CLEVELAND — Cleveland is forging ahead on a new way to pay for major investments Downtown, hoping to kickstart long-awaited development on the lakefront and riverfront.
Late Monday, Cleveland City Council agreed to create a new method for financing key public infrastructure projects, from streets and utilities to parks and parking garages. That tool, a tax-increment financing overlay district, will let the city capture – and borrow against – growth in Downtown-area property taxes over several decades.
The TIF district is a pivotal piece of Cleveland’s strategy for making something of its largely barren waterfronts. And it’s part of broader efforts to speed up Downtown’s rebound from the pandemic, which hammered the office market and spurred a shift to remote work.
“Our belief is the riskier proposition is to do nothing,” Ahmed Abonamah, the city’s chief financial officer, said during a council committee hearing on Monday afternoon. “We have to invest our way to prosperity.”
The legislation passed Monday doesn’t make any spending promises.
It merely sets the boundaries of the district, covering Downtown and bits of nearby neighborhoods. Council will have veto power over how money from the district gets spent.
“It’s a tool that I’m willing to take a risk on,” said Council President Blaine Griffin.
Property owners in the district won’t be getting a tax break. They’ll keep paying real estate taxes based on Cuyahoga County’s appraisals of their land and buildings.
And taxing entities will keep getting payments based on what those properties are worth now. That means the county, Cleveland Metroparks, libraries and other organizations won’t lose any money. But they will miss out on the upside for more than 40 years.
Now that upside – new tax revenues from real estate appreciation and development – will flow to two places: The Cleveland Metropolitan School District and a fund devoted to paying for public infrastructure.
Those investments will occur Downtown, at first, and then spread across the city.
“We have to start somewhere. We cannot continue to manage decline,” said council member Anthony Hairston, who represents several East Side neighborhoods.
'Not just Downtown'
The idea is that public spending will lay the foundation for transformative projects, making Cleveland a more appealing and viable place for private investment.
The Downtown TIF overlay district could generate $3.3 billion to $7.6 billion over 42 years, according to projections from Mayor Justin Bibb’s administration.
It’s not clear how all of that money will get spent.
A large chunk of it is likely to go toward principal and interest payments on debt. The city could work with a partner, like the Cleveland-Cuyahoga County Port Authority, to issue bonds. Private investors would buy those bonds, providing the up-front cash the city needs.
Officials expect to spend $400 million along the river, $706 million on the lakefront and $140 million in between. Much of that spending would happen over 10 to 15 years.
But – for the first time, thanks to a change in state law – Cleveland has the ability to use TIF revenues outside of the project boundaries. That means Downtown property-value growth could fuel investments, like better parks and recreation centers, across the city.
“This is a Downtown public infrastructure-focused strategy that we believe will benefit not just Downtown,” said Jeff Epstein, the city’s chief of integrated development.
'Not a silver bullet'
Council members peppered cabinet officials with questions during two committee hearings this month. But they ultimately approved the legislation in a unanimous vote.
That vote came despite criticisms from Zach Schiller, the research director at Policy Matters Ohio, a Cleveland-based policy research organization. He questioned the city's financial and economic-impact projections and urged caution during Monday's committee meeting.
“We just have way too many things we don’t know about this,” he said, calling the vote a “momentous” decision.
Councilwoman Stephanie Howse-Jones asked for more evidence that residents of poor city neighborhoods will see spillover benefits from Downtown spending.
“People are frustrated,” said Howse-Jones, who represents Hough on the East Side. “People are tired. They get all the promises in the world, only to end up getting nothing.”
Administration officials committed to regular reporting back to council, both on the TIF revenues and community benefits tied to development projects. But they stressed that one funding tool won’t solve the city’s complicated problems.
“This is not a silver bullet, so to speak,” Abonamah said earlier this month. “It is a piece of a larger puzzle.”
The city’s lakefront master plan for the North Coast Harbor area near the Rock and Roll Hall of Fame and Cleveland Browns Stadium is almost done. It includes more than 20 acres of public space and a land bridge between the lake and the heart of Downtown.
The lakefront could draw $1.3 billion in private investment, according to a document presented to council. That doesn’t include the price tag of renovating the football stadium – a topic of ongoing negotiations between the city and the Browns.
Public money from the TIF district cannot be used for a stadium project.
On the riverfront, Detroit-based landowner Bedrock has a $3.5 billion plan for Tower City and the sea of parking behind it. Of that, $3.1 billion would be private money.
Bedrock, the real estate arm of billionaire Dan Gilbert’s Rock family of companies, is preparing to launch its first ground-up development project – a practice facility and sports-medicine complex for the Cleveland Cavaliers and the Cleveland Clinic.
The developer’s broader master plan calls for more than a dozen new buildings, with apartments, for-sale housing, offices, shopping, dining and entertainment. Renderings also show 12 acres of public space, reconfigured roads and easier paths down to the water.
Kerry McCormack, the councilman who represents most of Downtown, applauded the administration for thinking about new ways to ignite investment.
“We have to take a risk, implement tools and fight back,” he said, “to make sure that growth is happening within the city limits of the city of Cleveland and does not continue to trickle out to suburbs.”
