Cleveland’s real TIF risk isn’t the one Councilman Shah describes
Throughout the country, the office market is going through a structural reset, as the impacts of remote work and AI are reshaping office footprints, driving a flight to quality and hollowing out Class B office spaces. Cleveland has gotten ahead of this trend with the repurposing of millions of square feet of office to residential property, but vacancy remains stubbornly high even as the conversion targets get more difficult and more expensive. Redeveloping and repurposing the City’s real estate inventory will be a principal challenge of the second half of the 2020s. Removing an essential tool will make that challenge even harder. Councilman Tanmay Shah suggests that the City has been bearing too much of the risk in real estate development through its use of TIFs. The real risk for the City is not losing the upside from development; it’s the downside of inaction and decline.
Development Is All About the Math
Real estate development is all about math. Construction costs are up approximately 30% since 2021, per the Turner Building Cost Index, and increased tariffs on wood and steel haven’t helped. For a hard example, the recently announced Warner-Swasey building project was announced at $64 million, up from $50 million in its 2020 tax credit award, roughly 30%. That construction gap has to be filled, and lenders and investors aren’t seeing building rents rise fast enough to fill it. That’s where a public-private partnership can move projects forward. In 2025, the City approved TIF to support $360 million in construction and almost 900 housing units. Compare that to $440 million in large-scale private real estate development and a current housing unit pipeline of 1,400 housing units and you can see how vital TIF is to construction markets.
TIFs Put the Risk on Developers, Not the City
When it comes to public financing, TIFs are as low-risk as they get. Communities forego future revenue rather than coming up with cash up front. The developer bears the risk of construction, leasing, cost overruns and building performance. If the building fails and the property value does not increase, the community has not given up anything: the anticipated tax revenue would not have materialized. Contrast this to when the community provides a grant or a loan, in which case its funds could be wiped out through foreclosure or otherwise unrecoverable. Furthermore, the community gets all the benefits of construction and development, including income tax, taxes paid by tenants and sales taxes. Even a building that fails for the developer can meet its projected revenues for the community.
The Real Risk Is Decline
The real risk for Cleveland and jurisdictions dependent on tax revenues is decline. Downtown properties are facing global headwinds, and second-tier properties have been selling for pennies on the dollar. Recent developments such as the Westinghouse and Warner-Swasey projects are taking long-blighted, vacant structures and putting them back into productive use. Revitalizing these properties brings residents and workers to the City, while empty buildings suppress neighboring property values and deter people from moving, investing or working in the neighborhood. Moreover, the buildings that are holding value in this market are the ones that are being invested in. TIFs that drive investment and stabilize building values can be viewed as a measure to prevent revenue loss rather than foregoing additional revenue gain.
What About the Tax Burden?
TIFs are also criticized for shifting the tax burden onto other property owners. However, in a functioning construction market, housing doesn’t get built unless housing costs cover the costs of land, construction and financing. When construction costs outrun what a project can charge in rent, that arithmetic breaks down. New construction, even at the top of the market, absorbs demand that would otherwise bid up the price of existing units, keeping rents more affordable market-wide. TIFs help close the gap that makes that construction possible in the first place. If construction doesn’t happen, rents go up and tax revenue from the undeveloped parcel stays flat or declines from disinvestment.
Cleveland’s Safeguards Are Already in Place
None of this is to say that communities should hand out TIFs unconditionally like Halloween candy. Proper underwriting and appropriate conditions play a role in any incentive conversation. However, Cleveland has many of these safeguards already in place. The City’s economic development professionals hold true to the “but for” test and thoroughly underwrite projects to ensure that the TIF is required. The projected tax benefits of a project are weighed against the value of the TIF. TIFs are a tool in the toolbox, but you wouldn’t use a sledgehammer to pound a nail.
In addition, the City has recently implemented new policies that ensure that a portion of development incentives are diverted into community priorities. Cleveland’s tax abatement ordinance, frequently used in concert with TIFs on residential projects, requires an affordable housing set-aside or a cash contribution to affordable housing funds. Cleveland’s community benefits ordinance ensures that some of the incentive value of the TIF is channeled into community interests rather than economic value for the project, benefits which begin before construction even starts. While these conditions can sometimes be frustrating for developers and construction teams, they play an important role in augmenting the return that a community gets on its investment.
A Tool Worth Keeping
TIFs are a valuable tool in the development toolbox. TIFs are a well-managed risk that requires the City to come up with no money up front. If the project does not perform, the City does not bear the risk of loss. In a challenging market where public-private partnerships play a critical role in financing construction, TIFs help keep the market functioning. Eliminating TIFs would not eliminate risk to the community’s tax revenues; it would be a choice to live with disinvestment and decline. A sound TIF policy will stabilize the present market amidst headwinds and uncertainties to build for a better future.
David Ebersole is a Partner at Kohrman Jackson & Krantz and former Director of Economic Development for the City of Cleveland.
Contact Us
KJK’s Economic Development & Incentives team advises governments, developers and businesses on TIFs, tax incentives and development finance strategies. To discuss further, contact David Ebersole (DME@kjk.com) or another member of KJK’s Real Estate & Economic Development practice.