At this point I wouldn't mind if this shrunk to the 30 story range if that would mean it got built. I've always believed 50+ stories was overly ambitious.

Any news on this yet?  It's been awfully quiet lately.  This is one project I would love to see built.

 

I think we need to pay attention to (or call and lobby) the state legislature regarding the financing incentive that they were considering for these types of projects.

The primary sponsor of the bill is Kirk Schuring, a moderate Republican from Canton and Speaker Pro Tempore. He is a well-positioned sponsor for this bill. But he is a lame duck as he faces term limits at the end of this year. The bill's co-sponsor is Tom Patton of Strongsville who is a more ideological Republican but he's not facing term limits.

 

The bill was referred to the House Government Accountability and Oversight Committee. I do not see any meetings scheduled for this committee, although the House will be in session starting May 16 and have to wrap up business for the current state fiscal year before the end of June. Otherwise it could be brought up in a lame-duck session after the November election but before the end of 132nd General Assembly at the close of the calendar year.

 

If this state legislation is currently driving Stark's game plan (and it looks as though it is) I cannot imagine any shovels for at least two years from now (just in time for the recession ;)).

 

If I recall the original news reports, if everything goes smoothly (and when does that ever happen with this type of legislation), the earliest it could/would pass both houses is December of 2018.  Then tack on a good number of months for implementation (again if things go smooth) and then the actual awarding process you are probably looking well into 2019.  At that point all the money guys and their lawyers have to hash things out taking into account the new tax incentive and how this affects financing. Maybe two years is actually generous.

 

I am assuming that at this point all the planning (if there actually ever was any) between local officials (school board, city and county) to coordinate public funding is just not happening any more (does anybody know for sure?)

You may be right. I'm looking forward to nuCLEus and likely other projects being instigated by this legislation. It will be a good economic stimulus.

I've been bugging Rep. Schuring and his staff for the last couple of weeks regarding an update on HB469 -- the transformative tax credit legislation. His office called me a bit ago and said a substitute bill was reported (accepted) by the  House Government Accountability and Oversight Committee yesterday. They referred me to: https://www.legislature.ohio.gov/legislation/legislation-status?id=GA132-HB-469

 

The substitute bill contains some interesting changes -- it reduces the standard by which a "transformational development" is judged. The BEFORE language was in the bill AS INTRODUCED. The language in AFTER is now in the bill SUBSTITUTE....

 

BEFORE

 

"Project area" means all territory located within a one- mile radius of the site of a transformational mixed use development site.

 

 

AFTER

 

"Project area" means all territory located within a radius of not less than one-fourth of one mile and not more than one mile centered on the site of a transformational mixed use development.

 

_________________

 

BEFORE

 

(4) "Transformational mixed use development" means a site  not exceeding seven acres that integrates some combination of retail, office, residential, hotel, recreation, structured  parking, and other uses and that includes at least one building that is twenty or more stories in height.

(B) The owner of one or more parcels of land in this state within which a transformational mixed use development is planned may apply to the director for a tax credit certificate if the estimated development costs to complete the project exceed four hundred million dollars.

 

AFTER

 

(4) "Transformational mixed use development" means a project that:

(a) Will have a transformational economic impact within the project area approved by the director of development services under division © of this section;

(b) Is a mixed use development that integrates some combination of retail, office, residential, recreation, structured parking, and other similar uses; and

© Includes at least one building that is fifteen or more stories in height or has a floor area of at least three hundred fifty thousand square feet.

 

Note also that the minimum project cost for measuring transformational has dropped from $400 million to $50 million....

 

(B) The owner of one or more parcels of land in this state within which a transformational mixed use development is planned may apply to the director for a tax credit certificate if the estimated development costs to complete the project exceed fifty million dollars.

Good changes. This could make the credits apply to more projects than just NuCLEus.

Good changes. This could make the credits apply to more projects than just NuCLEus.

 

Yes, a lot more projects. And most if not all of them will probably be urban projects. Aside from a few suburban office parks, the percentage of 15-story buildings outside of core cities or inner-ring suburbs drops off significantly.

 

EDIT... I just noticed that the requirement is 15+ stories -OR- a floor area of 350,000+ square feet. So it could definitely fund suburban sprawl projects.

Does it create competition for the tax credit? Potentially muddying the waters in much the same way the May Company Building didn’t win the $25,000,000 historic tax credit, the very project that instigated the credit?

Does it create competition for the tax credit? Potentially muddying the waters in much the same way the May Company Building didn’t win the $25,000,000 historic tax credit, the very project that instigated the credit?

 

It could create competition, yes. However, the bill assigns the limitation on the number of credits that can be awarded per year to the operating appropriations act, aka the General Revenue Fund (GRF) budget, which is passed by the legislature every two years (a biennium). Next year is when the next biennial GRF budget comes up for a vote. This bill assign responsibility to budget appropriators for estimating the total amount of credits that may be authorized in each year, an estimate of the amount of credits expected to be claimed in each year, and an estimate of the amount of credits expected to remain outstanding at the end of the biennium. So we won't know how many credits may be available until June 2019 (the state fiscal year starts July 1, so the next biennial budget has to be passed before then, and we'll know well before then, in early drafts of the budget, how many credits may be available).

 

It should also be noted that a taxpayer can claim only one credit per year. If the credit exceeds the amount of tax otherwise due in that year, the company may carry forward the excess for not more than five ensuing years, but the amount of the excess credit claimed against the tax for any year shall be deducted from the balance carried forward to the next year.

 

EDIT: the legislature could add a credit or three this year in its budget reconciliation act, if it so motivated. ;)

 

Good changes. This could make the credits apply to more projects than just NuCLEus.

 

Yes, a lot more projects. And most if not all of them will probably be urban projects. Aside from a few suburban office parks, the percentage of 15-story buildings outside of core cities or inner-ring suburbs drops off significantly.

 

EDIT... I just noticed that the requirement is 15+ stories -OR- a floor area of 350,000+ square feet. So it could definitely fund suburban sprawl projects.

Wow, that's horrible.

Which part?

It's in 4© in your post, KJP[/member] - "© Includes at least one building that is fifteen or more stories in height or has a floor area of at least three hundred fifty thousand square feet."

 

It does seem like this could go to a Pinecrest....

Yep, it could. I guess Cleveland is going to have to offer a better product (ie more responsive community services) to compete for private investment.

 

And remember that the Carney Family sought the catalytic-sized historic tax credit from the state legislature to benefit its May Company redevelopment project? And that the tax credits kept going to other projects here and around the state because they were better conceived projects/applications? Well, just because Stark thought of this, doesn't mean he gets to win it. Stark is going to have to offer a better project/application to win "his" tax credit too.

What specific changes to Nucleus would you recommend in order to make the project more viable?

Have construction cost less, have rents be higher, or have more public subsidy. That's really what it boils down to. Certain uses are easier to make work than others - at the moment, apartment construction is more viable than office construction here in Cleveland, partially because it's cheaper and partially because more grants/tax credits/HUD loans/etc exist for multifamily development.

^Class A office space is beginning to dwindle, and will soon justify the building of a new office tower.  Maybe more of an office component and the scaling back of residential, if that's the hold-up.  Maybe a scaling back of everything if that works even better.  It would suck, but there's plenty of room left around downtown for a large skyscraper in the future.

I am pro-scaling back, actually. I'd rather see ten small projects than one big one. (Personal preference, I'm more enamored with streetscapes than skylines) The big issue with scaling back, however, is cost of the land. Stark already paid $xxxxx for the land ($4 million?) and so he needs to build a project of a certain scale in order to justify the cost of the land.

^More like close to $29 million.

;D

I am pro-scaling back, actually. I'd rather see ten small projects than one big one. (Personal preference, I'm more enamored with streetscapes than skylines) The big issue with scaling back, however, is cost of the land. Stark already paid $xxxxx for the land ($4 million?) and so he needs to build a project of a certain scale in order to justify the cost of the land.

 

I wholeheartedly agree -- but if he needs to plan for something taller, why not take the approach followed with 515 Euclid?  Build mid-rise with some preparations in place to go higher when it can be better justified.  Let's get construction started on the parking garage and lower-level retail to improve the streetscape ASAP!

He could probably get a TIF for a parking garage easily, too.

 

He's holding out for this catalytic tax credit thing at the moment but hopefully he'll take your approach if that doesn't pan out.

I honestly think this project would be better served with a 30ish story building with 5-6 levels of parking immediately adjacent to the Q. He could land commercial tenants that need the "A" office space. However, he loses the "Live" entertainment portion of the agreement as well as the hotel

I think it's ego for a lot of these guys, a nice, successful, profitable project that contributes to the city isn't enough, they want to be THE new center of Cleveland. He wants to compete with Wolstein's Flats.

^It will also depend if Stark sees the entertainment, business, or residential aspect of this project as its most crucial component.

I am pro-scaling back, actually. I'd rather see ten small projects than one big one. (Personal preference, I'm more enamored with streetscapes than skylines) The big issue with scaling back, however, is cost of the land. Stark already paid $xxxxx for the land ($4 million?) and so he needs to build a project of a certain scale in order to justify the cost of the land.

 

Agree with everything but the last part. The land is a sunk cost. He might throw the land cost into his model to calculate his ultimate total return, but when evaluating alternatives, the land cost is now irrelevant.

True it's a sunk cost, but it's going to cause him to wait, possibly long, and try to build the biggest project he can, rather than build whatever is feasible today. (At the same time, the longer he waits the less relevant the land cost becomes.)

^Agreed. Also tied to the ego point, which I definitely buy.

I noticed that an article posted in the Flats East Bank thread reported that the seminal tax credit that Stark is pushing to get this project done passed the House.  If I recall early reporting when this was first purposed, it was suggested that if the legislation passed, the earliest this would happen would be December of 2018.  So I am just guessing that this is moving at a quicker pace than originally anticipated (especially given that the specifics have changed drastically).  However, I don't know much about the process in the Senate and whether it will have a harder time there.  I imagine a bunch of recesses are coming up which won't help matters.  Anybody have some inside information or at least knowledge of how the Senate works?

Good find, I hadn't realized it had passed. I did a quick google news search and it doesn't look like there are any articles about it in any newspapers. Not sure about the timing aspect.

 

https://www.legislature.ohio.gov/legislation/legislation-summary?id=GA132-HB-469

Regarding the timing, I have just enough knowledge of the Ohio General Assembly's legislative process to be dangerous. I can tell you that the entire assembly is taking the summer off as the state's fiscal year starts tomorrow and all necessary legislative work regarding the operation of the state (namely budget corrections since it's an off-year) are done. The state runs on biennial budgets. The operating budget (including ODOT's capital budget) is passed in the odd-numbered years, before July 1. This is a capital budget year and I'm pretty sure that work is done now too. But any legislation can realistically be passed at any time, as long as there is enough of a constituency asking for it. I doubt there will be much legislative activity before the election, so if anything happens it will happen in the lame-duck session before the end of the year. Lots of stuff can and does get passed during a lame-deck session. If it doesn't pass the full assembly by the end of this calendar year, then lawmakers will have to start over next year as a newly elected assembly will take over.

 

Will the senate have enough time to act? Possibly -- if a relevant senate committee (likely the Government Oversight and Reform Committee and/or possibly the Finance Committee) hears this legislation and doesn't have any objections. There is a chance that the bill won't be referred to a senate committee. It can be put to a floor vote without objection. If it is referred to committee, hopefully the committee likes it the way it is and doesn't modify because if it does, then a House-Senate conference committee would have to equalize the language in bill and then return it to both houses for floor approval. There may not be enough time for that, but I've seen the assembly work very quickly when it is motivated to do so.

 

BTW, the chair of the Ohio Senate's Government Oversight and Reform Committee is William Coley of West Chester, near Cincinnati. He is often described as a fiscal hawk, he champions Medicare reform, got his law degree at CSU's Marshall School, is the new chair of the National Council of Legislators from Gaming States (which just held its summer meeting in Cleveland a couple weeks ago) but is facing term limits and therefore cannot seek re-election. So he is truly a lame-duck senator who could shepherd a bill through a lame-duck session. He may either lack the political power to move this legislation quickly or, if enough of his colleagues respect him, be able to move the bill even faster with less fear of political consequences. We probably won't know until December.

Shows you how much I know. The Ohio General Assembly is not taking the summer off. It is still acting on legislation, including passing payday lending regulations today.

 

Regarding the transformational tax credit bill, HB469, that is essential for the nuCLEus development, the Ohio Senate introduced the bill to its chamber on July 5th. The Rules & Reference Committee met today to, among other actions, assign bills to various committees. However, HB469 was not referred to a Senate committee. I do not see another R&R meeting scheduled for the rest of this month. That doesn't mean they won't or can't schedule one. Their next meeting isn't scheduled until August 22.

Proposed Ohio tax credit would target 'transformational' mixed-use developments

 

https://www.bizjournals.com/cincinnati/news/2018/07/12/proposedohio-tax-credit-would-target.html

^Well that was a teaser!  I'm not a paid subscriber...

^Well that was a teaser!  I'm not a paid subscriber...

 

Google the headline and open the cached article.

 

That said, there's nothing much new in the article. The reporter wrote the article without talking to the legislative sponsors, so there's no update on pending legislative actions, potential timelines for passage, or any possible legislative roadblocks anticipated in the Senate

 

The article contains a couple of quotes from groups supporting or opposing the bill....

 

Economic policy nonprofit Policy Matters Ohio criticized the proposal, alongside a proposed film tax credit expansion and the recent sales tax exemption for oil and gas property. It said in a statement that there isn't a clear enough understanding of how many big developments would qualify or what the tax incentive could cost the state.

 

“Adding new special-interest breaks is ill-conceived when we’ve barely started looking at the tax exemptions and credits we have now," Wendy Patton, senior project director at Policy Matters Ohio, said in a statement.

 

Supporters of the tax incentive include the Ohio Municipal League and the Ohio Chamber of Commerce.

 

"We believe the eligibility criteria is specific enough to allow legitimate business development and growth," Jeff McClain, Ohio Chamber's director of tax and economic policy and a former Republican legislator, said in a statement. "These restrictions will ensure well-funded, well planned developments."

 

It should be noted that the bill has Republican and Democratic cosponsors.

 

The article also contains this interesting tidbit about the bill that I didn't notice before.....

 

If a project is certified, property owners can sell or transfer the rights to the credits to insurance companies to raise the capital for the project. Developments whose owners are the state or political subdivisions wouldn't be eligible.

 

If so, does that mean that the Flats East Bank's Phase III (which would rise on land owned by the Cleveland-Cuyahoga County Port Authority) wouldn't be eligible, despite what Wolstein hoped in a recent article? Or is a port authority not considered a political subdivision, even though it is taxpayer-supported?

^The Port Authority owns the FEB Phase III site?

^The Port Authority owns the FEB Phase III site?

 

Yes, both of them. The riverfront parcel for the "fishing village"-designed restaurant structures as well as the parking lot between West 11th and the Waterfront Line are both owned by the port authority. So are other parcels, including those for the existing apartment building, Alley Cat, FWD Day+Nightclub, parking lot east of FWD/Margaritaville/Landshark (all one parcel), and Coastal Taco.

^I'd be curious to read the conveyance docs and mortgages. I'm guessing there's either a ground lease (in which case the developer owns the buildings), or there was some weird conveyance and quick reconveyance to qualify for the TIF that the county's on line records didn't properly code. I can't get the county web site to cough up the actual document images right now, however.

State bill could give big projects sizable jolt

 

The financing of big real estate projects will get a bit of a lift if legislation now before the Ohio Senate becomes law.

 

HB 469 would authorize a new tax credit of as much as 10% of the development cost of what the legislation calls "transformational mixed-use developments." To qualify for the tax credit, a project would have to have a planned development cost of $50 million or more, include a building at least 15 stories high, or otherwise include 350,000 square feet of space, and more than one use. It could be some combination of office space, residential units, a hotel, retailing, structured parking or a recreational use, according to an analysis by the Legislative Service Commission, the Legislature's bill-writing and researching arm.

 

http://www.crainscleveland.com/article/20180729/news/169926/state-bill-could-give-big-projects-sizable-jolt

 

State bill could give big projects sizable jolt

 

The financing of big real estate projects will get a bit of a lift if legislation now before the Ohio Senate becomes law.

 

HB 469 would authorize a new tax credit of as much as 10% of the development cost of what the legislation calls "transformational mixed-use developments." To qualify for the tax credit, a project would have to have a planned development cost of $50 million or more, include a building at least 15 stories high, or otherwise include 350,000 square feet of space, and more than one use. It could be some combination of office space, residential units, a hotel, retailing, structured parking or a recreational use, according to an analysis by the Legislative Service Commission, the Legislature's bill-writing and researching arm.

 

http://www.crainscleveland.com/article/20180729/news/169926/state-bill-could-give-big-projects-sizable-jolt

 

The change from $400 million to $50 million is drastic. I wonder if that will have a positive impact on potential projects downtown such as Weston’s warehouse plans. Could potentially spark more development. $50 million is a lot lower - and could have applied to the Beacon and The Lumen? Hopefully it makes it through.

^sounds like the bill was written almost deliberately for the Nucleus project. 

 

I think the Weston Warehouse project is dead last I talked to some folks in the know at the City

 

^Class A office space is beginning to dwindle, and will soon justify the building of a new office tower.  Maybe more of an office component and the scaling back of residential, if that's the hold-up.  Maybe a scaling back of everything if that works even better.  It would suck, but there's plenty of room left around downtown for a large skyscraper in the future.

 

The term "Class A" office space hardly applies to most of Cleveland's downtown buildings anymore.  E&Y tower, Key Tower and 200 Public Square are all that offer full service buildings with real amenities attached like a restaurant.  Even One Cleveland Center, or PNC or North Point which are nice buildings, are a B building in most other cities.

 

Cleveland has a LONG way to go in terms of attracting Class A tenants before it justifies building another new office tower.  Tenants are taking less & less space with flexible work schedules, open floor concepts, etc

^sounds like the bill was written almost deliberately for the Nucleus project. 

 

I think the Weston Warehouse project is dead last I talked to some folks in the know at the City

 

^Class A office space is beginning to dwindle, and will soon justify the building of a new office tower.  Maybe more of an office component and the scaling back of residential, if that's the hold-up.  Maybe a scaling back of everything if that works even better.  It would suck, but there's plenty of room left around downtown for a large skyscraper in the future.

 

The term "Class A" office space hardly applies to most of Cleveland's downtown buildings anymore.  E&Y tower, Key Tower and 200 Public Square are all that offer full service buildings with real amenities attached like a restaurant.  Even One Cleveland Center, or PNC or North Point which are nice buildings, are a B building in most other cities.

 

Cleveland has a LONG way to go in terms of attracting Class A tenants before it justifies building another new office tower.  Tenants are taking less & less space with flexible work schedules, open floor concepts, etc

 

I would assume that the digitizing of archival records also reduces the office space needs of companies that used to need space for files, etc.

Also with more technology some businesses are splitting their offices between high rent Class A and more modest space. Baker Hostetler put their legal staff in Key Tower and back office in another cheaper building.

Also with more technology some businesses are splitting their offices between high rent Class A and more modest space. Baker Hostetler put their legal staff in Key Tower and back office in another cheaper building.

 

They segregate the Christmas party too lol

Also with more technology some businesses are splitting their offices between high rent Class A and more modest space. Baker Hostetler put their legal staff in Key Tower and back office in another cheaper building.

 

They segregate the Christmas party too lol

 

that's effed up.

Those big firms are intensely stratified. 

Jones Day used to do that too, at least with firm receptions. At least in 2002.

Can't even imagine that at my firm.

 

Nonetheless.... back to hopeless optimism about NuCLEus

Does anyone know if HB 469 is retroactive whereas projects like the Beacon and The Lumen

qualify?

Work is being done in the background on this. There is no reason to be hopeless about Nucleus.