LORAIN — The city of Lorain took ownership of the Broadway Building on Monday night after City Council approved an ordinance in order for the property to qualify for tax-increment financing, or TIF, for its rehabilitation.
The building is slated to become a 55-room hotel, with the goal of putting the TIF and community reinvestment area tax abatement for the building’s development on Council’s July 2 agenda. The hotel has a target opening of July 2019.
The measure passed Monday will allow the city to momentarily take control of the property deed, satisfying the state’s requirements that the city own the building for a recent period of time to be able to grant a TIF, which, along with a CRA tax exemption, are part of the financial incentives offered to the developer, Ariel on Broadway. The developer also is seeking several state incentives and historic tax credits to finance the project.
“This is the first step in a process that may culminate in the redevelopment of the Lorain Broadway Building into a hotel,” Law Director Pat Riley said. “The financial structure for this transaction is complex and the mayor, safety/service director and I have been in a conversation with the Port Authority and their bond council … trying to one, understand the transaction and two, represent to Council that this first step is a first step that you should seriously consider doing.”
He said during the discussions, they have taken into account many concerns that came to light with the city taking the title of the Broadway Building, but the short period of time they will actually hold the title will minimize any risk to the city.
He said the city also has been assured by the Lorain Port Authority, who owned the building before City Council voted to take control of it, that they will have no exposure during its brief ownership, as the developer is required to assume all responsibilities for the building.
“We are only required by law to have title to it — not to hold it for a week, a month, a year, or 10 years,” Riley said. “So we can minimize any risk that someone might believe we would undertake as a city when we take title to the building, by the fact that we won’t own it long.”
The version Council voted on Monday was amended, providing language that the city is not required to move forward with the project unless it is satisfied that the deal actually will go through, Riley said.
Mayor Chase Ritenauer highlighted the amendment as well.
“(What) we have before us is a deal with many moving parts,” he said. “There’s state incentives, state tax credits, there’s this TIF legislation where state laws calls out that there has to be some acceptance of the deed by the city for a period of time.”
Councilman Dennis Flores, D-2nd Ward, questioned whether the city would be held liable years later if the business did not succeed.
Ritenauer explained that that was one of the key considerations in talks with the bond counsel and that the transfer would be “almost instantaneous,” allowing the deed to go back to the Port Authority and release the city of liability.
At a separate meeting, the school board approved the CRA/TIF agreement unanimously, one of the hurdles left before construction can begin, but it also was a topic of discussion at the district’s Academic Distress Commission meeting as well.
At the commission meeting, Lorain Schools CEO David Hardy brought up concerns about the amount of money the district could lose from the abatement.
“We are still in the middle of analyzing how it will impact the district from the preliminary numbers, but this is something that ultimately goes to the school board for approval or not,” Hardy said. “We could lose up to $2.6 million over time, so those are dollars that would not come to the school district from that property if it’s given an abatement.”
Commission Chairman Tony Richardson, who also served on City Council from 2012 to 2015, said the idea behind the abatement is to encourage companies — and people — to come to the area.
“It’s about investing in your community to bring a diverse group of businesses,” Richardson said. “You’re trading property taxes for income and you’re trading school revenue for city revenue, but it’s about the wellness of the city.”
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