BY LISA DONOVAN
The Cincinnati Enquirer
Is it good public policy to subsidize homes starting at $250,000 in an affluent neighborhood?
That's the issue confronting Cincinnati City Council, and it is one raising philosophical questions about the role of city government.
Council may decide this week whether to approve a $550,000 subsidy to help create the Spencer Hill development at Delta Avenue and Mica Street in Mount Lookout.
The proposed 25 homes would be sold for between $250,000 and $350,000. The homes would showcase Citirama III, the urban home show sponsored by the city and the Home Builders Association of Greater Cincinnati.
Those who favor a subsidy think the city will be repaid many times over by drawing wealthier residents who will pay earnings and property taxes to pay for city services and public schools.
"I have no problem leveraging taxpayer dollars to create jobs, to create a larger tax base and create more homeownership," said Councilman Charles Winburn, who chairs council's neighborhood committee that will be considering the measure Tuesday.
But opponents think it isn't a good idea to funnel money into such pricey housing.
"It is not the best use of top dollars to subsidize areas where the free market . . . can produce an excellent result in the housing field," Councilman Tyrone Yates said.
For Citirama I in 1996, on Mound Street between Clark and Chestnut streets in the Betts-Longworth historic district in the West End, the city provided $590,000 and the land.
The city provided $630,000 and land for Citirama II, the St. Ann's Common project at the southeast corner of Mound and West Court streets in the West End. There was no show this year.
"The reason why we put money into Citirama I and II was because it was under the assumption . . . that you needed some public subsidy to get people to build and to live in that area," Councilman Dwight Tillery said. "I didn't know that Mount Lookout had problems getting people to build or buy in that area. It seems to me to be a bit of a stretch." Mr. Tillery, who resigned his council seat Sunday, and Mr. Yates said they thought the point of Citirama was to encourage housing development in struggling neighborhoods.
Councilman Phil Heimlich said he might support the Mount Lookout site if there were a second Citirama in 1999 that showcases new homes in Price Hill.
"Price Hill is the kind of development this program (Citirama) was intended for," Mr. Heimlich said.
But Councilman Todd Portune said Citirama was built on a foundation of luring developers and home builders to the city.
"The whole idea behind Citirama was to demonstrate new market-rate housing can be constructed and is available for purchase in the city of Cincinnati, sparked by a larger public policy concern about the low homeownership rate in the city," he said.
All agree the home ownership rate of 38 percent in the city needs to be increased, as does the mix of new housing available.
From the perspective of Arn Bortz, a developer and former Cincinnati mayor, incentives can be the difference between taking business downtown or out of town.
In the city, "you're hit by a triple whammy: high land costs, high construction costs and relatively low rents," he said.
Mr. Bortz and his Towne Properties have taken an interest in developing downtown residential property with Garfield Suites and the upcoming Shillito Place in the old Lazarus building on Seventh Street.
The city of Cincinnati approved a $7.2 million urban development bond issue to help finance Towne Properties' make-over of the Lazarus building. Mr. Bortz said he also received a $2 million grant from the city to clean up the building. The $10.5 million development will transform the 814,000-square-foot building into residential, office and retail property. At least 98 apartments will be available. "We would have done absolutely nothing without the help of the city," he said.
Jerry Honerlaw, president of the Home Builders Association of Greater Cincinnati, does not consider the $550,000 for Spencer Hill a subsidy. According to his calculations, the city would get its money back in two years when considering the amount of earnings and property taxes residents would pay.
"The city is the winner because they have the taxes coming in forever," he said.
Mr. Honerlaw, also president of Vineyard Homes Inc., was considering building at least two homes in the 1999 show. He said that without the $550,000 the cost of each home could jump as much as $20,000. "The city needs to provide incentives so that the builder can sell the house at a more reasonable cost," he said.
Another option is for the builder or developer to cut its profits. Mr. Honerlaw said any sound businessman is going to reason: "If I have to cut my profit margin, why build in the city?"
Dobbs Ackermann, a developer of the Citirama site in Mount Lookout, said there is a stigma attached to home building in Cincinnati because there are some who think the process is too bureaucratic.
"The city needs to have some type of lure out there," Mr. Ackermann said.
