Columbus tax abatements swell under Ginther, as Franklin County leads the state

Franklin County, led by the city of Columbus, has become the property tax abatement capital of Ohio, representing about 30% of the state's total market value of abated private real estate in 2022, despite accounting for less than 14% of the state's total property value, according to state and county data.

In tax year 2022, Franklin County had on the books abatements for economic development purposes approved by city, township and county officials that totaled more than $5.82 billion in market value, according to state Department of Taxation records. That is $362 million more than the next highest two counties on the list — Hamilton and Cuyahoga — had combined. Statewide, there was $19.4 billion in market value that was abated across all 88 counties, the records show.

The growth in the amount of properties getting tax abatements in Columbus and Franklin County was substantially faster than the rest of the state, and one of the reasons why tax abatements have been an issue in races for Columbus mayor and city council in the Nov. 7 general election.

The value of Franklin County abatements has risen about 8.5 times since 2000, when the county represented 17% of the abatements statewide. Statewide abatements, meanwhile, grew by less than five times over the same span, state reports show.

Columbus led the pack locally, accounting for about two-thirds of all Franklin County abatements. But other communities — mostly in the southern part of the county, which has become a multi-state distribution and data-center hub — took another roughly $2 billion off the tax rolls.

Among them: Groveport ($439.1 million for 34 parcels); Obetz ($408.4 million for 23 parcels); Grove City ($303.3 million for 296 parcels); and New Albany ($213 million for 23 parcels), according to county data.

And the numbers are growing. In Columbus, in fact, they are exploding, with the market value of abatements having almost quadrupled since 2015, the year before Andrew J. Ginther became mayor. Ginther and city officials have since been pushing a growth agenda largely based on abatements for developers in return for jobs.

In 2015, Columbus had $987.3 million in abatements on the county tax rolls related to more than 2,600 parcels; By last year, the county appraised value on properties receiving tax abatements topped $3.92 billion on almost 4,350 parcels. The number of parcels getting a tax break grew by 67% from 2015 through 2022, according to Franklin County Auditor data.

Tax abatements an election issue

Mayor Ginther makes no apologies for the tax abatements, saying the numbers are a byproduct of the city's state-leading pace of new development and growth.

“The City’s residential and commercial incentives drive investment in our community, create affordable housing and high-paying jobs, and grow our tax base so we can do our part in funding vital community services and schools," Ginther's office said in a prepared response to The Dispatch.

Just since 2020, Columbus has added 700 newly abated parcels worth almost $1 billion to the rolls of being "exempt" from taxes. Every year, county data shows, there are typically between hundreds and thousands of new parcels with abatements coming off the tax rolls as old deals expire and are returned to the taxable column.

But the new ones are outpacing the expiring ones each year. In 2018 in particular, a record of almost 4,800 parcels received abatements countywide, while only 1,280 expired.

Depending on the type of property, they typically feature up to 15 years of zero property taxes on projects such as condos, or 10 years of paying 25% of what is owed.

"The housing crisis is so urgent that we must use every tool at our disposal to fight it -- including the use of the residential (abatement) incentive, which has built thousands of new units and created affordable housing in some of our highest-rent neighborhoods,” Ginther's statement said.

But Joe Motil, Ginther's opponent for mayor on the Nov. 7 ballot, says the numbers are alarming, and fundamentally unfair to those stuck paying the tax bills of others. He notes some of the most valuable tax breaks being given owners aren't for housing, but for high-value commercial and industrial facilities.

"This is what I've been fighting against continuously for the last eight years," said Motil, a Democrat who has frequently spoken before City Council challenging the stream of new abatements that routinely flow through the chamber. Motil's yard signs get right to the point, saying: "Stop Tax Abatements."

Motil says abatements aren't a development tool, but "corporate welfare giveaways," claiming that most of that development would have happened anyway by virtue of firms responding to demand and business opportunities in a growing city.

Motil says many of them go toward high-rent projects in "risk-free development areas" such as the Short North, Downtown, Easton, Polaris, and for the Rickenbacker Logistics Center. "The recipients are luxury real estate developers, Fortune 500 companies, and Columbus longtime established corporations who are all major contributors to the mayor," Motil's website says.

Ginther's campaign declined to specifically comment on whether abatements have grown too large, are hurting chances that voters approve new property-tax levies as more of the burden is shifted onto them, or if there were any upper percentage of the tax base being abated that the mayor would find unacceptable.

"We continuously evaluate these policies to ensure they’re aligned with our public policy priorities around jobs and housing," Ginther's statement reads, noting that the policy was changed last year to require more affordable housing and higher pay for jobs created in return for abatements.

How much is too much?

A city-commissioned study released in 2017 said Columbus has been too generous with its tax abatements, with most of them going to the Short North, Downtown and other places where developers would likely go anyway.

Jeff Rich, a tax attorney who often represents school districts in disputes over property taxes, said at the time that school districts have been hurt by developers avoiding paying a fair share of taxes.

“If I’m representing a developer today and don’t get 100 percent tax abatement, I’m committing malpractice,” Rich told The Dispatch then.

All these local tax abatements cost the coffers of the county, cities, municipalities, school districts and other agencies more than $94.7 million in 2022 alone, according to the county Auditor's Office.

That's the equivalent of the annual property tax that would be paid by almost 20,400 Columbus homes valued at $250,000, according to the county auditor's tax estimator, meaning that amount of tax revenue got shifted from those who didn't have to pay taxes onto those who did.

And In Ohio, government buildings such as schools and libraries, parks, real estate owned by religious and charitable organizations, and cemeteries are already excluded from property taxes.

What is the future for tax abatements?

Where could tax abatement numbers be in the coming years? The trend suggests it will be up — by a lot.

Back in 2000, the notion that such a large swath of for-profit property wouldn't be taxed was a radical concept. Only just over 330 parcels in Franklin County had any abatements, county records show. Today, there are more than 5,200 parcels countywide, an increase of 860 parcels, or 20%, just last year alone.

It would take less than four years of consecutive 20% increases for the number of abated parcels to double again.

Almost 14% of the $41.86 billion in market value that what would normally be considered taxable property in Franklin County is now off the books, a percentage only bested by Hamilton County's 15.5%, the state data shows. While Hamilton had $2 billion less in market value abated, the total market value of all its property is 56% that of Franklin County, according to the state.

Cuyahoga County had about $1.58 billion in appriased property value abated, or about 4.5% of what would have been its total taxable property.

There were only seven counties in 2022 in which a double-digit percentage of its taxable real estate was abated, including central Ohio's Licking, Madison, Pickaway, and Union counties. The median percentage of abated private property across Ohio's 88 counties is 1.2%, and several counties reported to the state having almost nothing abated, among them Pike, Harrison, Perry and Noble counties.

"We don't have any," said Noble County Auditor Ruth Hayes, whose rural county is dissected by I-77 between Cambridge and Marietta in southeastern Ohio, adding that her county has gotten away from awarding abatements since factories have folded and most new development is small-scale residential, like four-unit apartments, 10-house subdivisions, or single-family rental rehabs.

"We don't have big investors coming in and putting up housing developments, or factories coming in," Hayes said. "...It's just a whole different way of lifestyle down here. We're very rural. Now, not to say that it won't happen, but right now, there's just no investors to come in and do that."

In 2015 then Franklin County Auditor Clarence Mingo commissioned a study that found property-tax abatements in the county shifted more than $300 million in tax burden to the rest of taxpayers over five years. The benefit went to 3,237 properties in Franklin County, or less than 1 percent of the more than 427,000 total parcels.

On average, the tax on a parcel was reduced by $93,450 over five years, while the roughly 423,800 remaining parcels each saw taxes increase by an average of $712 over that time, the study found.

In addition to abatements, Columbus and other local governments also award "tax increment finance," or TIFs, to developers. They are not considered an abatement because the full taxes are still paid by the property owner, but the revenue gets diverted in part or wholly to a special fund that typically offsets development expenses, such as installing utilities, sidewalks and roads. In some cases, they can be used for just about anything the developer wants.

In Franklin County, another 25,207 parcels have TIFs, diverting about $128 million in taxes in 2022 from child-welfare protection, drug and alcohol addiction services, the Columbus Metropolitan Library, the Columbus Zoo and Aquarium and other agencies supported by property taxes. Often school districts are held harmless in the deals.

wbush@gannett.com

@ReporterBush

This article originally appeared on The Columbus Dispatch: Columbus, suburbs shower abatements on developers at state-leading pace