Wednesday, April 29, 2009

County gives Jackson ultimatum: Sell convention center or else

Check out WKYC's report from Tuesday night about the city and county's intense negotiations about the convention center site (video above, video and text version here). Mayor Frank Jackson, quiet for most of the Medical Mart/convention center debate, is taking a tough stand in negotiations with the county. Jackson wants the county to pay $25 million for the current convention center and Public Hall.

The county commissioners say $17.5 million is their final offer. If they don't get it by Friday, they say they'll consider other sites. No, not Tower City -- several sites near University Circle. (I think this likely means the Cleveland Play House property on Carnegie.)

Jackson is also standing up for Positively Cleveland, insisting its budget not be slashed and diverted to the Medical Mart. (See my coverage of this issue here and here.) Tom Beres, WKYC's political reporter, asked Tim Hagan about it, and Hagan sounds ready to gut the convention and visitor's bureau. "Positively Cleveland is not as important to the future of this community as a new convention center with a Medical Mart," he tells Beres.

Positively Cleveland's Dennis Roche, making the case for his organization, warns Cleveland could end up like Colorado, which lost a third of its tourism after eliminating its tourism bureau. A representative of a Gateway hotel says cutting the bureau's budget would be "very stupid." The commissioners might also vote to raise the tax on hotel rooms from 4.5% to 6.5%.

On tonight's 7 p.m. broadcast, WKYC reported another idea has come up in negotiations: the city might keep Public Hall, and the new project could stretch west instead -- to the site of the county administration building.

This may just be a negotiating stance or ploy, or a serious way to cut the selling price. If the county or city are serious about the idea, it'd open up two huge issues:

-The county would move to a new headquarters -- reigniting the debate about where it should move and whether it can afford another big new project. See my June 2008 article "Tower Play," about the Ameritrust Tower, which showed that constructing a new county building would add millions of dollars a year to the cost of government.

-MMPI has said it can start booking trade shows into a renovated Public Hall within a year of starting the project. That, it has argued, is key to being "first to market" -- getting a Cleveland Medical Mart going before a possible competitor in New York City opens. Leaving Public Hall out of the project would eliminate that competitive advantage.

Update, Thu. a.m.: In today's Plain Dealer, Jones confirms the Cleveland Play House is an alternate site. The story says the county administration building could become part of the Mall site for the project if negotiations for the private property south of it fall through. (That fits what I've been hearing.)

Monday, April 27, 2009

Crain's on Positively Cleveland's funding threat

Crain's Cleveland Business reports today on how Positively Cleveland's funding may be slashed to pay for the Medical Mart. You need a subscription to read it online. (For my reporting on the issue, click here and here.)

Like last week's Plain Dealer story, Jay Miller's piece reports that $4 million a year could be cut from the convention and visitor's bureau's budget to give the Med Mart deal a second funding stream.

On the surface, that'd be a 50% cut -- but it'd actually be deeper than that. Officially, Positively Cleveland gets $8 million a year from the county tax on hotel rooms. But it has to immediately turn over about $1.4 million of that to pay off the debt from building Quicken Loans Arena. Another $1 million goes to other groups that promote Cleveland. Positively Cleveland really spends $5.6 million on its own work. So a $4 million cut would be a 71% cut.

County commissioner Tim Hagan tells Crain's no decision has been made about the size of the cut:

Hagan said it isn’t yet known how much of the bed tax would be diverted to the convention center operator. The amount won’t be known until bonds to build the complex are priced and sold and matched up with sales tax revenue projections, Mr. Hagan said.

That suggests that the county will take whatever it needs from tourism and meeting promotion to pay for the Med Mart deal. In other words, the county has committed to the Med Mart project without knowing how much it will drain Greater Cleveland's other strategies for attracting visitors.

Hagan and colleague Peter Lawson Jones seem to justify cuts to Positively Cleveland by saying (here and here) that the organization promotes the current convention center, and that MMPI will take over that job when a new one is built. However, says Crain's:

Dennis Roche, the group’s president, said the size of the cut under discussion would cripple his organization’s ability to market the region and all its attractions beside the convention center. ... Mr. Roche said his organization spends about 10% of its budget marketing the existing Cleveland Convention Center, which is outmoded. ... The rest is spent pursuing leisure travelers and meeting planners ...

Ronayne calls for metro government, state plan to fight sprawl

Chris Ronayne, president of University Circle Inc., writes in Sunday's Plain Dealer that Cleveland and Cuyahoga County should merge to fight sprawl.

"Since 2002, we've consumed more than 100,000 acres of farmland in Cleveland's metropolitan area without any growth in population," writes Ronayne, who was former Mayor Jane Campbell's chief planner and chief of staff.

Like Indianapolis and Louisville, Ronayne says, our city and suburbs should merge into a larger Cleveland 0f 1.3 million people. He says it would save taxpayer money and encourage "sustainability" -- investing in our older cities instead of abandoning them. "What if Westlake's mayor became a borough president like in New York City?" he asks.

Since our urban sprawl extends beyond Cuyahoga County, Ronayne also says our region should share tax revenue, like in the Minneapolis-St. Paul area. He wants Ohio to follow Maryland's lead by "requiring new exurban developments to build sewer lines, roadways and schools without state aid unless urban core communities were fully built-out."

I could easily get cynical here and say that Ronayne's proposals are radical for Ohio, that mayors won't want to give up their power, suburbanites won't want to attach themselves to the city, and nothing is likely to stop people from moving to big homes on big lots with low tax bills in Lorain County and Bainbridge and Sagamore Hills.

But metro government is the logical end point of our area's fashionable but vague talk about regionalism. It's an obvious idea to examine as we decide how far to take county government reform. Ronayne's op-ed is significant because he's Cleveland's first prominent political figure (that I can recall) to say all these ideas could work here. The question is, will any more join him?

I wonder if supporting metro government will help or hurt Ronayne's political ambitions. He has said he's interested in being mayor of Cleveland someday. See Andy Netzel's Cleveland Magazine profile, from last year, for more about him. (If you'd like to link to Netzel's story, use this shortened link:

Friday, April 24, 2009

The Rise and Fall of Jeff Johnson

Since former state Sen. Jeff Johnson is running for city council, it's a good time to add a vintage Cleveland Magazine story to our online archive. From February 1999:

The Rise and Fall of Jeff Johnson
On Feb. 5, former Ohio Senator Jeffrey Johnson will be sentenced for crimes of extortion. In the aftermath of this incredible political crash-and-burn, we examine his life’s story.

Michael Drexler's profile is the definitive account of Johnson's political accomplishments and the scandal that almost destroyed his career. It also reminds us of some fun trivia: Johnson is an ex-boyfriend of Halle Berry.

To bridge the decade since the profile, check out Ian Hoffman's piece on Johnson from our 35th anniversary issue in December 2007.

Before Johnson's felony conviction, many political observers thought he would succeed Mike White as mayor. A judge's 2007 ruling makes Johnson eligible to run for office again, and Roldo thinks Johnson still has a shot at the job someday.

Update, 4:30 p.m.: Johnson got his law license restored this morning.

(If you'd like to link to our 1999 story, here's a shortened link:

Wednesday, April 22, 2009

Mean Scene piece slams Hagan; student asks if he's unaccountable

Scene's cover story today, slamming Tim Hagan on the Med Mart deal, is mean. How mean? It begins and ends with snarky references to Hagan's recent heart trouble!

Though the story doesn't call Hagan a pimp, like the Plain Dealer's Chris Evans did, the headline is, "How We Got Screwed," and a subhead says he has "had his way with you," the taxpayer. Switching to a hardware metaphor, the cover calls Hagan the "Med Mart's chief fixer." (I thought Fred Nance was the "fixer"!)

There isn't much new news in the piece. It's mostly an informative, one-sided, sarcastic recap of the convention center and Medical Mart saga, from Hagan's 2004 defeat of Tim McCormack to now. (A couple of corrections -- there are cost limitations in the Med Mart deal, though the story quotes someone saying otherwise. Also, the story says Hagan was a protégé of Bobby Kennedy -- who died in 1968, when Hagan was about 22. Hagan is a protégé of Teddy Kennedy.)

One tidbit I hadn't seen before: a Campbell Administration official reports that Campbell had a proposal in hand in 2005 to give MMPI the old convention center in exchange for "as much as 5 percent of the profits" from the new project. That didn't fly -- "talk soon shifted to MMPI [covering] overruns in exchange for keeping all the profits."

The most interesting part of the article comes on page 17, when writer Dan Harkins reports on a talk Hagan gave April 9 at Tri-C West. Hagan gets worked up when the students ask him about the Med Mart deal and the county corruption investigation. He also delivers his often-repeated lecture on representative democracy. A student responds by asking Hagan if, in his last term, he's now unaccountable:

"[W]e listen to the public's view," [Hagan] says, "but ultimately the responsibility rests with your elected officials."

... Since Hagan acknowledged he's not running for office again, a student inquires: What keeps him from doing whatever he wants now?

"I could do that," admits Hagan. ... "I have three years or so left, and you're absolutely right — that's the power you gave me when you elected me. I hope that I execute that with respect and thankfulness and responsibility."

Tuesday, April 21, 2009

Jacobs Group relinquishes stake in Key Center, won't benefit from Med Mart

This just went up on this evening:

The Richard E. Jacobs Group, which developed Key Center in downtown Cleveland, has relinquished its 50 percent stake in the skyscraper complex.

Recent regulatory filings show that
Wells Real Estate Funds, based in Georgia, took full ownership of Key Tower, the Marriott Downtown Cleveland hotel and the neighboring parking garage in October.

I bet the Plain Dealer looked into this because of developer Jeffrey Jacobs' full-page ad Sunday supporting the Mall site for the Medical Mart and convention center. The Marriott at Key Center, which his father's company developed, would benefit greatly from having a vibrant convention center across the street.

I wrote yesterday that Jeff Jacobs' dad, Dick Jacobs, owns the Marriott. It's no longer true. This afternoon, I revised my post to reflect that the Richard E. Jacobs Group sold half of its share in Key Center in 2005 -- and now I'm posting a correction, since they sold or relinquished the other half in the fall.

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.

Monday, April 20, 2009

Med Mart: Dan Gilbert's weak argument

The Plain Dealer gave Cavs owner Dan Gilbert's argument for putting the Medical Mart at Tower City page-one play again Sunday. This time the lead was Gilbert's comparison of downtown Cleveland to downtown Detroit.

Gilbert argues that Detroit made a terrible mistake when it put three casinos in different places, two of them too far from the city's center. They lost a chance to give downtown Detroit a connected core.

True, but there's no lesson for Cleveland there. "NOTE: Maps are not at the same scale," says the fine print on page A16 under the PD's Detroit and Cleveland maps.

Detroit's downtown is much bigger and sprawled-out than Cleveland's. The Motor City Casino is 1.4 miles from Detroit's convention center, Cobo Hall. But the convention center site on our Mall is a half-mile from the Q, with East Fourth Street halfway between.

Yes, the Tower City site's big advantage is that it's connected to the Rapid, a shopping center, two hotels and the arena. But the mall site is hardly isolated -- it's next to two hotels, a block from Public Square, and the new center would have a big glass window overlooking the Rock Hall and the lakefront.

Developer Jeffrey P. Jacobs took out a full-page ad in yesterday's paper supporting the Mall site. His letter makes an interesting point about connecting downtown. "Successful urban planning... involves the creation of multiple traffic generators," Jacobs writes. "Moving visitor traffic throughout downtown will help sustain a community of businesses."

In other words, grouping things fairly close together is good -- but you do want conventioneers to get outside, into taxicabs, onto the streets.

{Correction, 4/21: In an earlier version of this post, I wrote that Jeff Jacobs' father, Dick Jacobs, owns the Marriott at Key Center, across from the Mall site. Actually, reports tonight that the Jacobs Group relinquished its 50% stake in Key Center this fall. See my new post.}

Saturday, April 18, 2009

Rep. Fudge: Let Americans travel to Cuba

Last weekend, on WVIZ's Feagler & Friends, I got to debate U.S. Rep. Marcia Fudge's trip to Cuba. She went to Havana as part of a Congressional Black Caucus delegation and said U.S.-Cuba relations ought to improve.

Most of the commentary I've read about this trip had an old-time Cold War feel to it: The Black Caucus is soft on Commies! -- that kind of thing. But this week, Raul Castro, Hillary Clinton and President Obama all said they want to start a new era of serious talks and better relations. Now, Cleveland's newest congressperson looks like she was ahead of the curve.

Yes, I agree our representatives should bring up human rights and political prisoners when they visit undemocratic countries. Yes, smoking a cigar with Cuban president Raul Castro seems kind of decadent (unless you think of it as a peace pipe).

But let's not just criticize the theatrics of the visit. Fudge brings up a serious issue (check out her letter to the Plain Dealer): She's co-sponsored a bill to repeal the law that makes it illegal for most Americans to travel to Cuba.

Because Cuba is a neighbor, 90 miles from Florida, and a Cold-War flashpoint that made both the right and the left froth at the mouth, and because anti-Castro Cuban exiles form a voting bloc in a swing state, Americans live with a double standard: we can travel to Communist China and Communist Vietnam, but we can't spend a dime in Communist Cuba.

"Open or free travel encourages the free exchange of ideas, which has been known to silently tear down walls, both literally and figuratively," Fudge said in a a statement last week.

Here's Nicholas Kristof of the New York Times arguing for lifting the travel ban, an article from Foreign Policy that says we shouldn't, and Eugene Robinson of the Washington Post, who's reported from Cuba 10 times, saying we should lift the ban but not trust Cuba.

What's it like to visit Cuba? Here's a vivid story Jesse Tinsley wrote about Havana for the Plain Dealer last year.

Friday, April 17, 2009

Two Cleveland council members resign -- why?

Sabra Pierce Scott
and Roosevelt Coats resigned from Cleveland city council yesterday, surprising their colleagues -- and the press. "WTF?" a journalist-friend wrote me this morning.

Coats' move makes the most sense. He's represented South Collinwood for 21 years, and now he's going to run for the Ohio House. It's a seat-switch with state Rep. Eugene Miller, whom Coats will recommend to replace him on council. Coats has tried to move up before -- he ran for county recorder in 1998 and lost to Pat O'Malley -- so this is a good chance for him to advance.

Pierce Scott's decision is the surprise. Not so much the timing, because by leaving at the end of April, she can recommend a successor who'll be the incumbent in the fall council elections. (She's tapping Shari Cloud, executive director of Sankofa Fine Art Plus, the Glenville-based arts organization.) Pierce Scott, a former aide to two city council presidents, was elected in 2001 (here's my article about that race), represented Glenville for two terms, and became council's majority leader, president Martin Sweeney's second-in-command. I interviewed her a few times, and she seemed pretty sharp.

I wonder if this article by Dan Harkins of Scene might help explain. Former state Sen. Jeff Johnson is thinking of running for Pierce Scott's seat this fall. It would've made for a tough campaign -- and with her out of the race, Johnson could be the front-runner, despite his 1998 felony conviction for extorting campaign contributions. (Click here to read Ian Hoffman's Dec. 2007 Cleveland Magazine article on Johnson.)

Thursday, April 16, 2009

Med Mart: What next?

Now that the county has inked the deal with MMPI, what will happen next?

The county still has to buy the current convention center from the city. MMPI and the county will negotiate some more over the next year, fleshing out the deal in further agreements about finances, leases, construction and design. MMPI will start trying to sign medical manufacturers and conventions. It has a year to lease five showrooms and book ten conferences or shows. If all that happens, construction probably starts next spring. It'll take three years, though MMPI may book shows into a renovated Public Hall starting in 2011.

Questions to watch: How many manufacturers and shows will MMPI book, and what kind? How much attention will they devote to non-medical conventions? Will negotiations with the county go smoothly, or will sticking points and surprises come up? What will be the second stream of money to fund the project besides the sales tax, if any? If it's the hotel tax, what happens to Positively Cleveland?

Dimora quiet before cameras, chatty after they're gone

Tim Hagan called the roll on the Med Mart vote without asking Jimmy Dimora if he wanted to comment. Hagan must've known in advance that Dimora wouldn't. Dimora just delivered his "yes" with unusual resolve.

Dimora has turned quiet at the newsier county commission meetings when lots of TV cameras are around. But now that most reporters have left the meeting (I think it's just me and the PD's Joe Guillen now), Dimora's getting chatty and cracking jokes.

Right now, Dimora and Jones are hearing a report on the county's investment portfolio. After being told it's doing well, considering the recession, Dimora called out to Guillen. "How about a little balance there, a paragraph of positive news?" he asked mischievously. Then Dimora turned to one of the county's investment advisers. "You're like the ugly duckling in the British contest that sang that beautiful song. You don’t look like you know what you’re doing!"

Hagan on Med Mart deal

Tim Hagan argued the Med Mart deal will benefit Clevelanders by reviving an ailing public property, the current convention center.

"We’re negotiating with the mayor in good faith to claim a public facility that’s not being used, a public building," he said at today's commissioners' meeting. "We’re giving the taxpayers of Cleveland an opportunity to use this facility to benefit Cleveland and Cuyahoga County. Yeah, we've got a private partner involved in this, but we're not turning over public money [to them] to buy the land. It’s owned by the citizens." (In other words, the county will own the new center after the lease expires.)

Cleveland spends $7 million a year to maintain the current center, Hagan said. "Eight to nine million dollars is going to promote it over there. That's $17 million to promote an inadequate facility."

Hagan is referring to Positively Cleveland's budget, which the county may cut in order to switch its county bed tax funding to the Medical Mart. Actually, Positively Cleveland's president made the case to me this week that most of the group's work is not booking conventioneers. If Hagan doesn't think Positively Cleveland's work is doing much for the city, that probably won't bode well for the group's hopes of holding onto its funding.

After joking his invitation to Cavs playoff games might be revoked, Hagan ripped into Cavs owner Dan Gilbert and Indians president Paul Dolan. He jabbed at the Plain Dealer too. "We’ve got a newspaper that can’t figure out a business agreement to keep itself going giving us business advice. We’ve got two owners of franchise[s] who are not interested in the public’s view." Sarcastically, he pretended to be Gilbert: "Oh, I’m concerned about the future of the community, I’m concerned about downtown. Oh, and coincidentally, just as an aside, my building the Cavs are in will be close to that" -- the alternative convention center site at Tower City -- "while I’m promoting the possibility of gambling in town."

After returning to a frequent theme of his in response to criticism, that we're a representative democracy, not a direct democracy, Hagan called the roll. The vote was 3-0.

Just before signing the deal, Hagan made a reference to his heart trouble last week. He was hospitalized and had two stents implanted, county administrator Jim McCafferty told reporters. "Some of you have read that I had a little problem over Easter weekend," Hagan told the audience. "I’m doing just fine."

As cameras gathered to watch the commissioners sign the deal, county administrator Jim McCafferty cracked an awkward joke about the possibility Hagan might have a heart attack as he signs. Hagan laughed it off. "Aarrh," he said, and faked falling down in his chair.

Jones on Med Mart deal

Highlights of Peter Lawson Jones' comments about the Med Mart deal at the commissioners' meeting this morning:

Jones got very animated talking about why he thinks Cleveland needs a new convention center. "The current convention center is only 9 or 10% full," he said, because of its "dilapidated condition." Convention planners tell the county they'd book Cleveland if we build a new center. "We have more attractions than anyone in our competitive set: Cincinnati, Detroit, Pittsburgh, or Columbus," Jones said.

"The impediment is right there. Look out the window." Jones pointed outside to the Mall, at the current convention center. "That’s the problem."

The county should get its investment back in the first few years the mart and center are open, Jones said. MMPI has estimated the project could attract $1 billion a year in economic activity to Cleveland, he noted. "Let’s assume they’re only a fifth right," Jones said. "Then it will only take five years for us to get back our investment."

Other cities tried to court MMPI, adding pressure on the county negotiators, Jones revealed. Denver tried to get MMPI to build a Medical Mart and convention center there, he said. Echoing Nance's comment that MMPI is the country's best merchandise-mart operator, Jones defended the deal's price: "When you want the best, there’s a premium on that. You can’t get LeBron James for Larry Hughes’ money."

Jones said the county intends for 20% of the construction workers on the project to be Cleveland residents and for a "significant number" to be Cuyahoga County residents. He said the county will use "laws and the bully pulpit" to make sure minorities and local residents work on the project. MMPI "will adhere to our desires, whether expressed in rules and regulations or aspirations," he said.

He also said he believed the county has spent about $500,000 on the project so far, mostly for construction and convention-business consultants.

At about the six-minute mark of his 14-minute remarks, the often-wordy Jones said he was just getting started praising and defending the deal.

"Peter, I’ve got a bad heart," Hagan interjected mock-wearily.

"I’m trying to save you energy by making comments you might have made, and at a higher decibel level than I have," Jones replied with a smile.

Commissioners sign Med Mart deal

The county comissioners have just signed the Medical Mart development agreement, after comments by commissioners Peter Lawson Jones and Tim Hagan.

I'll post highlights of their comments soon.

Hagan, who was in the hospital for heart troubles last week, has left the meeting after signing the agreement and giving Fred Nance a big hug.

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.

Live-blogging from Med Mart meeting

I'm headed to the 10 a.m. county commissioners' meeting, where they're expected to commit to the deal with MMPI to build the Medical Mart and convention center.

I'll live-blog from the meeting, assuming the county building's temperamental wifi connection holds up. (If not, I'll blog soon afterward.)

Today's news: the Cavs owner and Indians president ask for a delay in the vote. Tim Hagan blasts Dan Gilbert, saying he just wants to move the convention center to Tower City, nearer the Q. "Tell Gilbert to move to Cuyahoga County and run for county commissioner," Hagan says. "I find the comments self-serving."

Wednesday, April 15, 2009

More Med Mart reading: MedCity News' reports

For more news about the Medical Mart project -- which the Cuyahoga County commissioners are expected to approve tomorrow -- check out these two articles from MedCity News, a new website about Cleveland's medical industry produced by former Plain Dealer reporters Chris Seper and Mary Vanac.

Seper's interview with MMPI vice-president Mark Falanga highlights the fact that the Medical Mart is an untried concept. Seper asks about the clause that lets the county back out if MMPI can't book enough showrooms and trade shows. "We all want to know if this is viable," Falanga tells him. "If we don’t get these commitments, that tells us something else, and we need to step back and re-evaluate."

MedCity News has also done the best article on what merchandise will likely be displayed in the Medical Mart: "Medical Mart backers see furniture first -- but something greater down the line." It quotes four prospective showroom tenants or convention organizers. One, Hyland Software, is interested; the other three are carefully noncommittal.

Tuesday, April 14, 2009

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.

Monday, April 13, 2009

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.

Saturday, April 11, 2009

The second Med Mart tax?

Most of the Medical Mart and convention center project will be paid for with the quarter-cent sales tax hike passed in 2007. But not all of it.

The county will pay MMPI $45 million to $47.8 million a year from 2010 to 2027 to build and operate the project. The quarter-cent sales tax raises about $40 million a year ($42 million in 2008). Where will the extra $3 million to $7.8 million a year come from?

The leading candidate is the county’s tax on hotel room stays, known as the “bed tax” for short. I asked MMPI VP Mark Falanga about that yesterday.

“I think a portion of this [comes from] those funds, the pre-existing bed tax,” Falanga said. He said the county would know for sure. I’ll be making calls about it on Monday.

The bed tax raised roughly $14 million last year. About $4.5 million goes to pay off the bonds that were floated to build the Rock Hall, while $1.5 million goes to pay off the bonds that built Gateway. About $5.5 million* goes to fund Positively Cleveland, the city’s convention and visitors bureau. The bed tax makes up almost 90 percent of Positively Cleveland’s revenue.

Does the Medical Mart deal threaten Positively Cleveland’s funding? I will write about this again before the county commissioners vote on the deal on Thursday.

{*Correction: I originally wrote that Positively Cleveland gets $8 million a year, but about $2.5 million of that is paid out to other organizations and projects.}

Falanga on the Med Mart deal

MMPI vice-president Mark Falanga also talked with me about several details in the company’s new deal with the county.

-Why MMPI was reluctant, at first, to assume responsibility for any construction cost overruns: “We always recognized that was important to the county. To get to the point where we could make that commitment, and understand our relationship with the county, the architects, and the engineers, took a little time and effort. …

“We’ve done a lot of architectural due diligence. We have a strong relationship with the architect and engineering firm. [We decided we] could mitigate those risks and build the building from the budget available.”

-What information will remain private under the deal’s “trade secrets” provision: “The leases we have with tenants in the buildings, license agreements with different trade show producers. We don’t want to reveal our private agreements we have with our customers. We think if we did, it would be a great disincentive for companies to relocate into Cleveland. No other center opens up its licensing deals to the public.”

-Why the deal is so complex, with control of the mart and center cycling between the county and MMPI in three leases, while streams of money cycle back and forth: “Much of the complexity [is because of] how the bonds will be raised. Some is driven by the fact that we are a real estate investment trust. Some is just the nature of a public-private parntership.”

-What the payments are for: “Most of the money the county pays us, we pay the county back, to pay down the loan for this project. The loan will be somewhere in the $300 million range. … The county pays us roughly $45 million a year. We then pay the county $36 million. That is paying down the principal and interest. The difference between those two is the money used to operate the building, to pay for expenses, staffing, management, day to day operations, and to attract tenants.”

-When the county will start making payments to MMPI: “Those payments start when construction commences -- in one year’s time, more or less.” That means the deal will last from about April 2010 through September 2027: 17 1/2 years. Total cost to the county (my calculations, not Falanga’s): about $815 million, plus a few unknowns.

Falanga argues: “The economic impact Cleveland stands to benefit, with all the activities here, far outstrips the money being transferred between our organizations or the money required to build this facility.”

-The county will reimburse MMPI for all “pre-development agreement expenses” above $1.5 million. That includes spending in the next year, Falanga says. So far it’s spent $1 million. It’ll have “quite a lot of pre-development costs: all of the sales marketing and planning to build a facility.”

-Taxes: The deal says the county will have to pay any taxes on the facility, but Falanga hopes there won’t be any, since the county will own the land. (Note: This is in dispute. As of today, the county's negotiator, Fred Nance, still says MMPI will own the facility until 2027.)

MMPI and the convention business

To succeed, Cleveland's new convention center won't just live off the Medical Mart. It'll also book non-medical conventions. MMPI, as the center's manager, will have to win back convention organizers who used to book events in Cleveland until a few years ago, when our obsolete 1920s-era convention center was surpassed by competition in other cities.

My impression is, that's a different business than what MMPI does elsewhere. Its website bills the company as "the world's leading owner and operator of showroom buildings and trade show facilities." Compare the events at its current centers with events at the Pittsburgh convention center. Pittsburgh books trade shows, but also conferences where professionals get together to talk shop, rather than buy stuff.

MMPI VP Mark Falanga says the company has plenty of experience relevant to booking conventions. It works with third-party show producers at its other facilities, such as Pier 91 and 94, its convention facility in New York, he says.

If MMPI doesn't have all the experience it needs, it'll turn to those who do: "We plan to work with the Greater Cleveland Partnership" to book conventions, Falanga says. "We'll also hire in staff that has done this for other convention centers. We think this is a good overlap."

I didn't hear him say MMPI would work with Positively Cleveland -- which is, after all, our convention and visitors' bureau. There may be a reason for that, which I'll post about soon. Update, 4/13: MMPI says it does plan to work with Positively Cleveland. See this new post, halfway down.

Friday, April 10, 2009

MMPI's Falanga: the case for a Med Mart

I talked today with MMPI vice-president Mark Falanga, who gave me a better explanation than I've heard before about why MMPI thinks the Medical Mart will be successful.

To succeed, Cleveland's Medical Mart has to attract at least three audiences. 1) Medical manufacturers have to rent showrooms in the mart. 2) Medical conferences and trade shows have to book the convention center. 3) Non-medical conventions have to book the convention center too.

The showrooms will offer "tremendous economic benefits for a company," Falanga says. "They can set up their equipment in a manner best suited for showing off the benefits of their equipment. They'll have permanent displays, and not have to move all over the country. The company can benefit from the traffic of each of the trade shows cycling through the facility over a year."

The Medical Mart should give Cleveland an advantage in attracting medical conferences and trade shows. "The showrooms will, by and large, be occupied by anchor companies... with more customers than anyone else," Falanga forecasts. So, "each of those trade shows will be anchored by some of the largest manufacturers in the business. Those manufacturers will drive a lot of customers into those shows." So the showrooms will attract more attendees -- medical equipment buyers. The promise of more buyers will attract more temporary exhibitors, and vice-versa, making the trade shows successful, MMPI believes.

That's how MMPI's other facilities, including the Merchandise Mart in Chicago, succeed. "We pioneered this concept of marrying a temporary trade show to a permanent showroom," Falanga says.

But it hasn't been done in the medical industry before. Talking to Cleveland city council in February, Falanga talked about the possibility of Cleveland attracting 10 percent of all the nation's medical trade shows and 5 percent of all medical conventions -- or 60 shows and 100 conferences a year. That's what MMPI's estimate of $1 billion a year in economic spinoff is based on. "I was using that as hypothetical example," Falanga says. "I just wanted to put into perspective how attainable that is."

Last month the Plain Dealer cast doubt on the $1 billion a year figure, in part by asking if 60 medical shows will really come to Cleveland. The PD noted that San Diego -- which doesn't have a Med Mart, but does have immaculate weather -- hosts 16 medical conventions in a year.

Is 60 shows optimistic? "It might be," says Falanga. "We’ll see how it all goes."

The worst-case scenario is spelled out in the county's deal with MMPI. If the company can't book five trade shows or conferences and 10 showrooms in the next year, the county can back out.

Falanga says the bookings may start slow, but will build on each other. "The reality is, we'll attract some showrooms, which will attract trade shows and conferences, but doing that will attract more showrooms, so we'll be able to attract more trade shows and conferences," Falanga says.

"It’s going to take many years for this to ramp up, for Cleveland to prove itself to the medical community. It’s a long term plan, but we’ve got a clear focus on what we’re going after, and we think it’s all attainable."

I'll post more about my conversation with Falanga this weekend.

Feagler's friend

I'll be on WVIZ's Feagler & Friends this weekend, talking about the Medical Mart deal, Rep. Marcia Fudge's trip to Cuba, and the president's trip to Europe.

Dick Feagler's other guests are Plain Dealer politics reporter Mark Naymik and freelance radio reporter Greg Saber.

It airs at 8:30 p.m. tonight and 11:30 a.m. Sunday.

Wednesday, April 8, 2009

County & MMPI: The cost and what's next

So if the county commissioners approve their new deal with MMPI for a convention center and Medical Mart next Thursday, what happens next?

The county has to buy the land from the city (and a parcel on St. Clair from a private owner). Meanwhile, the county and MMPI have to nail down more details in further financial agreements. The deal really starts after those two things are done.

The cost: Let's say it takes five months for those next steps. That'd make it an 18-year lease, Sept. 2009 to Sept. 2027. I'm coming up with a total of about $842 million for the county, plus the cost of buying the land, the unknown excess "pre-development costs," and any unabated taxes.

That includes a new $12 million construction manager/developer fee that wasn't in last year's agreement. But the deal keeps shrinking the longer it takes to make it happen, because the Sept. 2027 end date has stayed the same. A 20-year deal, like the one in last year's agreement, would have cost about $923 million.

By the way, you might have heard people say this is a $400 million project. That's the initial cost of construction. The $842 million is the cost of constructing the project and running it, plus the cost of borrowing. The county will float bonds to pay for building the project, and the cost of the debt service payments could reach $36 million a year. (The cost of borrowing greatly increases the final cost of most public projects, just like it increases the cost of buying a house. For instance, 30-year mortgage to buy a $100,000 home right now will cost more than $180,000 to pay back.)

County & MMPI: The new deal

Cuyahoga County released its draft agreement with MMPI today for the Medical Mart and convention center. It looks like the county commissioners plan to approve it next Thursday.

Click here to download the 61-page agreement.

Most of it fleshes out the terms in their 4-page agreement from last spring:

-MMPI will spend $20 million to develop the project. The county will pay the rest, sending MMPI $45-$46 million a year at first -- that'll rise a bit as the deal goes on, to a maximum of about $47.8 million.

-The county will own the site but lease it to MMPI until 2027. MMPI can then negotiate to manage the center and mart until 2067.

-MMPI gets all the revenues from the center and mart, but has to pay for all expenses and repairs using the money it gets from the county. In other words, MMPI might make money on the project, or might lose money. This is the part of the deal that caps how much the county will have to pay.

-The county gets to sell the naming rights to the project.

-If MMPI can't lease 10 Med Mart showrooms and book 5 trade shows or conferences within a year, the county can back out.

New terms that weren't in last year's agreement:

-MMPI gets a $12 million "construction manager/developer fee" to build the project.

-The penalties the county can assess on MMPI every 5 years if the center and mart perform badly are spelled out. The county may be able to cancel the deal in some cases, or it could cut the payments to MMPI to as low as $36 milion a year.

-There's a complicated plan to deal with construction cost overruns, with a reserve set aside to deal with them (out of the money the county gives MMPI) and MMPI paying the rest if the reserve gets tapped out.

-If any taxes on the site aren't abated, the county will have to pay them.

Update, Wed. night: More new provisions:

-If MMPI spent more than $1.5 million in "pre-development agreement costs," the county will reimburse the company for any spending above $1.5 million. (I'm guessing this is because it was a lot harder to figure out the deal and the site location than MMPI thought it'd be.)

-MMPI agrees to let the county book 30 days of events for the public per year, if scheduling them doesn't interfere with other bookings.

-MMPI and the county will write rules for the general contractor to "to promote... diversity, local inclusion and regional employment." (I'm guessing they will be similar to the county's or city's diversity goals for contractors, but maybe not as strict.)

-The county won't have to pay for any incentive payments (rent discounts or signing bonuses, I presume) that MMPI gives tenants to locate there. (Correction: Earlier, in this post, I wrote the county would reimburse MMPI for "tenant lease-up" costs. Not so.)

Tuesday, April 7, 2009

Mason eyes statewide run; GOP would likely use O'Malley ties against him

Bill Mason may run for Ohio secretary of state in 2010 -- and if he does, Republicans will likely hit him hard about his friendship with Pat O'Malley, Mark Naymik reports in his Plain Dealer column today.

Former Ohio House speaker Jon Husted, the top Republican candidate for secretary of state, already has a negative campaign ready, based on O'Malley and the FBI investigation of other county officials:

Husted and the state GOP will link Mason with the county corruption scandal in literature and phone calls. And if they need heavy artillery late in the campaign, they'll bring out video footage of the toast Mason offered at O'Malley's second wedding in 2000.

How do you run for statewide office when your college roommate and former top political ally is in prison for downloading disturbing obscene materials? You acknowledge vaguely that the guy made a mistake and tell people you distanced yourself from him years ago. From Naymik's story:

Last Friday, Mason said about O'Malley: "He was a friend. He's made bad choices and is paying for it."

Mason was not palling around with O'Malley in recent years. Mason never visited O'Malley's Chagrin Falls home or met his kids from O'Malley's second marriage.

The Republicans surely have Mason and O'Malley's campaign finance reports, though. Here's my summary from my article on O'Malley in the October issue of Cleveland Magazine:

If campaign contributions are a reliable indicator, many of O'Malley's allies stuck with him for years, despite his problems. O'Malley's campaign fund borrowed $15,000 from Bill Mason's between 1998 and 2000, and he never paid it back.

You might think the county prosecutor would distance himself from a friend jailed on a domestic violence charge, but Mason contributed $250 to O'Malley's campaign on July 6, 2004, the day after O'Malley left the Solon jail. After the FBI raid [of O'Malley's house], Mason sent O'Malley (between August 2005 and August 2007) his usual contribution, about $400 a year. (Mason declined to comment. "Bill hasn't had contact with Pat in more than a year now," said Mason's spokesman, Ryan Miday.)

Friday, April 3, 2009

Arcane Game: the old machine has to go, our columnist says

"Our public officials’ corruption, political ineptness, hubris, incompetence and lethargy have created a crisis," writes Michael D. Roberts in his latest column, "Arcane Game," in the April issue of Cleveland Magazine.

"The county commissioners deal with major decisions as if they were playing a pinball machine. They flip and flap at answers, buzz and bing for the public and light and lurch for the developers. They like the lights and noise, but never know the score. An ever-wary media reports another 'Tilt!'"

Roberts wants us to retire the antique machine. "County or regional government reform would save millions in tax money by doing away with redundant layers of government and institute checks and balances that currently do not exist."

We'll soon see if Roberts gets his wish. As I reported in February (here, here, and here), Parma Heights Mayor Martin Zanotti and county prosecutor Bill Mason are both shopping reform proposals around town. The Plain Dealer updates us today. Some people once allied with Zanotti have split with him over strategic differences, slowing down that effort. Mason has embraced the idea of a county council as well as an executive.

The two groups meet today to try to unite. They aren't far apart. If they come together, their next task is forming a coalition with black political leaders. Since Louis Stokes killed a similar reform idea last year, the reformers know they need to address concerns about minority representation in a new government.