NuCLEus Cleveland rendering

A rendering shows an early vision of the nuCLEus project in downtown Cleveland's Gateway District, near Quicken Loans Arena. The project has since been scaled down and broken into phases, though developer Stark Enterprises hasn't released revised designs or site plans.

(NBBJ)

CLEVELAND, Ohio - If the ambitious nuCLEus development in downtown's Gateway District gets off the ground, it will do so without a special tax break from Cleveland's schools.

Eric Gordon, chief executive officer for the Cleveland School District, confirmed Tuesday that an unusual tax-increment financing deal for nuCLEus is off the table. He doesn't plan to ask the Cleveland Board of Education, the district's governing body, to vote on such a proposal.

The board shelved a vote on a potential tax deal in August 2017, after a monthlong run of community meetings and a public information campaign. At the time, the district attributed the delay to ongoing talks between the city of Cleveland and Cuyahoga County about the overall public-financing plan for the project, which would bring offices, apartments, retail, entertainment and garage parking to a site north of Quicken Loans Arena, at East Fourth Street, Prospect Avenue and Huron Road.

Now Gordon says the passage of time and changing circumstances for the district make the tax deal less compelling. He said his decision to end talks had nothing to do with developer Stark Enterprises or the merits of the project.

"I don't think the Stark people have done anything but a good-faith effort to treat the district well. ... It's just that conditions about us and the taxpaying community are different than they were a year ago," Gordon said.

That doesn't mean nuCLEus is dead.

"We're not going to comment on the school board, but we look forward to closing the financing gap with our public partners," said Ezra Stark, chief operating officer for family-owned Stark Enterprises of Cleveland.

Public officials confirmed that the city and county are talking to the developer about ways to fill funding holes, since rents in Cleveland still aren't high enough to support the cost of high-rise construction without subsidies.

And state legislators are considering a bill that could give nuCLEus a boost in the form of a tax credit for "transformational mixed-use developments." The legislation, House Bill 469, was drafted with input from developer Bob Stark and a Cleveland financial consultant. A refined and broadened version passed the House in June and is pending in the Senate.

But Cleveland's school board won't vote on giving up 30 years of gains in property-tax revenues on the nuCLEus site, in exchange for a lump-sum payment from the developer.

That's the deal floated last year - an atypical one, since Mayor Frank Jackson has been unwilling to let developers strike one-off deals to tap the district's share of property-tax bills. In Cleveland, tax-increment financing agreements typically reallocate only the non-school portion of property-tax revenues, or roughly 40 percent.

Stark offered the district $18 million up front, in place of anticipated new taxes created by nuCLEus. The district talked about using that money to construct schools, which are eligible for state matching funds of just over $2 for each dollar the district spends on approved projects.

In presentations last year, district officials basically weighed the value of $56 million today versus an estimated $121 million in new tax payments over three decades.

But the complicated, and controversial, proposal went dormant in the months leading up to November's mayoral election. By the time the request seriously re-emerged this summer, Gordon said, many things had changed.

First, the size and timing of the project are different. Revised plans for nuCLEus, which once called for a 54-story tower, are more modest, with shorter buildings, fewer apartments, more office space, no hotel - and a smaller budget. Stark also has broken the development into phases, spreading out the investment over time.

Despite those adjustments, the developer ultimately offered the schools a little-changed deal, Gordon said. But the district didn't have time to conduct another community roadshow to solicit feedback on the reworked proposal.

Second, the district and the Ohio Facilities Construction Commission in Columbus are mired in a dispute over the costs of school construction projects and which local spending qualifies for the state match. That disagreement has intensified over the last year, making it tougher for Gordon to predict how much state funding an $18 million payment from Stark would secure.

And, third, Cuyahoga County recently finished a reappraisal that found climbing home values in many areas, with dramatic jumps on the West Side and in a handful of suburbs. Those higher appraisals will raise property taxes for many homeowners, though swings in tax bills - available late this year and payable next year - generally won't be as steep as the value shifts.

"There's the very real issue of why would we be giving tax relief to this builder or any builder ... when taxes are going up," Gordon said.

Apartments at nuCLEus still would qualify for property-tax abatement under the city's blanket policy of offering 15 years of tax breaks on new residential construction and renovation projects that meet certain green-building standards. It's not clear, at this point, what the value of that abatement would be.