CLEVELAND, Ohio -- A bill that proposed a new state tax credit for “transformational” projects - and garnered attention from major real estate developers in downtown Cleveland - failed to make it out of the General Assembly this year.
The clock simply ran out on House Bill 469, said Rep. Kirk Schuring, R-Canton, who sponsored the legislation. But Schuring, who was elected to the Senate in November after butting up against term limits in the House, expects to reintroduce the bill in early 2019.
And he’s confident it will pass. “It had overwhelming support in the House,” Schuring said. “We had good support in the Ways and Means committee in the Senate. We had four hearings. Eight proponents. Two opponents. ... We just ran out of time.”
Introduced in January, the legislation would create a nonrefundable tax credit designed to offset premium taxes paid by insurance companies that invest in major, mixed-use developments. The idea is that the state would award a tax credit to a property owner who, in turn, would sell the rights to that credit to an insurance company or a group of insurers at a discount. That structure would provide up-front funding for a project while giving insurers the ability to cut tax payments that flow to the state’s general fund.
Originally, HB 469 was drafted with a particular project in mind: nuCLEus, a high-rise complex proposed for a site north of Quicken Loans Arena in downtown Cleveland’s Gateway District. Local developer Stark Enterprises and joint-venture partner J-Dek Investments Ltd. of Solon bought the 3-acre property in September 2015 with grand plans. But the developer has struggled to secure enough public and private funding to support an ambitious vision of a new office tower, apartments, retail and garage parking.
The most recent version of HB 469 still would apply to nuCLEus.
But it’s much broader than the initial language, which was specific to a project costing at least $400 million, with at least one building 20 stories or taller and a footprint of less than 7 acres.
The revised wording expanded the definition of a “transformational” project to a development costing at least $50 million, including a building that’s 15 stories or taller or that comprises at least 350,000 square feet. That project still would have to include multiple uses, such as shops and offices, and applicants would be required to provide estimates showing that the state would more than recoup its investment through other tax revenues generated by the deal.
The tax credit would be equal to 10 percent of a development’s costs - $5 million for the smallest eligible projects and much more for a major endeavor like nuCLEus, additional phases of the Flats East Bank in Cleveland or the planned overhaul of the massive, near-vacant former Huntington Building, now called the Centennial, at East Ninth Street and Euclid Avenue.
Bob Stark, chief executive officer of Stark Enterprises, and financial consultant Ryan Sommers, who worked to draft the legislation with Schuring, testified in support of the bill at a Senate Ways and Means committee hearing last week. Stark didn’t respond to a subsequent request for comment. Neither did one of his sons, Ezra Stark, the chief operating officer for Stark Enterprises.
During an interview, Sommers deferred to his client regarding the status of nuCLEus, which remains the subject of financing talks between the developer and city and county officials. But he expressed optimism about the future of HB 469.
“We’ve been told by several folks in the Senate that it was not an issue of lack of support. It has been embraced throughout the state of Ohio," said Sommers, managing director of financial services for Project Management Consultants in Cleveland. “We’re still hopeful that this bill will be passed in 2019.”
The House unanimously approved the legislation in June, after testimony from Stark Enterprises; the Ohio Municipal League; and the Ohio Chamber of Commerce.
The Senate committee heard from proponents including Schuring and Republican Rep. Tom Patton, another sponsor; Columbus developer Mark Wagenbrenner; Dayton-based contractor Miller-Valentine Group; the Greater Cleveland Partnership; the Greater Akron Chamber of Commerce; commercial real estate group NAIOP of Ohio; Heritage Ohio, which focuses on preservation; the co-developers of a planned Columbus high-rise project called North Market Tower; a Cincinnati economic-development consulting firm; and an executive from Terrex Development & Construction of Cincinnati. The Ohio Insurance Institute provided context.
The hearings also brought out two opponents.
Zach Schiller of Policy Matters Ohio, a nonprofit, left-leaning research institute, criticized the legislation as incomplete and missing teeth to ensure that that tax-credit projects wouldn’t be money-losers for the state. “It lacks needed guardrails and transparency,” Schiller said in written testimony.
The Ohio chapter of Americans for Prosperity, a right-wing advocacy organization funded by billionaire brothers David and Charles Koch, slammed the proposal as “corporate welfare."
Ultimately, though, the legislation appears to have stalled due to packed calendars and, some real estate developers speculated, concern that departing Gov. John Kasich - who has axed other tax-credit proposals - might not ultimately sign it into law.
Schuring said the bill could crop up again as soon as late January or early February.
“I think it should go fairly quickly,” he said. "I’ve been in the legislature now almost 26 years, and I’ve learned you don’t make specific predictions. But there’s a lot of momentum on our side.”