When Cleveland opens the gates to subsidies for downtown development what's the payoff?
Apparently, nothing.
In the latest examples, owners of The Arcade and the new Hyatt Regency Hotel within The Arcade are seeking significant tax reductions.
This claim to the County Board of Revision for past years wants a new value for The Arcade, 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.
This tax reduction request comes despite the following welfare subsidies for the redevelopment of the 1880s historic building:
- $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.
- $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.
"The appraisers estimate the present value of the interest rate savings from the below market loans and the value of the other public subsidies that were available to support the initial effort to save and reuse the subject property totals $25,956,511," according to the document for a tax reduction to the County Board of Revision.
How much do you have to give these guys to make them happy and prosperous?
Now, as the appraisal states, The Arcade also has location, location, location - it is located in the heart of Cleveland's Central Business District, in a sub-market between Public Square and the East 9th Corridor, not far from the $400 million renovated Tower City and close to the $35 million (also heavily subsidized Colonial and Euclid Arcades and other subsidized rehabilitation. And only a couple of blocks, through E. 4th Street, to the expensive economic generator (ha) Gateway.
Here is another case similar - though not as demanding - as the tax reduction requested for the nearby former National City building that includes the Holiday Inn Express. The request there at E. 4th and Euclid seeks a huge reduction from $22.3 million to $5.5 million.
Further, the developer and the city claim that without that drastic reduction - mostly hurting the Cleveland schools - the city will lose the House of Blues. Well, boo hoo hoo.
When do wealthy developers and investors start paying their own bills and get off the public welfare system.
What we need is a little capitalism for these people.
The continued demand for lower property tax values on downtown buildings calls into question the entire scheme of tax abatements, tax incremental financing and other governmental subsidies to build and hope the demand will miraculously appear.
Maybe even the light bulb lit up for corporate elites. They backed off again from the ill-timed, ill-planned attempt to place a tax on the March ballot for an unnecessary convention center as a symbol that Cleveland is alive.
JACKSON PLAYED HIS CARDS TOO CLOSE TO VEST - The inscrutable Frank Jackson continues to disappoint as Cleveland Council President. The fiscal crisis has exacerbated the problem of leadership at both ends of City Hall.
Jackson has not groomed his Council to strongly question and pressure the Campbell Administration on issues. He's made his colleagues sluggish and dependent upon him. Part of the problem is his closed personality of the strong, silent figure. At first, he named former Council President Mike Polensek as Finance Chairman, but soon deposed him, keeping all power - thus responsibility - to himself.
Mayor Jane Campbell and Jackson have had a cordial relationship, both say. Campbell has eschewed making book with Council members by working instead through Jackson. She has received some criticism for not forming relationships (a base) with Council members on her own.
When she recently tried to have six or seven members meet for discussion on the budget - and thereby skirting the open meetings law - she apparently did it without consulting Jackson. (Although Campbell did meet with Jackson's committee chairs.) Jackson then wrote her, "It is my understanding that you are attempting to arrange meeting with members of council in small groups." He told Campbell that he advised members not to meet with the Mayor. At the first meeting, one member of six or seven invited showed up, Nelson Cintron, likely the most useless member.
Jackson earlier that week got upset with Campbell and gaveled a meeting to an end when informed that the mayor had indicated Jackson "agreed" with cuts being made by Campbell. In response, Campbell wrote Jackson she erred and should have said, "As we discussed."
Jackson showed he's not going to be a patsy for Campbell. He cooperated with former Mayor Michael White when it was to his advantage. He also showed intransigence when it was to his and his ward's advantage.
There's a desire for both sides to avoid blame for the fiscal mess. However, it's late for the Mayor to be cultivating support among legislators whether an attempt to go around Jackson or not.
I have written before of too much cooperation with the administration. Jackson and Campbell have avoided the typical ego tiffs between the two sides. However, friction between Council and any administration might be irritating to many but it often helps spotlight problems before they become crises. That's why there are the two branches of government and natural adversarial roles. Accommodation apparently has allowed problems to go unattended.
A release of information requested by Polensek showed that 1,852 employees left city employment since January 2002. While the number was not divided by general fund and enterprise fund, it does indicate that the so-called Campbell "hiring freeze" was as warm as a Caribbean breeze.
The figures indicate that the city went right on hiring in the face of financial difficulties. Both Jackson and Campbell have to take blame.
You wonder sometimes who knows what they're doing at City Hall.
At the meeting discussing the preliminary austerity budget for the first three months of next year, Finance Director Robert Baker - lead for the administration on these ticklish problems - said that the legislation was presented for "introduction." That would have meant this temporary appropriation ordinance wouldn't be voted on at that evening's meeting, thus left open for more questioning.
Jackson quickly corrected Baker. Jackson, with no one on the Finance Committee objecting (as usual), said the legislation was "up for passage tonight." That meant Jackson was rushing the legislation, not allowing for another week of probing and/or griping about its content. Then Jackson allowed the hearing to drone on for hours. That night Council passed the legislation, meaning that the Council authorized the layoffs that follow, apparently without even realizing what it had done.
Jackson typically remains silent as committee discussions drag. He allows meaningless droning to waste time. Jackson seems comfortable with this controllable model. Before he was President, Jackson usually remained - except for the committee he chaired - aloof to the point he often wouldn't even sit at the committee table but elsewhere in the room.
This self-imposed isolation made him somewhat a mysterious almost cult-like figure among some members.
Jackson insured a lack of probing by stocking the Finance Committee with loyal, but most inexperienced members. Unfortunately, veteran members as Ed Rybka, Mike Dolan and Ken Johnson, a former chairperson, rarely attend the Finance meetings, where final decisions are made. Former President Polensek, a non-member, attends and asks for pertinent information from the administration.
If Jackson had had a more alert Finance Committee the last two years the city may not have found itself in the poor shape it's in today. Experienced, but not simply loyal, committee members might have uncovered the growing financial mess. Jackson instead has played things safe for himself and his leadership. Now, he seems content to have the administration take the responsibility, thus the heat, for the layoff problems.
That's not leadership.
Unfortunately for Jackson and his colleagues some people believe that one solution to these problems would be a reduction in the number of Council members from its present 21 members. Not a solution but a rallying cry that could catch on with disgusted voters as this financial crunch continues to reveal problems in the city.
ACCOMMODATION -The Gateway Economic Development Corp. finally met last week in a special meeting after going since March 3 without showing itself in public. Should we give the board a star for finally appearing in public?
No. The irony of the meeting was that it had one agenda item. That was to vote to allow the Cleveland Indians to construct a new scoreboard. The team will pay the $7 million for the new scoreboard from which it can make signage income.
Therefore, the only reason Gateway met was to accommodate the Cleveland Indians.
Since Gateway has been trying to get both the Indians and the Cavaliers to sign new understanding of their sweetheart leases, you'd think that Bill Reidy, chairman of Gateway, would use owner Larry Dolan's desire for permission to construct a new scoreboard as a bargaining chip.
Likewise, Reidy said nothing when the Gund family wanted new signage on Gund arena. Why didn't he use that as a bargaining chip with the reluctant Gund brothers who resist a new deal in its sweetheart lease?
"If they're not agreeing with the memo yet, why didn't you wait until they agree with the memo before you give them what they want?" I asked Reidy.
"They're close to an agreement and in this case they're paying for the entire scoreboard," said Reidy, adding, "We thought about that. I don't think we needed to do that."
I asked the same about the Gunds, "Wouldn't it be better if you had a bargaining chip to hold?"
"We try to keep all the chips we need," Reidy said.
Gateway, which has been trying to reform the leases for months, if not years, plans to meet at its next scheduled meeting, Dec. 18 with completed memorandums of understanding with both teams. At least that's Reidy's hope.
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