December 13, 2021 Special City Council and CoW Meetings

Special City Council Meeting

You can find the agenda HERE, the legislation that was presented HERE, and the council packet for the week HERE, which includes a draft of the Development Agreement with Amato Homes. You can watch a video of the meeting HERE.

Council Vice President Seren called the meeting called to order.

The Clerk of Council called the roll: Present: Seren, Ungar, Cobb, Russell, Moore. Absent: Hart (present via Zoom), Stein (who would arrive shortly).

Seren opened personal communications from our citizens, limiting comments to those related to the item on the agenda (because this is a Special City Council meeting).

  • One resident spoke about concerns regarding security related to the construction of new infill housing, citing the Trayvon Martin shooting and Kyle Rittenhouse, and asking whether Amato Homes will be using private or public security.

(During public comments, Council President Stein arrived and took over facilitation of the meeting.)

Council President Stein then closed public comments.

For the Planning and Development Committee, Councilmember Ungar presented the following legislation:

  • Resolution 160-2021: First Reading Only. A Resolution authorizing the City Manager to enter into a Development Agreement with Amato Homes I, LLC for the redevelopment of vacant residential lots owned or controlled by the City with new single-family homes; and declaring an emergency.

Council President Stein then adjourned the meeting.

Committee of the Whole

You can find the agenda HERE, the council packet for the week HERE, which includes a draft of the Development Agreement with Amato Homes. You can watch a video of the meeting HERE.

After Council President Stein opened the meeting, the City Manager briefed Council about, first, recent security concerns at the high school and that, in part because of that, the high school would be working remotely the next day (Tuesday, December 14), and second, that evening, around 6pm, someone had called in a threat to the Community Center, and the City closed the Community Center and the police, including the chief, were investigating.

The City Manager then reviewed the legislation that would be on the agenda for next week’s City Council meeting (December 20), including (but not limited to):

  • Ordinance 155-2021: Second Reading. An Ordinance amending Section 183.01, “Public Hearing,” of Chapter 183, Political Influence by Corporate Entities, of the Cleveland Heights Codified Ordinances to the date of the public hearing that is to be held annually;
  • Resolution 156-2021: Second Reading. A Resolution authorizing the City Manager to enter into an agreement with Arthur J. Gallagher & Company for continuation of its protected liability self-insurance program for the City; and declaring an emergency.
  • Ordinance 157-2021: Second Reading. An Ordinance authorizing the execution of a Property Schedule to a Master Tax-Exempt Lease/Purchase Agreement between U.S. Bancorp Government Leasing and Finance, Inc., as lessor, and the City, as lessee, for the purpose of acquiring an aerial ladder fire truck including related equipment and appurtenances, and declaring an emergency.
  • Ordinance 079-2021: Second Reading. An Ordinance enacting and adopting Chapter ___, “Tenant’s Right to Pay to Stay,” of the Codified Ordinances of the City of Cleveland Heights.
  • Ordinance 161-2021: First Reading. An Ordinance providing for the issuance and sale of not to exceed $3,100,000 of economic development nontax revenue bonds for the purpose of refunding the City’s outstanding Parking Deck Improvement Refunding Bonds, Series 2015, dated April 30, 2015, which were issued for the purpose of constructing and equipping a multi-level parking deck and improving the site thereof, and declaring an emergency.
  • Resolution 163-2021: First Reading. A Resolution authorizing the Mayor to submit the Community Development Block Grant entitlement application for the year beginning January 1, 2022; and declaring an emergency.

The City Manager introduced Brian Iorio, who is the staff member overseeing the Citizens Advisory Committee, which reviews applications for HUD Community Block Grant (CDBG) funds and prepares recommendations for allocation of projected CDBG funds for the coming year. Stein commented that he recalled that the CAC and City staff were in complete agreement regarding the 2022 CDBG fund allocation recommendations; the City Manager confirmed that is accurate. Iorio then distributed reports regarding the recommendations to those who had not yet received them.

The City Manager introduced Tim Boland, who presented an overview of the Development Agreement with Amato Homes for infill housing construction on 18 vacant lots on Desota Avenue:

The City and Amato Homes entered into a Memorandum of Understanding (MOU) in August 2021. These will be single-family, owner-occupied homes built on 18 vacant lots that the City currently owns or controls on Desota that have been vacant for a considerable time. The City hopes this will have a positive impact on the street and surrounding neighborhoods by attracting new residents, stabilizing the neighborhoods in the area, and adding vibrancy to the street.

The Developer anticipates that the total project cost will be in excess of $2.5 million, which is the Developer’s anticipated investment. The Developer predicts that each home will sell for upward of $220,000. The project will be developed in one continuous phase, wherein the Developer will take on four lots at a time. The Developer anticipates they will complete construction of all 18 homes within 24 months of Closing.

Each lot is subject to a Reverter Clause: if the Developer is unable to complete construction on a particular lot, the lot would revert back to the City.

Construction must begin within 90 days of a lot being transferred to the Developer. Completion of construction must be achieved within 180 days after the commencement of construction. If these deadlines are not met, the lots would revert back to the City within 60 days of the City demanding that to occur.

The lots will be sold to the Developer for $100 each. The area is within a Community Reinvestment Area (CRA). If the Developer meets certain sustainability requirements, the properties will be eligible for 15-year 100% tax abatement on the taxes that would have been payable on the increased value of these improvements. The ultimate recipients of these abatements are the homeowners.

Mr. Boland then invited any questions from Council.

Councilmember Ungar commented that he is happy to see the development moving forward and would like to see a great deal of demand for these homes, stating that he hopes the City will publicize the upcoming availability of these homes to promote interest and increase prospective buyers.

Council Vice President Seren asked which of the vacant lots on Desota are part of the Compton Greenway Plan. Brian Anderson of the Economic Development Department pointed to the two lots. Seren asked how the City is working with those two lots in regard to this development. Mr. Boland stated that the Economic Development Department is working with the Planning Department regarding these two lots. The City Manager said that Eric Zamft is working on this, and Mr. Zamft stated that his department is working with Community Parks and Properties about how to program those spaces. Seren clarified that he saw those lots on the map and wanted to ensure that the City was remembering the plan for the Compton Greenway; Mr. Boland stated that originally the infill Development included 20 lots and then revised it to include only 18, as these two particular lots are not available for housing development.

Seren then asked to confirm that the City would receive the pro forma from the Developer before the City transfers any properties. Mr. Boland anticipates that will be the case, but will make a note to ensure that. Mr. Boland then referred to Section 4 of the Development Agreement, which lists a series of conditions that must be met before Closing, then stated that if this condition is not currently among them, the City will make sure it is.

Councilmember Russell asked about the anticipated individual home sales prices and whether $220,000 is realistic. Mr. Boland stated that this is Amato Homes’ projection, emphasizing that they know their products and our city’s market, and he is trusting their expertise in projecting new home sale prices.

Councilmember Hart (via Zoom) asked a series of questions:

  • Would there be an MBE/FBE requirement (minority business enterprise and female business enterprise)?
  • Would there be an anti-discrimination clause included, as there was in the Development Agreement with Start Right?
  • How will the Developer engage in community feedback before they begin construction?
  • How will we check our requirements for green building? Hart noticed that their furnaces are only 92% efficiency—could they be higher?
  • Is the Developer engaging in communications with the Orthodox Jewish community regarding this housing?
  • Is vinyl siding best for this construction?
  • Dividing $2.5 million by 18 houses equates to the Developer spending about $139,000 per house, which would mean the Developer will be making about $81,000 per house, or a 59% profit—is this a little high?

Mr. Boland replied that the Developer’s projections are estimates, and Mr. Anderson added that the $2.5 million projection is for the “hard” construction costs and does not include “soft” costs that go into a development project.

Mr. Boland confirmed with Mr. Zamft regarding the LEED certification that the language in the Development Agreement is similar to the Cedar-Lee-Meadowbrook agreement, which requires meeting compliance standards but does not require obtaining actual certification. Mr. Boland also pointed out that certification is a requirement of the CRA and necessary for tax abatement eligibility.

Mr. Anderson stated that the Developer has engaged in outreach to the Orthodox community as well as preliminary other community outreach. He added that he knows they plan on conducting more specific events and outreach efforts once we move forward with the Development Agreement. Mr. Zamft added that there would be a preliminary review of each design plan from the Architectural Board of Review (ABR), after which the Developer would make design modifications before returning to the ABR for final approval.

Mr. Boland stated that, regarding using MBE/FBE contractors and subcontractors, while the Developer is committed to maximizing local/regional employment, this is a standard homebuilders model of agreement (not commercial, mixed-use agreement).

Mr. Boland confirmed that for future property owners to retain the CRA incentives of the 15-year tax abatement, properties must be owner occupied, adding that this benefit is attached to the property, so any homeowner who occupies one of these properties within the 15 years will receive the tax abatement.

Mr. Boland confirmed with the law director, Bill Hanna, that the agreement includes the same non-discrimination clause (in Section 17(D)) that was included in the agreement with Start Right.

Councilmember-elect Cuda asked to confirm that these are 1,500-square-foot homes, sharing Councilmember Russell’s concern that they will not yield the projected home sale prices. Cuda asked why the Developer is not building larger homes on these lots. He also asked to confirm that these homes have first-floor-master designs.

Mr. Anderson stated that 1,500 square feet is the base and that the Developer may add bedrooms to some lots’ designs, stating the Developer is open to these conversations once we have a legal document that would enable them to move forward. Mr. Boland stated that the Developer does want to be flexible to the demands of the market that Cuda is referencing and confirmed that the Developer’s floor plans include the ability to expand designs to add bedrooms. Mr. Anderson added that, even though the street is within a “double district,” these are not particularly large lots.

Councilmember Moore asked to confirm that all the homes will be first-floor masters. Mr. Boland and Mr. Anderson stated that they will double-check, and Hanna confirmed that was in the Developer’s RFP response.

Councilmember Russell returned to the question regarding the profit per home. Ungar responded that this will be dependent on the ultimate sales prices, which we cannot predict with absolute certainty.

Ungar commented that this development will be a “spark,” stating that our city does not have an abundance of developers showing interest in improving our city. He emphasized that getting new housing on Desota will be a good thing for the street, the area, and our city as a whole, which Kahlil Seren’s mayoral administration can then build on to drive economic momentum for our city. While Ungar shares skepticism of achieving home sales prices of $220,000, we cannot know for sure what their profit margins will be, noting that the costs for the project may increase due to supply-chain problems that are happening nationwide. Ungar is hopeful that this development will open possibilities for more “inspiring” future developments.

Cuda clarified that he wants to ensure that we are creating something for the market that we don’t currently have and is needed in this neighborhood. Mr. Boland stated that Amato has demonstrated that they are selling well in other areas, which indicates they are building what the market demands.

Councilmember Russell clarified that she wants to ensure that the $220,000 price point is affordable to those who would live in the Desota area, while also emphasizing that the area needs a “spark” to spur improvement.

Ungar recalled the surprise he felt when he saw the sales prices that FutureHeights was achieving with their FutureHomes program, adding that he is hopeful that $220,000 is achievable on Desota.

Councilmember-elect Mattox noted that new construction homes and older homes attract different consumer markets, even if these homes are around the same size. He also added that we need to be planning for the spark that will occur, engaging the surrounding community as well as organizations and businesses that operate in that area to ensure that we build on that spark and maximize the momentum it may bring.

Councilmember Hart emphasized that many homebuyers are looking for first-floor-master homes and cannot find them in Cleveland Heights and that this will help us provide for this market demand.

Council President Stein noted, in response to the discussions referencing the Orthodox Jewish community, that while first-floor masters are the most attractive amenity for these homes, it won’t be a pull for members of the Orthodox community, as they need larger homes than are being constructed here. So, while he supports this project, the homes will not significantly attract members of the Orthodox Jewish community.

Mr. Boland then concluded his presentation.

Councilmember Cobb then moved to go into Executive Session to consider the terms of sale or lease of City-owned real property. The Clerk of Council called the roll, and Council entered Executive Session. Upon return from Executive Session, Council President Stein adjourned the Committee of the Whole meeting.