CLEVELAND, Ohio - To spur development of downtown Cleveland's first true skyscraper in three decades, the city and its school system are considering an unusual property-tax deal.

The proposed arrangement would redirect new property-tax revenues created by the $540 million nuCLEus project, north of Quicken Loans Arena, to paying off construction debt.

Such structures, known as tax-increment financing, aren't new in Northeast Ohio.

But nuCLEus could be Cleveland's first real estate project in a decade to reallocate tax revenues otherwise earmarked for public schools. Mayor Frank Jackson historically has been unwilling to let developers tap the portion of a property-tax bill - roughly 60 percent - that flows to the Cleveland Metropolitan School District.

In this case, though, the schools and nuCLEus developer Stark Enterprises have come up with a plan that - they say - not only could push the ambitious project forward but also could give the school district access to a $56 million pot of cash for its own construction needs.

The math is complex, but the premise is simple: If the school board signs off, the district will forgo a long-term, and potentially variable, revenue stream in favor of the certainty of up-front money that could pay for a new high school or a handful of elementary schools.

The plan wouldn't impact residents' property taxes. It only involves revenues generated by - and potentially ploughed back into - development on the nuCLEus site at Prospect Avenue, Huron Road and East Fourth Street in the Gateway District.

"We were presented with a request," Eric Gordon, the district's chief executive officer, said during a recent interview. "We analyzed any way that the request could be beneficial to the residents and taxpayers of the district and, frankly, took off the table things that we didn't feel were. ... We came up with a creative strategy that, we think, makes the district whole."

This week, the district is launching a campaign to explain the TIF proposal to residents and solicit their feedback online and in person, at neighborhood meetings. The school board will take up the topic on Aug. 8 and will vote on whether to accept or reject the deal Aug. 22.

Cleveland City Council could vote on financing for nuCLEus in September.

The Jackson administration won't discuss the funding plan, which has been the subject of more than a year of talks between Stark Enterprises, the district and the city.

Gordon says transparency, at this point, is essential for the schools.

"It's so important to go out and educate people on this," he said, pointing to the unique and complicated nature of the nuCLEus proposal. "It's not business as usual for us."

Stark Enterprises and J-Dek Investments, Ltd., of Solon bought the nuCLEus property in September 2014. Within months, the Cleveland-based developer unveiled plans for a 54-story tower that would be downtown's fourth-tallest building.

Plans for the nuCLEus project include a high-rise residential tower, with a shorter office tower next door. A skyway-like hotel will link the buildings.

Marketing materials on Stark's website show a nearly 650-foot-high building, housing more than 400 apartments and a few dozen condominiums. The complex also would include a 120-room hotel, 200,000 square feet of offices, 2,100 garage parking spaces and street-level retail, anchored by a mammoth sports-focused entertainment venue called Cleveland Live!

The developer and its financial consultants conservatively predict the completed project will be appraised by Cuyahoga County at much less - possibly 54 percent less, or only $250 million - than it will cost to construct, based on Cleveland's relatively low rents and valuations of other downtown buildings.

That makes financing a challenge, leaving a hole the developer, investors and traditional lenders can't fill. And that's why the project has lingered in limbo for the past year or so, as the city and the schools grappled with a financially - and potentially politically - thorny issue.

"It's a very thin deal, this deal that we're doing," said Ezra Stark, chief operating officer at Stark Enterprises. "This project is a heavy lift. Without the teamwork of everyone involved in the community, it doesn't happen. But I believe the benefits to the community far outweigh the negatives."

A nuCLEus ground-floor plan posted on the Stark Enterprises website shows restaurants and entertainment venues including Cleveland Live!

Today, the schools receive $393,000 a year in taxes from the nuCLEus site, which carries a total property-tax bill of $650,000. The district will continue to collect property-tax revenues on the underlying land with or without a TIF. The financing deal only would impact new tax revenues - payments that don't exist today.

Under a TIF, Stark and J-Dek will use money they would normally pay in taxes on the buildings to repay debt on the project through 2046. That funding stream will help the partners obtain loans to pay for the development, now scheduled to open in 2021.

City Council laid the foundation for a more traditional TIF, with no impact to the schools, in late 2014. Under that to-be-scrapped arrangement, the county, city and other recipients of property-tax dollars would not have received increased payments from the project. But the schools would have received $121 million over 30 years based on the new construction value.

The new proposal goes further, outlining a 50-50 split of anticipated new taxes between the developer and the schools to fill additional project-funding gaps. Cleveland approved similar agreements more than a decade ago for construction of the Flats East Bank development on the Cuyahoga River and privately owned buildings occupied by the Veterans Administration in University Circle, but such revenue-sharing arrangements with the schools are extremely rare.

At 50 percent, the schools would gain $60.5 million in taxes over 30 years - much more than the district stands to get today, but only half of what a non-school TIF would produce.

For Gordon, that structure - and any proposal where the schools fell short - was a no-go. So Stark Enterprises, the schools and the city found a few ways to sweeten the deal and minimize the district's risks.

Here are the details of the plan:

* Instead of receiving a potential $60.5 million over 30 years, the schools will receive $18 million from Stark Enterprises next year when a financing deal for the project occurs. Gordon compares it to winning the lottery and accepting a lump-sum payout instead of an annuity, in which payments are spaced over several years.

The idea is that money is more valuable today, not later. The $18 million figure is based on a calculation of the up-front value of three decades' worth of partial tax payments.

* If the district earmarks that $18 million for capital projects, such as building schools, the money is eligible for state matching funds of just over $2 for every dollar the district spends. That could bring the district an additional $38 million, boosting the total to $56 million.

* There are real limits. State funds must be used for state-approved school construction and renovation projects. And lower-than-expected enrollment projections could cap how much the state will pay.

* But the district is likely to need more money for facilities than voters provided in a $200-million bond issue in 2014. That bond issue isn't likely to pay for all the new and rehabilitated schools in the district's official building plans. And there are projects beyond those plans that people in the community still want.

Gordon won't pinpoint specific properties, saying the district would seek suggestions from residents. But he did mention longstanding inquiries about building an East Side vocational high school similar to Max S. Hayes High School on the West Side.

* That $56 million today arguably would be more valuable than the full, 30 years of property-tax payments - totaling $121 million - that the district would collect under a more traditional, non-school TIF. That math involves assumptions about interest rates, inflation and the district's potential returns on its money.

* If the nuCLEus project, when built, has a lower value than the developer expects, that won't impact the schools. The proposed TIF agreement sets a floor, so the district won't receive less than $18 million at the outset.

If the complex is more valuable - appraised above $250 million upon opening and higher in later years - then the schools and the developer will split the upside, equally sharing in additional property-tax revenues.

* The agreement would apply only to existing taxes and renewals. If voters approve new tax levies, the district would receive 100 percent of its share of the proceeds.

* The district would have the right to audit the project a few years after nuCLEus opens. If changes in timing or the makeup of the development make the property more valuable, then the schools could receive extra money from the deal.

Saying he doesn't want to bias residents or school-board members, Gordon wouldn't offer an opinion on the TIF proposal. But, he added, "I wouldn't have brought something that I couldn't support if, in fact, people said 'Yes, this makes sense.'"

He acknowledged that if the schools and the city open doors to an unconventional deal with Stark, then other developers are likely to come knocking. The district's construction needs aren't infinite, though. Gordon said that $56 million might be enough to get the district close to the end of its construction plans, which will wrap up in 2021.

It's not clear how much money the district will need to realize those plans, which also call for fixing and updating schools - projects beyond the scope of the state match. The more bond-issue money the district spends on those unmatched projects, the more outside cash it will need to help build new schools or cover full state-funded renovations.

Councilman Kerry McCormack, who represents much of downtown and close-lying neighborhoods to the west, said he wholeheartedly supports the proposal.

"We're actually bringing in more tax revenue for the district," he said. "It's added value for our community - and we know that our market isn't what other places are. ... To me, this is an example of how projects in downtown Cleveland can generate money and support for the entire city of Cleveland."

McCormack expects City Council to take up legislation related to nuCLEus in August. But the body - the ultimate decision-maker on the TIF deal - won't vote until the school board has weighed in.

That legislation might include an additional, novel financing structure that would pledge new parking-tax revenues generated by the project to debt repayment.

Cleveland levies an 8 percent tax on parking. Under the potential financing deal, the city would continue to collect parking-tax revenues as it does today on the nuCLEus parcels, home to 600 or so spaces. But taxes generated by newly built parking - roughly 1,500 spaces - could flow back into the project.

Ezra Stark wouldn't discuss financing beyond the TIF proposal that's headed for a school board vote. County and state officials and the Cleveland-Cuyahoga County Port Authority have participated in funding talks, but the final lineup of sources isn't clear.

The city previously approved forgivable loans for nuCLEus to help with demolition and site clean-up. Apartments and condos in the complex will be eligible for 15 years of property-tax abatement under a widely used city program meant to encourage residential construction.

Plain Dealer education reporter Patrick O'Donnell contributed to this article.

A version of this story was published in the Friday, July 14 print edition of The Plain Dealer.