East College St. Project One Step Closer to Funding
The East College Street Project moved a step closer to completing its fundraising when on Tuesday the Oberlin school board conditionally approved a financial measure that would provide the project with about eight percent of its required funds.
City council will now vote on the measure, which would give the project the remaining $1.5 million that the developers say is necessary for the project to continue.
If the council approves the tax increment finance ordinance, it would agree to borrow money on behalf of the developers. The money would fund public aspects of the development, such as updating the 100-year-old sewers on the premises and building roads. The developers, using revenue from their project in lieu of taxes, would repay the loan over a period of 20 years.
“[Providing a TIF] is one of the things a city does when it wants to see development,” said Josh Rosen, OC ’01, one of the project’s three developers.
Rosen and his partners in the organiztion Sustainable Community Associates, Naomi Sabel, OC ’02, and Ben Ezinga, OC ’01, emphasized that the East College Street project, on which the Obie alums have worked for several years now, cannot continue without the school board and city council’s passage of the TIF. They have secured the rest of the roughly $17 million needed for their project through a variety of sources including bank loans, grants and philanthropists. Most of that funding, however, is conditional upon the developers securing all of the money they need.
Through the TIF, the school board would eventually receive approximately $44,000 a year in addition to the $7000 that it currently receives in tax revenue from the unused land. $44,000 is only 50 percent of what the school system would receive from a private development without the TIF.
“Without the Tax Increment Financing there is no way this can go forward,” said Rosen, in which case the school board would receive no additional revenue.
“For the school board to say no to this project, they would have to believe that another privately-funded project could do better in the same spot in the near future,” said Rosen.
Although one school board member was absent at Tuesday’s meeting, the board members in attendance voted unanimously to approve the TIF compensation agreement. The vote followed a colorful debate at the previous school board meeting, during which one resident raised concerns.
Tony Mealy, town resident and city councilman-elect, was apprehensive about the fact that the TIF will provide no additional income to other county organizations such as the joint vocational school and the sheriff’s department. He also raised the concern that the TIF would result in Oberlin’s diverting tax funds away from the already financially-strained school system in order to fund the project.
“My major objection is that the TIF is diverting property taxes away from the school,” Mealy said in a later interview.
School board member Marci Alegant said that the TIF should not be understood as a tax diversion.
“The truth is that the schools are currently receiving very little tax money from the properties — about $7000,” said Alegant. “As good stewards of the district’s financial health, we cannot ignore the possibility of increased revenue.”
City Manger Robert DiSpirito echoed Alegant’s statement.
“A TIF poses no financial risk to [the school board], since the schools can only generate more property tax revenue if the project happens, versus what they will continue to receive [even] if the project never happens,” he said.
Another town resident, Mark Chesler, raised additional concerns.
“I caution the school board to approve a project that has the potential to cost the city,” he said.
Despite these objections, the school board seemed to favor the TIF. Before passing the measure, board members took a moment to comment on it.
“I keep on seeing that block downtown, and I worry dearly if this project doesn’t go forward, there will be no potential development for that ugly block,” said Dennis Smith, school board president. “It will not do any good for the city to have that kind of site sitting there. I am betting and hoping that this development will work.”
Smith emphasized that it is important for city council to vote on the TIF before the end of the year in order for the school to get full tax credit for the agreement, before a new law would require the school to share its tax credits with the state. Because of these considerations, city council will likely vote on the TIF at its meeting this coming Monday.
“I believe that every young person has to start somewhere, and it’s nice that [these developers] have chosen to start here,” said board member Carol Williamson, referring to the SCA members. Her comment seemed to respond to recent critiques that the developers are too young and inexperienced to take on such a large project.
Oberlin College Professors of Economics Kenneth Kuttner and Robert Piron have expressed reservations as well. They’ve written a letter to city council regarding the potential risks of such a TIF for the city.
“It would be a mistake to interpret any of this as meaning that I’m ‘anti-SCA’ or opposed to the East College Street Project — not at all,” said Kuttner. “I’d love to see the project succeed. My position is simply that the citizens of the city should understand exactly what sort of financial commitment they would be taking on if they were to decide to approve the TIF.”
Kuttner went on to explain his concern with the TIF: “What one worries about in a deal like this, of course, is what happens if the revenues from the project turn out to be insufficient to make the [return] payments to the city — plus the payments to all its other creditors.”
City Manager Robert DiSpirito, however, expressed confidence in SCA.
“While the city is obviously not in the position of guaranteeing that this or any other private development project succeeds or fails, the city is, however, requiring that the developer provide a sound guarantee for the public investment component of this project,” he said.
DiSpirito explained that the city will require the developer to obtain and maintain a letter of credit from a financial institution that will guarantee that the city will be able to repay its bond debts.
“In this way, the city removes any risk for the use of public tax dollars,” said DiSpirito.
The process to secure the TIF began this summer when city council passed a letter of intent. As the process has continued through the fall, SCA members await city council’s decision, they continue with other aspects of their project including demolition and building plan revision.
“There are about ten processes going on simultaneously with the TIF,” said Sabel.
This enthusiasm has ultimately found an echo in some members of the city leadership.
“I think [the TIF] can benefit schools,” said Alegant. “I
have faith in these young people who are ambitious and courageous enough to take
a risk. Personally, I think it’s a good thing for us and for the