$1.50/FEBRUARY 28 - MARCH 6, 2011
Mistrust fuels Kasich’s bargaining bill Muni officials: Relationships already built allow constructive talks By JAY MILLER firstname.lastname@example.org
Reno Contipelli sees both sides of the public employee collective bargaining squabble that is roiling the Midwest. Indeed, he has been on both sides of the negotiating table. A union firefighter in Cuyahoga Heights,
Enigmatic Optima eyes
next NEO property Miami concern quietly builds local portfolio By STAN BULLARD email@example.com
Mr. Contipelli also is president of the Cuyahoga Heights School Board, where he negotiates contracts with union teachers. Mr. Contipelli, who as a firefighter accepts that he cannot strike, believes, as a school board member, that teachers also should not be able to strike. But he doesn’t see Senate Bill 5 — the proposal that
would take away many of the bargaining rights of public employees across Ohio — as solving what he sees as the real problem: longstanding suspicions harbored on both sides of the table. “Most negotiations come down to relationships,” said Mr. Contipelli, who noted that his first years on the school board were marred by
mistrust on both sides of the table that led to contentious negotiations. “But the school board built trust with the union and since then we’ve had nothing but positive (negotiations).” While some public officials are solidly behind the Kasich Republican proposal that would increase their negotiating position with their union employees, others, including Mr. Contipelli, are
not sold on much of the package of changes Gov. John Kasich and the Republican majorities in the state Legislature are trying to enact. They say they have built relationships across the table that have allowed for reasonable contract settlements. This legislative foray is coupled in the minds of several municipal See BILL Page 27
UP IN THE AIR A look at the future of air service in Northeast Ohio and what it might mean for the region
The aviation industry is in the midst of change — from Continental’s merger with United Airlines to Southwest’s deal with AirTran Airways — and no one knows for sure what it might mean for Northeast Ohio. We examine the latest in this special six-page report. PAGES 21-26 PLUS: INTRODUCING TWO AIRPORT DIRECTORS ■ PITTSBURGH, POST-US AIRWAYS ■ WHAT IS A HUB? ■ & MORE
Less than three years after Optima Management Group of Miami opened its wallet to buy properties in downtown Cleveland, it holds a collection of four skyscrapers, nearly 2.9 million square feet of commercial space and more than 2,000 parking spaces. By a nose, Cleveland-based real estate giant Forest City Enterprises Inc. remains downtown’s largest owner of office and retail buildings, with six skyscrapers and nearly 3 million square feet of properties. But publicly traded Forest City has been buying and developing buildings downtown since the 1970s. On the other hand, family-owned Optima began acquiring properties here in May 2008, when it shelled out $82 million in cash for the One Cleveland Center office building at 1375 E. Ninth St. Nearly $188 million in Cleveland acquisitions later, Optima has said little about why it’s buying so much property here. Industry insiders say the tipping point in determining Optima’s strategy in Cleveland may be coming soon should it buy another property —
See OPTIMA Page 27
How do downtown Cleveland restaurateurs view the new casino? We asked ■ Page 3 PLUS: FAIRVIEW HOSPITAL’S NEXT MOVE ■ PAGE 3 ST. VINCENT CHARITY FORMS FOUNDATION ■ PAGE 4
Entire contents © 2011 by Crain Communications Inc. Vol. 32, No. 9
CRAIN’S CLEVELAND BUSINESS
FEBRUARY 28 - MARCH 6, 2011
HOW DO YOU FEEL ABOUT FOUR-FIFTHS?
CORRECTIONS ■ A Feb. 21, Page 3 story on the hiring of Michael Deemer as director of the new business development center for the Downtown Cleveland Alliance incorrectly identified the chef/restaurateurs who are faces of the alliance’s new marketing campaign. Zack Bruell of Chinato and Jonathon Sawyer of
Greenhouse Tavern are featured in the campaign. ■ A Feb. 21, Page 3 story on Penske Automotive Group buying a former Chrysler dealership in Beachwood incorrectly identified the location of the dealership. It sits near the Chagrin Boulevard interchange of Interstate 271.
REGULAR FEATURES Big Issue ..........11 Classified ..........30 Editorial ............10 Going Places ....19 Letter................11
List: NE Ohio-based national professional associations ..28 Personal View....10 Tax Liens ..........12
Women who worked full time in wage and salary jobs had median weekly earnings of $657 in 2009, or 80% of men’s median weekly earnings ($819) that year, according to new data from the U.S. Bureau of Labor Statistics. Of the 45 million women who worked full time in wage and salary jobs, the largest segment — 17 million — worked in education and health services. Here’s a breakdown of employment and median weekly earnings of women, by selected industry, for 2009:
Employment Median weekly Women’s earnings as (in millions) earnings percentage of men’s
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Weatherhead Showcase March 5, 2011 10:00am – 12:30pm Registration starts at 9:30am Peter B. Lewis Building Case Western Reserve University To register, visit weatherhead.case.edu/showcase Receive an application fee waiver when attending this open house.
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Crain Communications Inc. Keith E. Crain: Chairman Rance Crain: President Merrilee Crain: Secretary Mary Kay Crain: Treasurer William A. Morrow: Executive vice president/operations Brian D. Tucker: Vice president Robert C. Adams: Group vice president technology, circulation, manufacturing Paul Dalpiaz: Chief Information Officer Dave Kamis: Vice president/production & manufacturing Kathy Henry: Corporate circulation/audience development director G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Subscriptions: In Ohio: 1 year - $64, 2 year - $110. Outside Ohio: 1 year - $110, 2 year - $195. Single copy, $1.50. Allow 4 weeks for change of address. Send all subscription correspondence to Circulation Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373 or FAX (313) 446-6777. Reprints: Call 1-800-290-5460 Ext. 136 Audit Bureau of Circulation
FEBRUARY 28 - MARCH 6, 2011
CRAIN’S CLEVELAND BUSINESS
Medical supply firms chafe at bidding process NE Ohio companies consider staff cuts, mergers to adjust to new Medicare system
BETS ARE ON THE TABLE
By TIMOTHY MAGAW email@example.com
Medical equipment suppliers in Northeast Ohio are in an uproar over a new competitive bidding program imposed by Medicare that, for some, is cutting off access to large chunks of their customers and is forcing them to trim their operations or to diversify themselves to ride out the storm. Under the program rolled out this year in nine regions, including Cleveland and Cincinnati, only durable medical equipment suppliers that won competitively bid contracts with the federal government can be reimbursed by Medicare. Proponents
Downtown restaurateurs take stock of casino’s eventual effect on bottom line
of the program, which will expand to other regions later this year, say it could save Medicare and its beneficiaries about $28 billion over the next 10 years. But a number of suppliers, including those that have won contracts, aren’t fans of the program. Joe Petrolla, president of Seeley Medical in Andover in Ashtabula County, said the program is, at best, “suicide bidding.” Companies that won the contracts, such as Seeley Medical, were forced to bid so low it’s tough to supply the latest equipment and offer the level of service they had in the past, Mr. Petrolla said. See BIDDING Page 14
THE WEEK IN QUOTES
Story by KATHY AMES CARR ■ Illustration by STEVE BENNETT
ill the planned Horse-
shoe Casino Cleveland
“The sooner this opens, the better,” said
and its 400-seat, buffet-
Mr. Bruell, chef and owner of Chinato, a 140-
style restaurant dull the
seat restaurant on East Fourth Street.
appetite of casino patrons for the offerings of neighboring downtown restaurants? Zack Bruell thinks not. Mike Moyer
But some restaurant operators fear the big eatery inside the casino will allow patrons to satisfy their hunger without venturing far from the slots and gaming tables.
isn’t so sure. Several local restaurateurs bet the casino,
“It’ll hurt some businesses like mine,
slated to open in early 2012 in the former
which already has been struggling due to the
Higbee Building, will bring more business
weather and tough economy,” said Mr.
to their tables by drawing to the center city
Moyer, owner of Alvies Gateway Grille &
hordes of people who otherwise wouldn’t
See BETS Page 18
“Whatever changes may come out of the process (in the Legislature), this is not a short-term fix for us and this may not be implemented for some municipalities for three years.” — Bay Village Mayor Debbie Sutherland. Page One
“It’s extremely important, because right now we enjoy a competitive advantage (over nearby cities that are not hubs). … It’s an attraction lever that we want to use.” — Tom Waltermire, CEO, Team NEO. Page 21
“Cash flow is tight. Fees are squeezed. It was gut-wrenching to let people go. We muscled our way through, but we don’t want to go through that again.” — Mike Crislip, president, Herschman Architects. Page 9
“It’s safe to say a reduction in the status of the hub … has a little bit of a chilling effect on your business attraction efforts.” — Douglas Moormann, vice president of economic development, Cincinnati USA Regional Chamber. Page 26
More room, rooms featured in Fairview Hospital’s $76M upgrade Patient visits far outstripping current capacity; officials keep watchful eye on West Side rivals By TIMOTHY MAGAW firstname.lastname@example.org
Business is booming at Fairview Hospital on Cleveland’s West Side, and it soon will embark on a $76 million renovation and construction initiative that officials say will transform the nearly 120-year-old hospital into a sleek and modern
medical center. At the end of March, Fairview will begin work on a roughly 125,000square-foot addition that will include a 52-bed emergency department and a 26-bed intensive care unit. The addition will be wedged alongside the hospital’s existing structure off Lorain Road. Construction of the addition and work on renovation of
another 25,000 square feet of space are expected to be completed by early 2013. Fairview officials said 2010 was a good year financially for the hospital as it hit its revenue targets, though John Mills, the hospital’s senior vice presi- Murphy dent of operations, wouldn’t share exact figures. Still, patient rooms are full, and the expansion plans are a welcome change for the hospital’s employees. Plans for the new structure
feature large, private patient rooms — a far cry from much of the hospital’s current emergency department and intensive care unit. Some of the current rooms are so small and packed with equipment that the feet of a patient on one bed nearly peak through the curtains into the adjacent hallway. The current emergency department was built for 35,000 annual patient visits. In 2009 — the most
recent numbers available — the emergency department saw 69,000 visits. “If we had bunk beds, we’d be using them,” said Janice Murphy, president of Fairview and Lakewood hospitals, which are part of the Cleveland Clinic. Fairview had a slight hiccup with the construction project when the city’s Board of Zoning Appeals in January denied the Clinic’s application for a variance to add a rooftop helicopter landing pod atop the See FAIRVIEW Page 29
CRAIN’S CLEVELAND BUSINESS
FEBRUARY 28 - MARCH 6, 2011
Fundraising arm next on St. Vincent Charity’s list Foundation will be hospital’s first formal effort By TIMOTHY MAGAW email@example.com
St. Vincent Charity Medical Center is building a fundraising infrastructure to support the Catholic hospital as it prepares to invest in itself and to weather a potential storm that could be produced by possible cuts in Medicaid reimbursements. St. Vincent, which is owned by the Sisters of Charity of St. Augustine, until this year hasn’t had a formal fundraising arm. Rather, University Hospitals handled fundraising for
St. Vincent when the big health system jointly owned with the Sisters of Charity the medical center on East 22nd Street in downtown Cleveland and Mercy Medical Center in Canton. The Sisters of Charity and University Hospitals parted ways at the start of 2010 due to differing missions as University Hospitals pursued its $1.2 billion Vision 2010 strategic plan and the Sisters of Charity looked to expand St. Vincent’s revenue base and invest in its operations. As part of the transition in ownership,
the Sisters of Charity and University Hospitals each are providing $15 million — $5 million a year, for three years — to seed the St. Vincent Charity Development Foundation, which launched at the start of the year. Similar foundations are starting at the Sisters of Charity’s other hospitals — Mercy Medical and Providence Hospital in Columbia, S.C. University Hospitals and the Sisters of Charity still jointly own St. John Medical Center in Westlake, and the bulk of its fundraising activities will be filtered through University Hospitals.
In search of angels Joanne Clark, St. Vincent’s vice president of corporate affairs and the foundation’s president, said her biggest task for the next year is putting together a board of directors for the foundation. She plans to announce the first class of 10 or 15 board members by April and hopes to have 30 on board by the year’s end. The board will consist of active fundraisers, Ms. Clark said, to support St. Vincent’s small development staff of three people. No fundraising goals are in place, but Ms. Clark noted that every dollar counts. Ms. Clark said officials at St. Vincent are exploring ways to raise money, such as tapping grateful patients, putting together annual fund drives and seeking donations from corporations and grantmaking foundations. The hospital holds a fundraising gala every other year, and last year’s brought it about $450,000. St. Vincent officials hope the foundation can build on that success. “We’re going to be looking for our angels,” Ms. Clark said. “We’re going to get out and talk to those people.” At the moment, St. Vincent is studying the possibility of a capital campaign to support the medical center’s expansion plans, which could unfold over the next several years. The first phase of construction would include a two-story, 80,000square-foot surgery center, according to Wendy Hoke, St. Vincent’s director of marketing and communications. Ms. Hoke said the size and scope of the building could change, but St. Vincent plans to make room for the structure when it demolishes its administration building and old pharmacy and research building in July. St. Vincent is tapping into an extremely competitive market for philanthropic gifts. The Cleveland Clinic and University Hospitals are the two major fundraising juggernauts in the area and often attract multimillion-dollar donations, but Ms. Clark doesn’t believe their presence will hinder St. Vincent’s fundraising abilities. Being a Catholic hospital that cares for the community’s poor and underserved provides the medical center the opportunity to tell donors a distinctive story, Ms. Clark said. “We want all of the community to know about us and understand what we’re doing,” she said. “We don’t just care for Catholics. The door is always open.” ■
Volume 32, Number 9 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the fourth week of May and fifth week of May, the fourth week of June and first week of July, the third week of December and fourth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2011 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $1.50. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373. Ride Along Included in Edition 1. REPRINT INFORMATION: 800-290-5460 Ext. 136
FEBRUARY 28 - MARCH 6, 2011
CRAIN’S CLEVELAND BUSINESS
Packaging specialist expands in Streetsboro after growth
Golf tech company hits rough patch
By STAN BULLARD firstname.lastname@example.org
By CHUCK SODER email@example.com
Expansion needs at Automated Packaging Systems Inc. of Streetsboro have taken off the market the largest empty industrial building in the Portage County town. A maker of packaging machinery and provider of packaging materials, Automated Packaging bought the hulking, 173,000-square-foot building at 600 Mondial Parkway from Playtex Manufacturing Inc. of Westport, Conn., for $5.23 million Feb. 16, according to Portage County land records. Daryl Manzetti, Automated Packaging’s chief financial officer, said the company has experienced “a significant amount of growth the past three years” and needs the added space. “We’ve expanded globally and are up against it in terms of capacity,” Mr. Manzetti said. Mr. Manzetti said air pouches and mailbags are growing product lines for Automated Packaging, and the new plant would make those products as well as others the company is developing. “This is a big deal for us,” Mr. Manzetti said of buying the building. “We committed to the state that we would create 85 jobs in the first three years. But we see it as a 10-year project. By the end of that time, we will have invested $47 million in the plant and have 200 to 250 jobs there.” The state of Ohio last December
approved a 45% Job Creation Tax Credit for seven years for the project, which includes buying the building and equipment to operate it. The state estimates the incentive will save the company a total of $224,000, but it requires Automated Packaging to operate in the building at least 10 years. Jeffrey Pritchard, Streetsboro city planning, zoning and economic development director, said he was pleased the company acquired the building from Playtex, which had marketed it for more than three years. “I feel we’re blessed,” Mr. Pritchard said. The former Playtex building would serve as Automated Packaging’s third plant in Streetsboro. Mr. Manzetti said when the new plant goes into production, it will be Automated Packaging’s largest factory under a single roof. The company operates five plants, including one in the United Kingdom. Online real estate ads say the property at 600 Mondial originally hit the market in 2008 with an asking price of $8.15 million. However, Terry Coyne, a Grubb & Ellis Co. senior vice president who represented Playtex in the sale, said the original price reflected the hot industrial market before the recession struck. “We got the price we wanted,” Mr. Coyne said. The building dates from 1995 and sits on 32 acres, Mr. Coyne said. ■
Drop in charity tournament bookings hurts Verishot
Verishot has hit a sand trap. Golf technology company Nine Iron Innovations Inc., which got money from state-funded investors, has shut down almost all its operations. The Independence company on Jan. 1 sold its core line of business, Verishot, a video monitoring service for golf courses that run contests, to the company’s former customer service manager, Paul Westdyk, said CEO Dan Quigg. Verishot had no employees at the time, said Mr. Quigg, who would not disclose terms of the deal. Nine Iron Innovations, which at its peak employed five people as well as several seasonal part-time employees, retains the rights to ShareGolf, a prototype-stage social media platform for golfers. That line of business is on hiatus until the company finds more money, Mr. Quigg said. Mr. Quigg cited the economic downturn as the main reason the company sold Verishot. Verishot expanded to provide video monitoring services to about 70 courses in 2009, up from 13 in mid-2008. All the while, though, golf courses were booking fewer charity tournaments for 2010, he said, which reduced the need for Verishot’s verification services. By contrast, another area company
providing similar services has achieved profitability, according to its owner. Nine Iron Innovations founder Mike Burkons 18 months ago started Charitee Golf LLC after agreeing to give up his equity in the original company to have his noncompete agreement dissolved. Mr. Burkons said the Shaker Heights company’s small staff, which consists of him and two part-time employees, has helped it reach profitability on an investment of less than $100,000. Shrinking the size of Nine Iron Innovations’ staff to Charitee’s size was not an option, Mr. Quigg said. Some of the investors that financed Nine Iron Innovations — including JumpStart Inc. and North Coast Angel Fund, both of which received money from Ohio’s Third Frontier economic development program — were looking for higher returns than could be delivered by a company with one or two employees, he said. “When you go to raise money, people expect you to grow a business,” Mr. Quigg said. Mr. Burkons wouldn’t comment about Nine Iron Innovations, but he did say JumpStart and North Coast Angel Fund need to focus more on getting companies to profitability than on getting the companies they finance to raise more money so they can grow quickly. He said his company eventually might raise more money, but being profitable gives it
“When you don’t (make money), you have no choice but to raise money or go out of business.” – Mike Burkons, founder, Charitee Golf LLC, which he says is profitable after 18 months options. “When you don’t (make money), you have no choice but to raise money or go out of business,” Mr. Burkons said. JumpStart would support a portfolio company’s decision to scale back growth plans to focus on quickly achieving profitability if it appeared that was the company’s only option, said Lynn-Ann Gries, president and chief investment officer with JumpStart Ventures, the investment arm of the nonprofit economic development group. JumpStart’s main goal, though, is to turn startups into highgrowth companies. “The money we give them is to prove something,” she said. Investors typically only back a company if they are excited about its growth potential, said Clay Rankin, managing member of North Coast Angel Fund. Realizing that potential often requires spending money, which means delaying profitability, Mr. Rankin said. “You can’t get to that level of revenue generation unless you invest a certain amount of money,” he said. ■
CRAIN’S CLEVELAND BUSINESS
FEBRUARY 28 - MARCH 6, 2011
Electric firm seeking input from contractors
2011 NORTECH INNOVATION AWARDS
Job experience can lead to ideas, company says By DAN SHINGLER firstname.lastname@example.org
Dr. Hiroyuki Fujita, the CEO of Mayfield Village-based QED, was given NorTech’s new Regional Impact Award. In delivering the evening’s keynote address, Dr. Fujita said, “together, we can make a positive difference in the world.” JASON MILLER
The winners of the 2011 NorTech Innovation Awards were announced during an awards reception last Thursday, Feb. 24, at LaCentre Conference and Banquet Facility in Westlake. Of 20 finalists, nine were selected as winners of this year’s awards, which are intended to highlight some of the technological advancements taking place in the region, especially those that have the ability to impact industries and markets in a positive way. The winners for 2011 are:
■ VasoStar Inc.: Vibrational guidewire system for crossing chronic lesions ■ Kent Displays Inc.: Boogie Board LCD Writing Tablet ■ Echogen Power Systems Inc.: Advanced energy recycling using a CO2-based power cycle ■ Ashlawn Energy LLC: Vanadium Redox Flow Batteries for energy storage solutions ■ RTI International Metals Inc.: Continuous casting method for making titanium ingots ■ The University of Akron: Ultra-
Mission Launch Introducing the launch of our mobile website!
sonic rubber devulcanization extruder and technology ■ AeroClay Inc.: AeroClay, a claybased aerogel, a lightweight porous material that can have a variety of mechanical properties ■ MAR Systems Inc.: Sorbster, which extracts heavy metals from water ■AllTech Medical Systems America Inc.: High-performance, low-cost total MRI system Also honored was keynote speaker Hiroyuki Fujita, president and CEO of Quality Electrodynamics LLC of Mayfield Village, who received the first ever Regional Impact Award from NorTech, a regional technology advocacy organization. In 2009, Dr. Fujita and QED were the recipients of a NorTech Innovation Award, and QED was designated by Forbes magazine as the 11th “Most Promising Company in America.” The company makes state-of-the-art MRI coils for customers worldwide, including Siemens Healthcare in Germany and Toshiba Medical Systems Corp. in Japan. To view a photo slideshow from the reception, visit CrainsCleveland.com; to listen to some of the winners, finalists and tech advocates talk about the importance of these innovations, visit http://tinyurl.com/4l7goj9.
Madison Electric is turning to its history for its future growth. The company got its start in 1929 with an innovative product that revolutionized a small part of the electricians’ trade. That product, known as the “Madison Strap,” allowed electricians to install outlet boxes in the middle of a wall, where there was no stud. It was the company’s mainstay for decades, even after it was copied by competitors, and it’s still a big seller. But Madison Electric thinks it’s time for new innovations, and it says it has found a rich source of ideas and inventions by tapping into electricians and other contractors who spend their days on job sites, often envisioning better ways to do things. “We’re getting some really good ideas that are what we call ‘contractor tested,’” said Madison Electric president Brad Wiandt during an interview that took place in a room full of prototypes and inventions the company hopes to bring to market. The company found its first new product at a trade show in 2008, when Madison Electric executives met Greg Herth, an electrician from Long Island, N.Y. Mr. Herth already had patented an electrical outlet box that had special attachment points, allowing it to be used in existing construction without tearing out walls. Mr. Herth said he spent 15 years tinkering with his idea before he finally got his first patent. Today, he has 13 of them, as he has continued to expand his line of products. But Mr. Herth said he gave up on selling those products himself after talking with Mr. Wiandt and Madison Electric’s director of marketing, Rob Fisher. “Now, Madison handles the distribution of our product,” Mr. Herth said. “I had 23 sales reps across the U.S. before.” Mr. Herth’s company, Smart Box Inc., doesn’t reveal its revenues, but Mr. Herth said he now makes far more as an inventor with his own products than he ever made as an electrician.
Madison Electric did not want to rely solely on Mr. Herth for new products, no matter how many good ideas or patents he might generate. So, in 2009, it set up something called the Sparks Innovation Center, an Internet-based entity that solicits ideas from other contractors, vets them through monthly meetings of trade professionals and then brings products to market and distributes them. One of the first contractors to walk through that new door was Doug Hill, a Brook Park electrician who specializes in building offices for dentists. Mr. Hill’s 18-person shop constantly was wiring commercial buildings, which use metal clad cable, known as MC cable, as conduit to carry electrical wiring. The cables were always a mess inside the walls and required a lot of labor to straighten out and attach to the internal studs, so Mr. Hill designed a clip that grips both the cable and a standard-size, 2x4 stud. An electrician quickly can snap the clip onto the stud, snap the wire into place and be done, Mr. Hill said. “I had the opportunity to go with some larger companies — much larger than Madison — but I went with them,” Mr. Hill said. Like Mr. Herth, Mr. Hill said he was working too hard as a one-man show trying to market his own product. He’d gotten his product into more than 100 stores, but said he decided he could make faster progress using the network of sales reps that Madison Electric already worked with, and which it was using to market other products such as those from Mr. Herth. The arrangement worked so well, Mr. Hill said, that he has signed a 10year agreement with Madison Electric. Mr. Hill said he also makes more money now than he did as a contractor, and plans work full time for his product development company, Time Saver Products Inc. “I’ll probably retire from this (electrical contracting) business next year and I’ll just run Time Saver full time,” he said. “It’s more profitable, and to be honest, it’s a passion I have.”
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For Madison Electric, the new products represent an opportunity to increase sales with higher-margin, proprietary products, Mr. Wiandt said. The company does not manufacture the items itself. That work is contracted out, often to China, but Mr. Wiandt said Madison Electric always has been principally a marketing and distribution company, which is what many inventors need the most. There are plenty more products in the pipeline, too. Mr. Wiandt said there are products to market spots in walls where wires are supposed to be routed and devices to hold cabling in place or to help a worker retract it through a wall when there is no room to move. All the products are constructionbased, which means few if any of them are selling up to their potential because of the ongoing slump in the construction business, Mr. Wiandt said. But Madison Electric can afford to be patient. Its sales last year were about $20 million, down about 20% from 2007 but still enough to keep the company profitable. ■
FEBRUARY 28 - MARCH 6, 2011
CRAIN’S CLEVELAND BUSINESS
Grant for low-income students at risk Colleges try to reduce reliance on aid program By TIMOTHY MAGAW email@example.com
The state budget crisis might cause the elimination of a popular grant program for Ohio’s neediest students, and Northeast Ohio’s public and private colleges are trying to figure out how to manage the uncertainty at a time when many are telling incoming freshmen how much financial aid they’ve received. The Ohio College Opportunity Grant two years ago unexpectedly was slashed by about 50%, and last year was sliced even further. The Ohio Board of Regents last November proposed eliminating the program altogether for students at public colleges and universities but keeping it in place for the state’s private colleges. However, the program’s fate ultimately will be determined by the Republican-controlled Legislature and Gov. John Kasich. The governor will present his budget to lawmakers March 15 and must sign one into law by June 30. “Our colleges are concerned — and I think legitimately — that the program could be wiped out,” said C. Todd Jones, president and general council of the Association of Independent Colleges and Universities of Ohio. As the belt-tightening continues at colleges statewide, many are finding it tough to make up their budget shortfalls themselves and have had to steer students toward student loans and other aid resources, according to George Rolleston, director of financial aid at Baldwin-Wallace College in Berea. Last fall, about 775 B-W students received the $1,848 grants, which were reduced from $2,256 the year before for full-time students at private schools. Baldwin-Wallace made up the difference, Mr. Rolleston said, costing the college a total of about $316,200. What will happen in March when Gov. Kasich presents his budget is anyone’s guess, he noted, but deep cuts to the grant program would be “dramatic” or “severe” for low-income college students. “With the economy having been what it has been, we are not seeing growth in the fiscal capacity for families to afford college,” Mr. Rolleston said. Mr. Jones, of the independent colleges association, suspects the absence of the grant program could be particularly harmful for Ohio’s private institutions. Students generally choose those types of institutions because of their missions or their size, he noted. “In absence of (the program), they either attend a college not suited for them or they don’t attend college at all,” Mr. Jones said.
Blunt warning At John Carroll University, financial aid award letters are going out to incoming freshmen bluntly telling them not to rely on state aid to help finance their education, said Dora Pruce, the college’s director for community and government relations. Last fall, 647 students at the private school in University Heights received the grant. “We have worked internally to rely less and less on that aid,” Ms. Pruce said. “We don’t want to be in the position of sending out award letters with an amount in it, then have to recalculate it and send out communi-
cations to our families in the summer.” The fate of the Ohio College Opportunity Grant, which is an $888 award for students at public institutions, is one of many fiscal issues faced by Northeast Ohio’s public colleges as the state works to eliminate an estimated $8 billion hole in its next two-year budget period, which begins July 1. The schools potentially will need to deal with deep cuts in their state subsidies, which could have implications across their campuses. Barring another tuition freeze, schools could hike their tuition rates, causing more of a financial crunch for potential students. Kent State University recently launched a scholarship-matching
program to encourage incoming freshman from Ohio to find other sources of money to help finance their education. Under the program, Kent State will match any outside scholarship up to $1,000 for lowincome students. Outside scholarships could include those by local clubs, churches, businesses or other organization. T. David Garcia, the university’s associate vice president for enrollment management, said Kent State expects to spend $300,000 to $500,000 on the program. If it’s successful, it could be expanded next year to include students from outside Ohio. “Students need to step up and be engaged with the process,” Mr. Garcia said. ■
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FEBRUARY 28 - MARCH 6, 2011
CRAIN’S CLEVELAND BUSINESS
Commercially focused architects optimistic
HEALTH CARE HEROES
But government, health care work may dry up
Crain’s Cleveland Business on May 2 will publish its Health Care Heroes section, and we’re seeking nominations to help identify honorees among the dedicated professionals who work in Northeast Ohio’s world-class medical and wellness communities. The nomination period runs through March 25. In the Advancements in Health Care segment of the section, Crain’s will honor people and institutions in the following categories: ■ Allied Health ■ Health Care Advocate ■ Nurse ■ Physician ■ Volunteer New this year to Health Care Heroes is a segment called Wellness that will honor the region’s Healthiest Employer. To tell Crain’s how your hero has touched the lives of people they serve and made a positive difference in the community, go to www.crainscleveland.com/ marketing/hcheroes.html. The 2011 Health Care Heroes luncheon is scheduled for the week of May 16. Tickets will be available beginning April 1.
By STAN BULLARD firstname.lastname@example.org
More work and something even more scarce the past few years — optimism — are flickering in the shops of some Northeast Ohio architects that serve commercial clients, though firms with more institutionally oriented practices increasingly are wary about the future. Mike Crislip, president of Herschman Architects in Beachwood, said, “The consensus for people in the retail architecture industry is that last year they could not see a road ahead. This year, they can see a road ahead, but it’s flat and bumpy.” Balanced against the sense that business is improving for hard-hit architectural firms is concern that institutional and health care work — sectors that sustained the profession through the recent lean times — are slowing.
A job here, a job there The murky outlook for the profession is reflected in staffing levels, which many Northeast Ohio architectural firms chopped once the recession hit. Examples of some hiring over the last 12 months of registered architects and other staffers are common, but at best constitute a handful at various firms. “We’ve hired back five people in the last year” to bring Herschman’s staff to 60, Mr. Crislip said. However, the additions came after the firm shed a total of 20 employees in 2008 and 2009 as the downturn decimated design and development work associated with retailing. Business still isn’t robust, which holds down hiring. “Cash flow is tight,” Mr. Crislip said. “Fees are squeezed. It was gut-wrenching to let people go. We muscled our way through, but we don’t want to go through that again.”
“I’m seeing more unconventional forms of financing emerging that will help the private sector. ... For now, we’re being called more often.” – Jonathan Sandvick, president, Sandvick Architects Robert Bostwick, president of Cleveland-based Bostwick Architects, said he and others worry that looming state budget cuts will reduce the flow of work at Ohio’s public universities. That work “means a lot to our profession,” Mr. Bostwick said, though he remains in the camp of architects who believe business in the design field this year will be better than last. In a shift, Paul Westlake, managing principal of Cleveland-based Westlake Reed Leskosky, said he has become “pathologically optimistic” — which he defined as upbeat without good cause — as state and local government work “has tanked” with government budgets now running in the red. Westlake Reed is a diversified practice that specializes in historic preservation work, and its assignments for federal agencies, museums and theaters kept its revenue and staff growing despite the recession. However, with government coffers tight, institutional work likely will become harder to come by for the firm. Mr. Westlake noted that a Westlake Reed assignment to design a $40 million museum at the Yorktown Victory Center in Yorktown, Va., was deferred last August due to Virginia’s money woes.
AIA Cleveland, a chapter of the American Institute of Architects national professional group, last month held a day-long seminar focused on job-hunting, résumé tips and interview skills that drew 40 people — two years after the downturn moved the focus of many designers from drawing boards to résumés. Even though a billion-dollar building boom is afoot in downtown Cleveland due to the new medical merchandise mart and convention center and other projects, insiders say the broader market is sluggish. Gary Hribar, managing principal of the Cleveland office of architectural and engineering firm URS Corp., runs an office benefiting from roles with the Flats East Bank Neighborhood project’s office tower and the medical mart. Nonetheless, he sees those assignments as anomalies. “I think the market has been soft and is still soft,” Mr. Hribar said. “We’re seeing a lot fewer (requests for proposals) in our business today.”
Pursuing new avenues To adjust, firms are exploring new geographic markets and new niches. GPD Associates, an Akron-based architecture and engineering firm,
COMING UP Crain’s introduces new small business e-mail Crain’s Cleveland Business this Thursday, March 3, is launching a free weekly e-newsletter aimed at providing readers with information about small business and entrepreneurship in Northeast Ohio and beyond. Every Thursday by noon, the Crain’s Small Business Report, sponsored by COSE, will bring you the latest news and trends that affect small companies and the entrepreneurial economy. Regular features include news stories related to important small business issues, events and develop-
ments in Northeast Ohio; a blog focused specifically on small businesses; links to small business-related data; Bright Spots, a column highlighting positive developments in the region; and COSE Voice, offering weekly updates from the Council of Smaller Enterprises. If you already receive Crain’s daily and weekly e-mail news alerts, you’ll automatically receive the new Crain’s Small Business Report. But if you aren’t already receiving our e-mails — and come on, they’re free — you can do so by visiting www.CrainsCleveland.com/signup.
last month acquired the four-architect Jester Jones Schifer Architects firm in Marion, Ohio, to boost its presence in central Ohio. William Dorsky, managing principal of Dorsky + Yue International of Beachwood, said his commercially Hodgson focused firm is designing its first non-U.S. project, a 2-millionsquare foot mall in Winnipeg, Canada, and hopes to learn soon if a project in Asia secures financing. However, no deliberate strategy gets credit for the projects. “They found us,” Mr. Dorsky said. “It’s a problem I hope to be cursed with for the next five years.” Cornelia Hodgson, president of C.C. Hodgson Architectural Group of Beachwood, said the decision she and Mr. Dorsky, her husband, made last year to divide the former Dorsky Hodgson Yue firm into Dorsky + Yue and her own namesake firm is working out well. Going on her own allowed her to qualify as a womenowned business and to compete for government work. Ms. Hodgson’s firm has won a commission from the U.S. Department of Veterans Affairs to design a freestanding dementia center in
Martinsville, W. Va., and to renovate the floor the current dementia ward will vacate in the VA hospital. She sees the job as a dooropener for more VA work. Her firm’s practice designing senior residences is also up. “I’ve been pleased to call back six people,” Ms. Hodgson said. Likewise, Mr. Dorsky has added four the past year. However, their prior combined firm shed 45 people before they parceled out the 40 survivors between their firms. Those firms that are able to hire hold out the hope of landing a rare talent released by a competitor. However, not all firms are so blessed. Jonathan Sandvick, president of Sandvick Architects in Cleveland, said his firm has not been able to call back any of 10 staffers on layoff. Current staffers continue to work at reduced pay — two years into the downturn. Even so, Mr. Sandvick said he believes the market is improving. “I’m seeing unconventional forms of financing emerging that will help the private sector. I hope in a few months we’ll have more work,” Mr. Sandvick said. “For now, we’re being called more often.” ■
CRAIN’S CLEVELAND BUSINESS
FEBRUARY 28 - MARCH 6, 2011
Brian D. Tucker (email@example.com) EDITOR:
Mark Dodosh (firstname.lastname@example.org) MANAGING EDITOR:
Scott Suttell (email@example.com)
Oh so snug
he brouhaha going on in Ohio, Wisconsin and a handful of other states over legislation to reduce the contract bargaining leverage of unionized public employees is exposing the snug relationship between those workers and Democratic lawmakers in those states. And the tightness of that relationship raises the question of whether the Democrats are working for the good of all the people of their states or for the employee unions that contribute to their election campaigns. Let’s start with a simple premise that defies debate: Many state and local governments and school districts nationwide face big budget deficits or barely can make ends meet, with no end in sight to their money woes. If these governments and school districts were companies, many would be filing for Chapter 11 bankruptcy so that they could void contracts with their unionized workers. In that way, these employers could be freed of the wage, benefit and pension obligations and seniority rules they no longer can afford to operate under because of their financial predicaments. However, governments aren’t companies. A city can file for Chapter 9 — the municipal version of Chapter 11 — but it would cut itself off from the credit markets by reneging on its debt obligations. A city that wore the scarlet letter “B” of bankruptcy also would scare away prospective employers and residents and would struggle to retain those already within its borders. Public workers know their employers can’t fold up their tents like a business could if that business kept flirting with bankruptcy. So, they hide behind their contracts and resist efforts to make them pay more of the cost of their health care and pension benefits. They also fight allowing employers to lay off senior workers first, which would let employers save more money when job cuts are a must. The extent to which collective bargaining should be part of the process of setting the wage and employment terms of public workers is an issue worthy of debate. However, it appears Democratic legislators are more concerned with protecting the interests of public employees than they are about discussing the impact on government bodies and school districts of maintaining the status quo. In Wisconsin, Democratic lawmakers have boycotted their legislature in a show of unity with riled-up public workers. And in Ohio, key Democratic figures have acted like cheerleaders for public workers during recent rallies in Columbus. Among those cheerleaders was former Gov. Ted Strickland, who was the writer of an e-mail sent last Wednesday by the Ohio Democratic Party. In that e-mail, Mr. Strickland commends public workers for their resolve. He then makes this pitch: “Please send a message to (Gov.) John Kasich and the Republicans in the Statehouse that we will not be muzzled in this fight. Make a contribution of just $10 to the Ohio Democratic Party today.” The underlined plea provides a link to a web site where recipients can make their contributions. The ex-governor’s message to public employees is clear: You cover our back, we’ll cover yours. And other taxpayers? They’re on their own.
FROM THE PUBLISHER
Union foes must find middle ground
last week, the huge amount of publichope — as I watch all this demonsector employment — and the costs of strating and protesting by unionized benefits packages (primarily pensions) public employees in Columbus and — are straining the economic health of other state capitals — that it repreOhio and other states. sents a start of negotiations that eventuBy the same token, unions have existed ally involve compromise on both sides. for decades in America, and have played Our country has become far too a necessary and proper role in things such polarized, far too black-or-white, in the as worker safety, fair wage scales way we look at everything, and and reasonable work rules. this is just one more example. BRIAN The fact is that America’s Some (not all) Republicans TUCKER manufacturing unions, most and business owners and execvisibly the United Auto Workers, utives loathe everything about have learned that it’s in the best unions, viewing them as nothing long-term interests of their more than obstructions to success, members to work with, rather saddling them with unnecesthan against, management in sary work rules and protecting order to build the kinds of under-performers. products best suited to generate Some (not all) Democrats and profits. They have had to shoulliberal supporters view unions der more of the hard costs of benefits, as the only way to ensure that workers especially in the arena of health care. aren’t overworked, underpaid and misAmerica’s domestic carmakers have treated by profit-hungry business owners. fought their way back to competitiveThe realities, as always, are someness, and they’ve done it in tandem with where in between. No one should argue their union. that it’s a good thing that the biggest That’s what’s necessary in the public unions in America now represent publicemployees’ unions, whether they’re sector workers. As we stated on this page
teachers or clerks or road crews. They need to realize that the future is now, and it’s decidedly different than it was just a few years ago. America is tax-weary, and state governments are in budget crises. Something could break, and it’s not likely going to be the governments. Public employees and their unions should resist the “us-or-them” strategy and help shape their future by accepting that change is unstoppable and should work to find a middle ground with government. **** UNITED WAY OF GREATER CLEVELAND has been stretched as never before, answering calls for help from thousands of our family members and co-workers. The sad fact is that the needs of those seeking help from United Wayfunded agencies are always the greatest when there are fewer of us to give. Calls to United Way’s 211 referral number increased by 11% to a record 230,000. The local campaign is $1 million short of its goal, so please do whatever you can to help by going to unitedwaycleveland.org/live. And let’s hope that next year, those calls go down, not up. ■
Vote to raise taxes sends wrong message By DAVID McCLOUGH
acked into a corner, governors across the country are talking about making cuts to public services and raising taxes. Jerry Brown, the recently elected (and former) governor of California, has announced massive cuts to the state budget and seeks extension of a voter-approved tax increase set to expire. If voter-approved taxation bails out California, you can bet that higher taxes are imminent everywhere. Voters need to seriously consider the implications of voting to hand over their income. Where I live, voters approved two levies to fund the library and fire protection. At first glance fire protection and libraries are valuable public services. So why would anyone vote against funding these
Mr. McClough is an assistant professor of economics at Ohio Northern University. services? In the case of fire protection, the city argued that failure to support the levy would result in the loss of one fireman. In a small community like mine, one fireman seems like, well, one fireman too many to lose. But is it? Consider that the probability of needing an additional fireman prior to the levy was close to, if not at, zero, just as it is after passage of the levy. My house has survived 82 years, with nearly all years characterized by (at least!) one less fireman. We are paying for no added benefit. When asked why I was against the tax, I replied that the city is entrusted with the public safety of the community, so
the additional fireman must not be needed for the safety of the community or the government would not risk the loss. Wouldn’t the fireman be among the last cuts? The situation for the library was somewhat different due to a reduction of state support for libraries. Without passage of the levy, hours would be reduced and workers would be let go. The community let the state government off the hook by reaching into its collective pocket to fund whatever project the state chose to fund rather than our library. It is unlikely that individuals voting for the library levy will use the service any more than if the levy failed. Again, we are paying for no added benefit. I suspect the state felt confident that taxpayers would pick up the tab for local libraries. See VIEW Page 11
FEBRUARY 28 - MARCH 6, 2011
CRAIN’S CLEVELAND BUSINESS
THE BIG ISSUE What do you think about the protests at the Ohio and Wisconsin capitals regarding the collective bargaining laws?
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I think there’s good and bad things about it. I think the unions should have the right to be able to fight for their rights regarding things like pensions and pension cuts. On the other hand, there are a lot of problems, certainly ... in Wisconsin and Ohio, as far as the state budgets.
I’m definitely against (taking away collective bargaining rights). I think anyone who joins a union should be able to negotiate their payment and their benefits, because that’s going to make them happier and that’s going to make them produce better.
I’m a supporter of the unions, personally, and I think it’s a disgrace what the Tea Party is trying to do. I’m a little disappointed our governor has jumped on the bandwagon this quickly and in this way in Ohio, which is historically a union stronghold.
Brooklyn (nonunion state employee)
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They have to keep both sides in mind. What’s good for the state and what’s good for their employees — keep both in mind. You don’t want to hold anybody’s throat, as far as the cities, to make them pay benefits like for police and fire that they can’t afford.
➤➤ Watch more people weigh in by visiting the Multimedia section at www.CrainsCleveland.com.
Lower taxes critical to private sector ■ I just finished reading your Feb. 21 open letter to President Obama on your editorial page, and I must say — well said, Crain’s. Well said. For the past 25 years, I’ve been a small business owner who works with hundreds of other small business owners. The points made in the editorial about the impact that
taxes can have on a business and jobs in the public sector that don’t pay for themselves are things I’ve seen and discussed time and time again. What I haven’t seen — until reading your editorial — is a description of the problem expressed so clearly and concisely. It’s going up on our
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WRITE TO US Send your letters to: Mark Dodosh, editor, Crain’s Cleveland Business, 700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1230 e-mail: firstname.lastname@example.org
View: Higher taxes during tough times wrong answer continued from PAGE 10
The problem with voting to increase taxes when times are tough is that government doesn’t reduce taxes when times are good. This is an example of an unhealthy relationship in which taxpayers enable government to continue its irresponsible behavior. The very same people who take car keys away from an intoxicated spouse or friend are in essence handing the keys to the drunk and asking him or her to drive. We would not hand car keys to a drunk, but we vote to tax ourselves. The analogy is not so far-fetched. Voting for taxes during difficult times is not the reasoned solution. When businesses are failing, we don’t hand over our income. We don’t choose to bail out failure because we expect the firm will fail sometime in the future. The difference between business and government is that government doesn’t have to make the tough choices necessary to survive. Even the worst state and local governments survive without consequence to the decision-makers (much like corporate CEOs and mortgage lenders).
However poorly the government functions, the cost is borne by taxpayers. Whereas it is headline news when taxpayers bail out GM, Chrysler, AIG, Fannie Mae, Freddie Mac and gigantic banks, barely a peep is heard when government fails to deliver adequate services within a budget. An unintended consequence is that taxpayers have a choice to stay or to go and often choose to leave, thereby voting with their feet. In their wake are the residents oftentimes least able to pick up the tab (see Detroit). During the most recent recession, business firms were forced to make tough decisions to survive. The firms that made wise choices are poised to thrive during the next expansion of the business cycle. Can we say the same for state and local government? Are state and local governments any better prepared for the next crisis? These are, of course, rhetorical questions. However, if we vote ourselves more taxes, we can be sure that the state will not make the tough choices. ■
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TAX LIENS The Internal Revenue Service filed tax liens against the following businesses in the Cuyahoga County Recorder’s Office. The IRS files a tax lien to protect the interests of the federal government. The lien is a public notice to creditors that the government has a claim against a company’s property. Liens reported here are $5,000 and higher. Dates listed are the dates the documents were filed in the Recorder’s Office.
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A Caring Alternative Inc. 1220 Huron Road, Cleveland ID: 34-1801887 Date filed: Feb. 8, 2011 Type: Employer’s withholding Amount: $240,933 CRS Co. Inc. Faith Christian School & Day Care 11089 W. Sprague Road, North Royalton ID: 34-1741604 Date filed: Feb. 4, 2011 Type: Employer’s withholding, unemployment, corporate income Amount: $198,968 TVK Floors LLC 5124 Wallings Road, North Royalton ID: 20-2839050 Date filed: Feb. 8, 2011 Type: Employer’s withholding, unemployment Amount: $163,221 Olmsted Manor Ltd. 27500 Mill Road, North Olmsted ID: 31-1550564 Date filed: Feb. 1, 2011 Type: Employer’s withholding, partnership income Amount: $154,052 Catered Elegance Inc. 1160 Broadway Ave., Bedford ID: 34-1835482 Date filed: Feb. 4, 2011
SINGLE FAMILY LOAN SALE 2011-1 (SFLS 2011-1) Second offering in a series of sales Approximate Portfolio Size 900 – 1,300 loans Scheduled Bid Date: March 9, 2011 Transaction Specialist Office of Housing Asset Sales Office 800-481-9895 or via email email@example.com For further information please visit the FHA SFLS 2011-1 website at http://www.hud.gov/sfloansales This announcement is not an offer to sell or a solicitation of an offer to buy mortgage loans. Information concerning the mortgage loans will be furnished only to, and bids will be accepted only from, bidders who certify that they have such knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risk and who certify that they have the resources to bear the risk of a purchase of the mortgage loans.
Type: Employer’s withholding Amount: $94,023 USA Parking Systems Inc. 1325 Carnegie Ave., Cleveland ID: 34-1695245 Date filed: Feb. 4, 2011 Type: Employer’s withholding, unemployment Amount: $90,902 Title Access LLC 27887 Clemens Road, Suite 1, Westlake ID: 34-1926916 Date filed: Feb. 1, 2011 Type: Employer’s withholding Amount: $82,274 Price Builders and Developers Inc. 5055 Corbin Drive, Suite A, Cleveland ID: 34-1897294 Date filed: Feb. 1, 2011 Type: Employer’s withholding, unemployment Amount: $80,133 Leasway Purchasing Corp. 3700 Park E. Drive, Cleveland ID: 34-6500296 Date filed: Feb. 16, 2011 Type: Federal excise tax Amount: $71,395 Manju Govind LLC Knights Inn 22115 Brookpark Road, Fairview Park ID: 34-1831580 Date filed: Feb. 1, 2011 Type: Employer’s withholding, unemployment Amount: $66,532 Cuyahoga Dairy Inc. 3740 W. 13th St., Cleveland ID: 31-1519059 Date filed: Feb. 1, 2011 Type: Employer’s withholding, unemployment Amount: $66,613
Type: Employer’s annual federal tax return Amount: $28,784 Entertainment Arts Research Inc. 4500 Rockside Road, Suite 400, Independence ID: 26-3760396 Date filed: Feb, 4, 2011 Type: Employer’s withholding Amount: $27,848 Pramuky Inc. 11837 Edgewater Drive, Lakewood ID: 34-1852948 Date filed: Feb. 1, 2011 Type: Employer’s withholding Amount: $26,378 Action Calibration Services Inc. 17820 Englewood Drive, Suite 13, Middleburg Heights ID: 34-1879978 Date filed: Feb. 1, 2011 Type: Employer’s withholding Amount: $23,995 Abel Counseling & Associates Inc. 14100 Cedar Road, Suite 300, University Heights ID: 34-1805036 Date filed: Jan. 11, 2011 Type: Employer’s withholding, unemployment Amount: $5,581 PMA Marketing Inc. P.O. Box 39119, Solon ID: 20-8176287 Date filed: Jan. 4, 2011 Type: Employer’s withholding Amount: $5,562 Hayat Inc. 4608 Great Northern Blvd., North Olmsted ID: 43-2041188 Date filed: Jan. 4, 2011 Type: Employer’s withholding Amount: $5,017
Quality Oil Change Inc. 547 Broadway Ave., Bedford ID: 34-1621969 Date filed: Feb. 16, 2011 Type: Employer’s withholding, unemployment Amount: $60,843
B & C Tavern Co. 1 Berea Commons, Berea ID: 34-1514084 Date filed: Feb. 9, 2009 Date released: Jan. 11, 2011 Type: Employer’s withholding Amount: $5,748
Post Painting Inc. 24816 Aurora Road, Suite F, Bedford Heights ID: 34-1700614 Date filed: Feb. 4, 2011 Type: Employer’s withholding Amount: $54,277
Bidder Transport Inc. 18401 Maple Heights Blvd., Maple Heights ID: 34-1554376 Date filed: Nov. 5, 2007 Date released: Jan. 4, 2011 Type: Employer’s withholding Amount: $11,043
Supportive Solutions Training 5333 Northfield Road, Bedford ID: 16-1637165 Date filed: Feb. 1, 2011 Type: Failure to file complete return Amount: $49,079 Forum Architectural Services LLC 1138 W. Ninth St., Cleveland ID: 26-3647659 Date filed: Feb. 1, 2011 Type: Employer’s withholding Amount: $46,588 Gray Container LLC 2800 E. 90th St., Cleveland ID: 20-3598415 Date filed: Feb. 1, 2011 Type: Employer’s withholding Amount: $39,459 Nicoles Child Care Center Inc. 4035 E. 141st St., Cleveland ID: 34-1700440 Date filed: Feb. 16, 2011 Type: Employer’s withholding Amount: $29,202 EC Financial LLC 6155 Rockside Road, Suite 201, Independence ID: 26-3324371 Date filed: Feb. 4, 2011
Bidder Transport Inc. 18401 Maple Heights Blvd., Maple Heights ID: 34-1554376 Date filed: May 27, 2008 Date released: Jan. 4, 2011 Type: Employer’s withholding Amount: $5,009 Canvas Specialty Manufacturing Co. 4045 Saint Clair Ave., Cleveland ID: 34-0890218 Date filed: Nov. 30, 2010 Date released: Jan. 4, 2011 Type: Employer’s withholding Amount: $10,050 Canvas Specialty Manufacturing Co. 4045 Saint Clair Ave., Cleveland ID: 34-0890218 Date filed: Jan. 15, 2010 Date released: Jan. 4, 2011 Type: Employer’s withholding Amount: $8,540 Cleveland Mica Co. 1360 Hird Ave., Lakewood ID: 34-0677613 Date filed: Dec. 21, 2009 Date released: Jan. 11, 2011 Type: Employer’s withholding Amount: $10,346
ERIC ABBEY / OWNER LOVING PETS CORPORATION DECORATIVE FEEDING BOWLS AND PET TREATS CRANBURY, NJ SINCE 2005 18 EMPLOYEES
SELLING MORE WITHOUT GOING BROKE CHALLENGE: Eric was enjoying astronomical growth. Orders for the Bella Bowl™, the company’s top seller, were going through the roof. But demand was putting a strain on Eric’s relationship with his supplier, not to mention his cash flow. SOLUTION: Eric and his PNC banker had the Cash Flow Conversation. They found that increasing Eric’s line of credit1 would help keep production lines ﬂowing smoothly — and allow Eric and his team to go out and sell even more, without worrying about cash shortfalls. ACHIEVEMENT: Loving Pets recently sold more than 330,000 Bella Bowls™ in a single month — the most ever. Now that Eric’s cash ﬂow is steady, he can focus on taking his business to the next level. WATCH ERIC’S FULL STORY at pnc.com/cfo and see how PNC CFO: Cash Flow Options can help solve your business challenges. Call 1-877-CALL-PNC or visit a PNC branch to start your own Cash Flow Conversation today. ACCELERATE RECEIVABLES IMPROVE PAYMENT PRACTICES INVEST EXCESS CASH LEVERAGE ONLINE TECHNOLOGY ENSURE ACCESS TO CREDIT
The person pictured is an actual PNC customer, who agreed to participate in this advertisement. Loving Pets’ success was due to a number of factors, and PNC is proud of its role in helping the company achieve its goals. 1 All loans are subject to credit approval and may require automatic payment deduction from a PNC Bank Business Checking account. Origination and/or other fees may apply. Banking and lending products and services and bank deposit products are provided by PNC Bank, National Association, a wholly owned subsidiary of PNC and Member FDIC. Bella Bowl is a registered trademark of Loving Pets Corporation. PNC is a registered mark of The PNC Financial Services Group, Inc. (“PNC”). BBK-5290 ©2011 The PNC Financial Services Group, Inc. All rights reserved. PNC Bank, National Association. Member FDIC
CRAIN’S CLEVELAND BUSINESS
FEBRUARY 28 - MARCH 6, 2011
Bidding: Firms seek more certain revenues continued from PAGE 3
Also, Mr. Petrolla said the familyowned company reduced its work force by about 25% over the last two years through attrition and layoffs in anticipation of the program. “We can’t run like the federal government,” Mr. Petrolla said. “We have to have cash flow, and we have to have profit.” Despite complaints from suppliers, Dr. Donald Berwick, administrator of the Centers for Medicare & Medicaid Services, said implementation of the program was going “very smoothly” and the agency had received only a handful of complaints from beneficiaries who found it difficult to line up suppliers. CMS estimated that Medicare and its beneficiaries will pay 32% less on equipment and supplies through supplier competition. This isn’t the first time the Centers for Medicare & Medicaid Services pushed a competitive bidding program. In 2008, Congress delayed the implementation of the program because of problems with the bidding process. Some of the kinks, particularly on the technical
side, have been worked out, but there still are concerns about the program as a whole, said Amy Leopard, a partner with Cleveland law firm Walter & Haverfield LLP. Ms. Leopard said many medical equipment suppliers are looking at mergers and affiliations to diversify their customer bases because it’s becoming increasingly difficult to operate their businesses independently. Many also are considering ways to diversify their product offerings in order to make up for business they might lose because of the program. Diabetic Care Services & Pharmacy, a national provider of diabetic supplies that is based in Eastlake, lost bids in all the regions involved in the project, effectively cutting off about 10% of its total Medicare business, according to the company’s CEO, Marc Wolf. “What’s happened is all these Medicare beneficiaries in Cleveland and other areas are really restricted in the supplies they’re going to get,” Mr. Wolf said. “They’re not getting product they’re used to. Also, that person is going to have to find some-
DIABETIC CARE SERVICES & PHARMACY
Marc Wolf, CEO of Diabetic Care Services & Pharmacy, said the Eastlake company lost 10% of its total Medicare business due to a new Medicare competitive bidding process. one new to service them.”
Period of adjustment To skirt that problem, at least in the Cleveland region, Diabetic Care Services & Pharmacy delivers supplies in its own vehicles rather than through
mail services, which allows the company to continue to be paid through Medicare because the bid process only applied to mail-order diabetes supplies. That’s not necessarily an option in the other competitive bidding regions, Mr. Wolfe said, so the company is looking to boost its business volume elsewhere around the country and diversify its product lines. Seeley Medical has gone beyond the health care arena in hopes of diversifying its product lines. The company recently invested in Azork Technologies, a company in Youngstown that developed a cloud computing platform that allows users to access documents and applications through a web platform rather than a computer or server. “We have to keep diversifying so we don’t have to deal with an industry where economically it doesn’t make sense to operate,” Mr. Petrolla said. Integrated Medical Inc. in Cleveland has thinned its operations in the face of competitive bidding, according to president Gary Bajusz. To cut costs, the company in December laid off two respiratory therapists and in February closed its Mt. Vernon site and let go of the three employees at that location. Integrated Medical is exploring new service lines — among them, retrofitting homes for medical equipment such as wheelchairs or chairlifts — to open new revenue streams. “Cash flow is an important part of any business,” Mr. Bajusz said. “With a loss of revenue, we have to look at our expenses and things of that nature.” Though Seeley Medical could be considered a winner because it won bids in every category in which it competed, its leaders say that’s not the case. Seeley and others will need to re-bid in three years, leading to
even more uncertainty.
Thinner ranks possible Invacare Corp. in Elyria has a big stake in the fight as many of its customers are heavily reliant on Medicare reimbursements. So, the supplier of wheelchairs, portable oxygen and other home care equipment is helping the distributors of its products eliminate some of their overhead costs, according to Invacare spokeswoman Lara Mahoney. The company, for example, helps its distributors collect co-pays from their customers and keep track of their inventory. “Invacare is the largest creditor in the (home medical equipment) industry,” Ms. Mahoney said. “We want to ensure our providers are as healthy as possible.” Ms. Mahoney said the competitive bidding program isn’t expected to affect Invacare’s earnings this year, but she couldn’t speculate beyond then. Suppliers have clamored for the repeal of the program. Though they aren’t offering specifics to address the cost issue, they say they would like to see more dialogue with the Centers for Medicare & Medicaid Services to develop a fairer payment system. Legislation to repeal the program garnered support in the last Congress — including the backing of much of the Ohio delegation — but organizers simply ran out of time, said Kamela Yuricich, executive director of the Ohio Association of Medical Equipment Services. If that support doesn’t translate to the new Congress and the program moves forward, Mr. Wolf of Diabetic Care Services said it could signal the end of several small home medical equipment suppliers. “They’re going to close their doors,” he said. “There’s no question about it.” ■
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CRAIN’S CLEVELAND BUSINESS
FEBRUARY 28 - MARCH 6, 2011
Bets: Casino aims to partner with downtown restaurants continued from PAGE 3
Catering, a longtime dining spot just a half-block from the planned casino. “Initially, everyone is going to want to go eat at the casino because it’s new,” Mr. Moyer said. “That will hurt some of us. How long that lasts, I’m not sure.” Mr. Bruell doesn’t share that view. “I don’t think people choosing to eat at a buffet will affect my business, and if I can get 2% of what comes through (the door of the casino) over a year, that’s a lot of money,” Mr. Bruell said. The $350 million casino is expected to draw 5 million visitors annually, according to Rock Ohio Caesars Cleveland LLC, a joint venture between Dan Gilbert’s Rock Gaming LLC and casino giant Caesars Entertainment Corp. Not unexpectedly, Rock Ohio Caesars rebuffs the notion that a restaurant inside the building will hurt surrounding bars and eateries. “The restaurant won’t cannibalize existing businesses,” said Marcus Glover, the Horseshoe Casino Cleveland’s general manager. “Four-hundred seats can’t satisfy our customer base at the casino. That’s why we’ll be partnering with local businesses.” When Ohio voters in November 2009 approved a constitutional amendment clearing the way for the development of four casinos, many locally owned and independently operated restaurants throughout the state — including in Cleveland — were skittish about the prospect of losing some business to a gaming mecca and its resident casino restaurants. Mr. Glover dismissed that concern and said bolstering traffic at peripheral downtown businesses is imperative to the casino’s long-term viability, as developers seek to create a loyal customer base that will be drawn to both the casino and surrounding attractions. “We see downtown Cleveland as a core, and that’s why we want to establish these partnerships with area businesses,” he said.
Let’s make a deal Mr. Glover met with a number of local establishments Feb. 16 to talk about forming partnerships as the casino’s developers prepare for more tourism in downtown Cleveland after Horseshoe opens. He declined to identify the businesses that attended the meeting. Mr. Glover said he is looking to solicit restaurants, hotels and other
A CASINO PRIMER
ABOVE: Mike Moyer, the owner of Alvies Gateway Grille & Catering, is somewhat fearful of the effect the new casino will have on his restaurant, located on Ontario Street in downtown Cleveland. BELOW: Meanwhile, Zack Bruell — the chef and owner of Chinato on East Fourth Street, among other establishments — is eager for the casino to open. hospitality-related operations to participate in Caesar Entertainment’s Total Rewards casino loyalty program, which allows gamblers to earn credits each time they play at the casino. They then can redeem those credits toward the purchase of a nearby restaurant meal or hotel stay. “It’s not a discount program,” Mr. Glover said. “For example, we do this with about 30 different restaurant and beverage partners in New Orleans with our downtown casino there. We contribute about $5 million to $6 million each year toward these businesses, and we have similar expectations for Cleveland.” Douglas Katz, former president of Cleveland Independents, a group of about 90 locally owned and independently operated restaurants, said some members have expressed anxiety about the planned casino and its restaurant, particularly because of the “convenience option” a casino restaurant offers. However, Mr. Katz said he thinks partnerships between the casino and local restaurants would be a boon for both
of Fire, Food & Drink in Shaker Heights. Mr. Glover said the casino’s operators are looking into a shuttle service that would transport visitors throughout the downtown area to enhance that carousel of commerce.
‘You adapt or you suffer’
patrons and businesses, though nonparticipants could be placed at a disadvantage. “Based on what we’ve seen, I think this is a quality situation that will improve the downtown region,” said Mr. Katz, who also is chef and owner
Restaurateur Alan Glazen said Cleveland’s top-tier restaurants only stand to benefit from the casino project, even if more eateries pop up within the Horseshoe. Mr. Glazen, who owns Erie Island Coffee Co. on East Fourth Street downtown and in Rocky River and is a restaurant investor, said he only is hearing enthusiasm for the casino from other owners and operators. “Who’s going to worry? The sub-average restaurants that are competing against a buffet are probably concerned,” he said. “I don’t see anybody who’s good who is shaking in their boots.” His East Fourth Street neighbors concur. “I think the casino/restaurant will be great for business,” said Michael
The Horseshoe Casino Cleveland is the first phase of a larger, $600 million Phase II casino, to be built nearby on 16 acres between Huron Road and the Cuyahoga River. That casino is scheduled to open in 2013. ■ Horseshoe developer: Rock Ohio Caesars LLC, a joint venture between Dan Gilbert’s Rock Gaming LLC and Caesars Entertainment Corp. that also is developing the Cincinnati casino. Penn National Gaming Inc. will develop the Columbus and Toledo properties. ■ The operation: About 2,000 slot machines, 50 to 60 gaming tables, a poker room with 25 to 30 tables, two bars and a 400-seat buffet-style restaurant. The casino is expected to draw 5 million people a year and employ 1,500 to 1,600 people — about 95% of them from Greater Cleveland. ■ Revenue allocation: Once the $600 million Phase II casino is fully operational, operators expect it will generate $100 million annually in gaming tax revenue. Local distribution of gaming taxes will provide an estimated $29.7 million to the city of Cleveland, $18.7 million to Cuyahoga County and $22.5 million to Cuyahoga County school districts beginning in 2013. Symon, chef and owner of Lola, in an e-mail. “The more people that come to downtown, the better. It creates great energy at our urban core, which will be nothing but good for the city. … Our city can only be as strong as our downtown long term.” Likewise, Jonathon Sawyer, the chef and owner of The Greenhouse Tavern, said in an e-mail: “I do believe some (restaurants) will lose business, but just like any other change in the culture of downtown, you adapt or you suffer. We are excited at the opportunity to expose even more people to what downtown Cleveland is all about.” Mr. Glazen, who also owns ABC Tavern in Ohio City and XYZ Tavern in the nearby Detroit-Shoreway neighborhood, said he believes these and other Cleveland neighborhood destinations also will see an uptick in business. “It’s a win-win-win-win,” Mr. Glazen said. “It’s going to draw new people who will walk one block, then the next time two blocks away and beyond to try new places.” ■
BRIGHT SPOTS It’s not all bad out there. Here’s the latest installment of a weekly web feature that highlights positive developments in the Northeast Ohio business community. ■ JD Mason & Associates Inc. of Cleveland, a consulting firm serving the nonprofit community, is wrapping up an assignment with a high-profile global client. The client is the American Foundation for AIDS Research (amfAR), which has offices in New York, Washington D.C., and Bangkok. It’s an international nonprofit dedicated to the support of AIDS research, HIV prevention, treatment education and the advocacy of public policy issues related to AIDS.
JD Mason said it’s assisting amfAR in “the implementation and deployment of a comprehensive replacement accounting solution that includes business process strategy and staff training.” The 10month project concludes this spring. Among JD Mason’s other healthrelated clients are the Catholic Medical Mission Board and the Global Alliance for TB Drug Development. ■ Two new retailers are coming to Legacy Village, the big lifestyle center in Lyndhurst. Yogurt Vi, which will be next to California Pizza Kitchen, opens in May and will offer 10 flavors of certified-probiotic yogurt. Customers can choose from candy toppings, sprinkles and fresh cut fruits, or
make a combination of their own. Be careful with those toppings, though; you pay by the weight of the dessert. Opening in June is Crazy 8, which offers apparel and accessories for boys and girls in sizes newborn to 14. The retailer, opening on Main Street near Gymboree (its parent company), got its start in 2007 and now has more than 80 locations nationwide. Legacy Village has more than 55 restaurants and retailers in total. ■ ViewRay Inc., a privately held medical device company in Cleveland, said it has received U.S. Food and Drug Administration marketing clearance for its radiotherapy treatment planning and delivery software.
The software “is a critical component of the company’s new radiation therapy system, which combines simultaneous magnetic resonance imaging and radiotherapy delivery,” ViewRay said in a news release. Now in the late stages of development, the integrated ViewRay system currently is available only as a nonhuman-use research system. The company is working to secure FDA clearance for commercial distribution of the system for clinical use. “FDA clearance of our software represents a significant milestone in the development of the ViewRay system,” said ViewRay president and CEO Gregory M. Ayers in a statement. “In the past year ViewRay has achieved a string of notable successes, in funding and partnerships
as well as product development,” Dr. Ayers said. “It’s exciting to see such progress with a product we believe will offer an advancement in radiation therapy.” The ViewRay system is designed to provide continuous soft-tissue MRI during cancer treatment so that clinicians can see precisely where the radiation is delivered, the company said. The company recently secured $20 million in financing “intended to move the ViewRay system through the final development and regulatory processes and toward the goal of commercialization and placement in major medical centers.” Send information for Bright Spots to managing editor Scott Suttell at firstname.lastname@example.org.
FEBRUARY 28 - MARCH 6, 2011
LONG TERM CARE OMBUDSMAN: Tyrone Robinson and Margaret Miller to ombudsman specialists.
JOB CHANGES FINANCE OHIO COMMERCE BANK: Eric Hetrick to network administrator.
REAL ESTATE LMI MANAGEMENT INC.: Rhonda Leonard to division manager.
FINANCIAL SERVICE PEASE & ASSOCIATES: Joe Rokas to senior auditor; Lindsay Welch to audit staff accountant; Patricia Garven to tax manager; Brian Early to tax staff accountant; Jim Emond and Laura Pelissier to CFO services staff accountants. SKODA MINOTTI: Victor Hernandez and Ritchie Wilson to help desk technicians; Sandy Jiberno to administrative assistant; Bridget Mullaly to paraprofessional. SS&G: Rebecca Frisina to senior associate; Jeannine A. Souders to associate; Christine Klaiber to manager, assurance services.
CUYAHOGA COUNTY: Gregory F. Clifford to law director.
INSURANCE MEDICAL MUTUAL OF OHIO: Kim Osadczuk to manager, Proposal Unit.
SERVICEMASTER BY AMERISTEAM: Craig Crissinger to operations manager.
WELLS FARGO INSURANCE SERVICES USA INC.: Margaret Ludwig to senior vice president.
TECHNOLOGY ATNETPLUS INC.: Damian Huising and Chris Horning to IT specialists; Rochelle Schenk and Susan Hudik to account managers; David Kaiser to service manager; Ellen Kurr to business process/communications manager.
TAROLLI, SUNDHEIM, COVELL & TUMMINO LLP: Brian W. Bolinger to partner. WELTMAN, WEINBERG & REIS CO. LPA: Theodore J. Bush to director of title operations.
MANUFACTURING CARLISLE BRAKE AND FRICTION: D. Christian Koch to president.
MARKETING FELBER & FELBER MARKETING: Michelle Willmott to public relations associate. LIGGETT STASHOWER: Cheryl Hanley to senior account director.
NONPROFIT BURTON D. MORGAN FOUNDATION: Dianne Ketler to grants manager and social media coordinator. THE GREATER CLEVELAND PARTNERSHIP: Martin R. McGann to vice president, state and local government advocacy.
WRIS WEB SERVICES: John Strathern to director of client services; Cassie Flanigan to marketing coordinator; TiaMarshae Sanford to social media specialist; Sandy Cronin to ColdFusion programmer.
BOARDS HIRAM HOUSE: Kevin D. Barnes (Taft Stettinius & Hollister LLP) to president-elect; John D. Barrett to president; David B. Moore to vice president, finance; Susan W. Cargile to vice president, development; Russell R. Grundke to secretary and executive director. NORTECH: Timothy M. Reynolds (Tribute Inc.) to chairman.
AWARDS SAINT JOSEPH ACADEMY: Dr. Michael Gallagher (West Park Dental) and Cathy Gallagher received the
After 25 years of dedicated and loyal service... THIS WAS THE COMPANYâ€™S
WAY TO THANK YOU.
The Law Firm of David A. Young, LLC represents long-term, highly compensated executives during the termination process. We represent individuals, not corporations.
Contributors leery of investing in stock, though BY JERRY GEISEL Business Insurance
GABLES SEARCH GROUP INC.: Tiffany Lengyel to recruiter; Megan Angus to account executive.
RESOURCE TITLE NATIONAL AGENCY INC.: Donna Betley to account executive.
EQUITY CORPORATE HOUSING: Kim Lucas to account executive.
DORMAN FARRELL: Ryan Rose to director of new business development; Cindy Nappi to director of human resources consulting; Nancy Vice to senior benefits consultant.
RUSSELL REAL ESTATE SERVICES: Jana Devers, William Hendricks Jr., Kevin McGuire, Lauren Nutter, Edward Roffey, David Streeter and Cindy Wisniewski to sales associates.
Average 401(k) balance up 11% over prior year
LIFEBANC: Michael K. Obeng to medical director of tissue services.
CRAINâ€™S CLEVELAND BUSINESS
2011 Medaille Shield Award. STARK COUNTY ASSOCIATION OF REALTORS: Jim Bray (Cutler Real Estate) received a Lifetime Achievement Award.
Send information for Going Places to email@example.com.
Employeesâ€™ 401(k) account balances in 2010 continued to climb and are higher than they were before the fall in the equities markets, according to an analysis released last week. The average 401(k) account balance was $71,500 last year, up 11.4% from $64,200 at year-end 2009, according to Fidelity Investments, a Boston-based mutual fund provider and 401(k) plan administrator. At year-end 2008, the average account balance, battered by that yearâ€™s plunge in the equities markets, fell to $50,200, a huge drop from 2007 when the average account balance was $69,200. â€œYou canâ€™t underestimate the fact that the markets were very favorable last year,â€? said Beth McHugh, Fidelityâ€™s vice president of market insights. Even with the resurgence of the equities markets, 401(k) plan participants are more cautious
about fully investing their account balances in stock. Thirteen percent of active participants held all of their 401(k) account balances in equities last year, down from 14% in 2009 and 20% in 2007. Loan activity increased slightly; just over 11% of participants took out a loan from their 401(k) plan last year, compared with 10.6% in 2009. Fidelity also found that 21% of plan sponsors offer a Roth 401(k) feature, up from just 10% in 2007. In a Roth 401(k) plan, participants make after-tax contributions, but those contributions and investment income can be withdrawn tax-free if certain requirements are met. The study analyzed the account balances of about 11 million participants in nearly 17,000 corporate plans serviced by Fidelity. A summary is available at http://tinyurl.com/4dh7qyx. Jerry Geisel is an editor-at-large for Business Insurance, a sister publication of Crainâ€™s Cleveland Business.
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See what we can do for you by visiting huntington.com/bizchecking or calling 1-800-480-2001. Huntington Free Business Checking is limited to 200 transactions and $5,000 in-branch cash deposits per month, then excess transaction and cash deposit transaction fees apply. A “transaction” is any combination of checks paid, deposit tickets, deposited checks and ACH credits and debits. Award claim based on 2009 Business Banking Study. All excellence award selections were based on studies conducted by Greenwich Associates, a leading worldwide strategic consulting and research ﬁrm specializing in ﬁnancial services. Huntington is the #1 SBA 7(a) lender in the region made up of Indiana, Kentucky, Ohio, Michigan, West Virginia and Western PA. Source: U.S. SBA from October 1, 2007, through November 30, 2010. Member FDIC. B® and Huntington® are federally registered service marks of Huntington Bancshares Incorporated. Huntington.® Welcome.TM is a service mark of Huntington Bancshares Incorporated. ©2011 Huntington Bancshares Incorporated.
UP IN THE AIR An examination of the future of air service in Northeast Ohio and what it might mean for the region
Can we stick the landing? Northeast Ohio travelers, officials wait to see how mergers will be felt as industry transforms By JAY MILLER firstname.lastname@example.org
ransportation consultant and blogger Mark Zannoni flies into Cleveland Hopkins International Airport twice a month from Los Angeles — and he makes a point of flying on Continental Airlines. So Mr. Zannoni, an aviation industry observer who blogs at airlinecity.com, is worried that the merger of Continental with United Airlines will cost him the direct-flight options he now has between the two cities. He is concerned the new,
merged airline might route him through hubs in Denver or Chicago if it prunes its flight schedule here and “de-hubs” Cleveland Hopkins. Mr. Zannoni believes so strongly in the importance of maintaining the Cleveland hub post-merger that he even avoids using Akron’s airport, where several airlines — notably AirTran — attempt to lure travelers with low-cost flights. In fact, he and other industry experts even suggest that such efforts in Akron have come at the expense of Cleveland Hopkins, where the passenger count has declined. See LANDING Page 24
United Continental Holdings Inc. Last May, United and Continental airlines announced a $3.2 billion all-stock merger that would create the world’s largest airline. In September, shareholders of the two companies created United Continental Holdings Inc. and said the airline’s nearly 700 aircraft would carry the United name. The merger joins two so-called legacy carriers. These airlines have higher cost structures and extensive hub-andspoke systems, which route traffic through a particular airport. They profit
when demand for air service is high, especially among business travelers, who generally are willing to pay higher fares for the better service the legacy carriers offer. The merger’s full impact won’t be felt for several years; final approval to operate as a single airline is not expected until 2012. The 200-plus daily flights of the merged airlines and their regional partners account for about 70% of the passenger traffic at Cleveland Hopkins, according to an analysis done last year.
Southwest Airlines Inc. Dallas-based Southwest solidified its position as the fourth-largest U.S. passenger carrier last September when it purchased Orlando’s AirTran Airways for $1.4 billion in stock and cash. With the merger, expected to get government approval by the middle of this year, the new airline becomes the dominant U.S. low-cost air carrier. Low-cost carriers like Southwest
don’t operate formal hub systems. Instead, they offer fewer frills and fly only on high-volume direct routes, though as Southwest has grown it has begun to route traffic through airports where they have a larger presence. Southwest has 24 flights from Cleveland. AirTran dominates service at Akron-Canton, accounting for seven of 16 daily departures at the airport.
ON THE WEB: Listen to portions of
Crain’s reporter Jay Miller’s interview with the leaders of Akron-Canton and Cleveland Hopkins International airports. www.CrainsCleveland.com /section/audio
RICKY D. SMITH Director of port control City of Cleveland
RICHARD MCQUEEN President, CEO Akron-Canton Airport By JAY MILLER email@example.com
elevision ads for AkronCanton Airport still suggest a competitive rivalry between the small-butgrowing airport in North Canton and the more sprawling Cleveland Hopkins International Airport. But the leaders of both airports still agreed to sit down together — it was the first time they’d met — to talk with Crain’s Cleveland Business
Richard McQueen (left) and Ricky Smith, on Feb. 18 at Hopkins about their airports and their roles in the region’s air service. Ricky D. Smith became Cleveland’s director of port control, which operates Cleveland Hopkins and Burke Lakefront Airport, in June
2006. Before that, he spent 14 years with the Maryland Aviation Administration, rising to senior deputy executive director and chief operating officer. The MAA operates the Baltimore/Washington
International Thurgood Marshall Airport. Richard McQueen has been at Akron-Canton since he joined as airport accountant in 1982. He became president and CEO in 2008, replacing the late Fred Krum, who launched the aggressive marketing campaign that rattled Cleveland Hopkins’ cage. An early ad said bluntly, “AkronCanton Airport: A better way to go.” A more recent ad claimed, “At our airport you’ll get to your gate 40% faster.” Meanwhile, Cleveland Hopkins See INTERVIEW Page 26
INSIDE ■ TALE OF THE TAPE: Are Hopkins and Akron-Canton actually competitors, or do they serve drastically different customers? Plus, the implications of the Southwest Airlines-AirTran merger. PAGE 22 ■ LOOKING BACK ...: Cleveland went from being Continental’s smallest hub (of three) to being United’s smallest hub (of eight). Plus, United Continental’s take on Cleveland. PAGE 24 ■ IN OUR (RELATIVE) BACKYARD: Pittsburgh lost its US Airways hub in 2004 after the airline struggled through bankruptcy; the other steel city found it’s not a death sentence, but it isn’t good, either. PAGE 25 ■ VARIED PERSPECTIVES: What is a hub, and what benefit does one bring to cities? Plus, a list of hub cities across the country. PAGE 26
SPECIAL REPORT: UP IN THE AIR
CRAIN’S CLEVELAND BUSINESS
FEBRUARY 28 - MARCH 6, 2011
Southwest’s post-deal plan not known Merger with AirTran could have an effect on CAK, Hopkins flights By SCOTT SUTTELL firstname.lastname@example.org
wo formerly small-time players in the U.S. aviation world — Southwest Airlines and AirTran Airways — could have a huge impact on Northeast Ohio’s airports when their merger is completed sometime in the first half of this year. To the extent the Akron-Canton Airport has been able to grab a larger share of the flying customer in Northeast Ohio, it’s largely due to AirTran. Orlando, Fla.-based AirTran, one of the nation’s largest low-fare airlines, carried about half of the 1.5 million passengers who flew into and out of Akron-Canton in 2010. “Our customers have really rallied around the type of service (AirTran has) brought to the airport,” said Richard B. McQueen, president and CEO of Akron-Canton. “We know that we’ve got a successful business here because AirTran has developed a successful business here.” But the planned $3.4 billion merger of AirTran and Southwest — the Dallas-based airline that virtually charted the path for growth in the low-fare end of the U.S. air service market — raises some anxiety because no one, obviously, knows precisely what will happen to fares and service in Northeast Ohio after the deal is complete. The stakes are high because AirTran is the dominant carrier at Akron-Canton and Southwest is the
second-largest carrier at Cleveland Hopkins International Airport, only about 50 miles away from Akron-Canton; about 11% of passengers at Hopkins fly on Southwest. An optimist might say that the merged AirTran/Southwest will be a stronger airline with the capability of adding flights — direct and otherwise — throughout its system. Under such a scenario, the merged airline continues both the dramatic gains AirTran has experienced at Akron-Canton and the slow, steady growth it has seen at Hopkins. Mike Boyd of Boyd Group International, an aviation consulting and research firm in Evergreen, Colo., noted in a report about the merger that “no single market represents even 1%” of Southwest’s revenue, which means the airline is a long way from hitting a saturation point in the cities it serves. Mr. Boyd added that Southwest in the past rarely has cut service following an acquisition and that in markets including southern and northern California, it flies from three airports. Those points aside, the big concern is that the merged AirTran/ Southwest could cut service at one of the airports in Northeast Ohio, where population growth is minimal and overall demand for air service rises slowly. In such a market with both airlines having a presence close together, it’s possible that service at one or both airports could be reduced, said Tom Parsons, CEO of BestFares.com. Nonetheless, Mr. Parsons said Southwest’s decision to take over AirTran was driven by a need to “expand quickly to keep up with the other merged airlines” and that
service cuts don’t appear to be part of the strategy. He also said Southwest’s owners didn’t want a legacy carrier to buy the well-regarded AirTran and that AirTran was a good cultural fit with Southwest. Combining with AirTran “makes good business sense for Southwest,” Mr. Parsons said, because it can add 38 cities quickly, and many of those markets are on the East Coast, where Southwest is weaker than in other parts of the country. Mr. Parsons said he was “happy not to see” AirTran acquired by a legacy carrier, which he said typically buys out other airlines and then scales back service in the newly acquired hubs. Akron-Canton’s Mr. McQueen is an optimist. “I don’t think they’re buying AirTran to reduce their scope,” he said. “They’re buying it to grow.” Indeed, an AirTran filing with the Securities and Exchange Commission indicated that at an AirTran board meeting in Atlanta last Sept. 21, AirTran financial adviser Morgan Stanley presented background on the airline’s efforts to grow, “and discussed its views regarding the lack of any other potential merger partners or financial buyers for AirTran.” The filing stated that among the reasons AirTran agreed to the deal were the risks of standing alone “in a consolidating, competitive industry” and management’s view that “there were no realistic other potential candidates for an alternative business combination transaction.” Shareholder and regulatory approvals are pending. An AirTran shareholder meeting is set for March 23. ■
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Akron-Canton Airport officials have made the airport’s lack of congestion and ease of use a major selling point.
Economy, slow demand cause traffic changes Volume up at Akron-Canton, while new era for business travel plays role in Hopkins decline By SCOTT SUTTELL email@example.com
rive up to the AkronCanton Airport and you might be struck by how similar it is to approaching a suburban office park. A Clevelander who drives about 50 miles south on I-77 gets off at Exit 113, crosses Lauby Road and finds the terminal straight ahead, less than a minute after leaving the highway. There’s a huge, open-air parking lot, and if you’re picking up or dropping off, the approach to the terminal is on par with collecting the kids at the mall. “We’ve made comfort and ease of use a big area of emphasis,” said Kristie Van Auken, senior vice president and chief marketing officer of Akron-Canton Airport. “From the time people enter the airport to the time they leave … it should be an excellent experience.” Cleveland Hopkins International Airport values service, too, but like all big airports — Hopkins is the 36th-largest airport in America, by passenger volume — it can make no particular claims to coziness. Hopkins’ strength is the breadth of its service, with about 250 flights per day to a total of 74 destinations, so the business or leisure traveler using Hopkins can get just about anywhere, at any time he or she needs. (Akron-Canton, by contrast, travels to only nine destinations.) The airports’ long-term passenger trends are going in opposite directions, though Hopkins and AkronCanton operate on considerably different scales. Hopkins reports it served 9.49 million passengers in 2010, down about 2% from 9.71 million in 2009. As recently as 2000, Hopkins served 13.3 million passengers. The airport’s passenger data over the past decade show marked drops in two years that make sense in the context of big declines nationwide in business travel. In 2001, for instance, the year of the Sept. 11 terrorist attacks, passenger traffic at Hopkins fell to 11.86 million from 13.28 million in 2000, the year that produced the highest figure for the airport during the decade. And in 2009, when the current recession began to bite hard on the economy, Hopkins
TALE OF TWO AIRPORTS The tale of the tape between Akron-Canton Airport and Cleveland Hopkins International Airport: ■ Runways: Akron-Canton 2, Hopkins 3 (Akron-Canton’s two runways both are 7,600 feet, but one is being extended to 8,200. Hopkins has two parallel runways at 10,000 and 9,000 feet, as well as one 6,000foot crosswind runway.) ■ Airlines: Akron-Canton 5, Hopkins 11 (Akron-Canton: AirTran Airways, Delta Connection, Frontier, United Express, US Airways Express; Hopkins: Air Canada Jazz; American and American Eagle; Delta and Delta Connection; Frontier Airlines; Southwest Airlines; UnitedContinental; USA 3000; US Airways and US Airways Express) ■ Number of flights per day: Akron-Canton 40, Hopkins 250 ■ Number of passengers: Akron-Canton — 1.56 million in 2010; Hopkins — 9.49 million in 2010 ■ Primary destinations: AkronCanton — Atlanta, Boston, Charlotte, Chicago, Detroit, Milwaukee, New York, Philadelphia and Orlando; Hopkins — All major U.S. cities, plus six international cities: Cancun, Montreal, Nassau, Punta Cana, Quebec City and Toronto (a total of 74 destinations) SOURCES: WWW.AKRONCANTONAIRPORT.COM; WWW.CLEVELANDAIRPORT.COM WWW.BTS.GOV
carried 9.72 million passengers, down from 11.1 million in 2008. Meanwhile, Akron-Canton’s passenger numbers have risen steadily, from 789,607 in 2000 to nearly double that — 1.56 million — in 2010. Even so, most of AkronCanton’s growth came in the first part of the decade; since 2005, passenger traffic at the airport is up a relatively modest 9%.
Ups and downs George Hobica, who runs AirFare Watchdog.com, said Akron-Canton’s growth is fueled by adding more flights to more attractive See CHANGES Page 23
SPECIAL REPORT: UP IN THE AIR
FEBRUARY 28 - MARCH 6, 2011
Changes: Airports see value in social media continued from PAGE 22
destinations, and offering generally lower fares. But he cautioned against drawing a straight line between passenger gains at AkronCanton and declines at Hopkins. Indeed, as a matter of mathematics, the 700,000-odd passenger gain at Akron-Canton since 2000 doesn’t come close to accounting for Hopkins’ drop of nearly 4 million passengers in the same timeframe. Hopkins’ drop in passengers is “overwhelmingly a matter of the economy and the changing nature of business travel,” he said. While there certainly are cases in which a person who might previously have flown from Hopkins now is choosing Akron-Canton due to price or increased flight availability from the smaller airport, he said, the region’s bigger challenge is a slow economy and a corresponding stagnation in demand for air travel. One set of numbers neither airport can provide is a precise breakdown of exactly who is choosing to fly from each airport, and why.
“From the time people enter the airport to the time they leave ... it should be an excellent experience.” – Kristie Van Auken, senior vice president and chief marketing officer, Akron-Canton Airport Richard McQueen, president and CEO of Akron-Canton, estimates that traffic at the airport is 60% leisure and 40% business, but he said there are no hard data to support those figures. Meanwhile, Ricky Smith, director of the Cleveland airport system, said, “We think our traffic is more than 40% business and that fluctuates with the time of the year.” (Hopkins’ web site states that the 9.49 million passengers who used the airport last year were “divided almost evenly between business and leisure travelers.”) Mr. Smith added that coming attractions in Cleveland — primarily a new convention center, medical mart and casino downtown — stand to boost the airport’s traffic by making the city more of a destination for business and leisure travel. Tom Spradlin, an Independence resident who has flown from both airports, said he values the choices that come with two easily reachable airports in the region. “If I can save a couple hundred dollars (on tickets) by going to Akron-Canton, that’s worth it,” he said recently during an interview in the short-term waiting lot at the airport, where he was picking up his wife from a trip to Florida. But he more often flies from Hopkins, which offers more options at more times. Mr. Hobica said that’s a common distinction for passengers in these pressed economic times. Average fares at Akron-Canton run about $100 less than at Hopkins, according to federal government data, though he noted that “averages don’t always mean much — specific fares to specific destinations at specific times do.” Akron-Canton can take you to some popular destinations, including
CRAIN’S CLEVELAND BUSINESS
Atlanta, Chicago, New York and Orlando. But there are, obviously, holes in its lineup; Mr. McQueen said he’d love to see Akron-Canton add flights to cities such as Baltimore, Dallas and Las Vegas. To do that, he said, the airport must continue to work with its five airlines to establish “strong relationships based on trust and good data” that would enable Akron-Canton to make the case for expanded service.
Fan favorites One thing both airports have in common is a mastery of social media. Robert Cook, co-founder and
The Bureau of Transportation Statistics’ most recent data on average fares are from the third quarter of 2010. Average fares are based on domestic itinerary fares, round-trip or one-way for which no return is purchased. Fares are based on the total ticket value, which consists of the price charged by the airlines plus any additional taxes and fees levied by an outside entity at the time of purchase. Fares include only the price paid at the time of the ticket purchase and do not include other fees, such as baggage fees, paid at the airport or on board the aircraft. Averages do not include frequent-flyer or “zero fares” or a few abnormally high reported fares.
% change % change ’00-’10 ’09-’10
managing director of aviation consulting firm AirGate Solutions, tracks Facebook usage by about 130 airports worldwide and finds that Hopkins, with more than 31,500 fans, and Akron-Canton, with more than 20,000 fans, are among the top five U.S. airports by
that quirky measurement. Akron-Canton passengers even can take part in a live web chat with Mr. McQueen on the third Wednesday of every month from 1 p.m. to 2 p.m. (Mark your calendars: The next one is March 16.) Mr. McQueen says he’s up for
anything during the chats. Most of the questions are pretty straightforward, but one chatter recently asked why an airport is called an “airport” rather than a “planeport.” “I had to wing it on that one,” he said. ■
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SPECIAL REPORT: UP IN THE AIR
Landing: Hub an asset to businesses continued from PAGE 21
“The Continental Cleveland hub needs all the passenger demand it can get,” said Mr. Zannoni in an exchange of e-mails sent during his travels earlier this month. “And I’m not a fan of Akron-Canton’s strategy of diverting passengers from Hopkins, so I can’t morally support it — it’s not really cheaper if it ends up costing the entire region the Continental/United hub.” Like many frequent business travelers, convenience is Mr. Zannoni’s top priority, not rock-bottom fares. So he is watching carefully to find out how air service will be delivered in Northeast Ohio as the industry transforms over the next few years. And that service certainly may be poised to change as the new United Continental Holdings Inc. merges its two airlines, and Southwest Airlines Inc. completes its merger with AirTran Holdings Inc., the dominant carrier in Akron.
‘Competitive advantage’ at stake Both Ricky Smith, director of port control for the City of Cleveland, and Richard McQueen, the director of the Akron-Canton Airport, say they are optimistic about their air service remaining intact as these mergers are completed. While both acknowledge that each merger could upset the status quo, they say the substantial increase in passenger traffic being forecast by the Federal Aviation Administration will allow for continued growth. Mr. Smith added that the opening of a casino and a new convention center and medical merchandise mart also will spur travel activity into and out of Northeast Ohio. Few in the airline industry expect the Southwest-AirTran deal to hurt the region’s air service, though some speculate that Cleveland Hopkins could benefit if flights are shifted from Akron-Canton to Cleveland, where Southwest already has a significant presence. On the other hand, to some industry observers, the Cleveland hub very well may be a goner. “Unfortunately, I don’t see too much good news for those people who enjoy so many nonstop flights from Cleveland Hopkins,” said Bijan Vasigh, a professor of economics and finance at Embry-Riddle Aero-
CONTINENTAL IN CLEVELAND ■ Cleveland became a Continental hub in 1987 after United Airlines severely cut back its service at Cleveland Hopkins during the years after air service was deregulated in 1978. In January 1987, Continental only had six daily flights out of Cleveland. By 1990, it had more than 150 flights on Continental and its regional affiliates. ■ Chicago O’Hare is the top daily destination in terms of the number of United or Continental flights from Cleveland, with 10 daily. ■ Houston is the top daily destination in terms of the number of United or Continental passengers traveling from Cleveland. (The company does not disclose market-specific nautical University in Daytona Beach, Fla., and a managing partner of the Aviation Consulting Group consultancy. “We should see a significant amount of reduction in traffic from Cleveland Hopkins, in favor of Chicago and (Washington Dulles International Airport). “The proximity (to those two United hubs) does not favor Cleveland to remain a viable hub,” he said, echoing the sentiments of a number of industry watchers. Mike Boyd of Boyd Group International, an aviation consulting firm in Evergreen, Colo., said if Cleveland Hopkins does lose its hub status, United and other airlines still will offer a reasonable level of service. “Cleveland will be well-served, but it will be served on the basis of what Cleveland can support,” he said. Even so, business leaders here still believe that maintaining Cleveland Hopkins as a hub is crucial for the region’s economic development. As a hub airport, Cleveland Hopkins has more direct flights to more cities since Continental brings passengers to Cleveland from smaller cities such as Albany, N.Y., or Flint, Mich., and sends them on from Cleveland to even more cities. The airport currently offers about 250 daily nonstop flights to 74 destinations; 52 locations over a one-year period are served exclusively by United or Continental. Tom Waltermire, CEO of Team NEO, the regional business attrac-
numbers.) ■ Number of United or Continental flights each day: 182 ■ Number of passengers departing on United or Continental flights daily: 7,397 (average for
12 months ended Oct. 30, 2010) ■ United or Continental destinations from Cleveland: 70 ■ Percentage of Hopkins flights that are United or Continental: 73% ■ Cities where only United or Continental offers direct flights from Cleveland: 52 locations over a one-year period (Some flights are
seasonal.) SOURCES: CONTINENTAL UNITED HOLDINGS INC., U.S. BUREAU OF TRANSPORTATION STATISTICS, CRAIN’S RESEARCH
tion nonprofit, said having a hub at Cleveland Hopkins is an asset when he talks to businesses considering a Northeast Ohio location. “It’s extremely important, because right now we enjoy a competitive advantage (over nearby cities that are not hubs),” he said. “It’s an attraction lever that we want to use.”
Not sitting back Joe Roman, president and CEO of the Greater Cleveland Partnership, said his organization has convened a task force of business leaders to marshal an effort aimed at convincing United to keep the hub here. The regional chamber of commerce group launched the task force with an organizational meeting on Feb. 14. GCP already has started surveying its members and intends to make a case to the new United-Continental management that the demand for air service here is growing, despite a recent dip in the number of passengers using Cleveland Hopkins. He said the survey, which is still under way, found that many expect their air travel needs to grow by 5% to 10% over the next one to two years. He also intends to argue that new projects like the convention center and medical merchandise mart and the growth of so-called medical tourism trips to the Cleveland Clinic and University Hospitals will add to the need for a continued high level of air service. The task force will be led by William Christopher, GCP’s chairman and a Cleveland-based executive vice president of Alcoa Inc. Rob Turk, executive vice president of Professional Travel Inc. of North Olmsted, believes that much of the flight schedule that might be
trimmed by United Continental would be made up by other airlines. He said his clients are not as concerned about the SouthwestAirTran merger as they are with changes in the service from the new United. The North Olmsted company manages the travel needs of 200 large and medium-sized companies. “They’re concerned about if the Cleveland hub is taken away or significantly reduced they’ll be forced to make a lot more connections,” he said. At least one company is working on its own to boost travel on United. William Conway, chairman of Chardon-based Fairmount Minerals Ltd., in December sent all the firm’s employees an e-mail urging them to book their travel on the new United whenever possible. “We urge that you select UnitedContinental Airline when flying in and/or out of Cleveland,” he wrote in a Dec. 21 e-mail. “The UnitedContinental hub is important to Fairmount Minerals and the community as a whole.”
Watching, waiting The yardstick United will use in regards to the service it offers at Cleveland will be the demand and opportunity for the growth of air service, said Jim Compton, executive vice president and chief revenue officer for United Continental Holdings in a recent interview with Crain’s Cleveland Business. Last September, Jeff Smisek, then-CEO of Continental and now CEO of the combined holding company, reached a written agreement with Richard Cordray, then Ohio attorney general, to maintain a hub in Cleveland for at least five years. That agreement only requires the combined airline to maintain 90% of its flights at Cleveland Hopkins for two years and allows for deeper cuts in years three, four and five if business falls off dramatically or the Cleveland Hopkins operation is significantly unprofitable. “(As an airline) you have to be aware of the demand that’s out there in the marketplace and to be smart about how you manage through that,” Mr. Compton said. “That’s how hubs become win-win with airlines and cities; you work together and manage that capacity and demand together. “In Cleveland, we’ll continue to work closely with the Cleveland business leaders and Ricky Smith, the airport director, to make sure we’re watching the challenges out there and ensuring the sustainable future for Cleveland.” ■ Sections editor Amy Ann Stoessel contributed to this story.
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United CEO: Hubs ‘need to earn their value’ daily Smisek says joint airline ‘committed to Cleveland’
ince 1987, Cleveland Hopkins has been a Continental hub. That means local passengers can find more direct flights to cities such as New York and Chicago than Pittsburghers, and they can fly direct to cities such as Indianapolis and Rochester, N.Y. Pittsburgh passengers would have to change planes to get to those midsize cities because Pittsburgh International Airport is no airline’s hub. Cleveland was the smallest of the old Continental’s three domestic hubs, the only one in the Midwest. Now after the merger, it is the smallest of eight domestic United hubs. The talk in the industry is that the airline will choose to route flights through United’s hubs at Chicago’s O’Hare International Airport or Washington Dulles International Airport in the Virginia suburbs. For now, however, the airline is standing by its commitment to its Cleveland hub. Last September, shortly before their merger won government approval, United and Continental reached an agreement with thenOhio Attorney General Richard Cordray to maintain the hub at Cleveland Hopkins for at least five years. Failing to live up to that pledge could cost the airline up to $20 million in damages. However, days later, with Jeff Smisek — the Continental, and now United, CEO — on the stand, lawyers challenging the merger in a San Francisco lawsuit produced an internal ContiSmisek nental analysis that suggested the new airline would abandon the Cleveland hub. According to that document, Cleveland Hopkins would lose 178 of 211 daily flights once the two airlines are fully integrated, which could take five years. Mr. Smisek responded angrily, saying the airline was committed to Cleveland and that the document produced was only one of several post-merger scenarios the airline generated as it was negotiating with United. At a speech here last November, Mr. Smisek said emphatically that, “We are committed to Cleveland.” He challenged his audience of business and civic leaders to show their support of the airline, meaning their commitment to prefer his airline could make a difference in whether the hub remains. “Every hub needs to earn its value every day,” he said. “The key for Cleveland is to have a level of business travel so that we can have either consistent profitability or have that hub’s profitability in a clear line of sight (ahead).” — Jay Miller
SPECIAL REPORT: UP IN THE AIR
FEBRUARY 28 - MARCH 6, 2011
CRAINâ€™S CLEVELAND BUSINESS
Pittsburgh business leaders step up after US Airways exit Departure hurt, but lessons can be learned from cityâ€™s reaction to loss Down to business
By DAN SHINGLER email@example.com
osing hub status with an airline isnâ€™t the end of the world â€” or even the end of airline travel â€” but itâ€™s a tough jolt for an airport. Just ask Pittsburgh. The other steel city lost its hub status with US Airways in 2004, the final move in a series of cutbacks that the airline had been making in Pittsburgh. The airline was struggling and filed for bankruptcy in 2002 and again in 2004. It cut flights and demanded concessions, including reduced fees, from the airport. But Pittsburgh International Airport officials did not give in, and US Airways finally pulled hub status from Pittsburgh in November 2004. Along the way, traffic at the airport 20 miles from downtown Pittsburgh plummeted faster than anything tied to aviation should fall â€” from nearly 20 million passengers traveling through the facility in 2001 to only 8 million in 2009 and 8.2 million in 2010. And yet, over that same 10-year period, the number of area residents flying in and out of the airport each year has roughly doubled, from 2 million to 4 million, said Brad Penrod, executive director of the Pittsburgh airport. When US Airways pulled back on its operations, competition increased and other carriers were able to move in and take some of its old routes, he said, offering lower fares at the same time. The number of cities with direct flights to and from Pittsburgh dropped, from more than 100 to 38, he said, but fares also dropped. In fact, Pittsburgh went from being one of the most expensive cities to fly from to becoming one of the cheapest, Mr. Penrod said. While the average U.S. domestic fare increased by about 1% between 2000 and 2010, the average airfare at Pittsburgh dropped by 28.3%, according to data from the federal Bureau of Transportation Statistics.
Thatâ€™s not to say there hasnâ€™t been pain â€” or that Pittsburgh doesnâ€™t wish it had been able to keep its hub status, said Ken Zapinski, senior vice president for the Allegheny Conference on Community Development, a group of business and civic leaders focused on regional economic development issues. The Greater Pittsburgh Chamber of Commerce and companies such as PNC Financial Services referred questions to Mr. Zapinski, whom they said was the business communityâ€™s expert and spokesman on transportation and air-service issues. Mr. Zapinski says itâ€™s the business community itself that has enabled Pittsburgh to keep flying to the degree that it has. â€œBy the end of 2003, it was clear to everybody that the region needed to be on top of what was going on in the aviation industry,â€? he said. So business leaders, the airport commission, the Allegheny Conference and local government officials formed the Regional Air Service Partnership that same year, he said. Its mission was and continues to be to market Pittsburgh to other airlines â€” making sure they were aware that new routes were opening up in Pittsburgh â€” and it worked. The business community called many of the shots, he said, by determining which cities were important and by promising to support new flights with their business. Two goals were established. â€œWe wanted to maintain twicedaily nonstop service to the 30 most important business destinations, and we wanted to make sure our ticket prices in Pittsburgh were below the national average,â€? Mr. Zapinski said. The Partnership was proactive in identifying carriers that would benefit from newly available routes and actively marketing those routes to those airlines. CEOs often attended the meetings, flying with Partnership staff to meet with airline executives. They shared their corporate strategies
and discussed their present and future employee travel needs, as only CEOS could, Mr. Zapinski said. As a result, AirTran increased its routes to Pittsburgh, Southwest began flying to Pittsburgh in 2005 and Jet Blue began servicing the city in 2006. Today, Pittsburgh has good air service in the eyes of Mr. Zapinski, along with some of his corporate backers. â€œAs a global company that has called Pittsburgh home for 142 years, Heinz and our employees are well served by the access and convenience that the Pittsburgh International Airport continues to provide,â€? said Michael Mullen, a spokesman for H. J. Heinz Co. in Pittsburgh.
Not without its casualties Still, pain has been felt in and around the airport itself. Large portions of the airport now are dark and mothballed, said Mr. Penrod, the airportâ€™s executive director. The airport maintains the vacant areas in the hope that more carriers and flights will come to use them â€” or it could even become a hub for another airline some day, he said. There has been significant job loss. For US Airways alone, Pittsburgh employment has gone from about 13,000 in 2001 to about 2,500 today, Mr. Penrod said. An unknown number of other jobs and businesses, supported by US Airways and its people, likely were affected, he said. â€œThose $80,000-a-year US Airways guys who worked at the hub all bought new Ford F-150s every year or two,â€? he said. The lesson for Cleveland might be
A LONG, SLOW DESCENT AT PITTSBURGH INTERNATIONAL A look at yearly passenger traffic at Pittsburgh International Airport, which in 2004 lost its hub status for US Airways; the airline employed 13,000 at the airport in 2001; now, that number is 2,500:
Total traffic (millions)
SOURCE: ALLEGHENY COUNTY (PA.) AIRPORT AUTHORITY
to focus on triage the way that Pittsburgh has â€” and get the business community involved, said Mr. Zapinski. A key to maintaining service, he predicts, will be marketing the location to airlines that are more focused on efficiency than finding expansion opportunities. It might even cost money â€” businesses and local governments had to guarantee revenue for two years in order to get Delta Airlines to begin a fight from Pittsburgh to Paris in 2009. The economic crisis, coupled with high fuel prices that drove up ticket prices, meant the Partnership had to pony up $5 million last year to meet that guarantee, he said. Itâ€™s too early to say for sure how the flight will perform this year, but so far itâ€™s tracking well ahead of last yearâ€™s performance in terms of ticket sales, according to Mr.
Zapinski, who said he hopes the Partnership wonâ€™t have to write a second check to Delta.
Glass half-full In the meantime, while neither Mr. Zapinski nor Mr. Penrod said they would classify the loss of US Airways as a blessing in disguise for the airport or region, they both said the community has been able to salvage some positives. Some businesses would rather have cheap, easy access to a few key cities, than more expensive access to many more, according to Mr. Zapinski. â€œFor some companies right now, our level of service to the New York market, the Chicago market, the Philadelphia market, or Boston, or to Atlanta â€” is as good as it was in US Airwaysâ€™ heyday, and itâ€™s much cheaper,â€? he said. â–
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SPECIAL REPORT: UP IN THE AIR
CRAIN’S CLEVELAND BUSINESS
Hub, no hub: Some upsides to both Interview Certainty helps, but overdependence on one airline is a risk By AMY ANN STOESSEL email@example.com
hen the SouthwestAirTran and UnitedContinental deals were announced last year, the Indianapolis International Airport took them as a chance to tout the positives of not having a hub. A September 2010 news release posted on the airport’s web site even put this spin on the developments: “The good news is that because Indianapolis is not a hub for any individual airline, IND has a good mix of passenger carriers, which is key to maintaining low fares and overall airport strength. “In fact, unlike other U.S. airports, because IND is less dependent on one particular passenger carrier, the central Indiana region is well-positioned for stable, continued growth, despite turbulence in the airline industry.” How’s that for a clear-skiesahead outlook? Universally, aviation and economic development officials proclaim the benefits of having a connecting hub, or an airport where an airline aggregates passengers. Hubs mean more direct flights, more visitors and a slew of economic benefits. But — as in the case of the hub-less Indianapolis airport — there are other perspectives to be had and lessons to be learned. In Indianapolis, for example, there is not a dependence on any one airline. “We’ve never really felt any panic” when a single airline reduces services, said Chris Matney, Indianapolis’ air service director. As of August 2010, the year-todate market share of all passenger carriers in Indianapolis was: Delta, 25%; Southwest, 17.5%; AirTran, 16.5%; US Airways, 13%; American Airlines, 9%; United Airlines, 7%; Continental, 6%; Frontier/Midwest, 4.5%; and other (Air Canada, etc.), 1.5%. Make no mistake; Mr. Matney does not turn up his nose to the opportunities that come with having a hub. Nor does it mean that the airport does not continuously work to keep its operating costs down while aiming to grow and add new markets. Still, he said, there are benefits to
LIST OF DOMESTIC HUBS FOR TOP AIRLINES ■ Delta Airlines: Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York (JFK), Salt Lake City ■ United/Continental: Chicago (O’Hare), Cleveland , Denver, Houston (George Bush), Los Angeles, Newark, N.J., San Francisco, Washington Dulles, Guam ■ Southwest (Top 10 cities by departure as of November 2010; Southwest does not refer to the use of hubs): Las Vegas, Chicago
having a good mix of carriers. “It’s that balance of airlines that really has allowed us to develop a fairly even relationship with all of our partners,” Mr. Matney said.
Milwaukee: ‘Best of both worlds’ The Milwaukee airport, on the other hand, has had its fair share of ups and downs when it comes to having hubs. “We’ve had a very interesting half a dozen years here with airlines,” said Pat Rowe, spokeswoman for General Mitchell International Airport. Both AirTran and Frontier airlines currently have hubs at Milwaukee. The Frontier hub was maintained after the airline’s bankruptcy and subsequent acquisition in 2009 by Republic Airways Holdings Inc., while the AirTran-Southwest deal means “the next chapter of that book remains to be written,” Ms. Rowe said. AirTran has the largest market share at Milwaukee, while Frontier runs at a very close No. 2; Delta and Southwest are Nos. 3 and 4, respectively. Ms. Rowe sees the current setup as “the best of both worlds.” No airline completely dominates the market, which means more competitive fares, and the region still gets the elevated service levels of having a hub. “What you lose when you don’t have any hub at all is service to small communities,” she said. December 2010 marked the 16th straight month of record passenger growth at General Mitchell, according to statistics from the airport. The airport served 774,341 passengers, an increase of 6.36% (46,274 passengers) over December 2009’s 728,067 passengers. Peter Beitzel, vice president of infrastructure and international business for the Metropolitan Milwaukee Association of Commerce, said nonstop air service is what the business community really wants. “If Milwaukee went back to
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(Midway), Phoenix, Baltimore/Washington, Denver, Houston (Hobby), Dallas (Love Field), Los Angeles, Oakland, Orlando ■ American Airlines: Chicago (O’Hare), New York, Dallas/Fort Worth, Miami, Los Angeles ■ US Airways: Charlotte, Philadelphia, Phoenix ■ AirTran: Atlanta, Milwaukee SOURCES: BUREAU OF TRANSPORTATION STATISTICS, CRAIN’S RESEARCH
having no real hub, that would hurt the business community a lot,” Mr. Beitzel said.
Cincinnati: Delta ‘right-sizing’ The 15-county, tri-state region surrounding the Cincinnati/ Northern Kentucky International Airport knows what it’s like to have a hub and worry about what the effects of losing it might be. In 2004, near the heyday of Delta Airline’s hub status at CVG, the airport served 22 million passengers with 655 average daily departures to 140 nonstop cities. Following a period of cuts by Delta, the airport served nearly 8 million passengers in 2010 with 200 average daily departures to 70 nonstop cities, according to figures provided by the airport. “We feel the air service levels now do not meet local community needs,” said Barbara Schempf, director of public and government affairs at Cincinnati/Northern Kentucky International Airport. She said the top goals for CVG at the present include working with Delta to retain the CVG hub, and working to get additional air service. Douglas Moormann, vice president of economic development for the Cincinnati USA Regional Chamber, said the reduction in service has not gone unnoticed by site selectors, although he said it’s impossible to quantify opportunities lost. “It’s safe to say a reduction in the status of the hub … has a little bit of a chilling effect on your business attraction efforts,” he said. However, despite moves to “right-size” its CVG hub, Delta has been willing to work with the region, he said. For example, cuts originally resulted in the loss of good access to the East Coast in a single one-day trip. “We went to Delta and said, ‘This is a real problem,’” said Mr. Moormann, who said the single biggest factor the region lost due to the cuts has been convenience. But, he noted, “We still have very strong access.” The lesson for Northeast Ohio from Cincinnati’s experience, Mr. Moormann said, might be this: “Look for places where the airline can help you.”
Cleveland: ‘Heartbreak Hotel’? Mike Boyd of Boyd Group International, an aviation consulting firm in Evergreen, Colo., said airlines are in a period of adjusting to economics and market forces. The industry isn’t growing, and airlines aren’t in the market to set up hubs, so if Cleveland loses its hub, there may not be much hope for another carrier to take its place. As for Cleveland’s chances of getting a replacement hub for Continental, Mr. Boyd characterized it this way: “Right up there with an Elvis sighting.” ■
continued from PAGE 21
responded by stepping up its own marketing efforts. One recent Cleveland Hopkins television ad touted the freshened and expanded food and shopping services at the airport. And recent ads targeting business travelers have used the tag line, “More Flights. More Destinations. More Non-stops.” Below are edited excerpts from the joint interview with Messrs. Smith and McQueen that took place this month at Cleveland Hopkins. Q I understand this is the first time you two airport directors have met. So let’s start with a sort of get-to-know-you question. What does each of you see as the role of your airport in the region? A Mr. McQueen: We see ourselves as an airport that serves North America. We just completed a runway extension that (will land Boeing) 737s that can get to the West Coast and to Mexico and the Caribbean, which we couldn’t get to before. We like to think that we add value to the region. We have the low-cost carrier AirTran that has provided some great fares for business travelers as well as to leisure travelers. A Mr. Smith: This economy is not so much a regional economy or a national economy as it is a global economy. We think Hopkins presents an opportunity for this region to connect to the world. Q I have to believe the biggest changes thrown at you by the airlines in the last year were the mergers of Continental Airlines and United Airlines and Southwest and AirTran. With the United and Continental merger, Mr. Smith, have you seen any changes? A Mr. Smith: From the standpoint of the airport interaction with them, it’s been pretty much seamless. We’ve established relationships with the new players and had discussions with them about their future here. Airlines tend not to look out further than six months; airports look out 10, 20, 30 years. But to the extent they can predict (the future), they’ve been pretty open with us. Mr. McQueen, I assume it’s too early to tell about the SouthwestAirTran merger. A Mr. McQueen: The Department of Justice hasn’t even ruled on it yet. What we see though in the near term is nothing changes. Q Will the Southwest-AirTran merger mean the end of the low-cost carrier? A Mr. McQueen. Southwest is a carrier that most airports over the years have wanted to have in their marketplace. They have always set the standard for low-fare carriers, and I think that is going to continue as they go forward. A Mr. Smith: (Lower fares) are their competitive advantage, and I don’t think they are going to change that. In fact, the airport managers see a growing role for Southwest for business travelers. A Mr. Smith: Given their tight budgets (businesses) appreciate the lower fares, the lower cost of flying (on Southwest). The bigger challenge for Southwest Airlines with respect to the business community is the nonstop routes. Continental has a number of nonstops in their system and the business community has an appetite
FEBRUARY 28 - MARCH 6, 2011
for more long-haul direct flights as opposed to the puddle-jumping that is characteristic of Southwest Airlines. But I imagine that as they begin to take a larger share of the domestic market that you’ll begin to see them upgrade their aircraft. You’ll begin to see longer flights out of Southwest and the business community will have a growing appreciation for that. They’re not there at this point but there is a growing segment of the business community that is willing to make that decision to fly Southwest or AirTran because of the savings experience, even though there is some inconvenience. A Mr. McQueen: I would echo that. There are some inconveniences when you travel (low-cost carriers). Q I know that Southwest operates in some metropolitan areas from several airports. But what if Southwest management says, “Let’s leave Akron-Canton and consolidate our service into Cleveland Hopkins?” A Mr. Smith: I never think about that (laughter). If you look at the Baltimore-Washington area, Southwest is operating in multiple airports in what is the same market. A Mr. McQueen: In any type of environment there are always ebbs and flows in your air service — at all airports. So there will be some balancing as the landscape changes through these mergers. And at both of our airports we have other carriers who will help fill in that void. For example, Delta and US Airways are at both of our airports. If there is a destination where they can make money, we have to be prepared to go and educate them ... and capitalize on that opportunity. Q What if there was no longer a hub at Cleveland Hopkins? A Mr. McQueen: We’ve never had a hub at Akron-Canton so I haven’t had to worry about that. We just want to be best the partners we can be with the (airline) partners we have. I wish I had that problem. A Mr. Smith: What you get with a hub is the service to the small markets that you otherwise wouldn’t get. This region gets service through the hub that it could not support (without the hub). Q Mr. McQueen, this is the tough question, I guess. How would you feel if the growing service at Akron-Canton ends up being a reason that Cleveland Hopkins loses its hub status? A Mr. McQueen: I don’t see (AkronCanton) playing a role in that at all. Most of our traffic comes from our core market. Sixty percent of our traffic comes from our core market of Summit and Stark counties. We had an all-time record year last year with 1.5 million passengers. I think (Hopkins) is seven times that. There are synergies in all regions where you have more than one facility. ... Business begets business. We think that we stimulated more people out of Cleveland Hopkins to go to Atlanta when AirTran came in (to Akron-Canton) and lowered the market price because (the other airlines) matched (the lower price). We think we can work together and it shouldn’t be a problem. A Mr. Smith: I am hopeful that with the acquisition of AirTran, which makes Southwest a stronger airline than it is today, that we will begin to experience the “Southwest effect” (low fares enticing new travelers) in this market. So the market will grow and expand with new travelers who aren’t using air service because they can’t afford to.
FEBRUARY 28 - MARCH 6, 2011
CRAIN’S CLEVELAND BUSINESS
Optima: Prices draw company here continued from PAGE 1
the largely vacant KeyBank Investment Center, 800 Superior Ave. Chaim Schochet — the 20-something investment executive who manages Optima’s Cleveland investments with three- or four-day weekly trips here from Miami — has noted that the company’s properties have not really competed with one another in this market. Optima’s 55 Public Square office tower is an older, class C building that is seen as a moneymaker because it mainly serves lawyers due to its proximity to downtown’s courthouses. While One Cleveland Center and Optima’s most recent buy — the Penton Media Center Building at 1300 E. Ninth St. — are both better class B buildings, insiders say they tap different markets due to technical matters such as floor sizes and shapes. Then there’s the 1 million-squarefoot Huntington Building, downtown’s second-largest office building, which is considered a redevelopment property. That’s because its largest tenants, from Huntington Bank to accounting firm Ernst & Young, will exit the 1923-vintage landmark by 2012.
In the mood to buy? Sources familiar with the situation say Optima now is among the bidders pursuing KeyBank Investment Center. The building’s purchase by Optima would give the company control over another potential redevelopment project. Alex Jelepis, a Grubb & Ellis Co. senior vice president, said the lender-owned building is up for sale, but he would not comment on prospective bidders. Mr. Schochet said he was aware that the building is available from a unit of Lennar Properties of Miami, but he declined to say if Optima is pursuing it. Mr. Schochet last week said he did not have time to discuss Optima’s big-picture plans for Cleveland because he was too busy closing three property purchases. He wouldn’t say where they are located, but noted that none is in Cleveland. His comments show Optima continues its acquisition binge as
other investors only recently have started to return to the nation’s real estate market after the most bruising recession since World War II ended. Some of Optima’s out-of-town deals are head-turners. They show both its desire to diversify its holdings geographically — and land major properties while many competitors were stalled — and its vast financial resources. They also show Optima has the resources to dig deeper into Cleveland if it has more appetite here. For instance, Optima last month in Dallas scooped up the former headquarters of EDS Corp., which now is the headquarters of CompuCom. CompuCom, a computer maintenance firm, leased back part of the 255,000-square-foot complex of four buildings. Previously, Optima bought the 1.5-million-square-foot former Motorola Corp. plant in Harvard, Ill., with plans to redevelop the property that once housed 5,000 workers.
On the contrary Mr. Schochet’s terse explanation for the buying spree in those cities is the same one that he voiced when discussing his first Cleveland acquisition in 2008. He said back then that Optima’s wealth was generated in the 1990s when it participated in the privatization of Soviet-bloc steel, tire and telecommunications companies. Real estate in the United States presented a diversification play after the company moved to Miami from Eastern Europe in the 1990s. Bargain-basement building prices in downtown Cleveland, due to the sour local economy and weak rents, attracted Optima. Competing developers even today say the $20 million Optima shelled out for the Huntington Building was a sweet price, even though it will take millions of dollars of risk capital to remake the structure. David Browning, managing director of the Cleveland office of CB Richard Ellis, said he views Optima as a classic contrarian investor. “I believe their end game is to buy these assets at a fair price,” Mr. Browning said. “In the long run,
they have faith in the market, and believe, based on these prices, they will generate a profit when they sell.” Mr. Browning noted that Optima is buying in Cleveland at a time most institutional investors are focused on the more glamorous, 24-hour cities of New York, Chicago and Miami. “Institutional investors won’t touch a Cleveland, a Columbus or a Cincinnati now,” Mr. Browning said.
Cornering the market The addition of one more building in Optima’s stable may prove significant for downtown office tenants as a group. That next building will give Optima enough variety and scope that it may be able to firm up the city’s rents. That strategy was used by the late Richard E. Jacobs as he bought skyscrapers and built new ones in the late-1980s in Cleveland. But Mr. Jacobs’ advanced age shortened the length of his run. The loss of downtown tenants such as British Petroleum also crippled the city’s office market for years. With redevelopment properties tied up under its ownership and buildings such as Penton and One Cleveland Cleveland in its stable, Optima might be able to resist tenant demands for lower rents. Mr. Browning said a disciplined marketplace stands to be a good thing for downtown. He cited Duke Realty Corp.’s drive from the mid-1990s to the late-2000s to commandeer much of Cleveland’s suburban office market. “The other building owners benefited from Duke’s leadership and discipline in the market,” Mr. Browning said. “If anything, the last three years have shown us that real estate is a service business. When the owners’ and the tenants’ interest in operating properties gets out of sync, things do not go well.” Mr. Schochet said Optima is a long-term owner and does not look to sell when real estate turns around. Kevin Piunno, a longtime Cleveland real estate broker who serves as Optima’s leasing representative, said he believes Optima is investing
FILE PHOTO/RUGGERO FATICA
The Huntington Building is part of the Cleveland portfolio recently amassed by Miami-based Optima Management Group. for the future — as in for future generations of the Schochet family. “I’ve not seen anything like this before,” Mr. Piunno said. “They really, really believe in Cleveland. They believe they had a chance to buy before Cleveland rebounded from the recession and the new convention center and casino. They also
like the Midwest because of its industrial and agricultural basis, like the Ukraine.” Mr. Schochet has rebuffed multiple requests since last September from Crain’s for in-depth interviews. “That’s not him,” Mr. Piunno said, as Mr. Schochet wants to shun the limelight. ■
Bill: Final version of proposed legislation may look different continued from PAGE 1
leaders with the governor’s budget, which is due to be unveiled next month and is expected to cut state support to local governments. Municipal leaders’ concern is that if they don’t support a substantial portion of the proposed legislation, which would allow them to reduce personnel costs, the governor and state legislators would have a reason to be less sympathetic when it comes time to dole out limited local government funds.
Proceed with caution Not surprisingly, Republican officials tend to be more comfortable with the pending legislation, but even they are not ready to wipe out collective bargaining entirely. Bay Village Mayor Debbie Sutherland, a Republican, said she believes collective bargaining “serves a purpose, and I would be cautious about eradicating the entire process.”
“But I think that there are some things that can be improved, binding arbitration being one of them,” Mayor Sutherland said. Under binding arbitration, both sides agree that a neutral third party — usually an attorney or an unaffiliated labor-management professional — will evaluate the final positions of both sides and have the last word on final terms of the agreement. Some public officials believe union sway over some politicians has led to agreements overly generous to union workers. Mayor Sutherland noted, though, that any changes made now in the law will not give cities and school boards quick financial relief. “We already have contracts that are in place,” she said. “Whatever changes may come out of the process (in the Legislature), this is not a short-term fix for us, and this may not be implemented for some municipalities for three years.”
Bargaining backers Cleveland Mayor Frank Jackson, a Democrat, is less enthusiastic about legislative changes. “I support collective bargaining,” Mayor Jackson said. “We’ve been able to work through these issues because we’ve developed relationships. But we do need some changes with how we interact with each other.” Mayor Jackson said he would like to be able to change work rules more easily. “But at the same time if we do not protect the work force, they will lose out and I don’t think that should happen,” he said. “What those work rule changes and protections should be, should be discussed. But we shouldn’t wipe out all of collective bargaining.” Likewise, Cuyahoga County Executive Ed FitzGerald, a former Lakewood mayor, said he never has felt constrained by the current
collective bargaining rules. “(As mayor of Lakewood) we took numerous things to collective bargaining and we almost always won,” Mr. FitzGerald said. “When people are talking about horror stories in binding arbitration, I personally did not experience that.” Mr. FitzGerald said the county just completed a round of labor negotiations where employees agreed to no pay increases and five furlough days. “I discussed this with the governor (earlier this year) and he said, ‘I’m going to do this,’” Mr. FitzGerald recalled. “I told him honestly I haven’t had trouble reducing my budget under the current rules.”
Changes afoot? At the end of last week it appeared that some changes in the legislation will be made. Amendments last week moved away from the complete elimina-
tion of collecting bargaining rights for state employees — state workers would continue to bargain for wages but not benefits or working conditions. However, another amendment to the bill, which was introduced by state Sen. Shannon Jones, a Republican who represents part of the Cincinnati area, would prohibit all public employees from striking. Earlier bill language allowed nonsafety workers the right to strike to a limited degree. And while the bill initially took away binding arbitration as a way to settle disputes, Republican senators last week were looking for an alternative third-party contract review process. State Sen. Kevin Bacon, Republican chairman of the Insurance, Commerce and Labor Committee, set a deadline of last Friday for amendments, though he had not scheduled additional hearings on the bill. ■
CRAINâ€™S CLEVELAND BUSINESS
FEBRUARY 28 - MARCH 6, 2011
PROFESSIONAL ASSOCIATIONS BASED IN NE OHIO RANKED BY NUMBER OF MEMBERS(1)
Name of firm Address Rank Phone/Web site
Members NE Number of Ohio members Year founded
Description or mission
ASM International 9639 Kinsman Road, Materials Park 44073 (440) 338-5151/http://asmcommunity.asminternational.org
AM&P, International Thermal Spray, EDFA
Serves materials professionals, nontechnical Aeromat 2011, Materials and Processess for Medical Devices, personnel and managers by providing highInternational Thermal Spray Conf. quality materials information, education and training
Stanley C. Theobald managing director
Workplace Benefits Association 9221 Ravenna Road, Suite D8, Twinsburg 44087 (330) 425-8399/www.workplacebenefits.org
Walt Podgurski CEO
International Association of Information Technology Asset Managers 1137 State Route 43, Mogadore 44260 (330) 628-3012/www.iaitam.org
IAITAM Annual Conference & Exhibition
Barbara Rembiesa CEO, founder
International Society of Explosives Engineers 30325 Bainbridge Road, Cleveland 44139 (440) 349-4400/www.isee.org
The Journal of Explosives Annual Conference on Explosives Provides technology, education and information Jeffrey L. Dean Engineering, ISEE and Blasting Technique; Ohio to promote the safe, secure and controlled use executive director, Blasters' Handbook Drilling & Blasting Conference of commercial explosives general counsel
Institute of Mathematical Statistics P.O. Box 22718, Beachwood 44122 (216) 295-2340/http://imstat.org
Annals of Applied Probability, Annals of Applied Statistics
North American Police Work Dog Association 4222 Manchester Ave., Perry 44081 (888) 422-6463/www.napwda.com
NAPWDA News & Events 2 meetings, 20 state workshops, Dedicated to assisting police work dog teams to Enrich, Enlighten & 1 national workshop throughout the world Enable
National Association of College Stores 500 E. Lorain St. , Oberlin 44070 (800) 622-7498/www.nacs.org
The College Store Magazine
CAMEX (CAMpus Market EXpo)
To be the leading advocate and resource for college stores â€” helping them connect, grow, and succeed
Brian Cartier CEO
Association of Nurses in AIDS Care 3538 Ridgewood Road, Akron 44333 (330) 670-0101/www.nursesinaidscare.org
Journal of the Association of Nurses in AIDS Care
Education and support of HIV nurses
Adele A. Webb executive director, CEO
Herb Society of America 9019 Kirtland Chardon Road, Kirtland 44094 (440) 256-0514/www.herbsociety.org
The Herbarist and Herb of the Year Guides
Educational conference and annual meeting of members
Promotes the knowledge, use and delight of herbs through educational programs, research and sharing the experience of its members
Katrinka Morgan executive director
Society for Photographic Education 2530 Superior Ave., Suite 403, Cleveland 44114 (216) 622-2733/www.spenational.org
Exposure Journal, members' newsletter
SPE National Conference, SPE Regional Conferences
Provides a forum for the discussion of photography and related media as a means of creative expression and cultural insight
Virginia Morrison executive director
Society for Investigative Dermatology 526 Superior Ave. East, Suite 540, Cleveland 44114 (216) 579-9300/www.sidnet.org
Rebecca Minnillo Jim Rumsey executive directors
The North American Menopause Society 5900 Landerbrook Drive, Suite 390, Mayfield Heights 44124 (440) 442-7550/www.menopause.org
Menopause (journal), Menopause Practice: A Clinician's Guide
NAMS Annual Meeting
To promote the health and quality of life of all women during midlife and beyond through an understanding of menopause and healthy aging
Margery L.S. Gass executive director
Marble Institute of America 28901 Clemens Road, Suite 100, Cleveland 44145 (440) 250-9222/www.marble-institute.com
Newsletter, technical manual, consumer materials
StonExpo/Marmomacc of the Americas
Technical resource for industry and design professionals; establishes standards and specifications for stone
Garis F. Distelhorst executive vice president, CEO
Rubber Division of the American Chemical Society P.O. Box 499, Akron 44309 (330) 972-7815/www.rubber.org
Rubber Chemistry and Technology
Rubber Expo and Advanced Materials in Health Care
To expand the elastomeric profession and individual development through educational, technical, and inter-active activities
Edward L. Miller Executive director
American Society of Sanitary Engineering 901 Canterbury Road, Suite A, Westlake 44145 (440) 835-3040/www.asse-plumbing.org
Plumbing Standards Magazine
Annual Meeting, E.J. Zimmer Technical Seminar & Exhibition
ASSE is an ANSI accredited standards developer and certification body
James Bickford international president
United States Association for Energy Economics 28790 Chagrin Blvd., Suite 350, Cleveland 44122 (216) 464-5365/www.usaee.org
Dialogue, Working Paper Annual North American Series conference
A non-profit that advances the understanding and application of economics across all facets of energy development and use
David L. Williams executive director
American Association of Neuropathologists 2103 Cornell Road, Cleveland 44106 (216) 368-3671/www.neuropath.org
Journal of Neuropathology & Experimental Neurology
The association addresses the needs of physicians and scientists in the field of neuropathology
American Holistic Medical Association 23366 Commerce Park, Suite 101B, Beachwood 44122 (216) 292-6644/www.holisticmedicine.org
iMosaic (Integrative Medicine Offering Science-based Alternatives In Collaboration)
To help create a healthy world by promoting holistic/integrative principles and practice in health care
Steve L. Cadwell executive director, CEO
Insurance Media Association 9221 Ravenna Road, Suite D8, Twinsburg 44087 (888) 282-1765 /www.insurancemedia.net
Walter Podgurski chairman, CEO
Association of Specialty Cut Flower Growers P.O. Box 268, Oberlin 44070 (440) 774-2887/www.ascfg.org
Conference and Trade The Cut Flower Quarterly National Show
The ASCFG provides production and marketing information to field and greenhouse cut flower growers
Judy Laushman executive director
United States Trager Association 13801 W. Center St., Suite C, Burton 44021 (440) 834-0308/www.tragerus.org
Quarterly membership newsletter
Annual membership conference
Non-profit membership organization supporting Trager practitioners in the USA
Russian American Medical Association 36100 Euclid Ave., Suite 330-B, Willoughby 44094 (440) 953-8055/www.russiandoctors.org
RAMA annual national conference Improvement of health care system
Boris Vinogradsky, MD chairman
American Institute of Organbuilders P.O. Box 35306, Canton 44735 (330) 806-9011/www.pipeorgan.org
Journal of American Organbuilding
Annual Convention (September or Pipe organ building education October Yearly)
Robert Sullivan executive secretary
Precision Machined Products Association 6700 W. Snowville Road, Brecksville 44141 (440) 526-0300/www.pmpa.org
Production Machining Magazine
Precision Machining Technology Show
Provide programs and services to the precision Michael B. Duffin machining industry in North America. executive director
Hard Hatted Women 4220 Prospect Ave., Cleveland 44103 (216) 861-6500/www.hardhattedwomen.org
Provides expertise for the successful Burgess Sandu recruitment and advancement of women in high- Terri executive director wage trade and technical careers
National Confectionery Sales Association 10225 Berea Road, Suite B, Cleveland 44102 (216) 631-8200/www.candyhalloffame.org
Yearbook and roster
Annual general meeting, two board meetings and Candy Hall of Fame Banquet
Administers the Candy Hall of Fame and provides scholarships to industry related students
Steve Forster executive director
American Aging Association 2103 Cornell Road, Room 5125, Cleveland 44106 (216) 368-3671/www.americanaging.org
To promote biomedical aging studies directed towards increasing the functional life span of humans
Tire Society P.O. Box 499, Akron 44309 (330) 972-7815/www.tiresociety.org
Tire Science and Technology
Annual meeting and conference on tire science and technology
An Ohio not-for-profit whose charter is to increase and disseminate knowledge as it pertains to the science and technology of tires
To foster the development and dissemination of Elyse Gustafson the theory and applications of statistics and executive director probability
Source: Information is supplied by the companies unless footnoted. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. Business lists and The Book of Lists are available to purchase at www.crainscleveland.com. (1) Source: Association websites, Associations Unlimited, individual associations. Fraternities, sororities, unions, honor societies and religious organizations are not listed.
RESEARCHED BY Deborah W. Hillyer
FEBRUARY 28 - MARCH 6, 2011
CRAIN’S CLEVELAND BUSINESS
Fairview: Clinic seeks to avoid community duplication continued from PAGE 3
new emergency department and intensive care unit. Ms. Murphy said it was too early to speculate what route Fairview might take concerning the helipad. For now, helicopters carrying patients with continue to land in Tyler Field in the nearby Cleveland Metroparks, which is about a 15-minute drive up Lorain Road by ambulance to the hospital. “We’re going to move forward with the project and look at other avenues we can take,” Ms. Murphy said.
Shifting gears Fairview’s planned renovations would come just a few months after the Clinic spruced up Hillcrest Hospital in Mayfield Heights — its eastern hub — with a $163 million campus upgrade. The Clinic is working to transform its community hospitals to ensure they aren’t duplicating services. Perhaps the most visible move the Clinic made in this area is when it eliminated more than 200 positions last November as it consolidated services and created “centers of excellence” across the health system. In the past, Ms. Murphy said, many of the Clinic’s community hospitals offered the same services and acted like competitors rather than partners. Fairview, considered by many as the Clinic’s western hub, is a key component of that restructuring. Lakewood Hospital, which sits just three miles away, has shifted many of its services to Fairview. Due to declining patient volumes, Lakewood Hospital still operates a fullservice emergency department but no longer a Level Two trauma center. Trauma patients now will be transported to Fairview along with patients who would have used Lakewood’s now-closed inpatient pediatric department, which only saw one or two patients a day. “Trying to be a community hospital that does everything just doesn’t happen anymore,” Ms. Murphy said.
technology infrastructure. “We are now in the execution phase of moving forward with these plans,” Mr. Coker said. “There’s a lot on the table to get these things done.” Mr. Coker said St. John also wants to upgrade its ambulatory network, but those plans haven’t been finalized. Also, several new programs, such as UH’s Seidman Cancer Center, are coming to St. John, which Mr. Coker said should help the hospital compete with Fairview. “The foundation of what we’re doing and the improved patient experience has helped rebuild the image of our hospital,” Mr. Coker said. ■
A look at how an updated Fairview Hospital might turn out, looking along Lorain Road. RENDERING PROVIDED
Big plans at St. John, too Though the Clinic is the largest medical provider in the western suburbs, Fairview is aware of its competitors, Ms. Murphy said. She cited Southwest General in Middleburg Heights, the MetroHealth System in Cleveland and St. John Medical Center in Westlake. Still, the rivalry there isn’t nearly as heated as in the eastern suburbs where, for one, University Hospitals recently built the $298 million Ahuja Medical Center in Beachwood, which sits down Interstate 271 from Hillcrest. “The West Side is a whole different animal,” Ms. Murphy said. St. John, jointly owned by the Sisters of Charity of St. Augustine and University Hospitals, plans to invest $100 million into its facility over the next few years, and Ms. Murphy said Fairview is keeping an eye on how the Catholic hospital uses the money. Cliff Coker, president of St. John, said the first phase of construction is expected to begin in July. Plans call for a new, 12-bed clinical decision unit for patient observations and a post-acute care recovery unit. St. John also will upgrade its main entrance and lobby. Other planned improvements include new operating rooms and an upgraded information
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Crain’s Executive Recruiter Cleveland-Cuyahoga County Port Authority VP, Planning & Development The VP of Planning & Development is responsible for providing support to the President & CEO by providing expert professional assistance and guidance to the Authority on developing and implementing the Port’s strategic plan, master facilities plan, and all other planning and project management efforts. This newly created position reports to the President & CEO. Duties & Responsibilities include: • Identifies and prioritizes capital improvement projects, including property acquisition, construction and expansion • Plans, implements and manages complex land use and environmental plans, projects and programs and monitors activities to ensure compliance with relevant federal, state and local laws • Works with the Army Corps of Engineers regarding the authorization, funding and coordination of dredge material management plan for Cleveland Harbor • Manages the anticipated construction of a new Confined Disposal Facility for dredge material and leads coordination effort with numerous private and public stakeholders • Leads planning and development efforts for the redevelopment of waterfront industrial property For a complete job description & requirements please visit www.portofcleveland.com Application Deadline: March 16, 2011 Please send cover letter and resume to: email@example.com
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FEBRUARY 28 - MARCH 6, 2011
CRAIN’S CLEVELAND BUSINESS
THEWEEK FEBRUARY 21 - 27 The big story: President Barack Obama told more than 300 members of the region’s business community — many of them entrepreneurs — that efforts by small businesses and economic development groups in the region give him confidence that the United States can compete in an increasingly competitive global economy. President Obama, who visited Cleveland State University’s Wolstein Center for the first of several Winning the Future Forums on Small Business, talked about some of his own ideas for boosting the country’s economy, such as the possibility that the federal government could give tax breaks to individuals who invest in startups.
New lease on life: Forest City Enterprises Inc. signed a lease agreement that will lead to the establishment of the new Horseshoe Casino Cleveland inside the Higbee Building downtown. The agreement is with Rock Ohio Caesars Cleveland LLC, which will use the space for Phase I of its new casino. The five-year lease, which includes extension options, is for 303,000 square feet on the lower level and first, second and third floors of the building.
A job well done: Mark Coticchia in April will resign his position as head of Case Western Reserve University’s technology transfer office. He plans to launch his own company, which would provide public and private institutions with various products and services related to business development and technology commercialization. Since Mr. Coticchia arrived at Coticchia CWRU in 2001, the university has created 29 spinoff companies that attracted more than $200 million in venture capital.
German engineering: Röchling Automotive AG of Germany plans to open a new U.S. manufacturing plant this year in Akron to supply fuelsaving engine and body undershields to Ford Motor Co. and General Motors Co. Röchling said it would invest over $10 million in the 75,000square-foot plant. The company said a third carmaker it would not identify will start sourcing parts from the plant in 2013. The new plant would be Röchling’s seventh in the United States.
In the money: The U.S. Treasury Department awarded a total of $53 million in New Markets Tax Credit allocations to two Northeast Ohio agencies authorized to disburse the valuable federal tax credits. The Cleveland New Markets Investment Fund received $35 million in tax credits and the Northeast Ohio Development Fund in Cleveland received $18 million. The Cleveland New Markets Investment Fund is operated by Cleveland Development Advisors, a supporter of catalytic neighborhood development funds. The Northeast Ohio Development Fund, operated by the Cleveland-Cuyahoga County Port Authority and economic development consultant Ariel Ventures, focuses on international trade and advanced energy.
REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS
A look behind the curtain ■ Interested in clean energy? Didn’t get a spot on the invite list when President Barack Obama came to town last week to talk small business? Never fear. I sat in on the clean energy breakout session led by Energy Secretary Steven Chu, one of five breakout sessions led by members of the Obama administration. Here’s a taste of the give and take. Jim Garrett, CEO of Vadxx Energy, a company in Cleveland that produces fossil fuels from petroleum-based waste, said the federal government should consider increasing the cap on the number of visas it gives to educated foreigners. Dr. Chu said he is “very in favor” of expanding the cap. Aaron LeMieux, CEO of Clevelandbased Tremont Electric, which has developed a generator that uses a person’s movements to recharge portable electronic devices, praised the U.S. Department of Energy’s ARPA-E program, which is designed to fund transformational energy research, but he added that it is still hard for small businesses to get money from the federal government. He said government officials should ask themselves if Thomas Edison, not General Electric, would be able to get financing for the light bulb if he invented it today. Mr. LeMieux and another entrepreneur, Bob Schmidt, CEO of Cleveland Medical Devices,
both criticized the Patent Reform Act of 2010. Mr. Schmidt said it would make patents too expensive for small businesses to attain. Mr. Schmidt added that, if Mr. Obama wants to create jobs inexpensively, he should get the federal government to put more money into research and development. “(Entrepreneurs) spend the money in the place where it provides he biggest bang for the buck,” Mr. Schmidt said. — Chuck Soder
Cohen & Co. wins valuable prize ■ Cohen & Co. in Cleveland has acquired The Lipson Group Inc. in a deal that has more than doubled the number of high-net-worth clients in the accounting firm’s family office services practice. No financial details were disclosed for the acquisition, which closed Feb. 1. Two of Lipson’s eight professionals now work for Cohen & Co., which has more than 225 employees. Anthony G. Micheli and Scott Lichtenstein will continue their work with the 50 to 75 high-net-worth families that also made the move. Family office services include tax planning, philanthropy and wealth transfer services. Acquiring the number and type of clients Cohen & Co. picked up from Lipson while adding only two employees is immediately accretive to its bottom line, said Randy Myeroff, president and CEO of Cohen & Co. It would have taken a “long time” to acquire such “top-notch” people one at a time, he said. “The clients are people who are well-known
BEST OF THE BLOGS
COMPANY: Creativity for Kids, Cleveland PRODUCT: Coloring & ARTivity Books
Excerpts from recent blog entries on CrainsCleveland.com.
Creativity for Kids has teamed with the Cleveland Institute of Art to expand a product line that the company says “takes coloring books to a new level of fun and enrichment for children.” The books feature original designs done by students from the Cleveland Institute of Art. The collaborative venture started in 2009. New titles this year are Cool Metallics Pictures & Designs and Fun Things to Color A to Z. Cool Metallics Pictures & Designs has 24 pages with “cute and trendy designs featuring unicorns, cupcakes, rainbows and butterflies.” Fun Things to Color A to Z also has 24 pages and comes with eight washable markers. Its designs “are a great first coloring and learning experience as they cover the alphabet from A-Alligators to Z-Zebras,” Creativity for Kids says.
Stop us if you’ve heard this one before ■ Here’s one of life’s certainties: When there’s a list of the country’s most affordable housing markets, Youngstown will be on it. Sure enough, CNNMoney.com said in its new list that Youngstown is the nation’s second most-affordable market, behind only Indianapolis, based on numbers from the National Association of Home Builders. The web site says 93.2% of homes in Youngstown are affordable for families earning the median regional income of $53,500. (The median home price is $68,000.) “The (Youngstown) housing market has been contracting in many communities and the population has shrunk,” CNNMoney .com reported. “Now large mansions can be purchased for less than $200,000.”
As insiders see it, this is a swell time to sell ■ Talk about a seller’s market. TheStreet.com reported that for the week that ended Feb. 11, insider selling at S&P
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in the Cleveland community, and we are privileged to have the opportunity to work with them,” he said. Alan Gordon Lipson, who founded Lipson Group in 1984, said his company approached four firms in Northeast Ohio about acquiring Lipson after Lipson lost some partners. “We had to decide whether to rebuild or that it was an appropriate time to find a home for the firm,” he said. Mr. Lipson, 67, elected not to join Cohen & Co. but plans to provide wealth preservation consulting services independently. — Michelle Park
Magnet’s incubator looks to narrow its focus ■ Magnet hopes to attract clients with the right mettle to its incubator, which it is rebranding as “The Incubator of Magnet.” David Crain, director of entrepreneurial services at the manufacturing advocacy group, said the Cleveland incubator’s 24,000 square feet is a little more than 60% full, leaving room for more tenants. Going forward, the incubator will be more targeted in signing tenants. That change means a focus on companies for which Magnet can provide not only space and office services, but also its engineering, design and manufacturing services. Not every tenant will be a manufacturer, but tenants likely will have some tie to manufacturing or engineered products, Mr. Crain said. “We want clients that are a good fit for Magnet,” he said. — Dan Shingler
500 companies outpaced insider buying by a ratio of 61.4 to 1. “According to a weekly report out of Bloomberg, the total amount of insider buying was $21.4 million and the total amount of insider selling was $1.3 billion,” the site reported. “This marked the largest amount of total selling by corporate insiders so far in 2011.” A chart of prominent companies with lots of buying and selling activity for the week ended Feb. 11 noted that insiders at Eaton Corp. “sold 239,114 shares, or $26,351,098 worth of stock, at an average price of $110.20.”
First kill the lawyers — so they can’t file flimsy copyright suits ■ “By our standards, Shakespeare was an intellectual property pirate.” That was one of the provocative statements in a New York Times letter to the editor by James J. Marino, an associate professor of English at Cleveland State University. He was responding to a Times op-ed piece, “Would the Bard Have Survived the Web?” Prof. Marino argued that Shakespeare “took his plots and characters from other writers for free. ... He routinely cribbed passages from other books.”
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