A Steelyard Paradox: New Shopping Center to Open Early Next Year

On a mile-long stretch of the Cuyahoga Valley, a place in the Flats with a hulking steel mill on one side and crisscrossing highways on the other, there’s a Target going in.

And a Wal-Mart, and a Home Depot. Between the mill and the highway, they’re laying the cinderblock and brick, and painting the asphalt with bright, yellow stripes.

This was once home to a two million square foot finishing mill for LTV, one of the largest steel makers in the world. When it opens early next year, the new retail development going in here, Steelyard Commons, will offer a million square feet of new shops. It’s the first new shopping center to be built in the city of Cleveland since Tower City in the 80s, and the largest open air mall in the county.

"The city of Cleveland is an underserved trade area," said Mitchell Schneider, CEO of First Interstate, developer of Steelyard Commons, citing studies showing that residents spend $600 million per year on merchandise, including food, outside of Cleveland. "We’re filling a hole in the market."

Steelyard Commons has given Schneider, who also developed Legacy Village, a project in the city. “Rather than participating in urban sprawl, we’re taking underutilized land and turning it into a valuable asset for city residents,” he said. Legacy Village, a 600,000 square foot shopping center in Lyndhurst, was one of the first lifestyle centers in Northeast Ohio.

Others point to Steelyard Commons as a sign of the times – union jobs going away, and low-wage, service sector jobs replacing them.

"Wal-Mart is not good for any city – they treat their employees worse than union employers, and offer poor health care benefits," said Mark Rock, Executive Assistant to the President at United Food and Commercial Workers, Local 880 (UFCW represents workers at area supermarkets). He added: "Public funds are being used in this project, and this is not a good use of taxpayer money."

Steelyard Commons is nothing if not a metaphor – a place where Cleveland’s old and new economies dramatically collide. Just take a drive down West 14th Street in Tremont, past the old Victorian houses, their gingerbread porches wrapped in layers of aluminum siding and soot. Worker cottages and hillbilly shacks, built into the Valley’s hillside, line the side streets. This was immigrant housing for steelworkers once. When you hit Clark, it’s there – an orderly grid of modern-day shops, black smokestacks puncturing the air behind it.

Wal-Mart is at the heart of this paradox. And its presence has stirred up a lot of controversy. This is the first Wal-Mart in Cleveland, a union town, and adding insult to injury, it’s being built on the site of a steel mill, once the workplace of thousands of union workers. The controversy has also placed Cleveland squarely in the middle of efforts, on the one hand, to keep Wal-Mart out of cities, or at least to reign in its negative impact on workers, wages and local grocers, and on the other hand, to develop new retail in cities.

In response to pressure from Local 880 and other groups, City Council proposed an ordinance in early 2005 that would have limited food sales at the new Wal-Mart (an effort to protect Dave’s Supermarket and other neighborhood food stores). Wal-Mart threatened to pull out, and the ordinance was dropped.

Steelyard Commons went into limbo. A few months later, with no ordinance on the books, Schneider and Wal-Mart did an "end-run" around city council. Wal-Mart signed a lease to build a Supercenter (with groceries), and First Interstate pulled the permit and started digging.

"We could not have done Steelyard Commons without Wal-Mart or another major tenant," Schneider defends himself. "If we had lost Wal-Mart, there would be no Target, no Home Depot. What would I do with a 125 acre parcel in the middle of Cleveland?"

He also rebuffed claims that Steelyard will hurt neighborhood retail. "It’s true that Wal-Mart will take business away from existing stores," he said, “but in a much more limited way than most people think, and the sales loss will be greater outside of the city. People also pay extraordinary amounts of money for basic needs in the city, and Wal-Mart and other stores keep prices down."

Mark Rock refuted Wal-Mart’s necessity. "This project would have been successful with another anchor tenant, or a Wal-Mart without groceries," he said. "The developer held the city hostage." Rock also cited the impact of big box stores on union grocery stores (Tops is one recent casualty); thousands of jobs have been lost as a result of union stores closing or downsizing.

According to Abe Bruckman, Director of Commercial Development for Clark Metro Development Corp., Steelyard may complement and compete with neighborhood retailers. “The tenants are different from those on Clark Ave., but there is overlap,” said Bruckman, citing Wal-Mart and Sav-a-lot. He added: “It will raise the bar. The presence of national franchises is going to challenge local retailers to keep their market share, and to live to a higher standard.”

First Interstate estimates that this $90 million project will create about 1,800 jobs, generate $700,000-$900,000 in annual payroll taxes for the city, and yield $1.6 million annually for the schools. The project has no city subsidy, but the Northeast Ohio Development Fund (NEODF) chipped in $30 million in low-interest loans. These loans were subsidized by New Market Tax Credits, awarded by the feds and funneled through the Cleveland-Cuyahoga County Port Authority. (A Clinton initiative, this program allows private entities to raise capital by selling the credits to corporations that assume the tax benefits. Cash is generated, and this is invested in mixed-use projects serving low-income areas.)

If you’re wondering how Steelyard Commons landed these tax credits, you’re not the only one. According to a 2005 study from Policy Matters Ohio, a liberal think tank, the decision was made without much public input.

"This is a project with major subsidy, and it’s important that people understand that," said Zach Schiller, Director of Research for Policy Matters, in a recent interview. "These millions of dollars could have supported other projects."

In a 2005 study, "Steelyard Secrets" (here), Schiller raised questions about the use of the New Market Tax Credits. Specifically, he questioned the lack of public input into the tax credit awards; the awarding of approximately two-thirds of available credits to a single project (particularly one that contains a Wal-Mart); and the close relationship between NEODF and the Port Authority (three of the seven board members of NEODF are Port board members).

"We wanted to make a dramatic impact on economic development in Northeast Ohio," said Annette Stevenson, Board President of NEODF, defending the decision to fund Steelyard Commons. "We looked at what projects would be catalytic and transforming for our region, and we felt that it met the criteria." NEODF, Stevenson said, complied with federal treasury regulations for New Market Tax Credits; no further public input was required.

Whether or not Steelyard Commons needed the tax credits to be successful, the project is full steam ahead, and boasts an impressive lineup. Tenants include Target, Wal-Mart, Home Depot, Best Buy, Staples, Marshalls, Old Navy, Radio Shack, Starbucks, Chipotle, Applebees, IHOP and many others. The project wasn’t always moving this quickly, Schneider reminisced.

"Each tenant said no at least twice before we convinced them to sign," he said. He and his staff drove these tenants through nearby neighborhoods, showing them the revitalization occurring in Tremont, Ohio City, Central and other neighborhoods, trying to get at the story behind Cleveland’s negative stats. Target will open in March, according to plans, and other retailers will follow throughout the spring and summer. Approximately 95% of the retail space available in Phase I, which covers about two-thirds of the development, is leased, and First Interstate is hoping to break ground on Phase II, the southern portion of the site, in fall of 2007. Schneider wants to attract retail categories that aren’t here – stores such as Bed, Bath and Beyond, or a bookstore.

One of site’s benefits is its accessibility. There are twenty-two freeway interchanges within five miles of the development (signage will be added at thirteen), and there are four highways, I-77, I-71, I-90 and 176. Clark and West 14th allow access from the neighborhoods. Within the development itself, the five-lane Steelyard Drive is the central street.

"When LTV was at its, peak, this site had to accommodate a shift change of 12,000 people – so it’s always been very accessible," Schneider said.

Despite misgivings about the new Wal-Mart, the city was able to score a big win with Steelyard Commons, as they’re leveraging the project to knock out a portion of the Towpath Trail. First Interstate placed a Tax Increment Financing District or "TIF" on the project. This scheme channels a portion of future taxes, about $18 million, into the Towpath. The city will link this bike and hike trail, which now dead-ends at Harvard Road, to Steelyard Commons.

"The funds from the TIF will provide us with the local twenty percent match we need to apply for federal money, which we hope to obtain in 2010," said Stan Kosilesky with the Cuyahoga County Engineer’s office.

In terms of its design, Steelyard Commons is more of a traditional outdoor mall than a "lifestyle center." The shops are set back from a central drive, behind the parking lot. Unlike Legacy Village or Crocker Park, there won’t be any street-level retail, quaint lampposts, or faux attempts at traditional downtowns. In other ways, Steelyard Commons is the most authentic lifestyle center yet, because it incorporates what Cleveland’s suburbs can’t imitate – the natural and industrial history of the Cuyahoga Valley. There is a "steel motif" that runs throughout the buildings. This complements the historic elements of the site – the brick building that once clocked steelworkers on and off of their shifts, and was saved from the wrecking ball, for instance, will house the “Industrial Heritage Museum”. A metal utility bridge, also saved from the site, will frame the northern entrance, running across Steelyard Drive. Finally, a 140-ton "bottlecar," a railroad car used to transport molten steel, will also be on display.

Steelyard Commons will also be one of the few retail centers in Northeast Ohio that is easily accessible without a car. First Interstate has actually built a mile-long section of the trail, which runs right through the site. Once the connection from Harvard is complete, visitors will be able to travel from here to Akron. Once the connection north to Canal Basin Park in the Flats is finished, Steelyard will become a stop on the Towpath, connecting trail-users with downtown. Eventually, Steelyard will also become a stop along the Cuyahoga Valley Scenic Railroad (currently, it ends at Rockside Road).

Time will tell how Steelyard Commons contributes to the "legacy" of the Valley. With this project, First Interstate seems to be striving for something beyond a successful shopping mall – something more akin to place-making. It’s a weird contortion for a suburban developer, but one that seems genuine enough. "We wanted Steelyard Commons to be a people-friendly development," said Kevin Zak, First Interstate’s Development Manager and Director of Design, during a recent tour of the site. "Steelyard Commons will be better connected than Legacy Village with the neighborhoods that it’s intended to serve."

From Cool Cleveland contributor Lee Chilcote lee.chilcoteATsbcglobal.net
Photos by Lee Chilcote & Thomas Mulready (:divend:)