater than what is being given up. So why are we recommending changes to the program? My boss, Tom Franzen and I, we sit here every day and we have people come to us with programs and projects that they'd like to do. And there were a number of projects that were coming across our desk that were outside of the current boundary. Tom and I don't want to be in the position of excluding projects based on the geography alone. It's my goal to make sure that those projects are happening inside of Springfield and to be competitive amongst other communities, we have to use incentives for the math to work. So we took that into account and we commissioned an independent housing study. And the result of that study was it showed that we should in fact expand the CRA. So what changes am I proposing? I'm proposing that we expand the boundary to include the remainder of the city. I also want to increase the rehab abatement from 10 years, 100% to 15 years, 100%. And that's because I want to incentivize rehab just as much as I am new construction. And finally, we'd like to implement fees to cover the administrative costs of the program. A few important points to leave you with. This program is really unique to Ohio in that we have control at the local level. So we get to say what the boundary looks like and what the amounts are. We have to do that within the confines of ORC, but having that control at the local level is really amazing and we should make use of it. Importantly, this is not set in stone. We can make changes at any time. So we can and will review this policy yearly and we can make updates depending on shifts in the market. This is meant to be responsive to the market and Springfield's not yet at a point where we have enough housing or enough development. So I want to keep incentivizing and encouraging that. And to that end, I want to have a few speakers talk about how they've used the CRA program and why it's needed. Kicking it over to Tracy.

Good evening. My name is Tracy Craig with Premier Properties, and I'm here tonight in support of expanding the community reinvestment area to encompass the entire city of Springfield. Over the past several years, our company has invested millions of dollars into Springfield through new housing, redevelopment, and infrastructure. We've seen firsthand the momentum the city has created, and we believe Springfield is in a unique position to continue attracting private investment. Expanding the CRA citywide is an important step in that effort. This isn't about giving away tax dollars. It's about creating an environment where developers, businesses, and homeowners have another tool to make investment decisions that might not otherwise happen. With today's construction costs, labor expenses, and interest rates, many projects simply don't work financially without the incentive. Premier Properties is a perfect example of that. We've successfully developed projects that would have been otherwise difficult to make financially feasible without the CRA program. Those projects include 24 townhomes on Hillside Avenue, 28 apartment units on Home Road, 13 single-family homes, and 8 townhomes on what we call the Northern Avenue project. The 15-year tax abatement significantly reduces the tax burden during the years when the projects carry most debt, making it possible to invest in properties that would otherwise remain underutilized. The CRA doesn't eliminate the taxes forever, and it doesn't reduce the value of the investment. It simply gives projects the opportunity to succeed during those critical first years. Once the abatement expires, the city, schools, and other taxing authorities benefit from the full value of a property that may have never been developed without it. Cities across Ohio are competing every day for investment. Expanding the CRA sends a strong message that Springfield is committed to growth and is willing to partner with the private sector to encourage responsible development. We believe in this city and we hope you'll continue providing the tools that allow companies like ours to reinvest in neighborhoods, create housing and strengthen our community. Thank you.

My name is Justin Bird. I'm a development manager with Casto. I'm here speaking in support of the expansion of the CRA boundary to include the corporate boundary of Springfield. Casto is a multifamily developer in Columbus, Ohio, with approximately 6,000 units under ownership. Casto retains ownership and management of its multifamily communities for the long term. Casto looks throughout Ohio for new multifamily development projects. Casto currently has eight projects in various stages of planning and development in the following markets. Kahana, Lancaster, Springboro, Columbus, Westerville, Lakewood, Finley, and Cincinnati. Each one of these projects received a tax abatement. Under today's economic environment, CASDA would not consider developing a multifamily project without a tax abatement. The reasons for this are rents do not support the cost of new construction, and multifamily communities compete across jurisdictions with tax abatements for residents. Casto is interested in developing a new Class A multifamily community in Springfield that must include a tax abatement to move forward. For these reasons, Casto is supportive of the expansion of the CRA within the city of Springfield to include the entire corporate boundary. Thank you for considering this economic development tool. Casto looks forward to the opportunity of working with Springfield on a new multifamily project.

Good evening. My name is Sean Murphy with Mid-Ohio Development. We actually own and maintain Spring Meadow Apartments and Olympic Reserve Apartments over off of Home Road. Speaking on the other side of that, you know, Olympic has a tax abatement. Spring Meadows Apartments does not. Spring Meadow Apartments consists of, all in Springfield, we have about 248 apartments. Similar to the others, we're developing all throughout Ohio. We have municipalities where we have tax abatements, municipalities where we are navigating that. Just some simple facts. Spring Meadow was built in 2013. Since 2013, we've seen 121% increase in construction costs. We as the developer are willing to absorb some of that, but on top of the tax increases in the assessment, that's just something we can't handle. The number of buildings on Spring Meadow phase one is 26 buildings. Our assessed value and our current annual property taxes are $172,000. With our final phase of Spring Meadow two, we have 12 buildings and our annual property tax is 160,000 on 48 units. With that simple math, we have a site on Middle Urbana Road, which is 94 units. Our annual tax bill is $315,000. The site's engineered. It's ready to go. We've done Olympic. We have Spring Meadow. We enjoy partnering with the city of Springfield. It's just something we simply cannot underwrite from a financial standpoint of looking at this municipality versus others. So, you know, obviously we're in support of the tax abatement. It's something that helps get us over that hurdle in relation to the financial aspect. We want to be a good community partner, but it's one of those things that we have to make the numbers work.

Ms. Cass, could you tell me what other communities have taken this same approach, particularly interested in benchmark communities similar to Springfield? Thank you.

So the city of Columbus has a citywide CRA and importantly theirs is quite complex. It's tiered, but they are charging significant fees and so on and so forth, but it is available throughout that city and it's not far from Springfield. So if we don't also rise to the occasion, I can see us losing out on projects in a city like Columbus where the rents are higher.

I think I understand the projects. I'm more interested in the infill opportunity and the housing stock and the age of housing stock and needing to reinvest in that. Have cities like ours taken that approach? Like that's one of the main reasons as well.

So Tom can speak to this too, but yes, this is a tool that's widely used throughout other cities.

Mansfield, Hamilton, Middletown, areas like that. Have we looked at those?

We have done a comparative analysis, but I could dive into specifics for each and get you a review.

I would be interested to know similar communities, legacy cities like ours, are they taking this approach? And if not, what is the negative effect that they've had because they haven't? Okay. Happy to get that to you. Thank you.

I mean, that was part of that initial study when we decided to expand the CRA initially. You'll recall we did, those were the cities we benchmarked against and they were very aggressively pursuing CRA policies that they were seeing success where the city at that time, we really didn't have the larger zone. So we'll get you that data, more recent updated information on the performance of those cities. But yeah, this would put us in kind of on par with our peer cities to attract the investment.

And it's my understanding that we're not taking any action on this tonight.

That's correct. There's no action tonight.

A learning opportunity for the community. Absolutely. Other commissioners have questions. Go ahead, Larry.

As a former developer myself outside of the state of Ohio, The community reinvestment area program was set up originally to encourage developers such as yourself to invest in areas where nobody wanted to invest. The units that you talked about over by Mother Stewart's are a perfect example. I love the program as far as commercial. I mean, we're getting apartments downtown because of this and so on. But I think statewide, and I'm not picking on any particular developer, but statewide this program has expanded to the point where now developers expect this. It's not a question of are they developing in an area that somebody wouldn't develop in in the past. So my concern about making the entire city of Springfield accessible considered under this particular expansion is that we're basically saying that the entire area is undevelopable. And I just, I don't think that's true. I think with some of the things that have happened here recently with the new businesses, with the new manufacturing that we're going to get in here, Springfield's going to be a place where people do want to move to. Jobs will be here. More opportunities will be here. I have a real problem, again, not with the developers themselves, but just the fact that this program has strayed from what its original intention was.

So I would say in response to that, it is true historically that's how it was used. The program has changed over time and evolved, and communities across Ohio are using it in this way. And we still need more housing in Springfield, and a rising tide lifts all boats. I think one of you could also speak to this if you'd like to just jump in and respond to those concerns.

Before that, you said it's changed since when Larry was familiar with it too. Now what changes have been made? How has it evolved?

I think the states still have to meet the requirements, but we're given more discretion. And I would argue that the indicators that were analyzed in this study did in fact show that even these areas need investment. So the intent is still for it to be on areas that need it. But as we can see with Columbus and other places, it is being more broadly applied. And that's to encourage housing because we have a housing crisis in the United States. There's no overlooking that, and Tom can jump in, too.

Just historically, Commissioner Ricketts and I had this conversation. When the CRA programs were started back in the early 80s, maybe late 70s, the idea was that it was to spur urban investment in areas that were... you know, low to moderate median income areas and those kinds of things. And over time, the state legislature slowly kind of opened it up. And jokingly, we talk about it spread evenly like peanut butter across the state now. So it's opened up suburban areas as well that are eligible for this. And it's not anything that we've done locally. This is the state legislature that's expanded that program. And so it's the environment that we're operating in today. And so when we look at it what the original intent was to what it is today, it doesn't change the fact that we're still competing with other communities for these investments. At the end of the day, these developers are making decisions on where they can get a return on their investment. And so if they can't get that return on that investment here in Springfield, they'll go somewhere else to get it. Our question is do we want that housing here? Do we still feel there's a gap? Do we still need that housing? And that's really the argument. It's not necessarily whether they deserve it, don't deserve it. It's more of do we want that development and is it worth expanding that? Because we're competing with communities that do have it. And so I think that's kind of it. I think it's the state legislature that's you know, change those policies on how these incentives are used. The enterprise zone is very similar. The other tax abatement program, uh, most of the programs in the United States were started to encourage development in urban areas, right? And then every, um, it's not the only program. A lot of programs have been changed this way. We initially, Springfield had eight different CRA zones when we first started. They were all very narrowly defined. along rail corridors, industrial areas that were in need of investment when we first started. But slowly over time, we've expanded those zones.

What's the reason for the 10 to 15-year recommendation?

um i'll just go ahead and so this is on existing homes on rehab original ohio advice code limited it uh rehab to 12 years um but new housing was available up to 15 years so it didn't make sense to us as staff it seemed like we were disincentivizing people to buy existing homes and rehabbing them and so we wanted to level that playing field okay thank you

I'd also just add to that the cost to rehab homes, especially if they're historic homes, is very, very expensive.

I know if you open a Dayton business journal, you'll see story after story, similar cities competing against us. So I recognize the productive use for this tool to get businesses here. And you said that we can do this year by year.

We review this policy yearly, so as the market changes and if we don't need to incentivize housing in the same way, we can take it before all of you and scale it back. Thank you.

Thank you. Is there a motion to close the work session?

So moved.

Second. I moved and seconded. Call the roll.

Mr. Ricketts?

Yes.

Mr. Rigsby?

Yes.

Mrs. Tackett? Yes. Mr. Wallace? Yes. Mr. Rue?

Yes.

Thank you for being here.