Explanation
Background: M/I Homes of Central Ohio, LLC, Pulte Homes of Ohio, LLC, SW Luxury Apartment Homes, LLC and Walnut Land Holding, LLC (collectively, the “Developers”) plan to develop or are developing approximately ±227.13 acres (the “Developers’ Property”) located within the far northeast area of the City of Columbus. Pursuant to Ordinance 1703-2017, the southeastern portion of the Developers’ Property along Harlem Road may have a maximum 296-unit residential development, and pursuant to Ordinance 1765-2019, as amended by Ordinance 0486-2020, the northwestern part of the Developers’ Property along Walnut Street allows for a maximum of 765 mixed-residential units, altogether an estimated $318,000,000 value in improvements. Pursuant to Ordinance 2932-2019 and Ordinance 2934-2019, respectively, the Director of the Department of Development entered into separate agreements dated March 11, 2019 with Pulte Homes of Ohio, LLC (the “Harlem Road Plan”) and November 22, 2019 with Cimenello Incorporated (the “Walnut Street Plan”). The Harlem Road Plan and the Walnut Street Plan identified three public revenue generation sources, including tax increment financing (“TIF”), for financing regionally beneficial public infrastructure improvements to grow with a plan in NE Columbus. A portion of the Developers’ Property which has not already been included in an existing TIF incentive district nor has already been developed and which encompasses about 706 new residential units with a value of approximately $142,000,000 will be included in this new TIF incentive district in accordance with the Harlem Road Plan and Walnut Street Plan.
This Ordinance establishes a TIF incentive district under Ohio Revised Code Section 5709.40(C). The proposed TIF incentive district (the “Harlem-Walnut Incentive District”) is “L” shaped, and bounded by Harlem Road to the most eastern extent, Walnut Street to the most northern extent, the City’s Walnut South and Hamilton-Central College Incentive Districts to the southwest and Plain Township to the northeast, the boundary of which shall be coextensive with the outside boundaries of Franklin County Tax ID Parcels Nos. 010-302730, 010-267723, 010-299459, 010-299458, 010-302548, 010-302547, 010-267724, 010-302731, 010-303832, 010-303833, and 010-303834, as modified or supplemented. The Harlem-Walnut Incentive District provides for a fifty percent (50%) exemption from real property taxation on improvements to the parcels within the incentive district for a period coextensive with the life of the incentive district containing such parcels for a term of not more than thirty (30) years. Columbus City Schools will receive, in the same manner as usual, all amounts that they would have received in real property taxes had the tax exemption not been granted. The City, Franklin County Board of Commissioners, and the appropriate taxing authorities under ORC Section 5709.40(F) will receive, in the same manner as usual, fifty percent (50%) of the amounts that they would have received in real property taxes. Those appropriate taxing authorities will also receive the amounts they would have received in real property taxes attributable to any amount by which the effective tax rate of either a renewal levy with an increase or a replacement levy exceeds the effective tax rate of the levy renewed or replaced, or that are attributable to an additional levy, for a levy authorized by the voters on or after January 1, 2006 for any applicable services as described in ORC Section 5709.40(F)(1)-(13). Annual service payments in lieu of taxes will be made by the owners of each parcel with respect to improvements to the incentive district parcels. The applicable portion of those service payments will be distributed directly to Columbus City Schools and the appropriate taxing authorities as described herein, and the remaining portions of those service payments paid to the City for deposit into the appropriate TIF fund established in this Ordinance to be used to finance public infrastructure improvements benefiting or serving the incentive district parcels.
Emergency Justification: Emergency legislation is required to allow for the immediate effectiveness of this ordinance, which is necessary in order to establish the incentive district prior to the assessment of any improvements to the incentive district parcels and before the end of the year to maximize revenue available for public infrastructure improvements.
Fiscal Impact: No funding is required for this legislation. The City is foregoing fifty percent (50%) of the real property tax revenue that it would have received from development on the incentive district parcels. Instead, the portions of that revenue not owed to the schools and other taxing authorities, as described herein, will be diverted to the TIF fund.
Title
To create the Harlem-Walnut Incentive District encompassing undeveloped property on the far northeast side of Columbus; to declare improvements to those parcels to be a public purpose and exempt from real property taxation; to require the owners of those parcels to make service payments in lieu of taxes; to require the distribution of the applicable portion of those service payments to Columbus City Schools and the appropriate taxing authorities; to establish a municipal public improvement tax increment equivalent fund for the deposit of the remainder of those service payments distributed to the City; and to declare an emergency.
Body
WHEREAS, pursuant to Ordinance 2534-2003 passed by Council on December 1, 2003, Council adopted and approved the Economic Development Plan for Rocky Fork District (the “Development Plan”), which identified the establishment of an incentive district in the far northeast of Columbus that would enable the City to provide funding for public infrastructure improvements identified by the Development Plan; and
WHEREAS, M/I Homes of Central Ohio, LLC, Pulte Homes of Ohio, LLC, SW Luxury Apartment Homes, LLC and Walnut Land Holding, LLC (collectively, the “Developers”) plan to develop or are developing residential development with a maximum of 1,061 units estimated at an approximate value of $318,000,000 (the “Project”) on approximately ±227.13 acres located in the far northeast area of the City of Columbus within the Development Plan area (the “Developers’ Property”); and
WHEREAS, pursuant to Ordinance 1703-2017 rezoning a portion of the Developers’ Property, the part of the Project near the southeastern portion of the Developers’ Property along Harlem Road may have a maximum 296-unit residential development, a portion of which is already constructed or under construction; and
WHEREAS, pursuant to Ordinance 1765-2019 as amended by Ordinance 0486-2020, rezoning a portion of the Developers’ Property, the part of the Project near the northwestern part of the Developers’ Property along Walnut Street allows for a maximum of 765 mixed-residential units, a portion of which is already constructed or under construction; and
WHEREAS, pursuant to Ordinance 2932-2019 and Ordinance 2934-2019, respectively, the Director of the Department of Development entered into separate agreements dated March 11, 2019 with Pulte Homes of Ohio, LLC (the “Harlem Road Plan”) and November 22, 2019 with Cimenello Incorporated (the “Walnut Street Plan”), which the plans identified three public revenue generation sources, including tax increment financing (“TIF”), for the Developers’ Property to finance regionally beneficial public infrastructure improvements; and
WHEREAS, a portion of the Developers’ Property which has not already been included in an existing TIF incentive district nor has already been developed and which encompasses about 706 new residential units of the Project with a value of approximately $142,000,000 will be included in this new TIF incentive district in accordance with the Harlem Road Plan and Walnut Street Plan; and
WHEREAS, Ohio Revised Code (“ORC”) Sections 5709.40, 5709.42, and 5709.43 (collectively, the “TIF Statutes”) authorize this Council, by ordinance, to create one or more incentive districts, declare the improvement to parcels of real property located within each incentive district to be a public purpose and exempt from taxation, require the owner of each parcel to make service payments in lieu of taxes, provide for the distribution of the applicable portion of such service payments to the subjected school districts and the appropriate taxing authorities, establish one or more municipal public improvement tax increment equivalent funds for the deposit of those non-school and non-taxing authority service payments, and specify the purposes for which money in those funds will be expended; and
WHEREAS, in relation to the undeveloped portion of the Developers’ Property not already subject to a TIF incentive district, this Council has determined that it is necessary and appropriate and in the best interest of the City to establish a new incentive district (the “Harlem-Walnut Incentive District”) whose boundaries shall be coextensive with the boundaries of, and shall include, the parcels of real property specifically identified and depicted in Exhibit A attached hereto (each individually, a “Parcel” and collectively, the “Parcels”) in order to properly facilitate the Project and to pay the costs of the public infrastructure improvements described in Exhibit B attached hereto (the “Public Infrastructure Improvements”); and
WHEREAS, pursuant to ORC Section 5709.40(C)(1), the City, having a population over 25,000 residents for the 2020 U.S. Census, determines that the sum of the taxable value of real property in each Incentive District for the preceding tax year plus the taxable value of all real property in the City that would have been taxable in the preceding year were it not for the fact that the property was in an existing incentive district and therefore exempt from taxation does not exceed twenty-five percent (25%) of the taxable value of real property in the City for the preceding tax year; and
WHEREAS, no Parcel is or has been exempt from taxation under ORC Section 5709.40(B) or another incentive district under ORC Section 5709.40(C); and
WHEREAS, pursuant to ORC Sections 5709.40(A)(5) and 5709.40(C)(3)(a), the Harlem-Walnut Incentive District is an area not more than three hundred acres in size enclosed by a continuous boundary and includes a portion of the Project being or to be undertaken that places additional demand on the Public Infrastructure Improvements; and
WHEREAS, pursuant to ORC Section 5709.40(5)(f), the engineer for the City has certified the public infrastructure serving the Harlem-Walnut Incentive District is inadequate to meet the development needs of the Harlem-Walnut Incentive District as evidenced by the Development Plan (a copy of the engineer’s certification and Development Plan attached together hereto as Exhibit C); and
WHEREAS, the Harlem-Walnut Incentive District exempts from taxation fifty percent (50%) of the improvements to each Parcel as permitted and provided in ORC Section 5709.40(C), as applicable, for up to a thirty (30) year period coextensive with the life of the Harlem-Walnut Incentive District containing such Parcel, and to simultaneously direct and require the current and future owners of each Parcel (each individually an “Owner” and collectively the “Owners”) to make annual payments in lieu of taxes (the “Service Payments”), in the same amount as they would have made real property tax payments but for the exemptions provided by this Ordinance; and
WHEREAS, the appropriate taxing authorities under ORC Section 5709.40(F) will also receive the amounts they would have received in real property taxes attributable to any amount by which the effective tax rate of either a renewal levy with an increase or a replacement levy exceeds the effective tax rate of the levy renewed or replaced, or that are attributable to an additional levy, for a levy authorized by the voters on or after January 1, 2006 for any applicable services as described in ORC Section 5709.40(F)(1)-(13); and
WHEREAS, the City has determined that the applicable portion of the Service Payments shall be paid directly to Columbus City Schools (the “School District”) in an amount equal to the real property taxes that the School District would have been paid if the improvement to each Parcel located within the School District had not been exempt from taxation pursuant to this Ordinance; and
WHEREAS, notices of this proposed ordinance have been delivered to the Owners, Council conducted a public hearing on this Ordinance, notice has been delivered to the Board of County Commissioners of Franklin County, Ohio (the “Board”), and notice of this proposed ordinance has been delivered to the Board of Education of the School District in accordance with and within the time periods prescribed in ORC Sections 5709.40 and 5709.83, respectively; and
WHEREAS, pursuant to ORC Section 5709.40(E) and the Board’s Resolution No. 0833-21, the Board formally objected to the exemption for the number of years in excess of ten (10) until such time as either the Board negotiates a mutually acceptable compensation agreement with the City or the City proceeds to create the Harlem-Walnut Incentive District providing for compensation to the County at the default rate as set forth in ORC Section 5709.40(E)(2); and
WHEREAS, the City has determined to enter into a compensation agreement (the “Compensation Agreement”) with the Board pursuant to ORC Section 5709.40(E), wherein the City has agreed to modify its plan to enact a fifty percent (50%) exemption rather than a one-hundred percent (100%) exemption as originally contemplated and the Board shall receive, in the same manner as usual, an amount equal to fifty percent (50%) of the real property taxes that the Board would have been paid for the improvement to each Parcel located within the Harlem-Walnut Incentive District; and
WHEREAS, the City and the Board have additionally agreed, pursuant to the Compensation Agreement, that the City and the appropriate taxing authorities under ORC Section 5709.40(F) shall receive, in the same manner as usual, an amount equal to fifty percent (50%) of the real property taxes that they would have been paid for the improvement to each Parcel located within the Harlem-Walnut Incentive District due to the City’s agreement to modify it’s original plan to seek a one hundred percent (100%) exemption to a fifty percent (50%) exemption; and
WHEREAS, pursuant to ORC Section 5709.43(A), this Council has determined to establish a municipal public improvement tax increment equivalent fund in which there shall be deposited the appropriate remaining non-school and non-taxing authority Service Payments distributed to the City as provided herein; and
WHEREAS, an emergency exists in the daily operations of the Department of Development in that this Ordinance needs to be immediately effective in order to establish the Harlem-Walnut Incentive District prior to the assessment of any Project improvements to the Parcels and before the end of the year to maximize revenue available for the Public Infrastructure Improvements, such action being necessary for the preservation of the public health, peace, property and safety; NOW, THEREFORE,
BE IT ORDAINED BY THE COUNCIL OF THE CITY OF COLUMBUS:
Section 1. Parcels and Creation of Incentive District. The real property subject to this Ordinance is identified and depicted in Exhibit A (as currently or subsequently configured, the “Parcels”, with each individual parcel, a “Parcel”), and pursuant to the TIF Statutes, this Council hereby creates a new tax increment financing incentive district (the “Harlem-Walnut Incentive District”), the boundaries of which shall be coextensive with the boundary of, and shall include, the Parcels.
Section 2. Public Infrastructure Improvements. This Council hereby designates the public infrastructure improvements described in Exhibit B (the “Public Infrastructure Improvements”) and any other public infrastructure improvements hereafter designated by ordinance as public infrastructure improvements made, to be made, or in the process of being made that benefit or serve, or that once made, will benefit or serve the Parcels.
Section 3. Exemption. Pursuant to ORC Section 5709.40(C), this Council hereby finds and determines that fifty percent (50%) of the increase in assessed value of each Parcel subsequent to the effective date of this Ordinance (which increase in assessed value is hereinafter referred to as the “Improvement” as defined in ORC Section 5709.40(A)) is hereby declared to be a public purpose and exempt from taxation for a period coextensive with the life of the Harlem-Walnut Incentive District containing such Parcel, which commences for the Harlem-Walnut Incentive District with the first tax year that begins after the effective date of this Ordinance and in which an Improvement first appears on the tax list and duplicate of real and public utility property for a Parcel in the Harlem-Walnut Incentive District and ending on the earlier of: (a) thirty (30) years after such commencement or (b) the date on which the City can no longer require service payments in lieu of taxes, all in accordance with the requirements of the TIF Statutes. The exemption provided by this ordinance is subordinate to any exemption for a Parcel granted pursuant to ORC Section 3735.65 et. seq. (community reinvestment area), ORC Section 5709.61 et. seq. (enterprise zone) and ORC Section 5709.08 (government and public property).
Section 4. Service Payments and Property Tax Rollback Payments. As provided in ORC Section 5709.42, the current and future owners of each Parcel (each individually an “Owner” and collectively the “Owners”) are hereby required to make service payments in lieu of taxes with respect to the Improvement allocable to each Parcel to the Franklin County Treasurer on or before the final dates for payment of real property taxes. The service payments in lieu of taxes will be charged and collected in the same manner and in the same amount as the real property taxes that would have been charged and collected against that Improvement if it were not exempt from taxation pursuant to this Ordinance, including any penalties and interest (collectively, the “Service Payments”). The Service Payments, and any other payments with respect to each Improvement that are received in connection with the reduction required by ORC Sections 319.302, 321.24, 323.152 and 323.156, as the same may be amended from time to time, or any successor provisions thereto as the same may be amended from time to time (the “Property Tax Rollback Payments”), will be deposited and distributed in accordance with this Ordinance.
Section 5. TIF Fund. This Council establishes, pursuant to and in accordance with the provisions of ORC Section 5709.43, the Harlem-Walnut Municipal Public Improvement Tax Increment Equivalent Fund (the “TIF Fund”) into which the appropriate Service Payments and Property Tax Rollback Payments collected with respect to the Parcels of the Harlem-Walnut Incentive District and not required pursuant to this Ordinance to be distributed to Columbus City Schools (the “School District”) and any other appropriate taxing authority under ORC Section 5709.40(F) (the “Taxing Authorities”) will be deposited. The TIF Fund will be maintained in the custody of the City. The City may use amounts deposited into the TIF Fund only for the purposes authorized in the TIF Statutes and this Ordinance (as it may be amended). The TIF Fund will remain in existence so long as the Service Payments and Property Tax Rollback Payments are collected and used for the aforesaid purposes, after which time the TIF Fund will be dissolved and any surplus funds remaining therein transferred to the City's General Fund, all in accordance with ORC Section 5709.43.
Section 6. Distributions; Payment of Costs. Pursuant to the TIF Statutes, the County Treasurer is requested to distribute the Service Payments and Property Tax Rollback Payments as follows:
a. To the School District, an amount equal to the amount the School District would otherwise receive as real property tax payments (including the applicable portion of any Property Tax Rollback Payments) derived from the Improvement to each Parcel if the Improvement had not been exempt from taxation pursuant to this Ordinance.
b. To the Taxing Authorities, an amount equal to the amounts they would have received in real property taxes attributable to any amount by which the effective tax rate of either a renewal levy with an increase or a replacement levy exceeds the effective tax rate of the levy renewed or replaced, or that are attributable to an additional levy, for a levy authorized by the voters on or after January 1, 2006 for any applicable services as described in ORC Section 5709.40(F)(1)-(13).
c. To the City, all remaining amounts for further deposit into the TIF Fund for payment of costs of the Public Infrastructure Improvements, including, without limitation, debt charges on any notes or bonds issued to pay or reimburse finance costs or costs of those Public Infrastructure Improvements.
All distributions required under this Section are requested to be made, unless required by the TIF Statutes to be made, at the same time and in the same manner as real property tax distributions.
Section 7. Further Authorizations. This Council hereby authorizes the Director of the Department of Development, the City Clerk or other appropriate officers of the City to deliver a copy of this Ordinance to the Ohio Department of Development and to make such arrangements as are necessary and proper for collection of the Service Payments. This Council further authorizes the Director of the Department of Development, the City Clerk, the City Attorney or other appropriate officers of the City to prepare and sign all agreements and instruments and to take any other actions as may be appropriate to implement this Ordinance.
Section 8. TIRC. The City’s Tax Incentive Review Council (TIRC) shall review annually all exemptions from taxation resulting from the declarations set forth in this Ordinance and any other matters as may properly come before the TIRC, all in accordance with Section 5709.85 of the Ohio Revised Code.
Section 9. Effective Date. For the reasons stated in the Preamble hereto, which is hereby made a part hereof, this Ordinance is hereby declared to be an emergency measure and shall take effect and be in force from and after its passage and approval by the Mayor or ten days after the passage if the Mayor neither approves nor vetoes the same.