Tax incentives that Columbus has used for years on developments in fast-growing districts such as the Short North now are far too generous, according to consultants the city hired last year.

The city hired HR&A Advisors in October to study how competitive Columbus is with other cities, how incentives affect development patterns and whether the city should be offering different types of incentives.

The answers are complicated. In some areas of the city, the abatements aren’t enough to create profitable, market-rate residential developments, according to a draft of the report The Dispatch obtained through a public-records request.

In others, they’re too generous — potentially leaving millions of dollars on the table.

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Among the biggest findings: Incentives for developers in the Short North are too high or, in some cases, completely unnecessary.

“The question is not whether or not we’ll stop offering incentives,” Mayor Andrew J. Ginther said. “What are the right types of incentives to offer? And what types of incentives can help us meet our critical public policy goals?”

Ginther said part of the reason he wanted the city to study tax incentives was so it could figure out how it could use them to expand affordable housing, offer better child care and expand access to quality pre-kindergarten education.

The study suggests that the city could offer an abatement but "recapture" a portion of the money by requiring developers to pay for other city objectives.

For example, the consultants say the city could generate about $1.7 million a year by recapturing 21 percent of the abated taxes that would be expected on new development in the Short North if trends continued there.

The study found that abatements aren’t needed to lure the mid-rise developments with surface parking that have popped up in the areas off High Street in the Short North. Those projects can be profitable for developers even without the incentives.

Developments with parking garages on High Street, though, cost more and still require incentives to bridge the financial gap. However, the incentives the city is offering those projects are still too generous, according to the study.

A larger portion of the Short North is abated than any of the other three neighborhoods the consulting firm analyzed. About 6 percent of parcels are abated in the Short North compared with 2 percent on the Hilltop and in the Near East Side and 1 percent in Linden.

The Short North also is by far the smallest neighborhood in that group.

Ginther said the city could continue to offer incentives to developers in fast-developing areas such as the Short North, but require them to include affordable housing or contribute to fixing other problems.

In areas that aren’t performing as well, the study says the city could continue using abatements. However, the consultants said other subsidies are needed as well to make residential development profitable for builders. Those areas include the Near East Side, Linden and the Hilltop.

For residential abatements to work in those neighborhoods without a subsidy, rents would need to rise anywhere from 25 percent to 100 percent, depending on the project and neighborhood.

Neighborhoods should be divided into three groups for which the city can tailor incentives to drive residential development, according to the study, and update them every four or five years.

Now, the city considers incentives on a case-by-case basis.

Ginther said the city still needs to use incentives to compete with other cities in the region and across the country to attract new jobs.

HR&A’s study found that Columbus is competitive with similar cities, but it needs to consider setting clearer “job quality targets.” For example, the city uses a $12 minimum wage as a guideline for the jobs it wants to create with incentives, but it is not city law.

Most companies already are offering that wage, according to the study.

The city also could offer bonuses on top of a base incentive, the study said, if companies locate in struggling areas, create jobs with higher wages or provide education and training for workers.

Downtown, the city needs to continue using incentives to draw development because rents have not risen high enough to make projects profitable, HR&A wrote. Columbus' Downtown development has paled in comparison with activity in Indianapolis, Cleveland and Cincinnati, according to the report.

Ginther said the final report should be finished by the end of the year, and his administration will begin forming policy changes once it is complete.

“Our hope is to put in place the final draft and the set of recommendations and set of priorities within the next year,” he said.

rrouan@dispatch.com

@RickRouan