City loses $60,000 in building deals

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The City of Middletown will lose about $60,000 from the purchase of five downtown buildings more than three years ago, according to financial records obtained by The Journal-News.

In November 2010, the city became a landlord when it invested $600,000 — spending $450,000 and forgiving $150,000 in debt — to purchase downtown properties, and has sold the properties for $200,000 and will obtain another $340,020 from a five-year lease.

City council recently voted to sell two of those properties, the Manchester Inn & Conference Center and the Sonshine Building, to an Illinois developer for $1, though it was asking $325,000. William E. Grau, with Manchester LP and Coldwell Banker, who has more than 30 years in the construction, contracting and development industry, said he expects to spend about $10 million in renovations, most of which will come from loans and tax credits.

Besides the Manchester and Sonshine Building, the city has sold the former Cinergy Building to Higher Education Partners for $200,000, leased the former Bank One building to Miami University Research for $68,004 per year over the next five years, donated the former First National Bank building to Cincinnati State and the Masonic building to the Art Central Foundation, city officials said.

In 2010, the city used money from the Downtown Improvement Fund to acquire the former CG&E, First National Bank and Bank One buildings on Main Street, the Manchester Inn and Sonshine Building on Manchester Avenue, and a lot at 105 Main St., city officials said. The city agreed to pay off the mortgages on the properties that were owned by the late Perry Thatcher.

At the time, the city earmarked the Manchester Inn, Sonshine building, CG&E and the former Middletown Senior Center Building, which it already owned, for use by Cincinnati State Technical and Community College for a branch campus downtown.

At the City Council meeting more than three years ago, passage of the emergency legislation was greeted by a round of applause from the audience despite some reservations voiced by then Council Members A.J. Smith, Bill Becker and Tom Allen. Each said they were concerned about buying the former Bank One and First National Bank buildings after Cincinnati State President Dr. O’dell Owens confirmed the buildings likely would not be used initially.

“There is no reason we should be buying property that is going to be sitting,” Smith said at the time.

Mayor Larry Mulligan and then-Vice Mayor Anita Scott Jones said by purchasing them, the city was ensuring it acquired the real estate at a good price and it was available for long-term growth.

According to the Butler County auditor’s office, the five buildings and lot had an appraised value of more than $1.2 million, or $600,000 less than the city invested.

“The issue with this city sometimes is we are afraid to take a chance on anything because of things that have failed in the past,” Jones said at the time.

Allen said because of the way the mortgages were “wrapped up,” the city had to purchase the bundled buildings. The city purchased the Manchester and Sonshine properties for $175,000 and forgave a $150,000 in debt and bought the other buildings for $275,000, city records show.

Allen said no city wants to get into the landlord business, but sometimes it’s inevitable if that city wants to attract businesses and spur economic development.

Allen, who served on council for 1 1/2 years, completing the term of the late Jim Armbruster, said luring Cincinnati State downtown was the “most important thing” on the city’s agenda at the time.

He said the city didn’t have an “absolute commitment” from Cincinnati State.

Mike Robinette, the city’s director of economic development at the time, said by purchasing the buildings, the city blocked real estate “speculators” from potentially buying the buildings, then jacking up the prices “significantly” to Cincinnati State.

He said it never was the city’s goal to profit from the real estate purchase, but the “real motive” was luring Cincinnati State downtown. If not for the possibility of Cincinnati State, he said, the city never would have purchased the buildings.

Robinette said the deal is “working out pretty well” because Cincinnati State’s enrollment continues to grow — from 201 on the first day, Aug. 29, 2012 to 700 today, college officials said — and the university may expand into the former Middletown Area Senior Citizens Center.

Middletown historian Roger Miller said the city shouldn’t spend taxpayers’ money on properties. He said cities never end up getting their investment back.

“The city has no business in the building business,” he said. “That is no good.”

While he said attracting Cincinnati State was “great,” the city should have had more of a commitment before it purchased the Manchester and Sonshine building.

Ed Johnson, of Middletown, agreed. He said if all businesses operated like governments, there would be more bankruptcies.

“It’s like they’re playing poker with house money,” the 58-year-old said while walking downtown. “But instead of house money, it’s our money.”