A tax break agreement between the City of Cincinnati and the Cincinnati Public Schools expires later this year, and it appears that a dispute over government school funding formulas could hold up a new agreement.
The city says details in these state numbers are important to getting a new deal, but the school board says no.
Developers in the city who receive property tax incentives for commercial projects receive a property tax break, but currently make PILOT payments (payments in lieu of taxes) to the school at 25-27% of the depreciated value. The 1999 agreement exempts new homes from PILOT payment requirements for $ 330,000 per unit or less.
In addition, the city has granted the school district an annual payment of $ 5 million. This was part of an agreement for the school district to support the construction of the Paul Brown Stadium and Great American Ball Park, which are exempt from property taxes.
Mayor John Cranley sent a letter to School Board President Carolyn Jones this week about the tax break agreement. He said a “collaborative approach to renegotiating this important agreement is in the best interests of all parties.”
“We believe that establishing objective, fact-based funding formulas is the basis of our agreement,” wrote Cranley. Otherwise, how would the public and the CPS know whether it is being held harmless or not? The city has given the CPS administration access to its own financial calculations, and the CPS should commit to it. Let’s compare the analyzes and isolate any differences . “
CPS attorney Dan Hoying disagreed on the information in the state funding formulas in an email to a city assistant attorney on July 25.
“The (school) authority has decided that government funding formulas are not relevant to these negotiations,” wrote Hoying.
A CPS spokesman said the district believes the state formula should not be used in negotiations with the city because the Ohio General Assembly is not part of the agreement and the calculation is unpredictable and volatile.
“The state funding formula has been declared unconstitutional four times,” said the spokesman. “The formula is not static and has the very real probability that it will change every two years based on the legislative wishes of this current General Assembly. For the 2020-2021 biennium, government funding does not take property valuation into account at all The latest formula was relative to the national average, so the benefits in calculating the state’s share may be reduced due to factors completely outside of the economic status of the City of Cincinnati. “
The district also said the entire formula could be redesigned by the state parliament.
“Our families, who live within the boundaries of the city of Cincinnati, contribute to the economic well-being of this city through their property and income taxes – it’s a symbiotic relationship,” the spokesman wrote. “Any new agreement should be based on what we want together as a community for our children and for our future, regardless of what the state does or does not do to fund public education.”
Cranley said real estate tax incentives are driving growth in the city, and unless there is a new agreement with the school district, the city will restructure its programs in line with state law.
“Even without an agreement, the city will ensure that CPS does not lose any revenue due to property tax incentives and is” held harmless “,” Cranley wrote. “I continue to believe that the best way to do this is through an agreement based on the facts. However, we remain committed to ensuring that CPS does not suffer undue loss of earnings if an agreement is not reached.”
Patrick Duhaney, Cincinnati city manager, said in a letter to the superintendent of the Cincinnati Schools in May that the district’s operating income has actually increased due to incentives for property tax developers in the city and the agreement related to those tax breaks.
Duhaney also stressed that the city wants to make sure CPS doesn’t lose money due to tax breaks the city offers.
In an appendix to this May letter, the city suggested that CPS should simply break even with a 30-year incentive. The PILOT would be 5% instead of 25%.
Another appendix showed that for the 2018 tax year, CPS had a net increase in revenue with a decrease of $ 9,311,627.
“Without an agreement, the city will continue to offer property tax incentives to support development projects that would otherwise not take place in the city, but the city needs to restructure its incentive programs,” Duhaney wrote in a May memo. “For CPS, a lack of an agreement will have a significant negative impact on CPS revenues.”
Some in the community disagree with the city’s memo at all, suggesting that the city’s tax break policy has cost the district’s revenue.
The school board passed a resolution in June setting out its ten priorities for a new tax relief agreement with the city. Some of them are:
- While the board respects the city’s role in determining the need for development incentives, the starting point for any mitigation should be an assurance from the developer that the board of directors will be made full for lost property taxes. Instead of the city’s $ 5 million annual payment under the current agreement, the board is backing a higher percentage contribution from developers who benefit from the cuts. The new agreement was intended to compensate the Board of Directors for “grandfather” rating agencies negotiated under the 1999 agreement.
- Parties should also consider the negative impact any cuts, including residential rating agencies, have on the Board of Directors. City-wide cuts should be avoided and the agreement should keep the Board of Directors harmless for housing reductions in areas of the city where current market conditions do not require reduction incentives.
- Instead of making cash payments from the city to the district under the current agreement, the city and CPS should partner to provide and fund community services that directly affect the health and safety of CPS students, including school nurses, and the city impact sponsored school-based health centers, border guards and school officials. The city should improve safety features for pedestrians around CPS schools, especially high schools. The parties should reconsider how both parties could benefit from the urban and administrative facility sharing described in the 1999 agreement.
- The agreement should have a shorter duration than the 1999 agreement and not exceed five years.