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What's Up with the Cleveland Convention Center?

by Daryl Davis

Boondoggle n. (informal)
  1. 1. an activity or project that is trivial and wasteful of time or money.
  2. 2. a government project of little practical value funded to gain political favor.
vi (informal)
  1. 1. to do something unimportant or impractical
  2. 2. to deceive or attempt to deceive somebody
The current proposal for public financing to construct a new convention center is a boondoggle that dwarfs most of the previous examples of misappropriation of public money perpetrated upon Clevelanders by her “leaders”.

It almost sounds rational. Here’s the argument: The current convention center, owned by the City of Cleveland, was built in 1922 and that was a long time ago. It has columns supporting the ceiling. People don’t want to come to an OLD PLACE. The convention and visitors bureau can’t seem to find more than a small handful of events that can fit into it’s many spaces: the Music Hall, the Public Hall, the Little Theatre, the Grand Ballroom, the Exhibition Hall now chopped into meeting rooms, the Convention Center itself.

So, the proposal to build a new convention center was put on the ballot, debated and defeated. The citizens just couldn’t see why they needed a new one when in addition to the old one, there is a perfectly enormous IX Center adjacent to the airport and they just paid for the Gund Arena, the new stadium, the new baseball field, and the CSU Convocation Center.

This ballot failure did not sit well with the “investors” (who don’t really want to invest any of their own money) and the owners of prime downtown real estate that just hasn’t attracted any buyers, or even renters, despite millions of dollars in tax incentives and low interest loans made with public funds and promises of jobs.

Enter Merchandise Mart Properties Inc. of Chicago (MMPI) who want a “mart” to lease showroom space to manufacturers of medical products; and they must have a new convention center to go with it - right next door and connected, and with a lot of hotels near it too. One immediately thinks of the empty Higbee building and the nearly empty Tower City and its adjacent vacant land and air rights owned by a prominent donor to political campaigns of the very two county commissioners who are promoting the project.

What do they really want?
We acquire the land or air rights, build MMPI a convention center, where they want it, and then we pay them to manage it for an undisclosed fee, while we pay off the bonds. Fred Nance, the county’s negotiator, clarified this on February 11 in the Plain Dealer. He said, “…they want to…build it lease it out and manage the development…” presumably at our expense. As owners of this new facility we would be responsible for maintenance and upkeep. Commissioner Hagan has said there would need to be a cap on public subsidy of operating costs. So, where is this cap?

What does MMPI get out of this?
Senior Vice President Mark Falanga said, “We’re a for-profit company, so our interest is in making money off the management of this facility…” Later he said, “Whatever money could be made off this facility is negligible.” Will anyone at anytime ask for some tangible figures? Why haven’t our county government officials produced a business plan or real justification for our involvement? And if the management of this facility is of negligible value, why does MMPI want to be involved?

And how about the hospitals and the medical product manufacturers? Aren’t they really excited about the boost to their industry and the glory from their participation in this great civic improvement project? Not that anyone has noticed. The two mega-hospitals wish it could be located closer to them in University Circle. The response from the manufacturers so far ranges from enthusiasm without commitment, to skepticism about the cost-to-benefits ratio, to disinterest.

What’s really going on here?
The basic principle behind the project must be to transfer wealth from the public to private hands; in our case the sales tax levied in October to finance bonds for the benefit of the bond traders, real estate dealers, construction contractors and later the manufacturers of medical equipment and their merchandisers.

Why do we believe this is true?
Convention centers are notorious money-losers by themselves. The prospect of tax revenue is nebulous – we are told in vague terms that collateral revenue results from the expenditures made by conventioneers on hotels and restaurants. Can we expect sales tax revenue from the Medical Mart? Probably not much. The majority of sales generated by the new "mart" will most likely be concluded on-line or by regional distributors of the products on display. This is the way these things are typically bought and sold. The land and buildings won’t generate any real estate taxes - government-owned property is tax exempt. Yet we're still expected to service the debt through sales taxes and finance our schools with real estate taxes…

How about the prospect of new jobs?
Remember the promises of jobs from the Jacobs field project? The Rock and Roll Hall of Fame, Brown's Stadium? Sure, there will be some jobs during construction, but once the guys have finished playing with their overgrown Tonka toys and screw guns those jobs go away. And once management of the facility is given over to MMPI then the service jobs remaining will likely be part time, low wage and non-union. At least many of the jobs at our municipally owned convention center come with benefits and job security – there are no such guarantees if we're dealing with a for-profit company that only expects a "negligible" profit from the management of the facility.

What do we lose in this deal?
The money that we are donating to these corporations could be used to fix some of the problems that actually keep Cleveland from moving ahead or it could be used to foster small businesses, the real life-blood of our economy. Schools and safety forces – our two biggest problems – will not benefit from this and in fact will be the first to lose. In the meantime the foreclosure crisis is rolling in like a freight train, further devaluing property and costing the city and the county millions in rising homelessness, crime and upkeep of abandoned buildings and land that the banks own but will not maintain or secure. Sinking all our borrowing capacity into the medical mart scheme will not address these problems.

Ironically, Cuyahoga County was facing a projected end-of-fiscal-year 2008 deficit of $42.6 million. Conveniently the recent sales tax increase allows the county to balance its books. With the $43.0 million the county projects to collect the budget management team can take credit for a 22% combined balance to expenditure ratio. Had it fallen below 20% the county’s bond rating would have fallen too. Thank you taxpayers.

Meanwhile the Public Auditorium, “a monument conceived as a tribute to the ideals of Cleveland, builded by her citizens and dedicated to social progress, industrial achievement, and civic interest” lies nearly vacant, under-utilized and falling into disrepair. There ought to be a way through our legislative and executive decision making to avoid making the Public Auditorium and Convention Center redundant and obsolete. Our current government and corporate leadership haven’t even tried.