When the Civic Foundation took over the building from Temple Associates, $142,000 in back property taxes was owed to Cuyahoga County. By 1998 this amount had accumulated to over $300,000 in back taxes and interest. The Civic discovered an interesting quirk of Ohio law when it tried to pay its first semi-annual tax bill after the title transfer in January 1995 - the County cannot accept current taxes if there are back taxes owed. This meant that since the Civic did not have the $142,000 plus accumulated interest plus the semi-annual current payment of $14,000, the County would accept nothing. The County, in fact, returned to the Civic its uncashed check for the current payment. Thus the Civic was positioned to perpetually default on its tax payment. Periodically the County Treasurer and the County Auditor would post the Civic on their delinquency list and send letters threatening foreclosure.

Another "catch 22" situation was that the Civic was not able to apply to the State of Ohio for a partial property tax exemption because the taxes were in delinquency. Under Ohio law, according to the Civics' attorneys, since the building was owned by a nonprofit corporation, it would qualify for tax exempt status except for that portion of the building that was occupied by for-profit companies. A large part of the building was occupied by religious congregations, the Ensemble Theatre, and nonprofit civic corporations. There were only a few for-profit permanent tenants. Ohio law permitted the Civic to apply retroactively for three years of exemption that would include all of the years that the building was owned by the Civic Foundation. However, until the tax delinquency was resolved, there could be no application for a tax exemption. Finally, on January 29, 1998, the Civic was served with papers formally filing foreclosure action against the building for non-payment of property taxes. The suit also included National City Bank and the City of Cleveland Heights, both of whom had liens on the property as a result of outstanding loans. In an attempt to turn a bad situation into a good one, the Civic contacted the Cleveland Foundation and asked for a meeting with their program officer to discuss its problem.

Armed with the lawsuit and the full support of the City, the bank, and the loan guarantors, the Civic board and executive director met with the Cleveland Foundation, which agreed to consider a loan to pay the portion of the taxes accumulated prior to the transfer of ownership to the Civic Foundation. With this news in hand, the Civic contacted the Cuyahoga County Treasurer's office. After several internal discussions, the Treasurer's office agreed to a plan that involved paying back in one lump sum the pre-1995 taxes plus interest, and placing the post-1995 taxes on a two-year monthly payment plan. The Cleveland Foundation, once the County was on board, agreed to loan the Civic $188,000 with a seven-and-a-half year repayment schedule with a three percent annual interest rate. The provisions in the loan document included a requirement that the County agree to drop the foreclosure suit and that the Civic agree to turn over to the Cleveland Foundation any tax refunds that the Civic receives from the state if and when the tax exemption is granted. With the three-year retroactivity and the possibility that a substantial percent of the building could be declared not-for-profit, the refund could be considerable.
Finally in November 1998, the lawsuit was dropped, the loan from the Cleveland Foundation was used to pay the pre-1995 taxes, and the Civic signed a two-year agreement to pay $4,300 per month to clear up the 1995-98 taxes. In addition, the Civic resumed paying the annual property taxes of about $29,000 pending resolution of the tax-exempt status.

In August 2000 the State of Ohio finally granted the Civic property tax exemptions for almost 90 percent of the building, retroactive to January 1, 1995. This rebate will allow the Civic to pay back a large portion of the Cleveland Foundation loan and frees up almost $30,000 per year currently used for tax and loan payments for reallocation to the maintenance of the building.