CCS makes deal with Nationwide Arena
A long-time feud between Columbus City Schools and Nationwide Arena may soon be coming to an end.
The board of education voted in favor of a resolution that would bring about a settlement regarding the tax abatement dispute between the two entities at the Dec. 4 meeting of the Columbus City Schools Board of Education.
Nationwide Arena opened in September 2000. Before the ground was broken, however, there was a tax abatement agreement in place.
Tax abatements occur when a taxing board grants a taxpayer, which in Nationwide’s case is a business enterprise, what is called a “stay,” or deferment of their taxes for a period of time. Abatements can be given for a variety of reasons, from increasing employment to supporting a company with financial problems or, as in this case, the development of a new building.
This settlement ends seven years of litigation between CCS and Nationwide Arena that started in 2001 when the county auditor determined the valuation, or appraisal, of the Nationwide Arena property was $129 million, which is the amount that Nationwide’s taxes would have been based on, according to board member Jeff Cabot.
Nationwide wanted a second opinion and appealed to the Franklin County Board of Revisions, whose valuation went further to value Nationwide Arena at $156 million.
Nationwide was unhappy with the higher figure and appealed to Franklin County Court of Common Pleas, who came back with a valuation of the arena property at $44 million dollars.
Cabot explained these dramatically varying amounts saying that unlike other business property, arena properties depreciate quickly and sited a court case for the Tampa Bay Ice Palace in which it was valued in 1996 at more than $150 million but just three years later the property value dropped to $24.5 million. That knowledge and these widely varying valuations caused Nationwide and the CCS to try to hammer out an agreeable settlement.
“This litigation has gone on over some time now and there’s been conversations and discussion over a better way to do this,” said Jeff Cabot.
District attorney Thomas W. Hill explained the reason arena property values depreciate instead of appreciating like other types of property rests on the type of property being dealt with.
“Most people think real estate goes up in value all the time, on a house it goes up in value all the time, but arenas are a different thing because they’re larger, there aren’t that many of them, there’s less people that can use them so the demand is less, the supply is less and so arenas have a tendency over time to go down in value,” said Hill.
Hill said that even if the district went back to court and continued to litigate and won, the law says a new valuation has to be done every three years, so the district would then have to battle with Nationwide for the valuations from the period 2004, 2007, 2010 and 2013. Hill said the case regarding the 2004 valuation is already filed, pending the outcome of whether the settlement is accepted or not.
“And we’re going to fight one again on January 1, 2007, and again on January 1, 2010, and another on January 1, 2013. Fight after fight after fight. Every single one exceeding costs, literally hundreds of thousands of dollars in legal fees from both sides,” said Hill.
Hill said so far the district has spent $496,000 for attorney’s fees, costs of litigation and consulting fees for experts on this endeavor.
Under this settlement agreement, the compensation from Nationwide to CCS is no longer based on valuations of the arena property but will instead receive payments based on ticket surcharges, payroll tax sharing from visiting players and previous payroll tax sharing amounts without the prior limits that were previously tied to the valuations. The district will also receive $3.3 million soon after the deal is sealed, according to attorney for CCS, Thomas W. Hill.
“There’s a guarantee provided in the agreement, a number of them actually. One of them is a guarantee that there’ll be no less than $1 million a year paid to the public schools,” said Hill. “But for the first seven years, 2000-2006, the guarantee has been in the agreement that we’ll receive a minimum of $7 million in that full seven years. As it turns out we’ll be paid a total amount of $9 million over those seven years.”
Before this settlement, when Nationwide was built, the Columbus City Schools, the City of Columbus and Nationwide entered into an agreement called the Community Reinvestment Area agreement (CRA), during which the city agreed to give Nationwide a tax abatement for fifteen years, till 2015. A ticket surcharge was applied to ticketed events and system of sharing payroll taxes resulting from new jobs at the arena was implemented, according to Hill; however, if the CRA was more than what the district would have gotten from the valuation, the district will get the lower amount.
Hill estimated the amount of monies that could have possibly been given to the district from the CRA agreement would be $5.8 million from the years 2000 to 2003.
“Here’s the catch; if the court values the arena at $44 million, the total constant based on millage at $44 or $46 million dollars is less than the CRA revenues. And so, they don’t have to pay us those CRA revenues, we lose them,” said Hill.
Another concern, Hill said, is that if the district loses, then the amounts the district would then receive goes down to a total of $1.9 million dollars and typically the CRA revenues are $4.6 million.
“If we don’t turn that around in the Court of Appeals, we’ll cost this district, just over the very first three years, the difference between 1.9 and 4.7 million, which is what, $2.8 million? Big number,” said Hill.
Hill says the CRA agreement is applied to new employees only because the idea is to create new jobs for the arena and CCS would receive 50 percent of the total income tax Nationwide paid for having those jobs in the area. Ticket surcharges would be one dollar to each ticket at hockey games and would vary for lesser amounts on other ticketed events.
“The more tickets they sell, the better we do. The less they sell the worse we do under this arrangement but guess what? If the Blue Jackets don’t do well, what does that do to the value of the arena? It reduces its value so it doesn’t create as much income,” said Hill.
The $3.3 million lump sum Nationwide will pay the district is based on the CRA revenues the district should have received from Nationwide, instead of payment based on valuation of the arena.
Cabot said that for this settlement to go through requires the agreement of not only CCS Board of Education, but also the Columbus City Council, the Franklin County Board of Revision and the Convention Facilities Authority. All board members, with the exception of Carol Perkins who was absent and Stephanie Groce, who abstained on the resolution due to personal and business conflicts, voted to pass the resolution.
Jeff Warner, district spokesman, said this settlement would not change the district’s intent to continue to see a levy on the next ballot. Warner said while this agreement is beneficial to the district, the revenue is not nearly enough to cover the district’s billion-dollar budget.
“This isn’t enough to change our large-scale financial picture. This is a million a year, we have a substantial budget, it wouldn’t be enough to offset project deficits,” said Warner.
The money will go into the district’s general fund which helps run the student achievement activities and operations of the district. Warner said the district is satisfied with the passage of the resolution to accept this settlement.
“We’re very pleased with this resolution. To continue litigation would use resources that could be used in classrooms and could be used for student academic achievements. This allows us to have a predictable amount of revenue over the next several years and prevents further litigation costs,” said Warner.
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