Plans for an 11-story project that would bring apartments, retail and more than 130,000 square feet of office space to the corner of Lane Avenue and North Star Road are contingent on Columbus City Schools' approval of a 30-year deal that would make annual cash payments in lieu of taxes to the district.

In recent months, Continental Real Estate Cos. and Roy Boy LLC joined with Arcadia Development to overhaul the proposed Arlington Gateway so that it now includes 1325-97 W. Lane Ave. and 2376 North Star Road, taking it from a nine-story building with 82 condominiums, 12,500 square feet of retail and 80,000 square feet of offices to an 11-story project that has 218 "luxury" apartments, 14,350 square feet of retail and 132,444 square feet of office space.

The new proposal, which was approved by the Upper Arlington Board of Zoning and Planning by a 6-1 vote June 4, is expected to generate more than $13 million in tax revenue for Upper Arlington in its first 10 years.

But developer Frank Kass, chairman of Continental Real Estate Cos., said the project can't proceed without CCS approval of the three-decade deal.

On June 5, Kass asked the Columbus school board to accept a payment in lieu of taxes (PILOT) that would give CCS a flat $442,000 annual payment that would be locked in for 30 years, regardless of what happens to property values or inflation.

Under the deal, which is expected to be voted on June 19, those payments would rise to $1 million annually beginning in the 31st year.

"We're offering ... a $442,000 per year PILOT payment for 30 years in place of the $116,000 a year that is now (going) to Columbus City Schools from the existing buildings on the 3 acres," Kass said.

"If they do that, then the city of Upper Arlington can issue bonds backed by the balance of the real estate taxes and the income taxes generated from the new development on that corner.

"The proceeds of (that) would pay for an 850-car garage costing $18-plus million and approximately $4 million of off-site infrastructure, including new sewer lines, water lines, underground utilities and road improvements," he said.

Although the proposed Arlington Gateway site is located in Upper Arlington, the targeted properties are also within CCS attendance boundaries.

Kass said there's no plan "whatsoever" to scale back the larger version of the Arlington Gateway project that's now approved. Therefore, a favorable Columbus school board decision is imperative.

"That's the deal," he said. "If the Columbus City Schools cannot accept a PILOT payment, then Upper Arlington would not have the funds available through the bond issuance to fund the necessary infrastructure."

Upper Arlington Senior Planning Officer Chad Gibson said he didn't attend the June 5 Columbus school board meeting and couldn't comment on the proposed deal before the board or Kass' statements to board members.

As for the Arlington Gateway proposal, Gibson said, "discussions with the developer team are ongoing relative to a proposed development agreement that would encompass both financial considerations and the level of city participation for public infrastructure improvements.

"Work continues to craft an outline of an agreement that would be mutually beneficial to all parties, and that would then be brought before (Upper Arlington) City Council for its review," he said.

"Tied to this ongoing effort is the city's review of possible funding options for whatever level of public infrastructure improvements might be agreed upon."

Columbus school board members made favorable comments about the deal at the June 5 meeting, which by Kass' calculations would deliver 43 percent of the almost $1 million a year that the district would collect in taxes without an abatement. All the tax money normally due the district would instead go into a tax-increment finance account used to make the annual payments to the district and to offset the project's $110 million construction costs.

The Franklin County auditor's tax calculator says a $110 million building would generate more than $2 million in total taxes a year, about three-fourths of which would go to Columbus City Schools, so it was unclear at the June 5 board meeting why a $422,000-a-year payment would be 43 percent of what the district could be expected to receive.

The locked-in payment also doesn't appear to account for inflation. If Columbus City Schools had agreed 30 years ago to a one-time payment of $422,000, it would have to rise to almost $914,000 today just to break even on inflation.

"That is locked in for three decades from the time the building is completed," Kass said after the meeting. What happens to property values "doesn't make any difference."

Adjusting the payment to CCS to compensate for property values and inflation is "not how the deals like that work," Kass said.

"In order to make it work, you need a parking structure, you need to change the infrastructure, the sewer and water and all that," Kass said. "Those are extraneous dollars that this project can't afford on its own."

The Arlington Gateway site currently includes a Pizza Hut, a Half Price Books, a 35-unit apartment building and some other retail.

Kass said he's hopeful the Columbus school board will approve the deal.

Although Arcadia has eyed the site for development for more than two years, and despite Continental's interest, "there's no reason to think the schools would ever get more than the $116,000 (per year) they've been getting from the properties the past 20 years," Kass said.

Columbus Dispatch reporter Bill Bush contributed to this story.

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