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Is it time to eliminate tax abatements in Cleveland?

Marc Lefkowitz  |  03/22/10 @ 11:00am

Mayor Frank Jackson’s comments last week about the city’s residential tax abatement put the issue of whether Cleveland should reduce or eliminate the 15-year break on the front burner. Jackson drew a comparison to bribing people to live here. He also drew the consternation of many local developers who see tax abatement as the golden carrot in attracting people back to the city.

Weigh the pros and cons – an important catalyst for thousands of new residential units or a loss of much needed revenue for the nation’s poorest city –clearly arguments can be made on both sides of the issue.

It’s generally understood that tax abatements are temporary – both for the new home owner and the city offering them. They spur the market until it has strong legs and is running just fine on its own. Across the board, Cleveland is still far from a strong residential market – even in areas where tax abatement has helped such as Ohio City and Tremont.

The residential building boom in parts of these neighborhoods during the last decade did produce spiffy new condos and town homes fetching up to half a million dollars or more. As the market toddled along, then-city council president Jackson and Near West ward councilman Matt Zone pondered whether the time had come to turn off the rain machine of tax abatement (council must re-approve it every two years). It was even suggested that offering less than 100 percent abatement might be an option. But, they couldn’t muster enough support and tax abatement continued.

Now Mayor Jackson wants to seriously discuss abatement as it is currently being used – does it help a developer make a profit more than anything? One of the strongest arguments for keeping tax abatement is building the income tax base. It’s hard to dispute that its played a role in the influx of new middle-income residents.

But someone still has to pay for city services. As former mayoral candidate in Detroit Freman Hendrix remarked, “beneficiaries of tax abatement need to make regular payments for the police, fire, and emergency services being made available to them, just as the casinos do. Fairness dictates that everyone contributes to the upkeep of the most essential city services. We’re in this together, rebuilding a major city. We need to share the costs.”

Detroit has tried a different set up with their Neighborhood Enterprise Zones, areas that offer 50 percent tax abatements. According to City Living Detroit, 1994 legislation tripled property taxes for new buyers and made it less appealing to build in the enterprise zones, still, the Southeast Michigan Council of Governments reported in February 2006 that Detroit outpaced its suburbs in new residential units built during 2005.

Maybe it's time Cleveland looked at that page from Detroit’s playbook?

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