Posts Tagged Cleveland Magazine
Cleveland Got Short End of Med Mart Deal
Posted by Roldo Bartimole in Economic Development, Politicians on May 8, 2009
May 7, 2009… Who got screwed on the Med Mart deal? Well, you did as taxpayer, definitely. However, so did the city despite the $20 million deal for its properties – 18.5 acres of prime downtown land.
The $20 million was hailed as a victory for Mayor Frank Jackson. I’ll bet this $20 million shot in the city’s fiscal arm will be used up in a year or two by the Jackson administration.
Perfect example. Mayor Ralph Perk sold the city’s sewer system for $32 million back in the 1970s, and used up the money in a couple of years. He did the same thing when he sold the Cleveland Transit System to its present regional system (RTA).
Mayors, always short of revenue, spend any revenue infusion quickly and often to keep patronage going. One-time infusions of money make for bad policy decisions. The money gets spent fast and usually not wisely.
Wouldn’t it have been better if Mayor Jackson insisted on a deal that kept revenue coming to the city year after year?
Why didn’t he offer to lease the property to the County? Of course, that might have cost the County Commissioner’s choice to run the new development some money.
There’s not much thinking that goes on at City Hall. It’s typical of administrations to take a quick revenue fix. That’s what the Jackson Administration did. He’ll grab the money and run. But it won’t go very far.
“I think the mayor was a tough bargainer,” Tim Hagan told Erick Trickey of Cleveland Magazine. “He did have something of value to the project: that is Public Hall.”
Only Public Hall had value? That’s laughable.
Hagan, of course, had reason to pat Jackson on the back. Hagan got what he wanted.
Hagan has been steering this disaster from the beginning. He forced the one-quarter percent increase in County sales taxes without public input or vote. (You can see past postings here that go into how stinking this deal really is and who profits from it.)
“Today, the public makes an investment in the future of this city, county and the region,” happy Hagan said at the City Hall announcement with Jackson. Of course, the region isn’t paying a penny in this some $1 billion (with interest) deal.
The PD reported: “Jackson said the transaction is a big step toward a grand regional project to capitalize on Cleveland’s global medical prominence. Once again, regional project paid for by Cuyahoga County taxpayers alone.
What else would he say? He made the deal.
The $20 million has some big holes in it for the city. As the letter of agreement by the county to the city notes the city will lose property taxes and parking meter revenue. No cost figures are given for these losses. It’s not convenient to be too open.
One big cost to the city may be its school system. It has to make the schools whole, supposedly.
The city is responsible to make the Cleveland schools whole on property taxes. In other words, the city would be responsible alone – the County has no responsibility – to make up the property tax revenue lost by the city’s schools.
This signals Hagan’s intention of providing a tax haven for MMPI, a private business.
The school system actually would lose the most revenue as it gets some 60 percent of the property taxes on private land. The County and City also lose revenue. The deal says, “The city would be responsible for making up any property tax shortfall, if any, to the City of Cleveland School District as a result of the purchase of the property from private land owners on St. Clair Avenue.”
It gets worse.
“The City agrees to support the County as it seeks tax abatement for the entire Convention Center complex before ANY PUBLIC BODY or regulatory authority, including the GENERAL ASSEMBLY of the State of Ohio (my emphasis added).
What that suggests to me is that Tim Hagan and Mayor Jackson will go to the state legislature to not only have the project tax abated but TAX EXEMPTED. It will NEVER EVER pay property taxes in that case.
Hagan and former Mayor Michael White did the exact same thing for then Jacobs Field and Gund Arena. They flew down to Columbus in a private corporate jet and lobbied successfully for a full tax exemption. Now any sport facility constructed in the state by a government entity pays no taxes. This scheme has cost the Cleveland schools tens of millions of dollars in property taxes since.
So it isn’t abatement. It’s exemption. They never pay a penny of property taxes on the buildings EVER.
This means not only the convention center but the medical mart, a private business of MMPI (Merchandise Mart Properties, Inc.), will not pay property taxes on its business operations. Thank you, generous Tim Hagan, the man who has given away more tax revenue than any politician in Cuyahoga County’s history.
Hagan, known as Tax’n Tim, is also king of tax give-aways.
I think another strange part of the agreement states, “The County urges the City to apply $2.5 million of the purchase price to the restoration of Perk Park in downtown Cleveland.” The park was developed in the early 1970s by Ralph Perk. It sits behind the Ohio Savings Building, built by the Carney family. The irony, of course, Hagan married into the Carney family, which became his political birthright in Cuyahoga County.
The deal also calls for the $20 million to provide for the city’s need to relocate employees now house in the Convention Center. They include the Dept. of Parks, Recreation and Properties, the Division of Parking Facilities, City Cable operations, its Photo Lab and the Dept. of Consumer Affairs.
How much will that cost to relocate these departments?
No price tag is put on the cost to move and house of these significant city resources that now reside in the city’s facility. They must move. The move will cost and the new digs will cost this year, next and so on.
It does say that the “cost of relocating these employees and their equipment in significant.” What it doesn’t do is give a price, which will be ongoing. The city, of course, assumes this burden.
The agreement also calls for the County or MMPI to hire “at least” 10 of the city’s full-time Convention Center employees. However, the city has 27 full-time employees so that suggests some of that $20 million might be going to pay the wages somewhere of up to 17 full-time city employees.
Again this could be an ongoing cost, not just a one-year cost.
No mention, of course, about paying these employees who now enjoy city pay scales and benefits.
The city also has a list of some 100 part-time employees at the Convention Center. Depending upon the size of the event, the city employs 20 to 30 extra people at events. No mention of what happens to them.
There is no mention of paying the city for events that are already scheduled at the Convention Center. The center has 43 schedule events for 2010, some as small at 10 but others in the 3,000 to 4,000 attendee range.
All in all, that $20 million now looks skimpy for 882,270 square feet of space (443,040 square feet at Public Auditorium and 451,130 at the current convention center, including the grand ballroom).
Anyone want to buy a bridge? See Tim Hagan.
Med Mart – “We Need It.” Remind Me Why. Please
Posted by Roldo Bartimole in Economic Development, Media, Politicians on April 17, 2009
Did The Plain Dealer actually think that Cuyahoga County Commissioners would really insist MMPI pay property taxes?
God. The PD has kept itself innocent all these years. And it remains naïve and innocent. Like Bernie Madoff.
I also love the PD editorial on Sunday. The headline is “One piece at a time.” It’s the subhead that really gets me… “Medical mart development agreement is acceptable; the challenge will be to make sure the project stays on course.”
Just as the paper monitored Gateway and the Browns Stadium. Kept them on course. Of course. We still don’t know what the Browns Stadium cost the city. Nor what it is still costing the city.
Have you noticed that not one of the high profile PD columnists has taken a crack at the issue. Why? Self-censorship. That’s why. They don’t dare cross the line. It’s safer to write about a rabbit and your 10-year old daughter. What editor can find a complaint there?
It’s why newspapers are seen as so irrelevant to so many. Just can’t pull the trigger on the big guys.
By Thursday, Cuyahoga Commissioners – possibly without Tim Hagan who is experiencing heart problems – will sign the deal to give MMPI (Merchandise Mart Properties, Inc.) hundreds of millions of tax dollars to do what no one can say with any confidence is a wise decision. A $1 billion blunder.
But we just need a convention center. So what if we’re doing it wrong. So what if it’s done at unbelievable cost. We NEED it. So they say. Our “leaders.”
There has been dispute about who owns the final product. This has no meaning whatsoever. Since whichever entity owns it – county or MMPI – it will run the same way and the costs and profits will go the same way. A public oversight committee (named by the same people who concocted this scheme) will be meaningless. The PD’s promise of oversight will be laughable. (As was the paper’s crowing that the lease was released a week before the vote, as if it makes a bit of difference.)
MedCity News – a publication headed by two former PD reporters, Chris Seper and Mary Vanac (two the paper didn’t want to lose but who took the PD’s buyout) say that MMPI now “will have to prove they know what they’re doing.” The publication deals, it says, with “health care as an economic engine of American cities.” You find it here… http://www.medcitynews.com/
It’s not assured that they will have to do so. The contact says, as MedCity reports, that “MMPI has one year to convince 10 tenants to spend three years in the medical mart.” However, MedCity already reported, “its likely many initial tenants in the permanent showrooms of the proposed medical showplace will feature beds, chairs and floor tiles meant for hospitals, private practice and some home care settings.” As I said when I read it, sounds like a barn-burner economic plus for Cleveland.
The point is that it may be easy for MMPI to get 10 outlets to rent for a time. Tower City got upscale outlets here when it opened because of Forest City’s ability to ask favors of people they do business with elsewhere. It had no long-term meaning.
Erick Trickey of Cleveland Magazine has some interesting stuff on his blog… http://clevelandmagazinepolitics.blogspot.com/ questioning use of the bed tax that would mean more public money flowing to MMPI.
He quotes Commissioner Peter Lawson Jones saying that it is very possible more money will come from new sources.
Well, back last April when Squire-Sanders chief honcho Fred Nance – conveniently the consultant to Cuyahoga County, negotiator with MMPI and representing the Greater Cleveland Partnership – called for a 2 percent increase in the bed tax to produce an extra $50 million AND taking $2.5 million from Positively Cleveland (Visitors Bureau) for another $50 million over 20 years.
Think there may be any more flows of revenue unrevealed? Maybe the PD will threaten them.
This deal has stunk to high heaven from the beginning. Nothing has changed it.
Heywood Sanders, public policy professor at University of Texas-San Antonio and a national respected expert on the convention business, is skeptical of this entire deal. He has been for a long time. For very good reason, as he well knows.
“First, it’s not clear there is any demand among the medical device manufacturers for this kind of ‘mart’ or ‘showroom,” he writes in an e-mail response to me.
“They (medical device industry) already have marketing and sales staffs and approaches, and they prefer to sell their own stuff in environments that they either fully control or in hospital/clinic settings where they know how the product is being used.”
Of course, this isn’t even MMPI’s business – the medical aspect. MMPI lists such industries it serves as “office/retail, home furnishings, gift and home, kitchen and bath, fine crafts. Not a medical hint on its business list. See for yourself… http://www.mmart.com/mmart/industries/index.cfm
Sanders goes on…
“Second, the tie to the convention center is simply wacky.” WOW! (Of course, we’ve said all along that the med mart has been an excuse to spend $1 billion on a convention center. We NEED it.)
“Medical and health care associations make their money from conventions, most of it from renting exhibit space to exhibitors. They have no incentive to share exhibitors with a Med Mart, and no particular reason to come to Cleveland. They’ll go to where they can get the space they need, in locations that are draws for their members (I say, think San Diego). Remember they are effectively in the business of delivering ‘eyeballs’ to exhibitors and running professional education programs that require substantial attendance.”
He concludes by writing…
“It is striking to me that MMPI has effective stalled this deal for over a year, and now gets to shop around for another year (or more) to see if it works. If there really was a demand for this thing, they would know it by now.”
If that’s true what the hell is going on?
There’s a lot of money out there for the taking. Figuring out how to finagle the deal seems to be the agenda of the County Commissioners, MMPI, Nance and the Greater Cleveland Partnership.
I love that The Plain Dealer editors have some confidence in this deal. Even though they write in their editorial…
“Based on the past performances of this trio – recall how they fumbled the Ameritrust project for their own new home – it’s hard to imagine them making such a tough decision. But they seem willing to, and this newspaper will do what it takes to make sure the people of Cuyahoga County have enough information to evaluate – and influence – their decision-making.”
Dream on, Plain Dealer, dream on.
As I said, as they will say and as the PD will say, “We NEED it.”
Well, actually, we don’t.