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Eminent Domain Tax Bill

June 28, 2006 09:07 AM

What do you get when a developer uses local government to seize property through eminent domain so he can put up a Crate and Barrel, and then the appeals drag on?  Before you answer, recall that the supposed public interest in this sort of eminent domain seizure is that the economic development increases the tax base.

Well it turns out that is not what the new developer argues when the tax bill comes due.  Today's Enquirer explains that the developers of the Rookwood Exchange property in Norwood--which the city of Norwood seized for them because it would increase the city's tax base--is arguing that the property it paid $21.6 million for is now only worth $3.2 million.  And that is all they should be required to pay tax on.  The reason?  Even though the Courts have turned over legal ownership of the properties to the developer, they have also issued a stay preventing the destruction of three homes on the property until the appeals are exhausted.  So the developer owns the property, but can't do anything with it until the Ohio Supreme Court issues a ruling.  And for property tax purposes, the developer claims that the property it now owns is basically worthless.

The Hamilton County Board of Revision has not bought into that argument completely, and has ruled that the property is worth the equivalent of what it was worth before the government seized it and handed it over to the developer (about $11 million).  So while it is worth more than the $3.2 million that the developer has claimed, it is still no where near the $21.6 million that the developer paid for the property.

So this year, at least, the City of Norwood is reaping what it has sown.  It has kicked people out of the homes that they owned, and turned the property over for a private development.  A development that is now stalled.  So Norwood has not, in fact, accomplished what it set out to accomplish--increase the tax base.  Remember how the City of Norwood claimed this use of imminent domain would bring in $400,000 more annually for the schools and $3.5 million in earnings taxes?  Well it turns out the schools will not be getting that $400,000, and Norwood won't be getting the $3.5 million in earnings taxes.  In fact, they haven't increased the tax base by a single penny.

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