What new city-county deal means for downtown

The city and county's new convention center deal tinkers with a lot of stuff downtown. Some interesting details I noticed in today's Plain Dealer story:

-Mall B may look really weird in a few years. The city will let MMPI raise the convention center's ceiling as high as it thinks it has to -- even if that means it pops up from underground and pushes Mall B, the plaza between St. Clair and Lakeside, above street level.

The good news is, MMPI has hired first-rate talent to make the best of the situation: local nonprofit ParkWorks and a renowned architectural firm from Seattle are in charge of planning how to remake the malls. Mall C, north of Lakeside, can only go a foot higher than it is now -- a sign that City Hall wants to preserve the lakefront views over the bluff.

-Separating Public Auditorium from the new convention center is going to cost the county $8 million. Taxpayers probably shouldn't fret, since MMPI has pledged to pay for any cost overruns on the development, but let's hope the rising site costs don't tempt MMPI to scale back its ambitions for the Medical Mart and convention center designs.

-The county will still pay the city $20 million for the convention center site, even though Public Auditorium isn't part of the deal. No surprise: it looked like a unique asset a year ago, but it looks like a money pit now. So the city is promising the county it'll spend some of the $20 million on renovating the 1920s landmark.

-{Update, 5/18: I've gotten a copy of the agreement, and last year's deal to spend some of the cash on Perk Plaza is still in there. "The County urges the City to apply $2,500,000 of the Purchase Price to the restoration of Perk Park in downtown Cleveland," the agreement says. It doesn't obligate the city; it's just a recommendation.}

Perk Plaza is already being renovated no matter what -- the basic work of converting it from concrete maze to green lawn is already underway. But without the convention center money, Perk would have to do without some of the innovations that would make it more of a respite for East 12th Street apartment-dwellers: a fountain for kids to play in, a space for concerts, a heated trellis to make the park more comfortable in spring and fall.

-The deal revives a question I blogged about a lot last year: whether Positively Cleveland's funding will be cut to help pay for the Medical Mart and convention center. The sales tax earmarked for the project raises almost, but not quite, enough to fund it. The county hotel-room tax may have to make up the rest.

"The document also calls for the county to retain control of the amount of county bed tax revenue that goes to Positively Cleveland," the PD story says. That means the city's attempt to argue Positively Cleveland's case in the negotiations didn't get anywhere.

That must make it an unnerving week for the town's convention and visitor's bureau. Today's PD also says it and other tenants may have to move out of the Higbee building to make way for a temporary casino. But with sales-tax cash piling up in the bank until construction starts in October, the county won't have to solve the bed-tax dilemma for a while. It's one more thing to add to the new charter government's to-do list.

Who will like the city-county deal, who won't

After reading the city and county's $20 million deal for the convention center and Public Auditorium, here's who I think will like the deal and who won't:

Activists and bloggers who hate tax abatements won't like this deal one bit. The city pledges to support any county requests for tax abatements for the project. (The county has already promised to cover any taxes imposed on MMPI.) Also, the city promises to make up the tax revenue the Cleveland schools will lose if, as planned, the county buys three private properties at St. Clair and Ontario for the site of the Medical Mart building.

Film industry supporters will be sad to lose the old convention center as a potential soundstage. But Nehst Creations, the film company that signed a lease to move into the center, will be able to stay at least a year.

Fans of the downtown Mall will be nervous, but maybe also hopeful. The deal acknowledges that the Mall will have to be raised a few feet higher to give the new convention center the ceiling height that convention planners want. But the county says MMPI will pledge to create a new park there that's at least as good as the current one. MMPI's Mark Falanga has told me the company wants the Mall to be an attractive gathering place for Clevelanders, like Millennium Park in Chicago.

Minority-hiring activists should be pretty happy. The deal requires MMPI to require the contractor who builds the new convention center and Medical Mart to "utilize good faith efforts" to do two things:
-subcontract 25% of the job to county-certified small businesses
-hire a workforce made up of 40% county residents, including 20% Cleveland residents

The county will monitor the project to see if the contractor is meeting those goals.

The word "minority" never appears in the agreement, because the county can't require private contractors to meet racial hiring quotas. But about 60 percent of Clevelanders are black and Hispanic, and the county's small-business program for subcontractors includes a lot of minority-owned and female-owned businesses. MMPI will also work with the Cleveland schools to establish construction training programs that will lead to jobs on the project for the trainees.

Norman Edwards, the mercurial activist who shows up at nearly every county meeting to argue for more minority hiring on county projects (and who now faces a ban from the meetings for abusive behavior), may not be satisfied with this, but it seems to go about as far as the law allows.

Those who want to bring non-medical conventions back to Cleveland will be moderately happy. The deal includes language about booking non-medical events that benefit Cleveland's economic development, even if they aren't profitable to MMPI(!). If a scheduling conflict arises between two possible events, MMPI still gets to make the final decision, but the county says MMPI will consult with Positively Cleveland before deciding what to book.

Supporters of Positively Cleveland will still be uneasy. The city got the county to agree that the convention and visitor's bureau "provides significant assistance to the entire region," and to give it a role in resolving scheduling conflicts. But the city backed off and acknowledged that "The amount of county bed tax that goes to fund Positively Cleveland in the future will be determined solely by the county."

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.)

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 ...

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.

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.}