Cleveland is eyeing a financing tool that would allocate new property-tax revenues from the project to pay for roads, utilities, landscaping and parks.
CLEVELAND, Ohio - As developers refine their plans for the downtown lakefront, Cleveland is eyeing a financing tool that would allocate new property-tax revenues from the project to pay for roads, utilities, landscaping and parks.
That tool, tax-increment financing, could generate $9 million up-front for infrastructure and green spaces, according to a very rough, early estimate from the city's economic-development department.
The city based its projections on the non-school portion of anticipated taxes generated by $280 million worth of development on sites north and east of FirstEnergy Stadium and at North Coast Harbor, near the Rock and Roll Hall of Fame and Museum and the Great Lakes Science Center.
Cumberland Development of Cleveland and the Trammell Crow Co., based in Dallas, aim to build more than 1,000 apartments, offices, a school, a hotel, eateries, shops, parking and recreation areas on 28 acres of lakefront land leased from the city.
On Friday, Cumberland owner Dick Pace received final approval from the Cleveland City Planning Commission for the team's first building, a two-story restaurant next to Voinovich Park. Pace is negotiating with two potential restaurant operators but hopes to have a deal signed soon. He expects to break ground late this year and to open the building before the Republican National Convention in July 2016. The project also will include public restrooms and sand volleyball courts.
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A site plan shows the full scope of the downtown Cleveland lakefront project planned by Cumberland Development of Cleveland and the Trammell Crow Co. of Dallas. In a separate vote, the planning commission gave an administrative thumbs-up to two pieces of tax-increment financing legislation slated for introduction at Cleveland City Council on Oct. 26. The city is proposing 30-year TIFs that would set aside 39 percent of property-tax revenues - the rest of the money flows to public schools - created by private lakefront development to cover basic site work and greenery.
The city would pledge those tax revenues to making payments on bonds issued to fund the site work.
The 30-year clock would start ticking sooner on development at North Coast Harbor, where the first buildings will rise. A separate TIF on properties around the stadium would kick in later, once Pace and Trammell Crow are ready to start construction there. It's those later-stage sites, now occupied by warehouses and parking, that pose the greatest financial challenge, since development requires utility extensions, road construction and other foundational work.
Money from the TIFs could be used anywhere on the 28-acre site, for projects ranging from utility installation to planting trees to replacing light posts. None of the TIF revenues would go toward private buildings or parking structures.
"Generally, in communities across the nation when there's a new development going in where there are no utilities, in most cases there is a look to the city to provide utilities," Tracey Nichols, the city's economic-development director, said during an interview. "And using TIFs is just one of the ways to finance utilities for a new development. It's a common practice across the nation."
Nichols said that early estimates show the TIFs would cover most of the infrastructure costs, with potential for a small shortfall. The city plans to work with Cumberland and Trammell Crow to seek out state and federal money to fill that gap. Cleveland took a similar approach to finding money for outdoor components of the Flats East Bank project, where a riverfront boardwalk, apartments and a second round of restaurants recently opened.
It's tough to put precise numbers on the lakefront project because so many things, from the size of buildings to the mix of tenants to the cost of construction, could change over the next few years. Tax-increment financing will generate the most money from commercial uses such as offices, a hotel and retail. Cleveland routinely grants 15 years of property-tax abatement for new residential projects, so apartments won't contribute to the TIF revenues until that abatement burns off.
A solid city commitment to funding infrastructure is necessary before Trammell Crow can get banks, pension funds and other lenders to invest in the lakefront, Pace said. Private money won't sign on until the public-sector's position is clear.
"We can't do the development without that infrastructure there," Pace said during an interview. In addition to water and sewer access and roads, he mentioned public spaces such as a lakefront boardwalk, landscaped gardens and waterfront areas for walking, bicycling, sitting and parking a stroller. Both the developers and city officials have stressed that the property will be open and accessible to everyone.
"Mayor Jackson has said let's open up our lake to our residents," Nichols said. "It's something that people have been clamoring for for years. It's not an easy task, but we're finding a way to get that done."
The restaurant plans approved Friday show that Pace shifted the proposed building south and tweaked the boundaries of his site, to jump through hoops related to outdoor restaurant seating and to meet Federal Aviation Administration restrictions related to Burke Lakefront Airport, to the east.
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An aerial plan shows the restaurant site (Site A) and the location of the planned mixed-use building (Site B) at North Coast Harbor. Pace and Dimit Architects of Lakewood still are revising designs for a second building, planned for a former skateboarding park site north of the Rock Hall.
The developers realized that they must drive deep foundations into the ground - a layer of fill dirt over the former lake bottom - to ensure the building's stability. That's a pricey proposition. To balance out the higher costs, Pace has added a fourth floor to what was originally a three-story structure. And he's swapped out office space for housing, since office parking became a challenge as the building grew.
Now the project calls for 24 apartments, including four penthouses, above ground-floor commercial space. Pace plans to move his offices there from the Fifth Street Arcades, a set of downtown retail corridors that Cumberland has remade over the last few years. His other likely tenants include Cleveland Bike Tours and a sandwich shop called Cleveland Pickle.
The planning commission might see designs for that building in November. Pace said it's feasible to produce an 8,000-square-foot, standalone restaurant before the GOP convention. But he didn't want to rush the larger, mixed-use building to meet an artificial deadline.
He hopes to break ground on that second project late this year or early next.
"It won't be complete for the RNC," he said of the apartment building, "but we won't have construction barrels up for the convention."
Later phases of construction, including a retail-lined connector between the Rock Hall and the Science Center, won't start until after the RNC.