Pictured (l-r) are Hillsboro City Schools board members Tom Milbery, Beverly Rhoads, Bill Myers, Jerry Walker and Larry Lyons. (HCP Photos/Caitlin Forsha)
Pictured (l-r) are Hillsboro City Schools board members Tom Milbery, Beverly Rhoads, Bill Myers, Jerry Walker and Larry Lyons. (HCP Photos/Caitlin Forsha)
Representatives from the city of Hillsboro and prospective hotel developers attended the Hillsboro City Schools Board of Education meeting Monday, Sept. 16 to discuss a tax increment financing proposal awaiting school district approval.

Hillsboro safety and service director Dick Donley; the city’s counsel for the TIF proposal, attorney Richard Spoor of Keating Muething & Klekamp; and hotel developers Nick Patel and Ankur Patel were in attendance at Monday night’s meeting, along with some Hillsboro city council members and interested citizens.

As previously reported, Hillsboro mayor Drew Hastings informed council during their Sept. 9 meeting that the fate of a proposed hotel development at state Route 73 and Harry Sauner Road rests largely with the Hillsboro school board’s approval of a TIF [Tax Increment Financing] district.



Hastings said the TIF would be “an incentive for the developer, offsetting some of their infrastructure costs, like curbs, sidewalks, sewer lines, etc., prior to the building going up.” If the city, school board and the developer can agree to these terms, Hastings said the development could bring an “83-room Marriott hotel property with two franchise sit-down restaurants” to Hillsboro, although Ankur Patel only mentioned one restaurant in his proposal to the school board.

Donley said Monday that he has already met with Hillsboro City Schools representatives, including superintendent Tim Davis, treasurer Ben Teeters and school board member Larry Lyons.

“I think we’re offering a very good deal to not just the school board, but the community of Hillsboro as a whole,” Donley said, before introducing Ankur Patel.

Ankur Patel said that they conducted a feasibility study to determine whether Hillsboro had a need for a hotel.

“Hillsboro, Ohio is not like a bigger market area,” Patel said. “We actually have relationships with Marriott and other hotel chains, and the representatives in their headquarters, and we actually had the Marriott representative come here and meet key people within the city.”

Patel said they were told that there was a need for a hotel to provide a conference space and for lodging for people working in the area, visiting family in town or traveling on state Route 73.

“We believe that there’s a big need for a hotel here, and it provides some economic growth as well to the city and the community in terms of tax revenues and having a tighter-knit product onto the face of the map,” Patel said. “The Marriott product will really bring something — people will see the city of Hillsboro has a lot of growth and development coming to it. Not just the hotel, but we plan to bring a restaurant, 5,000 square feet, and then a 3,300 square foot retail plaza. We also have 20,000 square feet of retail space adjacent to a bank, possibly, as well. These are all different items we believe can help the city grow in different measures as well.”

Patel added that these new developments would be “long-term” investments that would impact the community for decades.

Spoor addressed the board next, explaining the TIF proposal.

“What it does is it provides an incentive for building infrastructure,” Spoor said. “The infrastructure required for this project, as Ankur described, is approximately $3 million. That, of course, is a cost to the project that is not related to the vertical construction or the commercial activity.”

Spoor said that government entities also “don’t have the money to put in infrastructure of this type using their general fund,” which is where the TIF district can help.

“By doing a TIF, a portion of the incremental taxes are used — reserved, if you will — by the city to pay for the infrastructure improvements,” Spoor said.

The attorney said that for a $3 million project, a 30-year bond in that amount “would require probably about $180,000 per year of principal interest.”

“The more of the tax increment that can be captured, the more public infrastructure can be constructed,” Spoor said. “Like anything else, there are competing interests for tax money, as you’re acutely aware.

“In order to do a 30-year TIF, the city of Hillsboro has to reach an agreement with the school district themselves on compensation.”

Spoor added that although a 30-year TIF is being discussed, “it could be less.”

Spoor told the board that “another big incentive is a CRA, a Community Reinvestment Area, and that is a pure property tax abatement” program.

“That is an arrangement where they would do a property tax abatement, again for increased value, and they would negotiate with the school district on that,” he said. “Failing any successful negotiations, they could only take 50 percent of the tax, and the balance would be payable.

“The preferred method, which is what we’re hoping for, would be to do the TIF. That allows the city to borrow money and pay for the infrastructure from those proceeds.”

According to Spoor, if the board is in favor of the project, the city and school district representatives would meet and “whatever you negotiate, that would yield a number that would allow a certain amount of bonds. The closer we can get to $3 million, the better, because that is the required amount for the infrastructure.”

“The standard argument is if a developer doesn’t get an incentive, will they proceed? Or will they proceed with as large a project as they would have without the incentive? It’s hard to say,” Spoor said. “I think it’s certainly a reasonable request. I think it’s a very important part of this, to make it profitable, particularly since there is a certain risk in putting a hotel and development of this type in Hillsboro as compared to, say, Eastgate. There’s a little more risk to the developer, therefore their ask might be a little more.”

Spoor invited the board to respond, with only board member Jerry Walker asking what he called “a whole bunch of questions.”

“On a property valuation that is generating x for the school district — let’s say that x is $1,800 — if a TIF is granted, does the school still continue to receive the $1,800?” Walker asked.

“Yes,” Spoor said. “That never changes.”

“So the school district would not lose the current appraised value,” Walker said. “That value stays the same.”

“Correct,” Spoor said. “That’s the baseline. It doesn’t change. You would continue to get that, regardless of what happens.”

Walker said that with the hotel development, there would likely be an increase in income, sales and lodging taxes with increased employment. “Does that revenue — is it subject to the 1-percent tax for the school and 1.5-percent tax for the city?” he asked.

“Yes, nothing changes on that,” Spoor said. “The only taxes that are affected are real property taxes.”

Walker asked if TIF districts “had to be blighted properties.” “Only if you’re doing a TIF for residential,” Spoor said. “For commercial and industrial, there’s no blight requirement."

Walker then asked if the city could speak about the project’s infrastructure needs.

“It could be several different things,” Donley said. “Sewer and water. Entry and egress and so forth into the property. Retention of the water, also – retention ponds we have to build.

“There are lots of things that go into it. That intersection was designed prior to the building of this hotel, so we could have to change some things out there, which would be part of the costs.”

“Does the city have the capacity to handle the water and the sewage that would be generated by this business?” Walker asked.

“Yes,” Donley said, adding that the city’s water and sewer engineers have already looked into it.

“Do we see these buildings standing in 30 years, if a 30-year TIF is granted?” Walker asked. “Will these buildings still be upright? Will they be functional? Because we have a Kmart building that’s not occupied. I’m just wondering about the school. When this TIF expires, if it is granted, what would the valuation of that property be?”

“When we build hotels, in 10 years, 20 years, 30 years, most likely the value will go up from what you build for,” Nick Patel said.

Spoor said that a hotel development is different from a “single-purpose building” like Walker’s Kmart example.

“Mixed-use properties like this tend to not lose their value because they continue to be commercially viable, especially hotels,” Spoor said. “In order to keep the franchise flag, if you will, they have to refresh the hotel periodically, both with furnishings and also to keep the hotels moving. Again, there’s no guarantee on this, but it’s probably more likely that this will be more viable after that period than say the Kmart or frankly any other big-box retailer.”

Walker then returned to the matter of the TIF itself. “So what the school board is really considering is on this TIF, we are exposing ourselves to not receiving the increased valuation,” he said.

“Not all of it,” Spoor said.

“But then that is being offset by taxes on wages, lodging tax, and I’m under the impression the county [government] would benefit from this?” Walker said. “I would say the city receives additional revenue from this.

“We look after our students. I was just wondering what the school is putting at risk and what might we lose and what might we gain?”

“We’re dealing only with property taxes,” Spoor said. “All other taxes are unaffected. The county does not get any property tax. They’ll get their share of whatever the baseline is, but they won’t get any more until the 31st year, nor will the city get any property tax. Again, the city and the county’s property taxes are being redirected to pay for the infrastructure.

“The largest portion of the property tax goes to the school district, so in order for a TIF to work, the school district would take less than it would otherwise have gotten. It will still get a lot more than it’s getting now, but it won’t be the full amount.”

For example, Spoor said that in his “hypothetical, the school would get an additional $100,000. We’d be asking for a portion of that to help pay for the infrastructure.”

“A portion of the school’s increased taxes, all of the county taxes and all of the city taxes — those three buckets of money would go to paying infrastructure,” Spoor said.

Spoor told the administration that “if the board is interested, what we normally do is present the numbers to the superintendent and to the treasurer and go through all the numbers and come up with a proposed contract for your attorney to review. That would give you numbers to justify what we’re asking for.”

Walker then asked for more information on abatements. Spoor gave an example of the Peters Cartridge Factory.

“The developer is going in there to turn it into apartments, and in order to do so they needed a tax abatement,” Spoor said. “The village of South Lebanon essentially said ‘you do not need to pay property taxes on the improvement for 15 years.’ So it’s assessing no property tax — they have to pay what’s on it now, but it’s a forgiveness of property tax for a period of time, which then they could go to a bank and say ‘we don’t have to pay property taxes, so our numbers look better for you.’”

Walker asked if abatements were “historically common” in Hillsboro.

“Yes,” Donley said. “It’s my understanding that municipalities now cannot do abatements. I think Hobart got a tax abatement when they came to town, and Weastec got a tax abatement.”

Walker asked if the city was supportive of the proposed TIF.

“I think several of the residents are welcoming something like this for our community for the future,” Donley said. “It brings an entity into this community that’s going to be here at least that many [years].

“There was a reason that Hillsboro attracted these gentlemen here for a hotel. They’ve done their figures, they’ve done their research, and from discussions I’ve had with them and Mr. Spoor and other people, if they felt this was something this community didn’t need, they wouldn’t be here.”

Donley added that Hillsboro is “an up-and-coming community.” “If we don’t invite people to come to his area, they’re not going to come,” Donley said. “We have to think out the box a little bit and make our community worthy of people coming here and wanting to stay.”

Nick Patel then asked to speak to the board and told them “this is not an easy process for us to bring a Marriott into Hillsboro.” He said that he has relationships with other hotel companies, with Hilton, for example, telling them Hillsboro was “out of our market.”

“For Marriott to come to your city, it’s put the city on the map,” he said. “We’ve been working hard behind the scenes to get approval.

“If we don’t see movement, there are lots of opportunities we have. We’ve been spending almost two years now. If I don’t see the movement, we have other projects we want to go on. It’s great to work with you guys, but what we need, we explained to the city, the city explained to their attorneys, they explained to the owners. We’re here to do the business we have the ability to do.”

Patel asked the board to “meet in the middle” to reach a deal with the county and city.

“We’ll still put our due diligence together,” Patel said. “I request all of you to consider that Marriott is not that easy to just come to your city. It takes a long process for them to approve. It takes several million dollars before they can give us a brand name. There’s a lot to do on the other side of the market.”

Board president Myers thanked the group for attending the meeting and said that the board would be meeting with Davis and Teeters to further discuss the proposal. No action was taken Monday night, and no further discussion was held.

For more on Monday night’s meeting, go to: http://highlandcountypress.com/Content/In-The-News/In-The-News/Article/Hillsboro-school-board-hears-updates-on-ongoing-projects-welcomes-new-student-representative/2/20/52647.