ROLDO: Disgusting Record of Cleveland Downtown Scams

Time to Tote the Score in City of Corporate Welfare

By Roldo Bartimole

In sports we keep records to see who is ahead and who is behind. It’s simple. Get the scores. It tells the story.

I thought it was time to put up a scoreboard that gives us some feel for what the tally is on downtown public subsidies. Where the dough goes. It can’t be a precise record. There’s simply too much public money involved.

It is a tale of two cities. Downtown vs. neighborhoods. It is true some neighborhoods are experiencing resurgence. Others are suffering further decline. Where resources go is crucial to urban life.

This is a journalistic effort. What’s needed is a true academic study to track all this funding. As a reporter, I have followed the bouncing ball and made as thorough an accounting as possible. However, I don’t have a full accounting. No one does.

And just as this is being prepared, County Executive Ed FitzGerald and Mayor Frank Jackson at the Plain Dealer offices tell us they have a little cash – some $350 million – sloshing around to give – where – downtown. Total pie-in-the-sky nonsense for PD headlines. So predictable.

Cleveland is a city with 32 percent poverty, according to the American Community Survey, U. S. Census Bureau, 5-year estimate 2006-2010. I suspect it is worse now. Certainly for minority communities. But who cares about them?

While the subsidies were being doled out to multi-millionaires and billionaires, much of the city where ordinary Clevelanders lived was being destroyed by other money-making forces. Housing was being destroyed in too many ways to account here.

We have experienced decades of binge subsidizing of our rich while ignoring – and billing – the people who most need help. The shame is written in dollar signs.

Although I haven’t been close to city hall or the county administration for some years I have some indication of what’s been going on. I’m using – as much as I can – public records I’ve compiled. They will not be totally complete. However, I believe they will illustrate the point I’m trying to make.

Our history needs the truth. We rarely get it. 

We go back to the 1980s when money literally flowed out of city hall. Directing: Mayor George Voinovich (his fiscally responsible politician image largely a creation of the PD) and Council President George Forbes (never one to care about image). In the 1990s, Mayor Michael White and Council President Jay Westbrook followed with even more costly subsidies. Now FitzGerald and Jackson. They defer to the city’s corporate leaders, the Greater Cleveland Partnership – 50 or so top corporate leaders.

Voinovich and Forbes showed no pretense of real need, giving subsidies mostly at the maximum rate. They didn’t “deal” with developers. Just gave it away. White & Westbrook were no better. FitzGerald and Jackson continue the policy.

FitzGerald has set aside $100,000,000 for “economic development.” I’m willing to bet most of that cash will go to downtown interests. (PD headlines attest to it already.) He has promised the first flush of Cuyahoga County tax receipts from the Horseshoe Casino downtown entirely for downtown uses until July 2014, expected to be some $8.5 million to $11.5 million annually. The city is expected, as host city, to collect some $13 to $15 million annually. Why the County has restricted its take to downtown should be a mystery. If anything that money should go to the Cleveland School District. Most downtown projects have been tax abated, taking Cleveland school revenue.

A better use would be to improve Cleveland’s child mortality rates. Some Cleveland neighborhoods have worse records than Third World countries. “Within three miles of University Circle (city’s cultural center) infant mortality rate exceeds some Third World countries,” according to the division chief of neonatology at Rainbow & Children’s hospital here. Some neighborhoods have worse records than Zimbabwe! Where is the media and public outrage?

The County’s first $7,000,000 in casino money, according to a recent report in the Plain Dealer, will go to the following: Playhouse Square, $4,000,000 for “outdoor improvements,” that include a huge 24-foot-high glass crystal chandelier; $3,000,000 split between Wolstein’s Flats development (see list below) and a conversion of the old East Ohio Gas building on Superior & 9th for new (undoubtedly tax abated) housing.

You may have noticed that the Cleveland Metropolitan School System recently sold its Group Plan-located administration building for $4 million less than appraised to a hotel chain. The school administration must now find new digs to rent.

Already the cry is to use the school’s $4 million – not to re-house the administration – but to build a new downtown school.

Couldn’t they have converted the precious, historic administration building into a downtown school, located in the restricted Group Plan area? NO, instead they sell it to the Drury Hotels for $4.8 million. Its value is much more simply because it is located across from the new convention center.

The era I have observed starts in the 1950s under urban renewal when Cleveland helped destroy much of the East Side of Cleveland. The promised flush of new buildings and progress was never realized.

The Cleveland Development Foundation – funded by the Hanna Fund created by Leonard Hanna with Hanna Mining dough – provided the impetus for renewal and some believed it would help relieve the housing problem in the city. However, its corporate chairman said, “It would be a mistake to think that the foundation ever had as its main concern housing.” Rather it was to make land available for commercial and industrial use. This, as so many other efforts, had the fingerprints of the Cleveland Foundation and the city’s major law firms.

I have used this quote from Thomas Westropp, a banker and Cleveland Planning Commission member, whose honest assessment of what was in process under urban renewal is shocking in its revelations:

“… Urban renewal has worked very well indeed. Hospitals and educational institutions have been constructed and enlarged. So have commercial and industrial interests and many service organizations, all with the help of urban renewal dollars. With respect to housing, however, the urban renewal program has been a disaster. I wish I could believe that all of this was accidental and brought about by the inefficiency of well-meaning people. But I just can’t. The truth, it seems to me, is it was planned that way.”

Well, of course it was.

Then the subsequent attempt to spur new building arrived in the late 1970s when National City Bank – then the most profitable in the nation – built its headquarters on the northwest corner of E. 9th and Euclid. The $70-million bank building received the first downtown abatement. Unlike Voinovich-abatements, it at least was fashioned on a sliding scale by Mayor Ralph Perk. For the first five years, 100 percent tax free; next five years, 25 percent less, and so on until the end of 20 years when it fully returned to the tax rolls.

In 1990 I checked what abatement meant to the city and schools. SOHIO, when it first decided to build its new home behind Tower City in 1977, was given abatement. However, when it moved its plan to Public Square some years later it did not receive abatement. After five years I checked and SOHIO paid in property taxes $17,750,828, some $10,000,000 of it to Cleveland schools. At the same time National City Bank for property taxes it escaped via abatement: $10,630,245.

This gives us an idea of the cost of tax abatement, especially to schools. School systems depend largely on revenue from property taxes.

Projects downtown became the end all and be all during the 1980s. Voinovich at first held off on tax abatements. Dennis Kucinich in 1979 ran and won the mayor’s seat by opposing abatements. Voinovich in the early 1980s feared the wrath of Kucinich supporters opposed to abatement.

And while he was frightened and abatements were withheld, did downtown development die? Not at all.

Without abatements these major office buildings went up: the $78.5 million Medical Mutual; the $47-million Eaton Center; the $50-million Ohio Bell building and the $200-million plus SOHIO building at Public Square .

Despite this construction, the flow of abatements and free and low interest subsidies gushed out of City Hall and the County. And they haven’t stopped.

Let’s just list some facts by project:

TERMINAL TOWER:

– Tower City (retail UDAG)  $10,000,000

– Tower City III (UDAG)          $2,700,000

– Tower City IIIA (UDAG)       $2,036,000

– Tower City – Old Post Office Bldg.

$9,200,000

– RITZ HOTEL (UDAG)            $7,900,000

– RITZ HOTEL                          $34,500,000 (15 year tax abatement estimate)

OTHERS PROJECTS:

– HALLE’S BLDG (UDAG)            $7,000,000

– HALLE’S BLDG – OHIO LOAN $6,000,000

– HALLE’S – OHIO INDUSTRIAL LOAN $10,000,000

– HALLE’S – HISTORIC DESIGNATION $5,000,000                   

– JACOB’S GALLERIA (UDAG) $3,500,000

– JACOB’S KEY CENTER (UDAG) $10,000,000

– JACOB’S MARRIOTT (UDAG)   $7,729,398

– MARRIOT/KEY ABATEMENTS   $120,000,000

– MALL A PARKING GARAGE (UDAG) $2,500,000

(UDAGs are Urban Development Action Grants, given because of the city’s high urban poverty though the money seems to most often go to wealthy downtown developers. During this Voinovich-Forbes era they were fashioned as mostly zero percent loans for 20 years with neither principal nor interest payable for 20 years – essentially free money. Some were repaid sooner at much reduced paybacks. UDAGs started, as my memory tells me, with a restaurant on West 6th street. It was called George’s. It served good food at inexpensive prices. Lots of downtown office workers filled the place at noontime. It was replaced.  It’s now called Johnny’s. It caters to the high rollers of Cleveland. Used to be a favorite of the late Dick Jacobs and those of that ilk. Yes, we needed subsidies to turn a perfectly good, simple restaurant into a place for the elite. The headline in my piece in Point of View in 1983 read: “George’s UDAGed.” Replaced by George Voinovich’s progress.”)

PLAYHOUSE SQUARE:

–  PLAYHOUSE SQUARE: $750,000 UDAG for renovation of Ohio Theater.

–  PLAYHOUSE SQUARE BUILDING: $500,000 TO Prescott, Ball & Turben.

–  PLAYHOUSE SQUARE GARAGE: $5,500,000 UDAG.

–  PLAYHOUSE SQUARE HOTEL (WYNDHAM): $4,000,000 (COMMUNITY BLOCK     GRANT). –  WYNDHAM:  STATE OF OHIO LOAN: $4,000,000.

–  WYNDHAM: $3,100,000 TIF ABATEMENT.

–  WYNDHAM: Tax abatement: $13 million estimated.

–  WOLSTEIN RENAISSANCE BLDG AT PLAYHOUSE SQUARE: $7,700,000 tax abatement.

–  ELECTRONIC TICKER SIGN AT PLAYHOUSE SQ.: $2,800,000 PORT AUTHORITY BONDS.

ROCK & ROLL HALL OF FAME:

–  $92,000,000, constructed on city land.

– $8,500,000 for Inner Harbor by State of Ohio costs.

– Cost supported by TIF of properties at Tower City

–  Supported by 1.5% Cuyahoga County Bed Tax

–  Supported by 3% surcharge on city admissions tax.

– $5,000,000 from Cuyahoga County.

–  $8,000,000 from State of Ohio.

1990s – GATEWAY COSTS:

–  JACOBS FIELD                     $180,000,000

– TAX EXEMPT COST            $138,000,000 ($4.6 million annually – for 30 yrs.)

–  GUND ARENA                     $157,000,000

–  TAX EXEMPT COST           $75,000,000 ($3,750,000 annual – 20-years)

– SITE PREPARATION           $41,000,000

– LAND COST                         $21,000,000

(Gateway costs from a Gateway document marked “confidential.”)

–  GATEWAY GARAGES        $42,000,000 – city built. (City also had to rebuild city hall parking facility for another $21,000,000. It originally been built at city cost as a match for 1960 urban renewal at Erieview.)

–  GATEWAY WALKWAY      $13,000,000 RTA built.

(There is no total price but hundreds of thousands of dollars were spent on new street work, costly granite curbing and signage for the new projects.)

Gateway’s promoters promised some 16,000 good paying full-time jobs and 28,000 jobs in all. In subsequent years Cleveland lost tens of thousands of jobs. Gateway’s promoters promised no tax abatement but successfully fought and passed state legislation for full tax EXEMPTION for the projects.

GATEWAY POLICE PROTECTION: Mayor White & Council signed agreement that requires 50 city police at any baseball game with 35,000 attendance; 41 officers at arena large crowds. Of course, if these officers served these sports facilities they were unavailable in neighborhoods. The cost at times was at overtime rates. But who cares about them.

PUBLIC TAX FUNDS PAID FOR GATEWAY & OVER-RUNS ONLY AS OF 2013 FROM COUNTY DOCUMENT:

–  $240.5 Million (1st 15 years of excise sin tax)

–  $125.5 Million (County general fund payments for Gateway bonds              as of 2013 with $70 million still owed.)

– $38.2 Million (City admission tax for Gateway Bonds)

–  $8.6 Million (County Bed Taxes for Gateway Bonds)

–  $8.8 Million (excess from sin taxes for Gateway Bonds)

– $21.3 Million (labeled as “other” for County Gateway Bonds)

– $3.75 Million (County to reimburse State Loan for Gateway)

– $3.75 Million (City to reimburse State Loan for Gateway)

– $5.8 Million (City advance to Browns for Capital Improvements)

– $2.0 Million (Repay loan from Cleveland Foundation for Gateway)

– $11.5 Million (County payment on Gateway overruns)

1990s – CITY VOTED TAXES FOR BROWNS STADIUM & EXPECTED REVENUE:

DOWNTOWN PARKING 8% TAX  $213,000,000

ADMISSION TAX HIKE                    $36,000,000

CAR RENTAL TAX                            $18,000,000

SIN TAX – 10 YEAR EXTEND           $116,000,000

RTA WATERFRONT LINE              $69,000,000

GATEWAY WALKWAY                 $13,738,536

If sports facilities were paying property tax (which were exempted when Hagan and White pushed state legislation to free them of any property taxes) Browns stadium would be paying some $8 million a year; Quicken Arena, $3.8 million a year; Progressive Field $4.8 million a year, based on 2010 County figures. That’s more than $16 million per year in lost taxes, about half from the city’s schools.)

–  TOTAL SOME $16,000,000 PER YEAR SUBSIDY OF SPORTS FACILTY PROPERTY TAXES.

The RTA waterfront line, a big revenue loser which doesn’t even run regularly, was paid fully from local RTA revenue. Corporate leaders wanted the project done quickly and spurned federal subsidies that could have reduced RTA local costs. It showed clearly the corporate ability to ignore the major needs of poorest transit-dependent riders for the needs of downtown visitors.

1990s – BROWNS STADIUM – Financing

EXTENDED SIN TAX   $110,682,300 (COLLECTED AS OF MARCH 2013)        

STATE OF OHIO           $37,050,000

RTA CONTRIBUTION   $3,000,000

CITY – WATER DIV.      $2,000,000

N.E SEWER DIST.         $2,246,760

TAX EXEMPT COST      $240,000,000 (About $8 million annual 30 yrs.)

FREE USE OF CITY LAND – 2012 VALUE: $19,007,400

PRESENT YEARLY LAND TAX PAID BY CITY – $646,922.84 ON $19 MILLION VALUE

ANNUAL TAX LOSS TO CLEVELAND SCHOOLS ON STADIUM – $375,214

(I don’t have current figures for what Clevelanders are paying on bonds for the football stadium. However, by May 2009 the city had paid $102,823,947 and still owed $160,367,109 for bonds, according to city refinancing documents in 2007. Payments extend to November 2027.)

MEDICAL MART/CONVENTION CENTER:

–  $218,731,359 sales tax collected from Cuyahoga residents as of March 2013 (Expected revenue of unvoted 40-year, quarter percent sales tax: More than $800,000,000. Collections are running ahead of estimates.)

WESTON HOTEL: Hotel renovation, right across from new convention center.

– CITY LOAN – $1,000,000, 15-YEARS AT 3%, $200,000 forgiven w/185 jobs.

– TIF ABATEMENT – 30-years worth $6,569,741.

GEORGE’S/BURGESS BLDG. site of Johnny’s restaurant:

–  $430,000 UDAG at 5 percent interest;

– $790,000 in industrial development bonds.

PERRY-PAYNE HOUSING REHAB:

–  $1,890,000 LOW INTEREST LOAN.

–  75 PERCENT TAX ABATEMENT, 17 YEARS.

–  ANOTHER $550,000 3% 20-YEAR LOAN.

– $1,300,000 HISTORIC TAX CREDIT TO POLITICAL CONNECTED JOHN CARNEY.

HOUSE OF BLUES & E 4TH STREET:

–  $9,200,000 BOND (WITH INTEREST $12,800,000 PUBLIC COST) FOR DEVELOPER MRN BUILDING RHAB. (I wrote that after Council’s discussion on this legislation one councilman declared, “After 14 hours here, I can’t comprehend this information.” The city backed these bonds with a tax incremental financing abatement. In other words, it would be paid by diverting property taxes from that area from public revenues, particularly the Cleveland school system. Further, because the financing was shaky, nearby property of the same developer worth $22.3 million was to be reduced to $5.5 million. The property in question in the old National City Building on Euclid was delinquent $1.2 million at the time also property of MRN.

RTA – EUCLID CORRIDOR:

– $18,000,000 City of Cleveland.

–  $10,000,000 NOACA (Northeast Ohio Areawide Coordinating Agency).

–  $56,000,000 STATE OF OHIO.

–  $36,000,000 RTA (REGIONAL TRANSIT AUTHORITY.)

APPLIED INDUSTRIAL TECHNOLOGIES (FORMERLY BEARINGS Inc. TO RELOCATE ON SAME STREET – EUCLID AVE.)

– $3,250,000 (20-year, 3% LOAN FROM CITY NEIGHBORHOOD DEVELOPMENT FUND)

– UDAG $1,250,000.

–  $6,000,000 STATE OF OHIO, 1% TO 4% INTEREST, PAYABLE 20 YEARS OUT.

–  $2,000,000 CUYAHOGA COUNTY LOAN.

– $16,000,000 PORT AUTHORITY BONDS.

– 20 YEAR TAX ABATEMENT AT 75% FROM CITY, COUNTY, CITY SCHOOLS

– 10 YEAR PERSONAL PROPERTY ABATEMENT AT 75%.  

MALL A UNDERGROUND GARAGE

– 20-year, 100 percent abatement for underground parking to serve Key Center and Marriott hotel, developed by Dick Jacobs: Cost N/A (Jacobs got 65-year lease with a base rent of $60,000 for 1,650 cars, or about 10 cents a day per car. The garage was to go to another developer but Forbes/Voinovich shifted it to Jacobs. The lawsuit cost $443,000, paid by Jacobs to Voinovich’s old law firm – Calfee & Halter.)

POWERHOUSE AT NAUTICA – JEFF JACOBS:

– $4,244,000 UDAG LOAN

GREATER CLEVELAND AQUARIUM – JEFF JACOBS

– $2,000,000 10-YEAR LOW INTEREST CITY LOAN

THE ARCADE-HYATT HOTEL DEAL:

The following subsidies were bestowed on the 1880 historic building:

–  $1-million in low interest economic development grant from the   city of Cleveland.

– $2 million low interest loan from Cuyahoga County.

– $7 million tax incremental financing from city of Cleveland.

– $7,152,500 in federal historic tax credits.

– $9,686,600 in tax benefits from the donations of the Conservation Easement.

– $1.5 million in low interest loans from the Cleveland and Gund Foundations.

– $300,000 in grants from the Cleveland Foundation and the 1525 Foundation.

Despite the heavy subsidies the project has failed.  Soon enough the Arcade developer was before the County Board of Revision for reductions of its property tax value. At one point it asked for lower values for past years for The Arcade, its offices, and Hyatt Regency Hotel for the years 2001 and 2002. The owners want the value dropped from $25 million to $16.2 million for 2001 and to $12.1 for 2002. That would cut taxes in those years and more than half the future tax bill.

WOLSTEIN & FLATS PROJECT:

Although the project remains in its early stages here were the original committed subsidies passed by City Council:

– $11,000,000 CLEVELAND-CUYAHOGA PORT AUTHORITY LOANS

– $6,000,000 CITY OF CLEVELAND CORE CITY LOANS

– $3,400,000 CLEVELAND PUBLIC POWER IN FREE SERVICES

– $740,000 CLEVELAND WATER DIVISION INFRASTRUCTURE WORK

– $1,000,000 CITY OF CLEVELAND GENERAL OBLIGATION BONDS.

– $11,140,000 TIF (TAX INCREMENTAL FINANCING) SHIFT OF PROPERTY TAXES FROM COUNTY, CITY, SCHOOLS FOR PROJECT IMPROVEMENTS.

– $1,000,000 CUYAHOGA COUNTY SUBSIDY – UNSPECIFIED.

– $3,000,000 STATE OF OHIO GRANT – ENVIRONMENTAL REMEDY

– $1,000,000 CUYAHOGA COUNTY – ENVIRONMENTAL REMEDY.

– $8,540,000 – CITY OF CLEVELAQND PARKING REVENUE BONDS

– $9,000,000 – NORTHEAST OHIO REGIONAL SEWER DISTRICT TAX-EXEMPT BONDS FOR INFRASTRUCTURE COSTS

– $4,550,000 – FEDERAL HIGHWAY ADMINISTRATION

– $1,400,000 – U.S. DEPT.OF COMMERCE VIA CITY OF CLEVELAND

– 100 PERCENT TAX ABATEMENT, 15-YEARS ON ALL RENTAL AND CONDO UNITS, INCLUDING ANY IMPROVEMENTS. NO COST ESTIMATE GIVEN.

– NEW TRANSIT STATION FOR WATERFRONT LINE TO SERVE PROJECT “AT NO COST OR EXPENSE TO PROJECT.” NO COST FIGURE GIVEN.

EAST 9TH STREET DEAL:

– $22,000,000 CUYAHOGA COUNTY PAID FOR HIS WHITE ELEPHANT PROPERTIES ON E. 9TH & EUCLID. ADD MANY MORE COUNTY DOLLARS SPENT ON THE DEAL ESTIMATED AT $37,000,000 IN 2008. NO ONE KNOWS THE TRUE COST. And City Council has already given it a tax gift.

Jacobs had inserted into the deed a plaque to honor himself, where the plaque must be placed and “unobstructed and visible”:

“In recognition of over 50 years of endeavor and achievement the Board of Cuyahoga County Commissioners, on behalf of the citizens, gratefully acknowledges the significant contributions of

RICHARD JACOBS (YES, THE DEED HAS THE NAME IN LARGER TYPE)

Mr. Jacobs has consistently and selflessly devoted his insight, skills and resources to the development, redevelopment, and preservation of Downtown Cleveland and Cuyahoga County. This complex, which includes the historic old (Cleveland Trust) Rotunda, symbolizes the legacy that Mr. Jacobs has established through his leadership in development and owning many of this County’s major commercial, retail and recreation facilities.”

What pure bullshit.

This is by no means the final total of give-aways downtown. All the new and rehabbed downtown housing – praised in the media – are tax abated and some helped by added subsidies.

Downtown floats on public money. Most of the taxes are regressive taxes. In other words, the cost is paid mostly by the 47 percent that get so much abuse from the wealthy.

Most shamefully, we have a news media – Plain Dealer, television and radio stations (private and public) – that pay no attention to the theft of public resources for private profit.

I don’t think the above paints a hopeful picture for the future. I do hope some will pay attention because the city of Cleveland and the County of Cuyahoga will continue to tax the many for the benefit of the few.

The Plain Dealer recently editorialized favorably, of course, for another re-do of Public Square, presumably to give the casino more safety. The cost there is put at $40,000,000. FitzGerald and Jackson responded with a   new $350 million plan.

But that’s not all in the works. Expect cries for more.

Surely Jimmy Haslam, Danny Gilbert and Larry Dolan will be look for as the third life for the sin tax that ends in 2014. They will want – and the Pee Dee will certainly second the motion – an extension of the sin (sales) tax for another 10 years or to make it permanent. How they will get it without a vote will be interesting.

The cost to Cuyahoga County taxpayers: Another $100,000,000 or so. If permanent, much, much more.

It’s a spiral to the bottom for the less fortunate.

Finally, why do our public officials go along with these games?

First, they figure it’s a way to re-election or a higher office.

Then, the lawyers make money.

The bondholders get their safe deals.

The bond counsels make easy fees.

The developers win big.

The insurers make their profit.

The architects get their take.

The contractors make loads.

The construction workers get paid.

The newspapers sell papers.

It’s nothing but WIN-WIN for those with power.

And you get stuck with the bill.

What’s not to like?

 

 

[Photo : New York Times]

He was a 2004 Cleveland Journalism Hall of Fame recipient and won the national Joe Callaway Award for Civic Courage in 1991. [Photo by Todd Bartimole.]

 

 

 

 

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