The recent announcement by the City of Hamilton that it was considering to sell their building at 345 High Street took many by surprise.
Immediately, questions and concerns were raised by citizens about what the sale meant and why the sale was being considered. City officials have since clarified details and its relation to an upcoming development that recently broke ground.
In current estimates, the building would sell for approximately $26 million to a new organization called the Hamilton Community Authority (HCA), which is an entity that is largely unfamiliar to most citizens. While the building would be owned by the authority, the city would still use the property and their day-to-day operations would go largely unchanged. If the sale occurs, the city would pay to lease the space from the authority.
The transaction isn’t what most people think of when they think of a sale. The property won’t be listed on real estate markets and the current tenants aren’t moving. Instead, the property’s equity will be utilized by the city in what’s referred to as a sale-leaseback. This allows the city to tap into the equity of the building while still occupying the space.
The funds from the sale will largely go towards the city’s roughly $26 million pledges to the Spooky Nook Sports Complex project being built on the grounds of the former Champion Paper Mill. The project, scheduled to be completed and operating in 2021, is currently estimated to cost over $144 million.
So, what is the HCA and how does it work?
Ohio first created the ability for municipalities to establish new community authorities, or NCAs, in 1972 for the purpose of funding community and economic development projects within their borders. The authority can generate income in a different way within their borders by charging service or user fees, leasing property, issue bonds, or investing their funds. Many use a combination of methods to help produce revenue. A board of seven trustees is made up of local citizens, developers from the project, and a government official appointed by the city or township to manage the NCA.
The HCA’s board of trustees were appointed by city council to oversee the organization and distribute funds. The current trustees include three citizen appointees, which are currently Greater Hamilton Chamber of Commerce President Dan Bates, Community Volunteer James Fitton, and Accountant John Kirsch. According to Ohio law, developer trustees must also be appointed. Currently Spooky Nook Owner Sam Beiler and Chief Financial Officer Mike Dollard are appointed, with one empty seat remaining to represent the project. Jody Gunderson from the city’s Economic Development Department is the trustee from the city.
One local example of an NCA is the Liberty Community Authority, which was organized in 2013 to help fund portions of Liberty Center. That authority in 2014 sold over $20 million in bonds and charges usage fees on the property’s hotels to help fund the venture.
The city is utilizing the services of Attorney Greg Daniels a partner of Cleveland law firm Squire, Patton, Boggs and Financial Advisor Andrew Brossart, a partner with Bradley Payne LLC in Cincinnati to establish HCA and the funding plan the authority will use for the Spooky Nook project. Both men have expertise in assisting Ohio municipalities determine means for financing development projects. Daniels and Brossart have presented their recommendations at city meetings to Hamilton officials and citizens, which have been endorsed in a report to City Council by Finance Director David Jones and City Manager Joshua Smith.
Despite the support, citizens have concerns and questions regarding how the HCA will affect the city.
Perhaps the biggest concern is that the city’s building could be sold from under the city given that it no longer will directly own the property. However, the lease agreement between the city and HCA ensures that as long as Hamilton makes the scheduled payments, the building can’t be sold to an outside party. If the HCA is ever dissolved, which it can be by Hamilton City Council, all funds and property revert back to the city.
At this year’s February 13 council meeting, Smith reassured citizens that the city is financial stable, despite a recent statement to the contrary made in an unrelated lawsuit filing in 2018. He cited decreasing expenses and its current good credit rating as evidence of the city’s economic strength, adding to his confidence that the terms of the lease can be met by the city going forward.
Citizens have also asked officials about what the sale will mean for the building’s maintenance needs. If the sale proceeds, the city will continue to put aside the same amount of funds for these projects annually as previous years and the current maintenance team will still be tasked with addressing needs.
An ongoing anxiety amongst a number of residents is a perceived lack of transparency regarding the HCA and Spooky Nook funding. Mayor Pat Moeller has heard these concerns and addressed making documents on the authority’s dealings easier to access. All documents and information are subject to Ohio’s open record requirements.
Despite these worries, Hamilton Councilman Tim Naab expressed his optimism on the project and possible sale.
“We’re leading, we’re not following,” Naab said. “This is the right decision for Ohio now.”