City defends Positively Cleveland, pushes for non-medical conventions in Med Mart talks

I've been writing a lot about whether the Med Mart deal threatens Positively Cleveland's funding and whether non-medical conventions will be a priority at the new convention center. Turns out Mayor Frank Jackson and his staff are asking the same questions. The city's negotiators want the county and MMPI to make concessions on those two issues before Cleveland will sell the current convention center to the county.

The Plain Dealer picks up the story today, reporting on Jackson chief of staff Ken Silliman's briefing to city council. "Keeping a prominent role for Positively Cleveland is key," Silliman (pictured) told council yesterday. More from the story:

[Silliman] also stressed that lots of industrial trade shows are eager to return to Cleveland once the obsolete convention center is replaced. Those events would pack hotels and restaurants, even if they don't appeal to MMPI.

"We are not as confident that a private entity will always make that correct decision," Silliman said. "This is a critically important area to us."

This is a major difference in how to look at the new convention center -- though one that could be resolved through compromise. The deal with MMPI says the county will send it proposals for convention bookings, and that MMPI "shall make commercially reasonable efforts to pursue" them as long as they don't "unduly interfere with intended uses of the Convention Facilities as part of an integrated facility with the Medical Mart."

"What we’re going to have here is a so-called themed convention center," Fred Nance, the county's negotiator, told me last week. That means medical conventions will usually come first, though it'll also depend on a show's size. "You could have a very low-level medical show that would be dwarfed by the impact of a non-medical show," he told me last week. "But all things being equal, the medical stuff would take precedence."

So Jackson is asserting himself to make sure the project doesn't lead us to a single-minded focus on medical conventions. He wants Cleveland to attract a new medical show market and the old convention crowds the antiquated center lost.

Public talks at Med Mart meeting

Six people spoke during the public comment hearing at the county commission meeting, asking questions about the Med Mart deal. Two asked whether the deal's provision for hiring minorities and local residents is strong and detailed enough. Others said the public should have more time to study the project.

"How can the county sign an agreement committing $925 million [to the project], with no design, no plans, no final site, no budget, no cost protections, no cost limitations, and no guaranteed benefits for citizens?" asked Thomas Kelly, one guy who spoke. (There are actually cost limitations and protections from construction cost overruns in the deal. I think the payments will add up to more like $815 million.)

"Why are we paying [MMPI] $40 million a year, when we built this thing?" asked Joe Miller of Cleveland Heights.

Fred Nance, who negotiated the deal for the county, said the development agreement will be replaced by lease, design, and construction agreements in the next year. Waiting until everything was nailed down all at once would've taken another year and hurt the chances of getting a deal done, he said.

Nance also explained that MMPI has to turn over $36 million a year back to the county, out of the $45-$48 million a year, to pay off the bonds for the project. The county will own the building after the 20 year lease, Hagan just added.

Positively Cleveland president: "We have an important role to play"

I talked to Positively Cleveland’s president, Dennis Roche, today about the news that the county may cut his organization’s funding to help fund the Medical Mart project. He made a strong case for preserving what Cleveland’s convention and visitor’s bureau does for the city.

“We have an important role to play, both with the new convention center project and the existing business already in place,” Roche says.

“Last year, we sold about 200,000 [hotel] room nights. About 160,000 of those were non-convention business. … You hear, in the early years, the convention will add 200,000 room nights. But we were already doing that without a convention center. The trick is going to be doing that while preserving the business that is there.”

MMPI vice-president Mark Falanga told me Friday that he believes hotel tax money will be a second source of revenue to pay for the Medical Mart. That likely means budget cuts for Positively Cleveland, which gets $5.5 million a year from the county hotel tax. County commissioner Peter Lawson Jones told me yesterday that the county will probably tap the hotel tax for the Med Mart, and that Positively Cleveland will likely have a reduced role and budget after the project starts, because MMPI will take the lead in booking the new convention center.

But Roche points out that most of Positively Cleveland’s budget goes to promoting tourism and non-convention meetings. “If you let the tourism and meeting trade atrophy and build the convention trade, you really are not gaining a lot as a community.”

Positively Cleveland used to book a lot of conventions, Roche says: Union meetings, government meetings, and large shows related to manufacturing. Industrial groups, he says, like to book conventions in their market — which includes Cleveland. But most of them have stopped booking in Cleveland over the last 10 years, choosing new centers in other cities instead. The problem is our antiquated 1920s convention center, with its low ceilings, many columns, and difficult truck access, he says.

Once we have a new convention center, Roche wants to win back the business Cleveland has lost. “We have relationships with trade organizations,” Roche says. “[We can] refer back to the times when they did have us in their rotation. I don’t think those things tend to be on MMPI’s natural radar. MMPI has made it very clear their focus is medical meetings. We want to supplement that.”

After the conversations I’ve had in the last few days with Roche, Jones, Falanga, and Fred Nance, I see two points about the Med Mart deal that have gotten little attention:

As MMPI focuses on making the Medical Mart work, Clevelanders will need to keep asking what non-medical business the convention center can attract.

Also, although the county commissioners plan to sign the Medical Mart and convention center deal this Thursday, they haven’t decided if they’ll use the hotel tax as a second source of funding for the project — and it hasn’t figured out what effect that would have on our convention and visitor’s bureau.

Update, 4/22: Mayor Frank Jackson is defending Positively Cleveland in negotiations with the county, and insisting on using the new convention center for non-medical conventions.  See my new post.

Jones: Positively Cleveland faces likely cuts with Med Mart deal

I just talked to county commissioner Peter Lawson Jones, who confirmed that the county will "probably" tap into the hotel tax to pay for the Med Mart deal and likely cut the budget of Positively Cleveland, the convention and visitor's bureau.

"I’m assuming Positively Cleveland will have a role, though it’s going to be a reduced role, from what it currently has," Jones says.

The county may need a second source of funding for the Medical Mart and convention center besides the sales tax earmarked (indirectly) for the project. The county will pay MMPI about $45 to $48 million a year, while the sales tax will generate about $40 million annually or a little more. How will the county make up the difference? "The money of the hotel and bed tax will probably comprise some of that," Jones says.

That likely means budget cuts for Positively Cleveland, which relies on the hotel tax for most of its funding.

"I don’t see how [its budget] doesn’t get cut, because you now have another entity performing some of what Positively Cleveland does," Jones says. In other words, MMPI will book events at the new convention center, reducing the convention and visitor's bureau's role.

"But I believe there’s still a role for Positively Cleveland, and I believe my colleagues feel that way," Jones adds. "Trying to draw tourists to Cleveland is not exclusively conventions and conferences." He says MMPI and Positively Cleveland should sit down and figure out how they'll work together. Once the latter's reduced role has been defined, the county commissioners will figure out how much to reduce its budget, Jones says.

I will get a reaction from Positively Cleveland in the morning. I want to hear from them how much a budget cut would affect their efforts to bring visitors to Cleveland.

However, this may give Cleveland's professional promoters less to worry about: An awkward passage in Sunday's Plain Dealer article made it seem as if Nance thinks the county doesn't get a good return on its investment in Positively Cleveland. Not so, Nance says. He says he was only saying that Cleveland's attempts to book conventions in the current, antiquated convention center aren't paying off.

Also, Jamie Carracher, a spokesperson for MMPI, just e-mailed me about one of my posts from Saturday, in which I noted that MMPI VP Mark Falanga didn't talk about working with Positively Cleveland on convention bookings. "Mark didn’t intend to leave Positively Cleveland out during your discussion," the e-mail says. "MMPI definitely plans to collaborate with them going forward."

Finally, there's another possible option for filling the gap between the sales tax revenue and the payments to MMPI. Jones and Fred Nance, the county's negotiator on the Med Mart deal, note that the county is already collecting the sales tax money, and it'll probably have more than $80 million of it on hand by the time the project starts.

"That money will create a cushion that will be available to the county for the project," Nance told me this afternoon. "There could be multiple uses of it" -- including "paying what we call these additional base rent and supplemental rent obligations." (That's the money going to MMPI beyond the $36 million a year for construction.)

The longer it takes for construction to begin, the less the county will have to pay MMPI to run the facility, because the end date of the lease is set for Sept. 2027. So the county might use that money banked in advance to pay MMPI the extra few million required each year.

Progress on MMPI negotiations

The Med Mart announcement today wasn't as groundbreaking as I thought it'd be: the county commissioners approved an "agreement in principle" toward a "definitive agreement" with MMPI. No site decision or final agreement. But Fred Nance (the county's negotiator) and Tim Hagan said some interesting things about the project.

Nance's main points today sound a lot like the memo of understanding the two sides agreed on a year ago. "The county will have no responsibility for cost overruns," Nance said, and MMPI will take care of all capital improvements. The new agreement also includes a marketing plan and very specific design regulations, he says.

Nance did address the PD's story about economic benefits. Even if the project only attracts one-fourth of the benefit MMPI projects, it's well-warranted, Nance argued.

"Between the expenditure of the bond proceeds and the interest on them, the public investment is just under a billion dollars," Nance said. MMPI projects the convention center and medical mart will generate about a billion dollars a year in economic activity.

"Say it’s off by 75 percent, [though] I doubt it is," Nance said. "We get our money back in less than 5 years. None of this is science. But the order of magnitude -- this is a no-brainer, a tremendous benefit to the community."

Tim Hagan managed not to raise his voice when he addressed the latest press coverage this time. "We believe very strongly that our investment, our own stimulus package, will benefit [the whole community] in the long term."

Sounds like MMPI's strong letters defending the mall site are the biggest news today. I will post more about them later in the day. I hope to write more about the economic benefits debate -- the "why build it at all?" question -- in a few days.

Medical Mart: Behind the closed doors

Excellent story about this week's Medical Mart decision in the Plain Dealer today -- a must-read.

The front-page story asks why the commissioners decided, within hours of hearing the developer's recommendation, to pick the downtown mall as the location for the convention center and Medical Mart.

The story's highlights:

-Commissioner Peter Lawson Jones and county negotiator Fred Nance wanted to negotiate price before announcing a decision. Tim Hagan and Jimmy Dimora decided to make the decision right away -- another big disagreement between them and Jones.

-Hagan and Nance are very sensitive to the critics who assume local politics is beholden to Sam Miller and Forest City (which owns the other possible site).

-Hagan's biggest motivation was a sense of urgency -- an urgency the Plain Dealer and a lot of other people in town complained has been missing during the year and a half of studying and deliberating about the project. This story will likely infuriate Hagan, Dimora and Nance. They feel whipsawed -- criticized for moving too slow, then for moving too fast.

-But that's not the real issue here. Here's the real issue, high up in the story:
"The county has decided to spend nearly a half-billion public dollars without holding a meeting in public to discuss the basis for its decision. ... Why would a county government in the middle of a sweeping federal corruption investigation choose not to conduct its business in the most open way possible?"

-That's why Dimora's take isn't satisifying. Here's his quote: "We figured, 'Why continue to prolong the decision'" when MMPI had already done the analysis[?] "The public and the media should trust the due diligence" and cost analysis, he said.

-The commissioners do decide too many things in private executive sessions. But with this story, the Plain Dealer has done a great job of getting them to explain what went on behind those closed doors.

-The Plain Dealer and other citizens who want this decision explained clearly will probably not get what they want. Hagan and Dimora are usually not inclined to do this. When Jones held public forums on the Medical Mart site selection this summer, they didn't attend. If they act like they acted with the Ameritrust Tower issue, they're more likely to rant at the Plain Dealer at Thursday's commissioners meeting. (Wish I could be there to blog about it, but alas, I'm leaving for vacation that day.)