Cincinnati Says Tax Abatements Increase CPS Revenues; Others Disagree

May 7, 2019

Cincinnati City Manager Patrick Duhaney said in a letter Tuesday to the Cincinnati School superintendent that the district's operating revenues have actually increased because of city property tax incentives for developers and a 1999 agreement related to those tax abatements.

That agreement expires this year, and Duhaney said "the city is comfortable with or without an agreement."

Developers getting property tax incentives on commercial projects receive a property tax break, but currently make PILOT (payments in lieu of taxes) payments to the school for 25% to 27% of the abated value. The 1999 agreement exempts new housing at $330,000 per unit or less from PILOT payment requirements.

In addition, the city has been providing a $5 million annual payment to the school district. That was part of a deal for the school district to support construction of Paul Brown Stadium and Great American Ballpark, which are exempt from paying property taxes.

Duhaney stressed the city wants to ensure CPS doesn't lose money because of tax abatement the city provides.

"The hold harmless principle, established in the 1999 agreement, determined that PILOT payments should be made at 25 percent of the abated value based on the state funding formula at the time, in order to provide CPS with the same amount of revenue it would have received if there was no abatement at all," Duhaney wrote. "On a going-forward basis, the city is amendable to uphold the principle of hold harmless, but that percentage has changed based on the current state funding formula."

In an attachment to the city, the city suggests for CPS to simply break even on a 30-year incentive the PILOT would be 5% instead of 25%.

Another attachment shows CPS net increase in revenues for tax year 2018 with the abatement was $9,311,627.

"Without an agreement, the city will still be able to offer property tax incentives to assist development projects that would not otherwise occur in the city, but the city will have to restructure its incentive programs," Duhaney wrote in a city memo. "For CPS, having no agreement will have a significant negative impact on CPS revenues."

Some in the community strongly disagree with the city's memo, and have suggested the city's tax abatement policies have cost the district revenues.

A group calling itself the Cincinnati Educational Justice Coalition said the Cincinnati Public Schools "forgo $59 million every year in the name of economic development by subsidizing developers through the use of tax abatements."

In June 2018, Cincinnati Federation of Teachers President Julie Sellers sent a letter to Council Member P.G. Sittenfeld stating the city's abatement policies in some neighborhoods "short changes our schools and local services."  She also said the policies place "an unfair and increasing burden on owners of older homes and businesses."

Sellers asked that the city's annual payment to the school district increase "to an amount that will cover CPS's lost revenue from current abatement."

She also suggests new abatements be limited to blighted neighborhoods "in genuine need of new investment," and that the amount of future abatements be reduced and the length that they're offered be shortened.

The city and the school district had been holding talks about the future of the 1999 agreement. But the city says those discussions have been discontinued.

The Cincinnati School Board is holding a "tax abatement agreement hearing" Wednesday evening from 4:30-6:30 p.m. at the CPS Education Center at 2651 Burnet Ave.

A CPS spokeswoman confirmed Superintendent Laura Mitchell had received Duhaney's letter, and said the district will likely offer a response during Wednesday's hearing.