Dayton City Council hears plan for pay-as-you-go tax abatement to cover Parkway infrastructure gap

City consultants and the developer presented a financing concept to the Dayton City Council on Jan. 14 to cover an estimated $5 million–$6 million infrastructure bill for a proposed multi‑phase rental project in the Parkway neighborhood.

Jason Arzewald of Ehlers, the city’s financial adviser, told the council the developer’s initial pro forma shows the project cannot absorb the extraordinary roadway and intersection costs without public help. Arzewald said the firm’s review found the project’s rents and costs “meet what we would expect to see” but that “when we run that analysis, we determine that that return on investment at the end of the day is less than would be required to attract, equity and debt for this project.”

Arzewald outlined a pay‑as‑you‑go tax abatement as the preferred option to fill the remaining financing gap. Under the concept, the city would abate a portion of its share of property taxes (Ehlers proposed roughly a 75% abatement in the example) and the developer would borrow from private lenders and rely on future abatement receipts to pay that debt. Arzewald summarized how it differs from a TIF (tax increment financing): “Tax abatement doesn’t require any of that…we do have to hold a public hearing and that has to occur. Notice has to be published 10 days prior to actually holding that hearing.”

Council members and staff discussed phasing and numbers the consultant used. The current build assumptions presented were an initial phase of about 80 units, followed by larger phases that would bring an immediate total near 270 units and later additional phases (an example second phase described as about 180 units). Arzewald said the faster, larger initial build increases assessed value and helps financing dynamics. He estimated the developer‑assistance payback period would likely fall in a nine‑to‑12‑year window under the example assumptions and gave a present‑value range for the gap “more in the $1,800,000 range” while also noting the full possible gap could range between zero and about $2.5 million depending on final assumptions.

The consultant showed a model split in which the city would retain roughly 25% of the city portion of new annual taxes to cover increased service needs (Ehlers’ illustrative number at full buildout was about $118,000 per year to the city) and the remaining portion would go to abatement payments (an illustrative figure of about $356,000 per year to the developer in Ehlers’ chart). Arzewald emphasized the arrangement carries no upfront city cash outlay in a pay‑as‑you‑go abatement: “It means that there is nothing upfront from the city in a pay as you go arrangement.”

Council members asked about protections and look‑back provisions. Arzewald said proposed agreements would include look‑backs to reduce assistance if final construction costs are lower or the project’s post‑stabilization returns are higher than projected. He noted the city would stop abatement payments once a pre‑set return‑on‑investment threshold was met so the city “does not over assist.”

Staff and the developer asked whether the council would be willing to pursue the concept. Multiple council members said they were supportive of moving forward to the next step. City staff and the developer said they would return quickly with a nonbinding term sheet outlining the exact dollar amounts, term, obligations, and draft agreement language; the team proposed putting a term sheet before council on Jan. 28 and scheduling a formal public hearing with legal notice (the consultant noted the earliest practicable hearing date under the newspaper‑notice requirement would be Feb. 11). A staff member confirmed the city would provide the parcel for the road “for a dollar” to enable construction of the public roadway segment.

No formal council vote was taken on Jan. 14; the meeting recorded direction to staff to proceed with preparing a term sheet and the abatement process for council consideration and public notice. City staff said final detailed materials, including the Ehlers memorandum, final pro forma, and a draft abatement agreement, would be provided before any formal action.

Ending: If the council signs off on the term sheet and the public hearing resolution in February, staff and the developer expect to finalize the abatement agreement and development plat thereafter and the developer would be responsible for financing and constructing the roadway and buildings under the agreements discussed.