To our friends, clients and colleagues in local and regional government, higher education and the nonprofit sector, welcome to our latest Monday Message from the Public Law Group at McDonald Hopkins. In today’s email, assembled by attorneys Teresa Metcalf Beasley, Kelsey Smith and Kevin Butler, you’ll find insights into areas of law we’re watching on your behalf.

In today’s edition:

• Cleveland tax abatement study: what it foretells of future development and means for Cleveland’s citizens
• What’s a ‘criminal act’ giving rise to civil claim? Supreme Court says it’s not a conviction
• U.S. Senate unveils $1 trillion Heals Act as countermeasure to House HEROES Act
• A new Ohio House speaker arrives, and with him new opportunities

Cleveland tax abatement study: what it foretells of future development and means for Cleveland’s citizens

The results of the city of Cleveland’s long-awaited residential tax abatement study have been released. The study was commissioned to determine historical data, to determine the value and benefit to the city and to address the ongoing concerns of long-term residential property owners in certain Cleveland neighborhoods, who fear rising property values and potential displacement because of new housing in their neighborhoods benefiting from the city’s residential tax abatement program.

Subject to meeting the city’s green building standards and other program requirements, Cleveland offers a 15-year tax abatement of 100 percent of the increase in real estate property tax that results from either new construction of single-family, two-family, and multifamily-owned properties, or the rehabilitation of multifamily, single-family and two-family dwellings.

This economic development incentive tool has long been available in the city to help revitalize neighborhoods. The Cleveland tax abatement study, conducted over a six-month period, found that the city’s housing market remains fragile and continues to require tax abatement incentives to encourage development and rehabilitation. The study notes that there are a few Cleveland neighborhoods that are growing and improving their housing stock as a result of tax abatements being used for mostly multifamily development in neighborhoods such as Ohio City, Tremont, Detroit-Shoreway and University Circle.

The study includes the following recommendations:

• Continue to offer a tax abatement for residential properties, as it is a development tool that encourages new residential development and rehabilitation of residential housing which encourages long-term home ownership and helps to revitalize and transform neighborhoods.
• Cap single-family abatements at $300,000, which would most likely impact any high-rise condo development and fee-simple, single-family townhouse development.
• Implement a “but-for” requirement for market-rate multifamily projects above $5 million, which would require a determination that the activity that qualifies for an abatement would not occur without (“but-for”) the tax abatement incentive. This is not an unfamiliar requirement for projects receiving governmental incentives or assistance.
• Require developers of multifamily market-rate projects in block groups experiencing high displacement to enter into community benefits agreements (CBAs) to provide specific amenities or mitigations to the local community or neighborhood. Developers entering into CBAs is not an unfamiliar requirement in Cleveland.
• Develop a housing market displacement pressure threshold that would trigger adjustments to the tax abatement time period and percentage by block group.
• Enhance transparency and streamline the application timelines in order to simplify and streamline the application process which would include notifying impacted taxing authorities of pending or approved abatements.

The results of the study are a first step in creating an equitable community development strategy. The discussions and debate will continue as several local developers have already voiced their concerns and opposition with respect to certain recommendations.

We all agree that the city of Cleveland’s residential tax abatement must continue, as it is a necessary economic development tool to encourage new development and rehabilitation in our neighborhoods. The question is: What’s best for the residents and neighborhoods of the city of Cleveland?

Read the study here and let us know how our Public Law team, Public Finance attorneys and Real Estate practice group – which include two former Cleveland law directors and many others with deep connections to the city and its real estate market – can be of help.

What’s a ‘criminal act’ giving rise to civil claim? Supreme Court says it’s not a conviction

We have been watching the case of Buddenberg v. Weisdack, pending in the Ohio Supreme Court, because its outcome may lead to entirely new causes of action maintained against government, educational, nonprofit and for-profit entities and their officials across the state. Last week the court handed down its decision.

In Buddenberg, an employee of a local public entity sued her employer for civil rights violations and alleged that certain officials were liable under R.C. 2307.60, a statute that permits civil claims to be made against persons for damages caused by their criminal acts. The question before the court was whether the statute requires that the defendant first be convicted of the criminal act in question before the civil suit may be maintained.

The court answered that question in the negative, holding that “criminal acts” do not necessarily mean criminal convictions under R.C. 2307.60 – else the statute would’ve been written differently – and thus claims may be made against defendants under all manner of criminal statutes without any requisite proof of criminal culpability.

The court left unanswered, or perhaps left for another time, the question of what standard of proof must be met when a plaintiff in a civil action alleges a person has committed a criminal act leading to damages. Ostensibly, that standard of proof would be something less than beyond a reasonable doubt – which conjures the specter of a great many more people now being accused of committing “crimes” in Ohio without prosecutors doing the accusing. There may also be implications within insurance policy exclusions that could lead to coverage disputes.

The court’s decision was unanimous and not entirely unexpected, but it could have lasting implications in Ohio without a legislative change to the statute. Among other ways we can help, McDonald Hopkins is available to assist with a thorough review of your insurance policies that may now offer your enterprise less firm footing. Call on us for guidance.

U.S. Senate unveils $1 trillion HEALS Act as countermeasure to House HEROES Act

Last Monday, U.S. Senate Republicans introduced a $1 trillion stimulus package aimed at providing direct aid to schools and universities, delivering additional stimulus checks, introducing a sequel to the Paycheck Protection Program, and providing additional resources to the country’s hospitals and healthcare workers.

Under the HEALS Act, which our Public Law colleague Kelsey Smith writes about in a blog post here, the Senate’s governing party would also provide liability protection against tort claims related to the pandemic. The bill serves as a distinct countermeasure to the Democrat-controlled House’s $3 trillion stimulus bill passed in May, the HEROES Act, which would do more to supply direct aid to local governments struggling with tax shortfalls.

Any compromise must occur quickly, as the Senate goes into recess within a matter of days before it reconvenes in the fall. We remain committed to keeping you updated on the status of these major relief measures winding their way through Washington.

A new Ohio House speaker arrives, and with him new opportunities

We take a moment to congratulate Rep. Robert Cupp on his election to the speakership of the Ohio House of Representatives last week, replacing Rep. Larry Householder. Speaker Cupp is a career public servant in state and local government, having served in both houses of the General Assembly, with the Ohio Attorney General, and as a former appellate judge and Ohio Supreme Court justice.

Our lobbying group within Public Law includes two former state legislators on staff, Mike Wise and Dean DePiero, who actively engage with the General Assembly and governor on legislative, regulatory, economic incentive and economic development issues, and who served with Speaker Cupp when he was in the Ohio Senate and on the Supreme Court. With more than 30 years of elective service in both state and local government, and another combined 30 years of government relations work, our lobbying team understands how to leverage state contacts for emergency and long-term local needs. We join Mike and Dean in congratulating the new speaker and wish him a successful tenure at the helm of the House.

If you have questions or need assistance on any of the matters we’ve covered above or with your legal needs in general, please feel free to contact any member of the McDonald Hopkins Public Law team.

Have a great week!

Teresa Metcalf Beasley
Chair, Public Law