The Vision Thing

[Mark Kindt]

I do not have other independent data on office space demand or retail space demand to review here, but with respect to both of those issues the City's consultant's report is only guardedly positive.

The report describes a high vacancy rate (20%) for commercial office space with millions of square feet of office space already built-out in the markets reviewed.

Retail seems somewhat similar, but my knowledge there is limited.

But, the report is clear on slow overall population declines in all of the markets that it reviewed.

Now, having read both of these reports, who would recommend to their corporate CFO a business investment in a mixed-use real estate development project on the former hospital site?

Tomorrow, we will get even nerdier as we look at proposed public subsidies, estimated tax revenues, and negative blow-backs to local businesses.

[Tim Liston]

I don't get this thought process at all. The reason Lakewood or any city grows (or doesn't grow) is in part because of the housing options is has (or doesn't have). If you put 50 modern condos/apartments on a former public property (or wherever) in Lakewood, they're going to become occupied. Like it or not, that's what many people want these days. If instead you foolishly put up a bunch of doubles with tiny kitchens and shag carpet, you're not gonna do so well.

If the trends Mark points out were taking place in a city that already had lots of the same type of housing being proposed, the conclusions might be appropriate. But that's not the case here.

That said, I believe that in most instances, the appropriate re-use of former publicly owned property, should it no longer be useful, is as a repurposed publicly owned property. This city seems to think it''s perfectly appropriate to take a civic asset, such as a school or a hospital, flatten it and convey it to a developer, because by so doing it then generates incremental property taxes. As though property taxes are a higher purpose than say a park or other public (or non-profit) facility.

And I generally agree that the "vision thing" is an issue....

[Tim Liston]

I mean, to assert that we can't support modern housing because our population isn't growing, that doesn't necessarily follow. Maybe our population isn't growing because we have so little modern housing.

The fallacy of affirming the consequent, I think that's what it's called. Not sure....

[Jim O'Bryan]

I mean, to assert that we can't support modern housing because our population isn't growing, that doesn't necessarily follow. Maybe our population isn't growing because we have so little modern housing.

The fallacy of affirming the consequent, I think that's what it's called. Not sure....

Tim

The county is shrinking in population. Lakewood had they tried for their own destiny as we used to speak of maybe could draw. Now we are completely dependent on Cleveland, and it is not only not pulling people into the county, but it is also pulling people out of the suburbs. Using a semi cool factor and up to 30 tax abatements, in is a slug fest for home buyers, and renters. Add in the whack-a-mole what is cool this month, Tremont, to Collinwood, to Ohio City, to Duck Isalnd, to Hingetown, to Detroit Shoreway, to Slavic Village, to Hough, to Little Italy, to Ceder Road, to ... forever.

Funny 15 years ago when the project first started some of us put forth the concept, though twisted, if Lakewood was in Iowa it would be the 3rd largest city, and as such would be working to be self sufficient. In other words we would have had to develop reasons to not just move there but to sustain ourselves. With that idea in mind, no matter what happened to Cleveland or surrounding area we could be self sufficient. The civic leaders now at the helm fought that idea, and laughed about it, instead wanting to tie us to Cleveland, and looking for a regional approach, now we sit on the sideline looking for the scraps. Luckily through the library, arts, music, and food we have a "cool niche" but with the robberies, murders, shootings, car jackings. With the lack of a hospital and a proper engine one can only wonder for how long?

No I fear this group totally screwed the pooch looking no farther than their own self aggrandizement at the expense of the entire rest of the city.

Build Lakewood, hah! Screw and lie to Lakewood while cashing us out is more like it.

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[Mark Kindt]

Mr. Liston has made a very valid observation. As cities proceed through time, older buildings slowly drop from use and new buildings replace them. This is, more or less, a natural market-based process that can be quantified in terms of supply and demand.

I have no independent data of my own.

When we review the very recent public data that is available, it seems to illustrate that the projected demand for new apartment units in Lakewood is quite modest.

I cited the population trends in that public data to suggest that the projected demand for commercial office space or retail space might also be modest. I simply do not know. I do not have independent data to review. The presentation in the City's own market study seems to suggest that there is more than enough office space. (The conversion of Lakewood Center North from office space to apartment units seems to be evidence of this.) We also know generally that the nature of bricks-and-mortar retail is changing drastically now.

Obviously, new apartments and townhouses in Lakewood will attract new tenants and buyers.

Equally obvious, is that builders and developer who see sufficient demand will fulfill that demand for their own business reasons.

The topics that we will explore today will attempt to answer the question: "Why should the City of Lakewood subsidize a mixed use development project that does not appear to be viable on its own merits?"

[Tim Liston]

Jim I get all that, but it’s not my point. My point is, there’s no evidence presented above that “modern” housing will take years and years to assimilate, even though its population is stable at best. Which I believe is the premise of this thread, at least outwardly. And correct me if I’m wrong, but hasn’t the housing that’s been built in the last few years become occupied fairly quickly?

Did I say it’s a panacea? Nope. And it’s not. Did I say I like it? Nope. Heck I’m on record as saying that mixed-use developments make no sense in Lakewood (click here). It would make Lakewood seem like Crocker Park, while Crocker Park is trying to seem like Lakewood (but without the carjackings, though I seem to recall one in CP that also involved a kidnapping).

I really resent the notion proffered by city officials that the best use of languishing civic property is to maximize its property tax potential. And worse, that such an outcome justifies a sham “sale” (McKinley school) and a sham “auction” (Warren Road BOE property). I’m on record (above) as saying that such properties should remain civic assets. Isn’t that one reason we pay such high taxes? I think that’s Mark’s point too, though he goes about it kind of obliquely IMO.

(And I do wonder if someday the Ohio Supreme Court is finally going to demand that the Ohio legislature comply with its multiple rulings on property taxes vis a vis school funding, and thereby render it all pointless.)

Lakewood has a ton of things going for it. The lake. Density. Proximity to downtown Cleveland and the airport. Detroit and (especially) Madison. Parks. Diverse housing options. Decent schools (as government schools go). Walkability. And bikeability too, if they don’t ruin it first. Leveraging those assets is Lakewood’s best hope for not just sustainability, but prosperity. And it’s how you build Lakewood….

[Mark Kindt]

Keeping in mind that the City of Lakewood entered into a Master Agreement that will subsidize a to-be-created foundation to the tune of $32,000,000 with funds that could/should have been repatriated to the City, we can see additional public subsidies in the works, as follows:

We know from public statements of the Mayor and the Planning Director, that certain public subsidies have been offered to the proposed developer of the former hospital site.

The city administration has proposed giving the former hospital site to the proposed developer for $0.00 or $1.00.

The city administration has proposed providing between $7,000,000 to $10,000,000 in site preparation to the proposed developer.

The total value of these public subsidies to the proposed developer is approximately $12,000,000 to $15,000,000.

The former hospital site has an approximate value of $5,000,000 based on similar recent nearby sales. (It could actually be higher given other public statements by public officials.)

At the time the City's own market study was made, the city administration did not have any independent appraisal of the value of the former hospital site. It is my understanding that this is only being done because council-members recently requested it.

This failure to obtain independent appraisals is similar to the city administration's previous failure to have Lakewood Hospital appraised as a going-concern.

[Jim O'Bryan]

Lakewood has a ton of things going for it. The lake. Density. Proximity to downtown Cleveland and the airport. Detroit and (especially) Madison. Parks. Diverse housing options. Decent schools (as government schools go). Walkability. And bikeability too, if they don’t ruin it first. Leveraging those assets is Lakewood’s best hope for not just sustainability, but prosperity. And it’s how you build Lakewood….

Tim

I actually think we are all saying the same things, but Mark is using documents.

An analogy I would use on this is, WE had a very healthy community fish tank, than the person in charge of keeping it clean for no rhyme or reason decided to sell the air pump and filter, for money and strictly to benefit their friends. Now the fish tank and fish tank maintenance guy are desperately scrambling to 1) Justify the heist and sale, 2) to not allow the tank to get toxic and kill the community off.

ZERO thought before, well actually as we know from the documents that were uncovered they did it for themselves and the Summers Rec Center, but when they got caught, and it was proven and underline by most communities a real losing idea, they just started making shit up.

Also be prepared to hear an announcement that we are awarded(paid for) a plan that will allow Lakewood to do everything you have underlined we have already done. And the awards will flow(paid for) and the Mayor's friends will get jobs managing the group (already happening). They will ignore the needs of the community while they pat themselves on the back for being successful at various social events and parties.

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[Mark Kindt]

The City's own market study does not provide any qualitative or quantitative support for subsidizing a mixed-use development with public assets or public funds.

The market study provides no analysis, no comparative data, and provides no rationale for such public subsidies.

When the city administration doesn't even know the value of the real estate that it is proposing to donate to the proposed developer, what reasoned justification can they provide for $12M to $15M in public subsidies for this project?

[Mark Kindt]

Now, we can add another argument to the list:

Argument No. 1. There is a strong qualitative argument that the former hospital site be redeveloped for purposes that are broadly public, civic, beneficial and innovative with high on-site employment levels.

Argument No. 2. The quantitative data provided by the federal government does not support the proposed construction of new apartments at the former hospital site.

Argument No. 3. The quantitative data provided by the City's own consultant is even less supportive of the proposed construction of new apartments at the former hospital site.

Argument No. 4. The market study prepared for the city administration does not provide qualitative or quantitative support for the use of public subsidies for redevelopment of the hospital site.

[Mark Kindt]

Both Mr. Baker and Mr. Liston have raised the question about when and how public property should be returned to the tax base for taxation.

How do we maximize public revenues with public property like the former hospital site?

1. Sell the former hospital site to any willing private purchaser at market value for any permitted, zoned use, or modified use.

The City gains short-term revenue from the sale of the property, the real estate becomes subject to future property taxation, and may generate employee income tax revenues too.

2. Lease the former hospital site to any willing purchaser at market value for any permitted, zoned use, or modified use.

The City gains long-term revenue from lease payments and depending upon the use will likely gain employee income tax revenues as well, but property does not generate real estate tax revenue.

Mr. Austin's Tide Laundromat project could be accommodated by either of these two options. Nothing hard about this at all. What I am describing is typical.

And, to Mr. Baker's observation, time and scale do make a difference. The sooner the better. The bigger the better.

While the proposed redevelopment of the hospital site meets the "bigger" test, it only superficially meets the "sooner" test.

[Mark Kindt]

The city administration proposes to donate the land and subsidize the redevelopment of the former hospital site.

The Mayor recently stated in writing that "Once constructed, the property will generate at least $1.5 million in combined property and income tax annually."

How long will it take for these future tax payments to cover the cost of the public subsidies granted to the proposed developer?

The answer is ten (10) years!

or, alternatively,

The answer is eight (8) years!

(Calculation 1: $15M total subsidy amount divided by $1.5M equals 10 years)

(Calculation 2: $12M total subsidy amount divided by $1.5M equals 8 years)

Friends, the public subsidies could be higher in the final deal. No one know yet. I'm just working from public statements made by public officials. I have no inside information whatsoever. And, I could be wrong.

[Brian Essi]

Doesn't the above discussion lead to couple of predictions becoming a reality and, if so, I have some simplistic conclusions under scenarios:

1. It will take a decade or more for the proposed housing to become occupied--why are we subsidizing something that is not economically viable if, as Summers claims in "Lakewood Life", we already have "vibrant" neighborhoods?
OR
2. It will be occupied fairly quickly--why are we subsidizing housing if the developers/sellers can make a profit so easily?
OR
3. We have "vibrant" neighborhoods because we've historically had reasonable civic assets that attract folks to Lakewood --why are we privatizing civic assets with subsidies?

In other words, I don't disagree with anyone above---our City Leaders apparently lack the "intellectual capital" that Summers claims (in "Lakewood Life") our residents possess,----why does City Hall shun the Kindt/Liston et al brain trust who taxes finance City Hall's "Think Big" failures?

It seems that Summers is choosing the "head we lose, tails we lose" path.

[Stan Austin]

Too much "on the one hand, on the other hand" apartments/retail what is the real demand--- I'm tellin' you Tide Laundromat get P&G to finance it. Start small, get smaller.

[Mark Kindt]

Mr. O'Bryan reminds us that the city administration had years to plan the redevelopment of the former hospital site. Five years (or more) by my count. (2013 thru 2017) The decanting plan for the hospital is even earlier.

We also know that the city administration's plan for a mixed-use commercial/residential development on the former hospital site was not viable on its own independent business merit, because each of the developers that submitted proposals to the City required public subsidies to participate in the project.

From the City's own market study, we can conclude that the market capture for the redevelopment project is weak and in some cases speculative. That is the obvious explanation of why the proposed project cannot stand on its own two feet as a business venture.

The proposed project for the former hospital also seems pretty anemic from a potential tax revenue standpoint.

Once you compensate for the potential $15,000,000 in public subsidies, the proposed project only generates about $750,000/year in combined income and property tax revenue for the City over its first 20 years.

This is only about a third of what the City was receiving as a result of the contracts with Lakewood Hospital.

The proposed project does not capture the tax revenue shortfall from the loss of the hospital.

My major concern is that once we finally see the actual terms for the proposed project, we will identify other types of public subsidies buried in the fine print.