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Changes Recommended for Tax Abatement Programs

Brent Warren Brent Warren Changes Recommended for Tax Abatement ProgramsConstruction cranes in Downtown Columbus — Photo by Walker Evans.
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A new draft report takes a comprehensive look at how the City of Columbus incentivizes development and makes some recommendations on ways to change the system to benefit more neighborhoods.

One of those recommendations calls for taking a portion of the benefit that developers currently get for building in the Short North and directing it toward a “Community Revitalization Fund” that could be used to pay for infrastructure improvements, build affordable housing in other neighborhoods, or provide funds for low-income home-owners to rehab their houses.

The idea is to make sure that incentives like tax abatements are being used to revitalize neighborhoods that wouldn’t redevelop without them.

The report was prepared by New York-based HR&A Advisors at the behest of the city.

Whether the city acts on the consultants’ specific recommendations is still up in the air, said Steve Schoeny, the city’s Development Director, but the report provides a framework for making those decisions.

“We have an incentive system now that is basically a layering of a bunch of individual solutions to individual problems, and that has evolved into being our system,” said Schoeny. “This is an opportunity to build a system directed toward an objective, which for us is about Columbus being a place where all residents can succeed.”

The study found that for lower-density developments in the Short North – ones farther from High Street, with surface parking – there’s no gap between the cost of a project and the return a developer can realize by charging market-rate rent. For denser projects that require steel construction and structured parking, there is still a gap, meaning that those projects likely wouldn’t happen without the incentive of a tax abatement.

“That leaves you with couple options,” said Schoeny, “You could either reduce incentives, or, since we have this value in the system – which right now is going to land owners and developers – is there a way to capture that value for another public objective?”

Based on the amount of development activity in the Short North in recent years, HR&A estimated that about $50 million dollars could be generated in ten years, money that could be invested in neighborhoods like Linden or the Hilltop.

A similar program in Cincinnati is used to provide money to operate that city’s streetcar, while one in Boston funds affordable housing.

Schoeny said that the city will take some time to examine the draft report and to reach out to stakeholders like the Columbus City Schools, Franklin County, neighborhood groups, and business interests. Input from the general public will also be solicited, although plans for public meetings have yet to be finalized.

“It’s in everyone’s interest to have the public understand these issues because it affects everyone,” he said. “It’s also important to have an accurate idea of how incentives are working today – what they do and don’t do in different neighborhoods – in order to have a discussion that’s based on data and analysis versus general impressions and soundbites.”

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