CLEVELAND GOT SHORT END OF MED MART DEAL

Submitted by Roldo on Thu, 05/07/2009 - 12:00.

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. 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.
 
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How much of the convention

Submitted by None on Thu, 05/07/2009 - 14:58.

How much of the convention centers operating budget should go to taxes? What would the tax be? Would it be on the value of the complex? That’s $425M or what? How much $1M a year? $2million a year? At some point you go beyond potential revenue and what would that be?

That complex has today no revenue, until it is built and space sold it has no income. It may never make a profit it all goes to management, figure it out already.

The people behind this are doing it for the pay check, none of us think it will make a profit, taxing the property many believe will ensure that.

What about the incomes of the executives, if you operate out of Chicago then whose income tax do you pay? Their should be tax on income both personal and corporate, not property it is a public facility that is being privately managed. Will the six figure executives pay city income tax ? The operation should be taxed on its profits. If it has non yet?

http://www.ccatax.ci.cleveland.oh.us/ordinance.asp

What is this about that all involved in med mart being tax exempt, (totally tax free) that cannot be. If they request to be exempt form income tax I would be concerned, but property tax, no that does not work. It actually would rob the income tax.

The city should fix Chester Commons, people die there.

The Cleveland School today are well funded, the entire topic can be revisited after the facility is built and operating budgets can be seen, is or will it have money to contribute to the community? Then how and not in ways that render it economically infeasible. I do not come from the school of they have lots of money. They actually have and will have definable capital flows. Only a hand full get rich on this, the ones that make it happen. The executives that run it, if it fails they go on to other things. They cannot take the facility with them. It only makes money for anyone if it is marketed and it services sold, the city is not good at that. Maybe these people will be? 

It would likely depend upon

Submitted by Roldo on Thu, 05/07/2009 - 17:10.

It would likely depend upon what it costs to build. Right now some taxes are being paid on the private portion. The city  doesn't pay taxes. However, under MMPI it will be a business. Businesses are supposed to pay property taxes. In recent years, most of what has been built or rehabed downtown has had either tax abatement or TIF (tax incremental financing). The later the property owner pays taxes but it money does not go to the usual place, i. e., schools, county, city, library but is diverted to pay some aspects of what is being built or infrastructure. For example, a portion of Tower City (that isn't tax abated) is TIFed - the money is paid by Forest City but goes to pay for bonds for the Rock Hall.

 

I doubt seriously if any of the income of MMPI executives would be paid to the city. A manager who might live here would pay. Browns & Cav players, for example, split their income taxes between Cleveland and Berea where the teams have practice sessions. Also, I seem to remember that they pay only on what they proportionally earn if they are playing actually in Cleveland.

 

How you can say the Cleveland schools are well-funded I don't know.  I do know that tens of millions of property tax money (some 60 percent of which would go to the schools) is not being paid because of the abatements and exemptions I spoke about above. Also the County and the city are losing about 12 percent a year  from these abatements with the city libraries being cut a smaller amount.

 

 

It's isn't  true that there is no income coming from the convention center. They have 17 shows contracted and 62 either firm or potential for this year and I think it was 76 in out years. So there is income, plus the salaries of city employees working in the building.

I believe the entire project will be tax free as to property taxes or there wouldn't be the language that the city will join with the county to petition for tax relief and the city by accepting the $20 million says that it will.  So just as  Gateway doesn't pay any property taxes (except on land) this won't either.

Whether MMPI will run the operation to make money for itself I'd say certainly they will try.

What else they will ask for I don't know but I suspect that it will involved parking facilities and a hotel with subsidies from the city and county.

I hope that answers some of your questions.

  Roldo do you think that

Submitted by None on Thu, 05/07/2009 - 22:55.

 

Roldo do you think that this business model has tens million in it, tens of million in profit? In 2009? In 2010?….

The city schools are getting $60M in funding from the stimulus, how does that affect their budget.

The current convention center does it operate with a profit? It pays no taxes on that property and I do not know does it ever operate in the black? Would it if it was taxed, the current operations? Within in a private property tax model?

It is like the Rock Hall, like the stadiums what are their budgets and what would traditional property tax look like within those? Does forest city make a profit on tower city? If it was traditionally taxed would it be able to do the exterior renovations?

I think the public over simplifies it, in this case they get handed a simply deal in the past they got complex financing and hated it just as much. I do not love any of it, but it is about what is feasible. If it shows no potential to make a profit, or even to breakeven it gets no takers, it get no investment. This is that type and what it looks like on paper.

I spent allot of time on this at the onset as many did, nobody sees profit in conventions, no profit and property taxes are not good combinations. Demanding that could kill the deal, does the agreement have a clause in it to change terms if profit occurs?

The center will it get free water and sewer, free trash removal? Will it use CPP for power? There are economic in it, above what is current that offer jobs and taxes above what currently is. The city gets parking taxes as well. Will they use Cleveland Police or private security?

Will the people that run med mart be or have civic conscious? It depends on many things, I would suspect yes, but not in a mother Teresa sort of way.

You know the language, getting screwed or who got screwed…it made me think how many will screw in that place, you know after hours in front of that big glass wall over looking the lakefront!