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FEATUREREAL ESTATE LAW

CLEVELAND:

A GROWING METROPOLIS

PUBLIC FINANCE AND TAX INCENTIVES

FUEL CLEVELAND’S DEVELOPMENT

BY DAVID HALES & ALEC F. DAVIDSON

leveland has gone through the renovations will include some portion of In addition to these powers, port authorities
quite the makeover in recent private and public finance. may issue bonds or notes for the acquisition,
years. Since 2015, the real estate What caused this increase in real estate construction, furnishing or equipping of real or
development market in the development in the downtown area? Public personal property for the above noted authorized
Cdowntown area has boomed, financing tools and federal and state tax incentives purposes. Ohio Revised Code § 4582.06(A)(3).
with dozens of projects utilizing private and that offer substantial enticements to real estate There are several benefits to utilizing port
public financing tools to create new multi- developers and investors is certainly a significant authority financing, including tax-free interest
use properties. Examples of these large-scale reason for the trend. These options have been for the purchasers of bonds in instances of
construction projects include the Flats East used to varying degrees, but have continued to construction of public improvements. Perhaps
Bank, which turned a once dilapidated area of be a substantial portion of the financing and the largest benefit, at least for large real estate
the Flats into a residential and commercial center investment obtained for the revitalization of development projects, is the Ohio sales tax
of the city, and the planned construction of the downtown Cleveland. exemptions that a developer may obtain for
NuCLEus Project, which will further transform Perhaps the most significant public entity to construction materials. Port authorities are
Cleveland’s Gateway District near Progressive promote high-end real estate development in generally exempt and not required to pay “any
Field and Rocket Mortgage FieldHouse (which Cleveland is the Cleveland-Cuyahoga County taxes on property, both real and personal, or
itself is completing a $140 million renovation). Port Authority. A port authority is a quasi- any combination thereof, belonging to any port
Large skyscraper, multifamily apartment governmental organization created for the authority that is used exclusively for” any of the
complexes such as the Beacon Apartments near express purpose of, in part, engaging in activities above noted authorized purposes. Ohio Revised
the East Fourth District, the One University that “enhance, foster, aid, provide, or promote Code § 4582.20. This, in turn, provides the key
Circle apartment tower near the Cleveland Clinic transportation, economic development, housing, for significant savings for real estate developers
and University Hospitals campuses, and the recreation, education, governmental operations, through the use of the port authority’s tax
Lumen Tower Project in the Playhouse Square culture, or research within the jurisdiction of the exemption, when financed via the port authority’s
District are likewise utilizing the financing and port authority.” Ohio Revised Code § 4582.01(B) issuance of bonds or other debt instruments.
investment tools offered through both public (1). Port authorities have specific powers Typically, construction materials amount
and private means. In keeping with this surge of provided by statute, which include the ability to approximately half of the expenses of large
downtown development, the city of Cleveland to “acquire, construct, furnish, equip, maintain, scale development projects. On the real estate
has turned its eye to renovating its outdated repair, sell, exchange, lease to or from, lease with side, as part of port authority financing, the port
justice center complex, which houses the county an option to purchase, convey other interests must retain a requisite ownership interest in the
jail, the Cuyahoga County Court of Common in, or operate real or personal property, or any project to qualify for the sales tax exemptions.
Pleas, the Cleveland Municipal Court, the county combination thereof, related to, useful for, or in This can include the port authority owning the
prosecutor and the sheriff’s department. While furtherance of” any of the above noted authorized property in fee simple and leasing the property to
plans are preliminary at this time, it is likely that purposes. Ohio Revised Code § 4582.06(A)(1). the developer under a capital lease. In such case,
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