PILOT for 'Agora' deserves consideration

Posted 3/24/19

Whether he can make the numbers work remains uncertain, but Cleveland downtown redeveloper Nicholas Lillios may be giving our community a glimpse into the future of how public-private partnerships …

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PILOT for 'Agora' deserves consideration

Posted

Whether he can make the numbers work remains uncertain, but Cleveland downtown redeveloper Nicholas Lillios may be giving our community a glimpse into the future of how public-private partnerships can play a pivotal role in mainstreet revitalization.

Earlier this month, Lillios unveiled an innovative proposal that could conceivably convert an abandoned downtown factory building — site of the former Permna Color Inc., an apparel manufacturer — into a mixed-use structure.

The repurposed warehouse, located at 240 First St., would be anchored by 19 loft apartments, two large 4,500-square-foot spaces ideal for a restaurant or a retailer, four smaller 1,000-square-foot spaces best suited for small businesses, and two office suites totaling 3,000 square feet.

Each loft apartment would have a balcony reminiscent of downtown Cleveland during the early to mid-20th century. Also, the facade of the existing structure would be renovated to include more windows.

“If you have ever seen old pictures of Cleveland, most of the buildings had balconies,” Lillios told Cleveland City Council members in his presentation. “It was a neat feel for its time, but we’ve lost all that. But this will recapture that architectural style, with a modern twist.”

In theory, and on paper, it is a marvelous concept that personifies the potential benefits of government working with private visionaries for the good of the community; and, specifically in this case, the enhancement of downtown Cleveland.

But such development comes with risk, the majority of which lies with the private developer. If the project materializes and the exhaustive facelift is completed, the owner must rely upon willing tenants — residential and commercial — to occupy the valuable downtown spaces.

If they come, all is good. If they don’t, a substantial investment goes sour.

To help offset some of the preliminary cost, Lillios is asking the city’s support for a PILOT agreement that would freeze the site’s property taxes at their predevelopment level; at least, for a mutually determined number of years. At the contract’s expiration, full taxation would then be phased in over a four-year period.

PILOT is an acronym for payment-in-lieu-of-taxes, a program that for years has brought big industry and new businesses to communities in Tennessee and across the nation. Like any program, PILOTs have supporters and adversaries alike. 

Those who don’t like PILOTs say they cost local governments too much in tax revenue, at least when compared to the benefits new companies bring to communities; namely, new jobs and eventually a broader tax base.

Those who like PILOTs do so for the same reasons, only they believe increased employment and long-term tax benefits outweigh upfront losses during the early years of the negotiated agreement.

Last October, the Cleveland Health and Educational Facilities Board approved in concept the idea of granting PILOT agreements to “help fill the gaps” — as described by City Manager Joe Fivas — in funding for invaluable downtown development projects.

Fivas proposed the PILOT program as a financial incentive to recruit visionaries for the redevelopment of the Cleveland Summit, and returning it to its days of yore as the Cherokee Hotel.

A businessman at heart, but one who lives and breathes the restoration of downtown Cleveland, Lillios is asking the city to consider entering into a PILOT agreement that could “help fill the gaps” in the expensive revamping of the 44,000-square-foot, two-story warehouse that has sat empty for almost two decades.

The days of acid-washed blue jeans, manufactured by Permna Color, are gone. But the building still stands, and it stands empty.

So, what’s the answer? Partnerships. Lillios is proposing one, but it will require the willingness of city government to forfeit some early revenue in exchange for a greater tax reward down the road.

Lillios already has a name for his development: the Agora, a term used in ancient Greece meaning a gathering place whose mix includes residential and commercial spaces.

To the developer, the Agora is not a new idea. He has worked on it for years, but could never get revenue projections to outweigh cost. Lillios believes a PILOT agreement could make the difference.

Granted, it is not a guarantee. Even if it is restored into a sparkling jewel of capitalism, the people must still come. But Lillios believes, “… It’s the right time to take this risk.”

If it fails, the city has lost some tax revenue, but the developer has lost far more. If it succeeds, it appears to be a “win-win” for all: a deserved profit for Lillios, an expanded property and sales tax base for the city, and a shiny new dime for MainStreet Cleveland.

If approved by the city, the PILOT agreement could be setting a precedent for downtown development. But it’s a precedent that seems to be well worth the making.

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