UPDATED: Macy's TIF agreement moving forward after Upper Arlington school board approval

Nate Ellis
ThisWeek group

Upper Arlington City Council will seek a tax-increment-financing deal to allow Continental Real Estate Cos. to forgo upwards of $17.25 million in property taxes to redevelop the Macy’s site at Kingsdale Shopping Center. 

City Council members working with Upper Arlington administrators say the arrangement is necessary to proceed with the kind of development the city wants and to potentially land a favored place to build a community center. 

City of Upper Arlington

The deal could be approved in January. It would allow the developer to use money otherwise earmarked for Upper Arlington Schools to construct a parking garage and other infrastructure. 

“There is some interest in that property by some national fast-food chains,” council president Kip Greenhill said during a Nov. 30 special meeting. “Also, some regional gasoline and convenience stores are interested in that property. So that’s a possible prospect for development there, but we’re also looking at developments that will be very similar to Olentangy River Road and Sawmill Road (in Columbus).” 

Council voted unanimously Nov. 30 to enter into an economic-development agreement with Continental to redevelop the 6.23-acre Macy’s property. Council member John Kulewicz recused himself from the vote because he works for a law firm that in different dealings represents both Continental and Kroger, the owner of the Macy’s site.

The proposed TIF is moving forward after the Upper Arlington school board unanimously approved the deal Dec. 8.

"I know we've had many missed opportunities to have a community center," school board member Carol Mohr said. "I think the development makes Upper Arlington more vibrant, and I feel it would be a great asset." 

Through an agreement with the district – and if a community center is part of the redevelopment project – the district would continue to receive the $124,000 annually it that currently receives from the Macy's site in each of the 30 years the TIF is in place.  

The city also would transfer ownership of the land at 1945 Ridgeview Road, where the Upper Arlington Senior Center sits, to the district after demolishing the current buildings there and resurfacing its parking lot. 

Additionally, the city will pay the district $50,000 annually through Dec. 31, 2037, after the certificate of occupancy is issued for the senior-living portion of the proposed development. 

Upper Arlington voters in the May 4 election will decide whether the city should build and operate a community center. If voters reject the measure, the district would not receive the senior-center land or the $50,000 annual payments from the senior-living portion of the project. It would receive approximately $800,000 paid from the TIF fund each year, Geistfeld said. 

A TIF is an economic-development mechanism available to local governments to finance public-infrastructure improvements and, in certain circumstances, residential rehabilitation, according to the Ohio Development Services Agency. 

A TIF locks in the taxable worth of real property at the value it holds at the time the authorizing legislation is approved, diverting resulting incremental revenue to designated uses, such as funding necessary improvements or infrastructure to support a new development. 

Revenue that exceeds the locked-in valuation of the land is diverted from the entities that typically receive property-tax revenue, including school districts, parks districts, libraries and fire departments. 

Upper Arlington City Manager Steven Schoeny said TIF deals are "typical" for developers where parking is required for the project. 

“The TIF would generate the revenues to pay for the parking," Schoeny said. “That’s part of the compensation agreement we’ve worked out with the schools if the TIF does go forward.” 

During a Nov. 9 council meeting, Schoeny said Continental would need to make a $250,000 nonrefundable deposit in “early December” for what ultimately would be a $12.5 million purchase of the Macy’s building and affiliated property from Kroger. 

Continental is expected to close on the purchase in early January, he said. 

“(Continental’s) investment is not financially viable without the TIF,” Schoeny said. “In order for them to go forward … and then further make a $12.5 million purchase, they need to understand what the financial relationship between the city and Continental is going to be, and they need to have a high degree of certainty on it.” 

Continental CEO Frank Kass said Dec. 10 he's paid $375,000 toward the purchase of the Macy's site and expects close on the property Jan. 5. He added that he's invested approximately $300,000 on site planning. 

"We are thrilled that the city of Upper Arlington, its leadership and development staff, and the city schools, the school board and their staff, were in universal support of this project," Kass said. "Over $1.8 million in real-estate taxes from the new development will go toward making the public infrastructure possible, with the balance (of money paid to the TIF fund) used to support the community center.

"If there's not a community center, those funds will be shared by the schools and the city.

"As a result of our vision for Kingsdale, the city is able to bond about $35 million that will be able to be paid solely through the real-estate taxes inuring from the development that Continental will do on the site." 

Schoeny said Continental is expected to submit final development plans in January or February for two of the three buildings it wants to construct at Kingsdale. 

The Board of Zoning & Planning approved preliminary plans Oct. 19 that called for a 7-story building along Northwest Boulevard with 383 apartments and 2-story parking garage. 

Schoeny said Nov. 30 final development plans likely will show a reduction in the building’s height from 75 feet to 63 feet on its north side, and the number of apartments is expected to be cut to 325. 

Preliminary plans also approved Oct. 19 call for a second building to be 6 stories tall, with 104 senior-housing units on the northwest portion of the site and a 6,000-square-foot restaurant on the ground floor facing Tremont Road. 

Schoeny said those plans likely would be adjusted to increase the building height from 75 feet to 84 feet and to raise the number of residential units to between 124 and 139.   

On Dec. 2, Schoeny said final development plans for the third building – currently proposed to be 9 stories, with 75 two-bedroom apartments, 50,000 square feet of office space on its top two floors and potentially room for a community center – likely won’t be brought forward until at least May. That would be after residents vote on whether they want a community-center project to move forward. 

Despite calls from several residents that the project set aside at least 20% of residential units for “affordable housing,” Schoeny said Nov. 30 some of the units being proposed “do come in at about $1,200 a month” and he believes “that gets close to being affordable for folks making the definition of ‘middle income." 

Schoeny and council members also said the project has compelled them to look more closely at traffic issues in the Wakefield Forest neighborhood, where some residents have expressed concern that a development as dense as Continental’s proposal would exacerbate problems of speeding cut-through drivers and parking. 

“The big thing for me for this development is the shot in the arm it gives to our community, in particular to Kingsdale,” council member Brian Close said. “There’s been some turnover in some of those businesses. … While I don’t think this project is absolutely perfect, I think it’s great, and I think it checks a lot of the boxes we need, not only to make the development great but also all the Kingsdale development great, all of the shops south of that (Macy’s site) and all the neighborhoods around that.” 

Council member Michele Hoyle said although a TIF would divert future property taxes away from UA schools, the district still will collect at least the same amount of taxes from the site as it currently does. 

If the deal falters, she said, Kroger could tear down the Macy’s building, reducing the property taxes that go to the city, and might yield less attractive redevelopment options than Continental’s. 

“I think our choices are essentially to allow it to languish as it is and, as my colleagues have said, to allow a very valuable core of our community to become less vibrant, less of a center of our community, or to work together with a willing developer to try to come up with something that is mutually acceptable and that will hopefully revitalize a very key part of our community,” Hoyle said. 

Emma Speight, the city's community-affairs director, said the city is considering a TIF of up to 30 years with Continental. 

If approved, she said, the district still would receive property taxes generated from the site it currently receives but would forgo new property taxes “generated by the completed project’s increased value until the city has been made whole and the TIF agreement ends. 

“Once the TIF is in place, as the schools place any future operating levies on the ballot, they would receive in full any voter-approved new (or) increased property taxes,” Speight said. “The 50,000 square feet of office space is projected to generate approximately $450,000 in annual income tax revenues for the city. 

“Additional income tax revenues would also be anticipated from workers at the restaurant and senior housing complex,” she said.

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