July 11, 2006

Cincinnati Is on the Verge of Another Eminent-Domain Nightmare

Filed under: Corporate Outrage,Economy,Taxes & Government — Tom @ 9:34 am

The Castle Coalition cites The City of Cincinnati as being among the nation’s worst offenders when it comes to using heavyhanded eminent domain tactics:

Cincinnati city leaders dream of a glitzy new downtown area, but time and again they bungle planned redevelopment projects, leaving a string of relocations, condemnations and wasted funds in their wake.

Two examples cited include the 1998-2000 to have retailer Nordstrom build a store (the targeted property, which had previously had businesses operating on it, is a parking lot today), and the expansion of the Contemporary Arts Center, which took out a business that had been operating next to the Center for 95 years that was speciously accused of being “blighted.”

This week, it was revealed that the city appears close to having another colossal failure on its hands just two miles north of downtown:

Huge UC project might be dead
‘The rug was pulled out from under us’
Cincinnati Business Courier – July 7, 2006
by Dan Monk, Senior Staff Reporter

Rising costs and skeptical lenders might deal a death blow to McMillan Park, a $100 million condominium development planned for the Calhoun Avenue corridor, south of the University of Cincinnati.

The nonprofit development group that has been planning the project for more than five years claims its lending partners — which include the University of Cincinnati and the Uptown Consortium — are changing elements of the project’s financing plan, a move that could force them to scuttle the project altogether.

“We’ve basically destroyed a business district only to have the rug pulled out from under us,” said Dan Deering, a trustee for the Clifton Heights Community Urban Redevelopment Corp., or CHCURC. Deering is the group’s former executive director. He’s been working since 2001 to develop a massive condo and retail project in the blocks bordered by Calhoun and McMillan Streets, Ohio and Clifton Avenues.

Here is the area in question, which appears roughly as it did before the McMillan Park demolition began:

UCsouth

The red area is the border identified in the article. The yellow area roughly represents the demolition done to date. What has yet to be torn down is an operating Shell gas station on the east and a couple of buildings on the west that still have operating businesses. I do not know whether or not a completed McMillan Park would require their destruction, but the article makes it appear that way. The blue area is a new multi-story building the University completed early this year. That building contains storefront space on the first floor that has already been partially rented out to a restaurant, a bank branch, and perhaps a couple of other tenants.

The fact remains that roughly two city blocks of operating businesses were leveled for a project that not only has dicey prospects, but also breaches good faith with tenants in the UC building across the street who surely moved in based on the assumption that the McMillan Park project would be completed.

Why has this happened? First, a consortium of entities (three hospitals, a zoo, and a university, which formed the Clifton Heights Community Urban Redevelopment Corp. cited later) with little experience in development projects decided that they could handle something like McMillan Park. Second, they were able to get the City of Cincinnati to use eminent domain to take the properties of those in the business district who were resisting “progress,” and (surprise) to personally benefit at least one of the parties involved.

Here is an excerpt from a 2004 Cincinnati Business Courier story about a couple of the final holdouts (also note what I see as an outlandish edifice complex exhibited by one of the consortium’s representatives):

Another eminent domain fight gets ugly
Cincinnati Business Courier – May 21, 2004
by Dan Monk, Courier Senior Staff Reporter

Two Clifton Heights business owners, struggling for survival, are taking aim at the leaders of an urban-redevelopment project that could wipe out their businesses but bring $150 million in new investment to a three-block area just south of University of Cincinnati.

The fight pits two small businessmen — Joe Kennedy, owner of Acropolis Chili, and Bill Wood, who owns a restaurant and bar called Inn The Wood — against the UC-financed Clifton Heights Community Urban Redevelopment Corp.

….. In the Clifton Heights case, scheduled to go to trial May 24, attorneys for the two restaurateurs are expected to argue that officers of CHCURC, an economic-development nonprofit, have used a $24 million UC credit line and the city’s power of eminent domain to benefit their personal real estate holdings.

“This thing just reeks of conflict of interest,” said Wood, whose 20-employee restaurant was labeled “blighted” by city officials shortly before the city sued to take Wood’s property by eminent domain last year.

Kennedy faces a similar threat. The 46-year-old Amelia man bought the Acropolis restaurant in 1987. He leases the building from his father-in-law, Tom Mirkos, who began selling chili dogs and double deckers there in 1976.

If Mirkos is forced to sell, Kennedy may go out of business. If he prevails in court, however, Mirkos could force developers to scale back their plans to bring condos, townhomes and upscale retailers to the Calhoun corridor, where dozens of buildings already have been razed in anticipation of the new development.

“I wasn’t a blight for 17 years while I was paying my taxes,” Kennedy said. “The blight is what the city’s creating up here. I’m in a panic. I haven’t slept a decent night in two damn years. I’m not looking to start over again from a brand new spot.”

Trouble is, Kennedy’s “spot” is CHCURC’s flashpoint for a neighborhood’s rebirth, under a plan that took two years to craft and already has run up a $24 million tab for land acquisition, demolition and due diligence.

“We’ve never seen anything like this in Cincinnati,” said Dan Deering, CHCURC’s executive director, who hopes by 2007 to build 241 luxury condominiums, including 52 rooftop units that would fetch up to $750,000. “You could see the airport” from the planned rooftop terraces, Deering said.

In addition, CHCURC plans 18 townhomes, 70,000 square feet of retail, a 0.7-acre park and a 606-car underground parking garage on the blocks bordered by Calhoun, Ohio, McMillan and Hartshorn streets. And that doesn’t include two other companion projects that could bring new entertainment venues, a hotel and more housing to the corner of Calhoun and Vine.

Another companion project is a $90 million student-housing development on UC’s southern border, on the north side of Calhoun, across from Wood’s and Kennedy’s properties.

Deering thinks the project could fuel an influx of homeowners to the hillside neighborhood, now dominated by rental properties, and help the city stem the flight of upper-income residents to the suburbs. He notes 11 other land owners in the district willingly sold their properties to the city, which is handling site assembly via a $6.2 million contract with CHCURC.

….. “We want to change,” said Deering. “This is not some private developer trying to make something happen without community consensus.” (Somebody’s pants are on fire. Consortium Consensus? Yes. Community consensus? Please. — Ed.) “We have to re-invest in ourselves if we want to be competitive in the future. If we don’t, we’ll continue to experience population decline.”

….. But mostly what makes Kennedy angry are the ways he said CHCURC board members stand to gain from the development. Both Deering and CHCURC’s board president, Paul Pratt, own investment property within the “urban renewal” area targeted by CHCURC. Like the buildings occupied by Wood and Kennedy, Pratt’s and Deering’s properties were labeled blighted. But neither are targeted for acquisition. Pratt testified in a pre-trial deposition that CHCURC’s development “may help” his property values at 113 Calhoun St.

….. “That shows Pratt was trying to profit from this,” (Attorney Matt) Fellerhoff said. “They’ve contracted out (the city’s) power of eminent domain (to use) for their own benefit. If they wanted to come in and buy my clients’ property without the threat of coercion, that would be one thing. Instead, they’re removing one business for the benefit of another business. My clients are very successful where they are. They invested in the neighborhood and only want to be left alone.”

Kennedy and Wood eventually gave in. The loss of daily business cited in the article surely had to be a factor.

What this again shows is that the power of eminent domain should not be used by governments to take property away from one party for the purpose of conveying it to another. Aside from its original-intent unconstitutionality, it encourages deals that don’t work.

If you are inclined, read through all of last week’s Courier story to get a flavor for how much public money was going to be “invested” in the project in various ways (i.e., taxpayer money spent on credits, loan forgiveness, etc.) if did get completed. Even with all the breaks, the project is in limbo.

Somebody ought to ask Joe Kennedy and Bill Wood how they feel about being forced to sell their businesses so that their former sites can lie dormant for what appears will be quite some time, because McMillan Park appears not to make sense now even with government and institutional subsidies.

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