Cleveland and Bedrock seek $1 billion for riverfront development – ​​NEOtrans

The Kayak Launch Plaza at Bedrock Real Estate’s Riverfront development is just one of many public infrastructure features the city and developer are working to build together. A Tax Increment Financing District is being created to help with much of that public infrastructure (Adjaye Associates). CLICK ON IMAGES TO ENLARGE.

City TIF and Bedrock to build riverbank foundations

The City Planning Commission voted unanimously today to recommend that the City Council approve a 45-year, project-specific tax-increment financing (TIF) deal with Bedrock Real Estate to generate $400 million for infrastructure to support Bedrock’s $3.5 billion riverfront development. This would create a second, albeit smaller TIF district downtown to support major improvements to the waterfront and urban core that could ultimately generate up to $1 billion in public funds for the riverfront.

The Bedrock Project-Based Riverfront TIF would be pulled out of the larger city TIF District from Coast to Core to Coastpassed by the City Council in March. The reason is that a different state law applies to a project-based TIF than to a district-wide TIF, and two TIFs cannot apply to the same property. City officials negotiated a community benefits agreement (CBA) with Detroit-based Bedrock, associated with the TIF, to help neighborhoods plus minority/disadvantaged businesses and employees.

The development of Bedrock on the river in several phases proposes more than 12 acres of public space along the Cuyahoga River, 2,000 new residential units, and more than one million square feet of office space, retail, and entertainment. The city anticipates an economic impact of more than 30,000 new direct jobs and more than $10 billion in new taxes generated by the riverfront development over the next 30 years.

The riverfront TIF will support public improvements including district parking, a riverfront promenade, road relocation, bridge construction, public parks and open space, plus utilities, site cleanup and more, said Emily Collins, Cleveland Mayor Justin Bibb’s senior advisor for major projects. Any city bond issuances resulting from the Bedrock Project TIF are subject to City Council approval.

The TIF is scheduled to begin in 2027, coinciding with the expected completion date of the 2.2 million-square-foot building. Cleveland Clinic Global Peak Performance Center in partnership with the Cleveland Cavaliers. Construction on that facility is scheduled to begin this fall, but site preparations have already begun. The TIF is for 30 years with an option to extend for an additional 15 years.

The properties shaded in blue are parcels that will be taken out of the recently approved Shore-to-Core-to-Shore tax increment financing district and placed into a proposed Bedrock riverfront project tax increment financing agreement. The parcels outlined in dotted lines are air rights parcels above ground, including much of Tower City Center and the streets built on bridges above the track level of the former Cleveland Union Terminal train station (City of Cleveland).

“As projects are built, they will begin to generate TIF revenue,” Collins said today at the planning commission meeting. “Only early TIFs on projects will last the full 45 years. Based on current construction estimates, the average TIF term of a project will be 38 years. This is a non-school TIF, which means that no taxing entity will receive a penny less in property taxes than they do now because of the Bedrock Project TIF.”

Payments in lieu of taxes (PILOTs) from Bedrock’s vertical developments will be deposited into the Bedrock Project TIF. PILOTs from land value appreciation will continue to go to the Shore-to-Core-to-Shore TIF District, as approved by the City Council in March, Collins said.

The Shore-to-Core-to-Shore TIF District was expected to generate at least $3.3 billion over the next four decades. The Bedrock Project TIF would subtract an amount capped at $400 million from that. Another $75 million in expected riverfront infrastructure investments will be Bedrock’s responsibility. However, Collins said additional state and federal subsidies will reduce the city’s contributions to the TIF District and Bedrock’s commitment.

That includes nearly $10 million in pre-TIF infrastructure works started a year ago for the Cleveland Clinic Global Peak Performance Center next to Collision Bend on the Cuyahoga River. That came from a mix of public and private sources. Another $10 million in state funds was committed to the Bedrock riverfront development in the State of Ohio’s $4.2 billion capital budget.

The Bedrock Project TIF includes an expanded CBA requiring Bedrock to build approximately 400 housing units (or 20 percent of all projected units) at or below market rents. Of these, 160 units will be available to households with incomes ranging from 30-60 percent of the area median income and 240 units will be available to households with incomes ranging from 60-120 percent of the area median income.

The first phases of Bedrock’s riverfront development are actually considered Phase 1A and Phase 1B. Both require significant infrastructure improvements, including new sheet piling along the river, relocated streets and sewers, public spaces, and a new Eagle Avenue ramp from Ontario Street (Bedrock).

And at least 5 percent of the homes built in the Bedrock Riverfront development must be designated as for-sale units. While it’s a small number, that share of for-sale units has been a point of pride for city officials, who said they want to see more for-sale units downtown despite the city’s rollback of incentives in the form of tax breaks on residential developments last year.

Bedrock will also make a total of $25 million in neighborhood contributions at certain project milestones. That includes $15 million to a neighborhood investment fund, $5 million to a minority business lending fund, $3 million in workforce development contributions, $1 million in city resident contributions, plus $1 million for mentoring and training. Collins said the CBA is a new model for managing projects for the city.

“It’s our most aggressive and comprehensive CBA that we’ve had to date,” she said. “This project and this initiative is a way for us to really get all of these benefits while still protecting the general fund.”

“Some of that money will be available over the next year or so to invest in city neighborhoods,” added Tyson Mitchell, director of Cleveland’s Office of Equal Opportunity.

Other CBA elements in the Bedrock Project TIF include commitments to small and minority businesses requested by the city, Mitchell added. That includes awarding 40 percent of contracts to minority-, women-, and Cleveland-based small businesses.

The annual revenues generated by the proposed Bedrock Project tax increase for riverfront infrastructure are less than the revenues generated by the already approved Shore-to-Core-to-Shore TIF (City of Cleveland).

Twenty percent of the project workforce must be Cleveland residents, and 4 percent of the residents’ employees’ hours must be worked by low-income individuals, he said. And there must be mentor-protégé participation, as well as reduced rent or free retail spaces made available in the development for small businesses.

Planning Commission Vice Chairman August Fluker said he wants metrics to track and measure the CBA’s outcomes to see if it’s living up to its promises. He said the city has long been bad at that with other CBAs.

“Historically, in this city, throughout my life, we haven’t done much to understand what success looks like, not just in numbers and checking boxes, but to make sure that those results are measurable and actionable.”

“We’re tracking the goals of the minorities,” Mitchell responded. “We’re going to put these community benefits into our system and they’re going to be tracked throughout the project with milestones and outcomes and we’ll have some good success stories to tell when we’re done.”

He noted that one specific component of the CBA involves hiring a “community benefit fellow” – a five-year project led by a staff member to explore opportunities within the project to be more equitable and create more wealth in the community.

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