The city of Gahanna is waiting for additional financial information regarding a $25 million, 128-unit apartment development on Mill Street proposed by Metropolitan Holdings of Columbus.
Gahanna interim development director Michael Blackford said he thinks the developer has been asked to conduct a traffic study for the project on the east and west sides of Mill Street, south of Carpenter Road and at the northern boundary of the Creekside development.
He said he doesn’t know what’s the next step in the process.
“Since the developer chose to go directly to City Council with the current project, we’re scratching our heads a bit since this is way outside the normal process,” said Tom Kneeland, Gahanna mayor. “If council requests and receives a pro-forma (as a matter of form or politeness) as we’ve recommended and also requested, my goal will be to have (financial counsel) Greg Daniels use that data to provide a more in-depth review to report and recommend a package that is deemed acceptable financially.
“Without any pro-forma, we will only be guessing what the overall financial performance will look like and we won’t really have an idea of what the ROI (return on investment) to the city will be financially,” he said.
With other similar projects, Kneeland said, the project and financials are vetted and the administration works with the developer to come to some common ground and understanding of what the administration is willing to get behind and recommend to council, knowing more negotiation is likely before a final plan is approved.
During council’s Sept. 23 finance committee meeting, Daniels, a partner at Squire, Patton Boggs and Gahanna’s financial counsel, provided an overview of what’s typical in central Ohio for such a project.
He said real property-tax abatements are common and used in many cities.
The incentives in the draft development agreement with Mill Street Investors LLC, in care of Metropolitan Holdings, 1433 Grandview Ave., Columbus, includes a 15-year, 100% tax abatement on all improvements, the bike path and parking-access easements and vacation of right of way on North Street.
Council member Michael Schnetzer said when residents hear about the idea of a tax abatement, the initial knee-jerk reaction isn’t necessarily positive.
“This is starting to get into the real weeds of tax-abatement law,” Daniels said. “Going all the way back to ’94, the General Assembly significantly revised tax-abatement law in Ohio. And so there’s a pretty sharp demarcation between what are called pre-1994 abatements — and this is one of those — and post-1994 abatements.”
He said the key differentiator is if it’s a commercial project, which the proposed project is not.
“It falls into the residential category,” Daniels said. “But if we’re talking about a commercial project — office, retail, manufacturing — then, by law, if the abatement is over 50% of the new taxes, you need to get the school district's consent before you can grant that abatement. If you’re in a pre-'94 area, you don’t need to get school district consent for those sorts of commercial abatements. For residential abatements, either a pre-'94 or post-'94, you don’t need to get school district consent.”
Council member Brian Metzbower asked if the city is required to make the school district "whole" -- meaning the district is reimbursed for any tax revenue lost because of the abatement.
“For this particular CRA, you don’t need to make them whole,” Daniels said. “You don’t need their consent. That’s spelled out in the agreement between the city and school district. If this would produce enough payroll ... say it would be an office project. If the payroll is big enough, there would be some income-tax sharing with them. I would not expect it for a project of this size.”
Council member Nancy McGregor asked if the 15-year, 100% tax abatement is only on improvements to the property.
Daniels said that’s correct.
He said the abatement isn’t on the land value, but the new building value would be abated.
Daniels said the developer also requests some vacation of rights of way and some easements.
“Those are also very typical of these sorts of developments, especially when they don’t impose additional costs on the city,” he said. “The additional cost side is one potential follow-up item here to review and make sure that by vacating the (right of way) requested and by granting easements and things like that, that we aren’t imposing costs on the city.”
Daniels said he typically doesn’t see some of the other requested incentives, such as fee waivers and tax-increment financing on residential projects.
“We do see them some,” he said. “Usually, we take out the microscope a little bit and go into the finances for the project to see what the reason is that the tax abatement isn’t enough incentive for this sort of project. Every project is different. They may have good reasons why they need things like TIF funding and fee waivers for this project. We just have to drill into the developer’s financials and look at that information a little bit closer to see if it’s appropriate in this instance.”
Kneeland said he was one of the council members in the 1990s who supported the Creekside concept and purchase of property, and he placed a lot of political capital on the line when he got firmly behind the project to return the downtown into the heart of the city.
“If the same opportunity were presented again today, I would do the same thing,” he said. “I still believe downtown Gahanna will continue to be ‘the place to be.’ I want the area to develop more than anyone, but we have to make sure that the decisions we make today that leverage public funds are done wisely and with due diligence so we can see the area produce positive results for everyone.”