(Editor’s Note: This is the fourth installment of a multi-part series detailing Cleveland’s master plan to revitalize its historic downtown).The projects outlined in Cleveland’s Downtown …
(Editor’s Note: This is the fourth installment of a multi-part series detailing Cleveland’s master plan to revitalize its historic downtown).
The projects outlined in Cleveland’s Downtown Revitalization Master Plan, which was unveiled to the Cleveland City Council earlier this week, will be financed through a mixture of public and private funding, enabling the city to transform its downtown without incurring additional debt.
According to City Manager Joe Fivas, there are several funding sources and tax credit programs the city and private developers may tap to fund projects such as the one proposed for Inman Street, which includes the reduction of the artery from four to three lanes, the construction of medians and tree-lined sidewalks, as well as roundabouts.
An action plan approved under new business by the City Council on Monday will enable the city manager, city staff and MainStreet Cleveland to “develop Requests for Proposals for a future redevelopments" from private developers for projects such as the Cherokee Hotel.
“This may also include an effort to find a partner development firm to privately develop the downtown with a city/county partnership on all of these developing issues," the action plan stated.
During the presentation of the city's master plan Monday, Fivas said "any public investments would be tied to a private investment and have delineated returns on investment."
"We are working on a 15-year investment schedule to be able to make these investments without increasing the amounts we are paying for our current debt," Fivas said.
The potential funding sources include:
• BUILD Grants: Currently, the city is working to acquire up to $25 million in BUILD grant funding from the Federal Highway Administration to embark on the massive streetscaping project for Inman Street downtown. During last week’s meeting of the City Council, members voted to approve a search for a grant consultant to guide the city though the federal grant process.
• PILOT Programs: Also known as payment-in-lieu-of-taxes, the financial incentive program freezes taxes at the predevelopment level for a predetermined time. As a result, the money saved through the program can enable projects to have improved chances for profitability, especially ventures where a developer is investing in an area designated for revitalization.
One such investor is downtown redeveloper Nicholas Lillios, who recently began a project downtown after the City Ccouncil last month approved a PILOT agreement to convert the former Permna Color Inc. building into a mix of loft apartments, as well as retail and office space.
The 44,000-square-foot, two-story structure, located at 240 First St., will be named the Agora.
The refurbished building will feature 19 loft apartments, three of which will be located on the ground floor per Americans With Disabilities Act requirements. In addition, the building will feature two 4,500-square-foot retail spaces ideal for a restaurant or a large retail anchor, as well as four 1,000-square-foot spaces ideal for so-called mom-and-pop stores.
There will also be two office suites, consisting of 3,000 square feet of combined space.
The PILOT will freeze property taxes for the project for 10 years. The assessed value for the property is $397,600.
The project is expected to be completed early next year, according to Lillios.
• Historic Tax Credits: Although Tennessee does not have a historic tax credit program, the city may utilize a federal tax program that allows "program participants to claim 20% of eligible improvement expenses against their federal tax liability,” according the United States Department of the Treasury’s Office of the Comptroller of Currency.
In order to be considered for federal HTCs, a building must be depreciable, meaning it must be income-producing or utilized in a trade or business.
“In addition, a “substantial” amount must be spent rehabilitating the historic building, meaning that the cost of rehabilitation must exceed the pre-rehabilitation cost of the building,” according to the OCC.
• Tax Increment Financing: Tax Increment Financing is a method of financing development that ensures a certain amount of tax revenue generated by businesses in a specified district is reallocated to that district to help finance further development.
"The taxes in that area stay in that area," Cleveland Mayor Kevin Brooks said in an article previously published in the Cleveland Daily Banner. "Those dollars stay in that zone.”
According to the University of Tennessee Institute for Public Service’s Municipal Technical Advisory Service, all taxable properties have an assessed value, which is used to determine property tax amounts for that property.
For example, if a “property has an assessed value of $40,000 and the city tax rate that is applied to all city property is $2 per $100 in value, the city tax on this property would be $800.
If the “property owner decides to improve the property, and based on the value of these improvements the assessed value increases to $400,000,” according to the IPS. “Using the same tax rate, the increased tax amount would now be $8,000. The additional tax revenues created with these improvements amount to $7,200.”
The increased tax amount is then set aside to be used to pay debt and other improved property expenses.
• Brownfield Redevelopment Grants: Brownfield grants provide funding for redevelopment, expansion or resume of properties were the pollutants or contaminants are present.
Such funding may be used to redevelop property occupied by former Whirlpool Plants 1 and 2.
Recently, Tennessee Gov. Bill Lee signed the amended law that removes the required designation of county size and minimum acreage requirements, expanding the definition of a "qualified cost" for which certain tax revenues may be utilized.
In the Sunday edition of the Cleveland Daily Banner, an examination of similar downtown revitalization initiatives undertaken in three southeastern cities will be featured.
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