Tax exemption debated for development at former Elder-Beerman site

Feb. 19--A request for tax incentives to help redevelop the former Elder-Beerman property on Secor Road in West Toledo got a final vetting on Tuesday, with people on both sides of the issue making their closing arguments to several Toledo City Council members.

Council is expected to vote next Tuesday on whether to grant Niki Toledo I, LLC, which owns the former department store at 3311 Secor Rd., about $978,000 in tax breaks to help cover the $1.2 million cost of ridding the property of asbestos.

The Niki Group, a San Diego real estate investment firm, bought the property in 2015 and plans to demolish the 154,000 square foot department store and build 50,000 square feet of new retail. It has tentative contracts with two retailers -- T.J. Maxx and Bob's Discount Furniture.

City economic development officials are recommending that Niki get a 50 percent tax exemption for 15 years of the property's assessed value before remediation, and a 100 percent exemption for 15 years after remediation.

At Tuesday's meeting of council's committee of the whole, Commissioner of Economic Development Brandon Sehlhorst restated the city's position that although tax incentives rarely are given for retail development, this one warrants it.

"The $1.2 million is an upfront cost that is needed just to clear the site. ...It (Elder-Beerman) can't be repurposed. It has to be torn down,' he said.

Kevin Baker of Landmark Commercial Real Estate, which is a partner of Niki, said that even with tax incentives, the return on investment after his company spends $12 million on the new retail space will be 7 percent, barely enough to convince investors to fund the project.

"Without the incentives we would lose money," he added.

But Old Orchard resident Peggy Daly-Masternak, one of six members of the public who spoke, said other new businesses along Secor had torn down a theater, a hotel, a tire center, and a funeral home, and none of them ever sought tax incentives even though they faced asbestos mitigation issues.

A tax exemption "is a proposal that's bad on all accounts," she said.

Mrs. Daly-Masternak provided council members who were present with a spreadsheet indicating that over 15 years, children of Washington Local Schools would lose about $1 million in tax revenues, essentially paying for the asbestos mitigation.

However, Mr. Sehlhorst said that there is an agreement whereby Washington Local will receive payments equal to 100 percent of the revenue it would have gotten without the abatement.

Still, Old Orchard resident Harry Ward said it appears to him that if Niki cannot develop the property without tax incentives, "then this is not a viable project."

Niki had to know that buildings of that age and design from the 1960s contained asbestos when it bought it, Mr. Ward said. The San Diego company would have included abatement in its financial planning.

"It really boils down to this, if you could each only give one tax exemption to any retail project in Toledo ... would you give it to this development?" he said.

Councilman Rob Ludeman said in the past council has been reluctant to give tax breaks to retail, but on rare occasions one is needed to provide a seed that spurs additional retail.

"If the seed is planted on (the Elder-Beeman) side, it might help grow the other side" where a vacant Sears store sites, he said.

Councilman Sam Melden, whose district includes the project, said the hearing didn't provide him with any new insights, but several council members at the hearing had yet to hear all the arguments.

Mr. Melden said he was leaning toward voting with "his neighbors and the people I represent" but that it is hard to know what the rest of council will do.

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