$2.00/DECEMBER 5 - 11, 2011
In construction, boom and bust Some find work plentiful on local projects; others look elsewhere By STAN BULLARD email@example.com
As steel thrusts skyward at construction megaprojects in downtown Cleveland such as the Medical Mart and Convention Center and Ernst & Young Tower, ironworkers are coming here for jobs from Los Angeles, Las Vegas and Buffalo. That’s because, for the first time
Oil, gas reps warn Ohio to limit taxes on industry Revenue forecast rosy; future worries drillers
since 2006, there is more work than the 892 members of Ironworkers Local 17 can handle, said Timothy McCarthy, business manager of the union local that serves Northeast Ohio. Meanwhile, headed out of town for work is Pride One Construction Inc. of Medina, which plans to provide construction management services for the conversion of a 12-
unit apartment building to a condominium hotel in San Lorenzo, Calif. “I’m doing it to keep the guys busy,” vice president Doug Leohr said in explaining Pride One’s cross-country stretch. Welcome to the two sides of Northeast Ohio’s construction market. Multimillion-dollar projects in downtown Cleveland have several
construction trades experiencing a boom time along with the cadre of national and local subcontractors that employ those workers. Yet other contractors are searching for work, with some hitting the road to find it. The push from the megaprojects is giving the building business in the Cleveland area a much-needed boost, but the picture is incomplete. The state’s October jobs report shows regional employment is languishing
INSIDE Akron General does well in wellness The health system is partnering with a nearby developer to replicate its successful health and wellness centers. PAGE 5 ALSO INSIDE: ■ Downtown Cleveland’s Embassy Suites hotel is in foreclosure. PAGE 4 ■ Electronic recycling is big business for Cleveland company. PAGE 9
See CONSTRUCTION Page 7
TROUBLE IN MLB TALENT SEARCH Big bonuses for top young players have been the ammo of choice for small-market baseball teams. New rules eliminate that weapon from the arsenal. By JOEL HAMMOND firstname.lastname@example.org
By DAN SHINGLER email@example.com
ong removed from the glory days of the mid- and late ’90s, the Cleveland Indians in recent years have made building their farm system the heart of their strategy for building a successful franchise. Major League Baseball’s new collective bargaining agreement, though, stands to make the strategy — also employed by other small-market ANALYSIS teams — a lot tougher to pull off. The new deal, introduced before Thanksgiving, will penalize teams that spend more on draft choices than MLB-recommended bonus allocations that vary based on records from the prior year. They’ll be dinged in the wallet, but most importantly for the Indians and others, they’ll also lose draft picks. Because small-market teams traditionally
Ohio’s burgeoning oil and gas business should add tons of money to state and local tax coffers in the coming years. But industry representatives caution public officials not to squeeze the golden goose too hard with taxes unless the state wants to risk seeing investment in their business go elsewhere. “If you do that, you’ll see capital start to drift away,” said Jerry James, president of Artex Oil Co. in Marietta and current president of the Ohio Oil and Gas Association. The association recently analyzed how drilling and exploration in the Utica shale beds, which lie beneath the eastern half of Ohio, will impact the state in taxes. It estimates the industry likely will generate $1.05 billion in additional annual tax revenue by 2015. That money would come in the form of commercial activity taxes, income taxes and sales taxes — paid by companies in related industries, too — as well as so-called “severance taxes” collected specifically on oil and gas taken from the state.
See INDIANS Page 8
WATCH YOUR WALLET Major League Baseball now will penalize teams for spending over draft bonus allocations, at times severely. The details: ■ Up to 5% over the recommendation: 75% tax ■ Between 5.1% and 10%
over: 75% tax and a loss of a firstround pick ■ Between 10.1% and 15%: 100% tax and the loss of first- and second-round picks ■ Over 15%: 100% and the loss of two first-round picks
See TAXES Page 20
LEGAL AFFAIRS Take a tour of a Cleveland law firm’s new digs, at the former East Ohio Gas building ■ Page 13 PLUS: MANAGING PARTNERS’ EXPANDING ROLES ■ & MORE
Entire contents © 2011 by Crain Communications Inc. Vol. 32, No. 49
CRAIN’S CLEVELAND BUSINESS
‘WHO TO WATCH’ NOMINATIONS We’re looking for technology up-andcomers for “Who to Watch: Technology,” slated for publication Jan. 16. If you think you know who will be among those leading the Northeast Ohio tech scene of the future, drop an email to sections editor Amy Ann Stoessel, firstname.lastname@example.org, or call 216-771-5155. Please send in your suggestions by Friday, Dec. 16. There are no hard and fast requirements for this section, other than the candidate needs to exhibit the kind of potential that makes him or her someone to watch in the field of technology. Mark your calendars for future sections: “Who to Watch: Finance” (April 23); “Who to Watch: Health Care” (July 16); and “Who to Watch: Law” (Nov. 26).
DECEMBER 5 - 11, 2011
LEADERS OF THE PACK
Only 19 of Ohio’s 88 counties had October unemployment rates below 8%, and five of them are in Northeast Ohio. Geauga County had the state’s lowest jobless rate, at 5.4%. There are 21 counties with jobless rates above 10% and a total of 42 where the rate exceeds the state average of 9%. Here’s how all seven counties of Northeast Ohio stack up against their counterparts:
■ A Nov. 21 Forty Under 40 story had the wrong high school for Greater Cleveland Automobile Dealers’ Association president Lou Vitantonio. He attended Walsh Jesuit High School. Also, the association has 250 members when counted as individual dealerships, as opposed to individual owners who can own more than one dealership.
REGULAR FEATURES Classified ........................22 Editorial ..........................10 Going Places ..................12 Letters ......................11-12 List: Largest office leases ........................19 Reporters’ Notebook ......23
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CRAIN’S CLEVELAND BUSINESS
Small retailers upbeat after Black Friday
Some local outfits report robust spending, but observers skeptical of staying power By MICHELLE PARK firstname.lastname@example.org
Myra Golden has benefited from OneCommunity’s computer training program and has formed a consulting company that works to help low-income parents receive public money for child care. Ms. Golden still takes a word processing class and an advanced computer class at the Ashbury Senior Computer Community Center in Cleveland.
COMPUTER PROGRAM LOOKS FOR POWER Area nonprofit aims to solicit community support to maintain technology training program for low-income residents By CHUCK SODER email@example.com
efore the Connect Your Community computer training program runs out of federal stimulus money, it would be well served to find partner organizations that like the program as much as its graduates do. Nearly all of the Cleveland-area residents who took the training courses and subsequently got a reasonably fast Internet connection say they would recommend the program to a friend, according
to a phone survey conducted by the program’s organizers. Now Connect Your Community aims to win similar support from businesses, school districts and nonprofits, according to Bill Callahan, executive director of the program for Cleveland-based OneCommunity, which is organizing computer training programs in Ohio and four other states. Doing so will go a long way toward supporting the courses when federal stimulus dollars run out next year, Mr. Callahan said. See COMPUTER Page 21
Beachwood eyes key commercial connection Chagrin Highlands, Commerce Park link part of larger strategy By JAY MILLER firstname.lastname@example.org
Beachwood is marking its re-entry into the economic development business with a move forward and a step back. The move forward is a plan to link the aging Commerce Park business
district to the newer Chagrin Highlands just to the south, where a new hospital has opened and Eaton Corp.’s world headquarters is going up. At the same time, however, the city lost a new hotel planned for Chagrin Boulevard when developers on Nov. 23 withdrew a rezoning bid for land at Chagrin Boulevard and Richmond Road. A citizens group had objected to putting an Aloft hotel and attached restaurants onto property currently zoned for an office building, and Mayor Merle Gorden didn’t have the support of Beachwood City Council to push
the rezoning through. Beachwood had been one of the region’s leading beneficiaries of the decades-long growth of suburban office development that began in the 1960s, but has spent nearly a year figuring out how to remake itself in the current slow-growth era. The city brought the community’s economic development effort inhouse two years ago, ending its longstanding financial support of a business attraction and retention program run by the Beachwood Chamber of Commerce. But after See BEACHWOOD Page 22
A busy Thanksgiving shopping weekend has many Northeast Ohio retail merchants dreaming of a greener Christmas, though others are skeptical the sales momentum will last. Several area businesses and shopping centers say their early sales and traffic trumped those of last year and even reached prerecessionary levels — something some view as a harbinger of a better full shopping season. American consumers, they say,
INSIDE: A closer look at consumers’ holiday shopping intentions. Page 21 are weary of keeping their wallets shut. “I think some people who were not spending … are tired of the money diet,” said Bonnie Chernikoff, who owns Bonnie’s Goubaud at Eton Chagrin Boulevard in Woodmere, where sales on Black Friday and the following Saturday were up about 6% over last year and up 14% over 2009. “They’re just saying, ‘OK, I’m done.’” Ms. Chernikoff’s women’s apparel See RETAILERS Page 21
THE WEEK IN QUOTES “Our job is to take the structure and find a way to win. Owners and players create the system, and our job is to win within the system.” — Mark Shapiro, president, Cleveland Indians. Page One
“What we’re doing, the investment we’re making, is not only good for our law firm but the city of Cleveland.” — Brent D. Ballard, managing partner, Calfee, Halter & Griswold LLP. Page 13
“As you see more and more of the government, the corporations, going green, they are now thinking, ‘Hey, where do we send our computers, our electronics, for recycling?’” — Craig Silverstein, founder, EScrap Solutions. Page 9
“Being managing partner is a lot easier when everybody’s making plenty of money. … When money gets tight, minor issues become major, and major issues become life-threatening.” — Eric Seeger, principal with Newtown Square, Pa.-based Altman Weil Inc. Page 13
CRAIN’S CLEVELAND BUSINESS
DECEMBER 5 - 11, 2011
K&D Group says foreclosure logical route for Embassy hotel By STAN BULLARD email@example.com
What IF your law firm provided Insight for the challenges at hand and Foresight for the issues on the horizon?
The gains Cleveland hotel operators hope to see once the Medical Mart and Convention Center and Horseshoe Casino Cleveland are up and running downtown won’t come soon enough for the Embassy Suites at Reserve Square, which is the subject of a foreclosure proceeding. Wells Fargo Bank of San Francisco filed suit Nov. 22 in Cuyahoga County Common Pleas Court to foreclose against Hotel at Reserve Square Ltd., a partnership led by K&D Group, after it defaulted on a $9.5 million mortgage the lender handles on the 268-room hotel at 1701 E. 12th St. K&D CEO Doug Price said the foreclosure followed an attempt by the apartment owner and developer to restructure the loan to a smaller figure that cash flow from the hotel can support. K&D owns the largest portfolio of apartments in Northeast Ohio with more than 9,000 units. “We’re committed to the hotel,” Mr. Price said last Wednesday, Nov. 30. “The hotel business has not been the best in Cleveland. It’s getting better, but the hotel has not been able to meet its mortgage obligations. Unfortunately, you can’t pick up a phone and talk to a lender, and this is the process you have to go through.” Mr. Price can’t talk to the original lender because the loan was sold into the mortgage bond market. K&D is among several Northeast Ohio real estate owners trying for such loan revisions. K&D decided to try to restructure the loan by defaulting on it, rather than carry it, Mr. Price said. The Wells Fargo lawsuit said the lender has not received monthly loan payments of nearly $60,000 since January. That delinquency triggered the default and the foreclosure case now assigned to Judge John O’Donnell. Mr. Price said the apartments at Reserve Square that K&D owns in a separate company are full and have never performed better. The hotel’s performance is improving, but Mr. Price said, but it “doesn’t make sense to continue to feed it. “Business in 2010 was not good, 2011 was a little better and 2012 will be a little better,” he said. The hotel outperforms the downtown and regional market, according to Mr. Price, but it is “still under water.”
A brighter future? Even when the new Medical Mart and Convention Center opens in 2013 and the casino opens next spring, Mr. Price said the market will
The Embassy Suites at Reserve Square in downtown Cleveland is the subject of a foreclosure proceeding. STAN BULLARD
not improve enough to change the hotel’s outlook. However, not everyone agrees with Mr. Price’s assessment. The foreclosure news surprised David Sangree, president of the Hotel & Leisure Advisors consultancy in Lakewood. “Embassy Suites is doing better than some of its competitors,” Mr. Sangree said. Mr. Sangree said the outcome was unexpected as K&D bought Embassy Suites at a low price, about $5 million in 2005, according to Cuyahoga County land records. However, Mr. Price said K&D pumped another $5 million into renovating the property, which produced the $9.5 million loan. Mr. Sangree said he expects Cleveland’s hotel business to get a boost from the new convention center and casino, but he has not quantified its size. Statistics from lodging data source STR/HotelNewsNow.com show the downtown hotel market is emerging from the 2008 downturn. On a year-to-date basis through October, the most recent period available, occupancy is up this year to 62% from 60% in last year’s like period. However, average daily room rates dipped almost 1% this year, to $108.80 from last year’s $109.79. Both the occupancy and room rates remain below the market’s last peaks of 63% and $118.77, respectively, that were hit in October 2007. However, STR data show the downtown Cleveland hotel market is out-
Small Business Employment Index inches up
Carl J. Grassi
Shawn M. Riley
Cleveland Managing Member
McDonald Hopkins LLC 600 Superior Avenue, East, Suite 2100 Cleveland, OH 44114 • 216.348.5400 www.mcdonaldhopkins.com Chicago • Cleveland • Columbus • Detroit • Miami • West Palm Beach
The November Small Business Employment Index issued by the CBiz Payroll Services unit of CBiz Inc. showed improvement from the previous month. The index, which is a barometer for hiring trends among companies with
ON THE WEB Story from www.CrainsCleveland.com. 300 or fewer employees, increased by 0.35% last month, after posting a decrease of 1.28% in October. Philip Noftsinger, business unit
performing the market as a whole.
‘Everything’s possible’ Mr. Price noted he isn’t alone in his hotel woes, as Chicago-based LR Development Co.’s Old Arcade and Hyatt Regency also are undergoing foreclosure and drew no bidders at a September sheriff’s sale. More optimistic about the hotel market’s future than Mr. Price is Gary McGauley, general manager of the Cleveland Renaissance Hotel, who said businesses increasingly are spending money on meetings; his hotel’s 2012 bookings are well ahead of where bookings for 2011 were at this time last year. Moreover, Mr. McGauley said he expects Cleveland to regain its place as a stop for statewide conventions that rotate through major Ohio cities after the new convention center opens in 2013. The old convention center’s obsolescence cost the city its place in the lineup years ago. Mr. Price said although K&D wants to retain the Embassy Suites, it plans to focus on its core apartment business and is hunting another downtown property. Judge O’Donnell has scheduled a hearing today, Dec. 5, on a Wells Fargo motion to appoint a receiver. Mr. Price said that matters little; Hilton Hotels Corp. already manages the property. Meghan O’Dell, a Troy, Mich., attorney for Wells Fargo, said its suit speaks for itself. Asked if K&D could win a principal reduction, she said, “Everything’s possible.” ■ president for CBiz Payroll Services, said the latest index indicated “mild growth in employment, consistent with our expectations that low levels of hiring would take place as we approach the holiday season.” The data show 23% reported a decrease in employee headcount while 24% and 53% maintained their number of employees.
Volume 32, Number 49 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: $2.00. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-8249373. REPRINT INFORMATION: 800-290-5460 Ext. 136
DECEMBER 5 - 11, 2011
CRAIN’S CLEVELAND BUSINESS
Akron General planning to replicate health, wellness centers System will pair with neighboring developer By TIMOTHY MAGAW firstname.lastname@example.org
More companies in recent years have flocked to wellness programs as a way of keeping their employee health care costs down, but officials at Akron General Health System say they embraced the “wellness” concept well before it was en vogue. Now, the health system wants to cash in on its wellness enterprise, as it looks to commercialize its approach to keeping folks healthy by embarking on a new joint venture — dubbed Integrative Health Partners — with a local developer to create sprawling new health and fitness centers across the country. The idea behind Akron General’s foray with Signet Enterprises, a real estate developer based in Akron, is to replicate the success of the health and fitness centers Akron General operates in Bath Township and Stow. Hospital officials say those centers have provided a solid revenue stream since they were built in 1996 and 2007, respectively.
“This whole idea has generated a lot of interest across the country because it addresses a lot of needs.” – Dr. Doug Ribley, vice president of health and wellness, Akron General Health System “These projects are very capital intensive, but we know there’s a return on investment by keeping people healthy,” said Akron General CEO Vince McCorkle. Mr. McCorkle said the new enterprise stands as a potential source of revenue for the health system as it faces declining reimbursements from private and government insurance payers. However, he couldn’t predict how much revenue the joint venture could produce given that each of the possible projects would vary in size and scope. Signet chairman Tony Manna, whose firm will underwrite and manage the future construction projects, said the idea behind the joint venture is to keep people out of the hospital, which ultimately should drive down health care costs. “It’s clear Akron General is being aggressive and thinking outside of the box,” said Mr. Manna, whose firm has been involved in health care building projects nationwide. Those projects include Summa Health System’s $25 million health center at Lake Medina as well as proton beam cancer therapy centers in California, Georgia and Maryland.
COMING UP Final 2011 business breakfast Wednesday Crain’s on Wednesday, Dec. 7, will wrap up its 2011 Ideas at Dawn business breakfast series with a panel discussion on best practices for “Hiring Rock Star Talent.” For more information or to register, visit www.Crains Cleveland.com/breakfast or call Jessica Snyder at (216) 771-5388.
A fit bottom line Akron General’s health and fitness centers integrate rehab and general fitness work in the same setting. Once patients are done with their rehabilitation work, the hope is they’ll stick with the fitness center and perhaps buy a membership. An Akron General spokesman wouldn’t provide specific numbers, but said the Bath Township center, with 9,000 paying members, has had net profits that have ranged between 20% and 25% of annual revenue over the last six years. Officials expect the center in Stow, with 4,000 members, to perform similarly. The health system is building a similar 98,000-square-foot health
center in Green, which is expected to open early next year. The $32 million project will include radiology and lab services, sports medicine, physical therapy and the medically based fitness center. Akron General contracted with Rendina Cos., a real estate firm in Jupiter, Fla., to develop the health center. The joint venture sees health systems, higher education institutions and communities as among the potential clients of the wellness enterprise. Akron General officials say they’ve already received calls from dozens of interested parties nationwide, while others have visited Northeast Ohio to tour its existing health and wellness centers to see what they might be able to build.
What Akron General Health System’s new health center in Green will look like. “This whole idea has generated a lot of interest across the country because it addresses a lot needs for health systems and communities to improve their health,” said Dr. Doug Ribley, Akron General’s vice
president of health and wellness. “We believe over the next 10 years, every health care organization in the country will have this type of facility and program,” Dr. Ribley said. ■
CRAIN’S CLEVELAND BUSINESS
BRIGHT SPOTS Bright Spots is a periodic feature in Crain’s, highlighting positive business news in Northeast Ohio. To submit information, please e-mail Scott Suttell at email@example.com. ■ The Akron/Summit Convention & Visitors Bureau said it received six industry awards for various initiatives in 2011. From the Ohio Association of Convention & Visitors Bureaus it received a first-place Middy Award for its website, www.akron .travel, and two second-place awards for the “Greater Akron Video Tour” and a social marketing event/campaign called “Summit Up!” The Ohio Travel Association presented the Akron/Summit bureau with a citation of excellence for the “Greater Akron Video Tour.” Finally, the Ohio Society of Association Executives awarded the Akron/Summit organization a firstplace Achievement Award for “Summit Up!” and a Merit Award for the 2011-2012 Akron/Summit Visitors Guide.
The Akron/Summit bureau promotes Summit County as a destination for business and recreational travel. It also manages the John S. Knight Center and Greystone Hall. ■ Two faculty members at Kent State University’s School of Library and Information Science received a National Leadership Grant totaling $219,386 from the federal Institute of Museum and Library Services. Prof. Marcia Lei Zeng and assistant Prof. Karen Gracy will use the funds to help improve access to digital resources through what is known as “linked open data,” or LOD. “With linked data technologies, libraries can efficiently reach a much wider range and more diverse data universe, and more effectively provide services to their users,” Dr. Zeng said in a statement. “Libraries can enhance their existing digital collections and services with linked data technologies and LOD resources without significantly increasing the library’s work-
load or requiring them to reengineer their existing bibliographic databases and websites.” Drs. Zeng and Gracy are developing prototype tools “to help libraries and museums connect to the unfamiliar data and metadata resources in the LOD world,” according to Kent State. “In this project, Dr. Zeng and I will be aligning metadata terms from different and diverse namespaces, which means that we will be analyzing semantic relationships among many different metadata schemas to identify areas of overlap and degrees of similarity,” Dr. Gracy said in a statement. ■ Kowit & Passov Real Estate Group announced several new deals in Northeast Ohio. Laz Cazuelas Express, a Mexican takeout restaurant with four locations in North Carolina, Florida and Ohio, will open a fifth location in March at 7205 North Aurora Road in Bainbridge, in Marketplace at Four Corners. Brad Kowit and Chuck Essreg represented the landlord on the 1,079-square-foot lease. Asian Sun Martial Arts, a martial arts school with sites throughout
DECEMBER 5 - 11, 2011
Northeast Ohio, opened its eight location last week, at 7735 Marketplace Drive in Bainbridge. Messrs. Kowit and Essreg represented the landlord on the 3,155-square-foot lease. Sally Beauty Supply has a 2,000square-foot store in the works for the first quarter of 2012 at Bruns-wick Marketplace on Center Road in Brunswick. Tori Nook exclusively represents Sally Beauty Supply throughout Northeast Ohio. EdisonLearning, a charter school, will open a new Cleveland location at 3167 Fulton Road in Lin’s Omni Square. Amy Doroba and Jim Wolf represented the landlord on the 7,000-square-foot lease. Comprehensive Pain Management Centers bought a 12,800square-foot, freestanding office building at 1560 Corporate Woods Parkway in Green. It will move there in January from 3593 S. Arlington St. in Akron. The company has seven locations in Medina, Portage and Summit counties. Michael Weiss represented the buyer. ■ Software Answers Inc. of
Brecksville unveiled new product packaging and an updated logo for its ProgressBook Suite of student, classroom and district management web solutions used by K-12 public school districts, private schools, charters and education service centers. In 2002, ProgressBook started as a single, web-based grade book application used by a handful of school districts for teachers to move hard-copy grade books to the web. Since then, Software Answers said ProgressBook has been expanded through in-house software development, product acquisition and with business partnerships. ProgressBook now is used by more than 800 school districts. Paul Chaffee, CEO and chief financial officer of Software Answers, said the repackaging and rebranding initiative “is a direct result of the continued growth of our company and product offering, as well as a desire to refresh the look of our products.” Solon marketing firm Goldstein Group Communications was hired to develop the new brand identity.
New STEM school in Rootstown appealing to rural population
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By TIMOTHY MAGAW firstname.lastname@example.org
Would-be physicians and pharmacists won’t be the only students inhabiting the Northeast Ohio Medical University’s Rootstown campus next fall. Expect a throng of high school freshmen as well. The medical school, formerly known as NEOUCOM, will house the region’s first rural STEM high school, Bio-Med Science Academy. The school, sponsored by the Rootstown Local School District, will place a heavy emphasis on science, technology, engineering, math (STEM) and — in this case — medicine. The school, which will run yearround, is looking to recruit 60 freshmen for its August 2012 opening. Most of the students will be from rural communities in Portage County. Beyond the first year, the hope is to recruit 100 additional students each year, said Stephanie Lammlein, director of the new school. “There are a lot of careers in the health care field, biosciences and engineering, and these (rural) students are not exposed to enough of them,” Ms. Lammlein said. “I want to open their eyes to this world.” Officials still are hammering out the details of where the school
“There are a lot careers in the health care field ... and these (rural) students are not exposed to enough of them.” – Stephanie Lammlein, director, Bio-Med Science Academy would be located during its first year on the NEOMED campus. However, the plan is to move the school to the university’s new wellness and education complex, slated to open in 2013, as part of a $76 million campus upgrade announced earlier this fall. Kathleen Ruff, NEOMED’s vice president for external affairs and special assistant to the president, said the university saw the STEM school as another opportunity to recruit more students to the medical school and to reach students who otherwise wouldn’t receive the specialized approach to education. “As we were looking how we can address some of the health work force shortages, one of the things we realized we needed to do was go backwards to begin to influence kids at a much younger age,” Ms. Ruff said. “This is one of the ways we can do that.” ■
DECEMBER 5 - 11, 2011
CRAIN’S CLEVELAND BUSINESS
Construction: Contractors find specializing helps draw business continued from PAGE 1
in the construction, mining and logging category; it was down nearly 7% in the Cleveland-Elyria-Mentor Metropolitan Statistical Area, to 31,100 workers this October from 33,300 in October 2010. However, employment in that category in the Akron MSA nudged into positive territory with a 14% increase to 13,600 jobs from 11,900 in October 2010. Cleveland economist George Zeller and others find it easy to cite the biggest cause of the construction market’s struggles. “We were in this huge recession because of the housing bubble bursting,” Mr. Zeller said. “Residential construction remains miserable.” Construction of single-family homes requires more workers, often nonunion, for fewer dollars than big commercial projects.
Construction Co. unit of Streetsboro-based Geis Cos., said his company’s focus on heavy-duty industrial real estate projects is bearing fresh fruit as resurgent manufacturers buy empty industrial buildings at bargain prices and retrofit them for their use. “A lot of people are knocking on our door again, although the market is tough for contractors in general,” Mr. Martin said. Mr. Martin said Geis did as many retrofit projects for clients as it did higher-profile new construction projects, including work for sister company Geis Development, which accounts for about 35% of his unit’s workload. It also is following clients out of town; 60% of its work was
“Optimism hit bottom in 2010 and has started to come back. There is some optimism, though not strong optimism.” – Roger Gingerich, partner-in-charge of the real estate and construction group, Skoda Minotti outside Ohio this year. Likewise, Adelbert “Chip” Marous, CEO of Marous Brothers Construction Co. in Willoughby, said the company added a dozen employees to its 124-person core payroll and kept busy by following clients to cities such as Washington, D.C. Marous also pursued a diverse workload that ranges from installing drywall at the Horseshoe Casino Cleveland to building
government-subsidized affordable housing for low-income residents. However, Mr. Marous said, the devastation in the construction business means his company does business differently, such as cutting checks directly to suppliers to protect itself for material costs in case subcontractors fail. Union leaders are more optimistic than business types. Terry Joyce, president of the
Cleveland Building Trades Council, said his membership will have a better holiday this year thanks to the current work. He’s confident more work is ahead, such as the planned American Greetings Corp. headquarters in Westlake, and other projects in downtown Cleveland spawned by the under-construction convention center and casino. Marous already has one of the first of the latter project: the $64 million renovation of the former Crowne Plaza hotel across East Sixth Street from the convention center. The hotel will become a Westin under its new owners, a joint venture of Sage Hospitality and Optima Management Co. ■
‘Back to where we started’ Both sides of the picture are clear for Mr. Leohr of Pride One. When the housing downturn hit in 2005, Pride One was building and selling about 80 homes a year. Now Pride One no longer builds singlefamily homes, leaving that business to national home builders. Instead, Pride One pursues small commercial construction work to sustain a staff that numbers 13 now compared with 30 in 2005. Though business for many still isn’t robust, the uptick in construction has produced some improvement in the region’s building business. The word “optimistic” is back in use, though universally prefaced by “guardedly.” Roger Gingerich, partner-in-charge of the real estate and construction group at Skoda Minotti CPAs, Business & Financial Advisors in Mayfield Village, said optimism levels among the region’s construction contractors are back to where they were in 2008, before the devastating downturn struck. “Optimism hit bottom in 2010 and has started to come back,” Mr. Gingerich said. “There is some optimism, though not strong optimism.” Mr. Gingerich’s pulse-taking is in the form of Skoda Minotti’s 4-yearold survey of trends in the construction industry. “The bleak outlook is gone and we’re back to where we started,” Mr. Gingerich said. This year, 38% of the more than 100 contractors returning Skoda Minotti’s survey said they believe there will be more opportunities in the future; that’s the same percentage as in 2008, and it’s up from 27% and 23% in 2009 and 2010, respectively. However, the No. 1 concern is unchanged: a lack of work going forward. “Several contractors are busy, but many worry about their lack of backlog for the future,” Mr. Gingerich said. Jeffrey Gliebe, CEO of Krill Construction Co. in Cleveland, illustrates the point. Mr. Gliebe said he is guardedly optimistic because, after years of discussion, many of the big local projects such as the convention center are under way, although it’s hard to see what sector will fuel broad future growth.
Who’s knocking at the door? Big local contractors say two ways they are finding business is by looking for it out of town or by pursuing specialties. Jeff Martin, president of the Geis
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CRAIN’S CLEVELAND BUSINESS
DECEMBER 5 - 11, 2011
Indians: Competing in free agency not in team’s plan continued from PAGE 1
spend the most on draft bonuses as a way to compensate for their general inability to compete for pricey free agents against top-grossing teams such as the New York Yankees and Boston Red Sox, they likely would be hurt the most by the new system. However, those clubs remain guarded in talking about it — a situation baseball observers chalk up to the power of big clubs in running the game. Consider the measured response of Indians president Mark Shapiro to the new agreement: He cites the positives, including a competitive balance lottery for small-market, low-revenue teams, the potential for greater competition in the inter-
national market and the simple matter of avoiding a work stoppage. “Our job is to take the structure and find a way to win,” Mr. Shapiro said in an interview last Thursday, Dec. 1, with Crain’s. “Owners and players create the system, and our job is to win within the system.” The pending change in the rules for spending on players in baseball’s annual amateur draft comes as the Indians’ front office executives in recent months have made good on a promise they’ve stated repeatedly throughout the team’s dry spell — that they will spend money when the time is right. In a trade with the Colorado Rockies, the Tribe last July dumped its top two pitching prospects, Alex
White and Drew Pomeranz, for starter Ubaldo Jimenez and the $21 million left on his deal. They brought back the ofteninjured Grady Sizemore on a one-year contract that could reach $9 million. They traded with the Atlanta Braves for starter Derek Lowe, and will pay $5 million of his $15 million salary. With anticipated raises to the team’s top young players through the arbitration process, the Indians’ payroll could jump back to the $70 million range from $49 million last season. It’s ironic, then, that with the Indians following through on their spending promise, Major League Baseball wants to rein them in.
Putting the hammer down Previously, teams adhered — sort of — to a bonus slotting system recommended by MLB, but there were no penalties for exceeding the slot, just a stern glare. For instance: The Indians by far exceeded the slot recommendation when they drafted Lakewood Saint Edward product Alex Lavisky in the eighth round in 2010 and paid the catcher a $1 million bonus. The MLB-suggested amount for Lavisky was $150,000. Under the new agreement’s terms, teams depending on where they pick would have from $4.5 million to $11.5 million allocated for draft bonuses for players selected in the first 10 rounds.
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The penalties for going over those allocations, though, are severe. Overages will be taxed 75% for bonuses up to 5% over the recommendation; 75% and a loss of a first-round pick for overages between 5.1% and 10% above the recommendation; 100% and the loss of first- and secondround picks for an overage of 10.1% to 15%; and 100% and the loss of two first-rounders for overages of 15% or more. Doing the math, the team with the highest bonus allocation — the Houston Astros in next summer’s draft — will start losing draft picks when they reach $12.09 million in bonuses. Six teams spent $11.5 million or more on bonuses last year, with the Pittsburgh Pirates leading the way at more than $17 million; the top three spending teams spent over $14 million. The Indians spent $8.2 million on draft bonuses this past summer, drafting from the eighth spot; the Indians spent $9.4 million in 2010. The Indians will draft in the middle of the first round next year after finishing 80-82 last season; the team’s bonus allocation, then, likely will come in around $8 million.
The picks are the thing The Indians remain unwilling and unable to compete with the league’s top spenders in free agency, so the draft remains the team’s best way to stockpile top talent (and, in the case of the Jimenez trade, turn that talent into proven major-leaguers). Thus, while it’s likely the Indians begrudgingly would stomach the extra couple million in taxes if the team went over the league’s recommendation, it appears from comments by Mr. Shapiro that they’re unwilling to forfeit the draft picks the new rules would force them to lose. “That’s true for every team,” said Mr. Shapiro, who predicted no teams would spend over their slots and thus pay the draft penalties. “Picks are of greater consequence.” Michael Weiner, executive director of the Major League Baseball Players Association, told ESPN.com in a Q&A that the union “had heard from general managers and other people in baseball operations … that they weren’t in favor of some of the proposals.” How, then, did the deal get pushed through? According to Mr. Weiner, the league “said that what (it was) trying to achieve was competitive balance. “We questioned them, really at every turn, on whether their proposals would achieve those goals,” Mr. Weiner told ESPN.com. “We did question whether restricting the ability of lowfinish clubs in any fashion to spend on the draft really was (good for) competitive balance.” Mr. Shapiro would not comment on whether the Indians were one of the teams that opposed these draft penalties, saying only that he was involved in the discussions at intermittent times and had no presence in the final negotiations between the league’s labor committee and the players’ union. But rest assured, the Indians and other small-market, dependent-on-the-draft clubs led the charge against the changes. And yet those teams still are hesitant to criticize the deal. Dayton Moore, general manager of the Kansas City Royals — which spent the third-most on draft bonuses in 2011, at just over $14 million — told The Kansas City Star, “We really believe that whatever the rules are, we have to adapt to them and be successful within the confines of the structure.” ■
DECEMBER 5 - 11, 2011
CRAIN’S CLEVELAND BUSINESS
Ratner sees solution to Tech prevalence helps e-recycler company takes advantage of focus NYC housing shortage in Cleveland on ‘green’ practices, handles old electronics modular construction By THERESA AGOVINO Crain’s New York Business
Developer Bruce Ratner thinks he has found a solution to the city’s vexing housing shortage and wants to showcase the answer at his massive Atlantic Yards Ratner project in Brooklyn, N.Y. The CEO of Forest City Ratner — an arm of Cleveland real estate giant Forest City Enterprises Inc. — wants to construct 15 apartment towers planned for the 22-acre site by using modular construction, claiming it will shave about 20% off the construction costs. He said he hopes to start assembling and constructing the first test case — a 32story, 350-unit residential building stacked on the corner of Flatbush Avenue and Dean Street — this spring. “We could build 20% more housing this way,” Mr. Ratner said. “This could be positive for the city.” Mr. Ratner faces numerous challenges. He must reach a deal with various building trade unions in which they’d agree to the lower labor costs that modular construction promises. His company also still needs to obtain financing. “At this point, we are pursing the prefabricated model,” Mr. Ratner insisted, adding that Forest City has been working on this approach for more than two years.
the soured economy. However, the $4.9 billion project’s signature element, the arena that will be the home of the Nets basketball team of the NBA, is under way and should be completed next fall. The surrounding residential buildings are slated to be built using modular units that are constructed offsite, then fitted into the steel that serves as the tower’s frames. The process has been widely used in a variety of projects, but never on a structure as tall as the one planned by Forest City. Designing a bracing system to protect against wind and other forces has been a challenge. Forest City said it believes it has overcome the problem in collaboration with SHoP Architects, Arup structural engineers and XSite Modular. If Forest City reaches a union deal and finds financing, it intends to make the modules in a factory in the city, said MaryAnne Gilmartin, executive vice president at Forest City. If the idea of building this way takes off, the factory could create modules for other developers, creating even more jobs. In modular building, roughly 60% of the construction is done in a factory. That means less congestion, noise and pollution around the building site, Ms. Gilmartin noted.
New building, more jobs
A naysayer isn’t convinced
Union officials also hope a deal can be struck. “We are in the process of attempting to reach an agreement on modular construction that will work for the building trades and Forest City in an effort to create permanent employment opportunities for our members,” said Gary LaBarbera, president of the Building and Construction Trades Council. Construction of the site has been delayed for years by lawsuits and
A factory also can be a safer environment for construction workers as they toil inside on the ground rather than outside. Still, not everyone is convinced this style of construction will be safe for residents. “Past experience has shown that designing a ‘bracing system’ for prefabricated steel buildings to protect against storms has been challenging,” said City Councilwoman Letitia James, a longtime Atlantic Yards foe. ■
Area Verizon retailer eyes bigger national profile By MICHELLE PARK email@example.com
Determined to become one of Verizon Wireless’ top national agents, an Independence-based chain of Verizon retailers has spent this year expanding aggressively, and expects to do the same next year. The Wireless Center has increased its number of locations to 34 in Northeast Ohio, up from 27 a year ago. Across its five-state footprint, which includes Michigan, Kentucky, Pennsylvania and West Virginia, the chain counts 60 locations, up from 40 a year ago. Eight more locations are slated to open yet this year. “We want to get a national contract,” said Junaid Hasan, one of The Wireless Center’s three founders. “We want to be considered not a regional player, but a national player.” He noted that an advantage
of achieving national status is being one of the first agents to sell Verizon’s newest products. The company, which conservatively expects $40 million in sales companywide this year, expanded quickly during 2011 into new markets, including central Pennsylvania and Detroit, a city where it now operates a handful of locations. By the end of 2012, the company intends to open another 15 to 20 locations in Northeast Ohio, either by acquiring other dealers’ locations or by simple expansion, Mr. Hasan said. Already, The Wireless Center is one of Verizon’s larger premium authorized retailers, according to Tony DePinto, district manager for Verizon Wireless, Northeast Ohio. “There are a few that are growing rapidly, and they are one of them,” he said. “They just do a great job for us. I can’t say enough about them.” ■
By MICHELLE PARK firstname.lastname@example.org
Thanks to the ubiquitous use of electronics and the spread of the green movement, E-Scrap Solutions of Cleveland is logging substantial growth. E-Scrap, a computer and electronics recycling company, said its staff has more than doubled since January to 28 employees from 13. It also has increased its physical space at 7510 Bittern Ave. on the city’s East Side to 65,000 square feet from 43,000, said Craig Silverstein, who founded the company in January 2007. E-Scrap obtains materials, such as cell phones, televisions, computers and monitors, and sells them for scrap or to dealers that refurbish them for reuse. “As you see more and more of the government, the corporations, going green, they are now thinking, ‘Hey, where do we send our computers, our electronics, for recycling?’” Mr. Silverstein said. “I’m definitely not surprised,”
Mr. Silverstein said of E-Scrap’s growth. “I don’t believe we’re slowing down at all.” He anticipates the company will add at least 10 employees in the coming year. Plus, he expects to open a second recycling and processing center in another state by the second quarter of 2012. The entire electronics recycling sector has grown dramatically in recent years. According to a recent report by International Data Corp. of Framingham, Mass., the sector employed more than 30,000 full-time workers in 2010, up from 6,000 in 2002, and collected and processed domestically more than 3.5 million tons of end-of-life electronics last year, up from 600,000 tons in 2002. “It’s clearly an industry that’s growing now and has even more room for additional growth,” said Kevin Lawlor, spokesman for the Institute of Scrap Recycling Industries, which represents recyclers. “People are purchasing and using more electronic products, and given that, they’re recycling them more.”
“(Electronics recycling is) clearly an industry that’s growing now and has even more room for additional growth.” – Kevin Lawlor, spokesman, Institute of Scrap Recycling Industries
E-Scrap’s clients include a couple hundred local schools, companies in Northeast Ohio and nationwide, and government entities. In addition, EScrap hosts roundups where residential users can drop off electronics. Most of the company’s new hires are people who work on the disassembly line, where they take apart computers and other items, Mr. Silverstein said. The volume of materials brought in for recycling or reuse is up 25% to 30% in 2011 from last year, he noted, and revenues are up about 25%. The privately held company does not disclose revenue figures. A good portion of the company’s growth, Mr. Silverstein noted, occurred after E-Scrap attained two industry certifications this year. “Some companies will not deal with you unless you are certified,” he said. ■
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CRAIN’S CLEVELAND BUSINESS
DECEMBER 5 - 11, 2011
Brian D. Tucker (email@example.com) EDITOR:
Mark Dodosh (firstname.lastname@example.org) MANAGING EDITOR:
Scott Suttell (email@example.com)
new year is just around the corner. It’s a perfect time for a wounded Republican Party to get back in the good graces of Ohio voters by resolving to eliminate a gaggle of tax breaks that do little but deprive the state of needed revenue to balance its budget. It’s unfortunate that Gov. John Kasich and the Republican-controlled Legislature haven’t attacked unnecessary tax loopholes with the same zeal they showed in taking on public employee unions over the state’s collective bargaining rules. Voters last month rebuked the governor and his colleagues for passing Senate Bill 5 as they repealed with 61% of the vote the law that whacked the collective bargaining rights of public employees. Here is an opportunity to regain some of that lost goodwill. Republicans don’t need to look hard to start the process. As we first noted in this space in mid-April, the state’s own Tax Expenditure Report provides a list of 128 “tax expenditures” — tax breaks that take the form of exemptions, deductions and credits and collectively add up to more than $7 billion in revenue that the state forgoes each year. These tax breaks go on and on, without a formal review as to whether individual breaks produce enough economic benefit to merit their existence. Even business interests agree that it shouldn’t be this way. A year ago, the Ohio Chamber of Commerce and the state’s eight largest metropolitan chamber of commerce groups (including the Greater Cleveland Partnership) issued a report titled, “Redesigning Ohio: Transforming Government into a 21st Century Institution.” Included in the report’s valuable contents is a recommendation to implement a regular and comprehensive tax expenditure review to determine which tax breaks are worth the cost of retaining and which are not. As the report notes, tax breaks can be valuable economic development tools, provided they yield increased investment and employment in the state. An example is the Ohio Motion Picture Tax Credit, which significantly has increased the number of films made in Ohio and the jobs associated with them. On the flip side, we must ask whether it’s worthwhile for the state to bypass an estimated $211 million in revenue in the current fiscal year by exempting the first $1 million of a business’s annual taxable gross receipts from Ohio’s already-low commercial activity tax rate. Instead, each taxpayer pays just $150 on the first $1 million. Reducing the number of tax breaks makes for sensible tax policy. That’s because the fewer exemptions that exist, the greater the ability of the state to spread out the tax burden in a way that could lower rates for all businesses. Ohio Republicans could seize the political upper hand going into the 2012 elections if they were to make the elimination of various business tax breaks a key part of their agenda next year. Some of the largest business groups in the state have given them the cover to do so. They should take advantage of this opportunity for a fresh start while they still have it.
FROM THE PUBLISHER
Read this week’s paper? Kasich hasn’t
he Honorable John Kasich Riffe Center Columbus, Ohio
don’t take that as an affront. My opinion, after all, is worth about as much as yours, and it all depends on who’s doing the reading or listening, right? DEAR GOV. KASICH: Since you’ve been elected, much has been said and written about your shootYou and I haven’t met yet, which is from-the-hip style, and it certainly can unfortunate, given the fact that your have its drawbacks. I, for one, find it Cleveland office is a short two refreshing to have a governor blocks from ours. Perhaps one who doesn’t carefully weigh BRIAN of these days you’ll meet with every word, worried about that TUCKER our editorial board for a discushour’s poll results. sion of issues important to the And while the jury’s still out, I business community in Norththink your idea about privatizing east Ohio. economic redevelopment could It is a sincere invitation, and I have a great upside for our state, extend it with the full knowledge and Mark Kvamme certainly that you don’t seem to much seems to have been a great value the work done at newspa“get” for your administration. pers, at least according to some Now, back to your speech at comments you made last week at a the Columbus College of Art & Design, speech. I don’t know if you lump busiduring which you shared the fact that ness newspapers into this group or not, you “rarely read a newspaper.” Granted, but that’s beside the point, really. We’d you’re not alone in that regard. Professtill like to meet. sional athletes and coaches have for I’m sure that if you don’t read newspayears been claiming they don’t read critpers, then you pay even less attention to ical stories written about them. It makes columnists like me. And believe me, I them more comfortable, which is what
you hinted at in your remarks. “I have found my life’s a lot better if I don’t get aggravated by what I read in the newspaper,” you said, and elaborated by saying that you read some stories and “things I need to know about.” I’m guessing many of those are these positive stories and editorials, including ones from Crain’s, that your staff distributes to media across the state. I’m guessing that you think those stories and editorials that support your view and praise your administration are OK to read. It’s just those critical ones that are so darned annoying. While I hope you and your team are wildly successful, I worry about folks who say they don’t read newspapers because they don’t want to get “aggravated.” We need a governor keenly attuned to what’s happening around this state, and reading newspapers could be the easiest and most effective way to achieve that. Perhaps at one of the most critical junctures in its history, Ohio needs citizens who are well-informed, and reading your local newspapers is part of that process, even when they criticize you. ■
THE BIG ISSUE A new study says the average American today is nearly 20 pounds heavier than the average American in 1990. Should government have a role in getting people into shape?
EMILY HONSA HICKS
No. I think the government should stay as far out of it as possible. … It becomes (a matter) of individual health care issues.
The government does have a role, but at bottom it is an issue of personal responsibility. We have a responsibility to ourselves, our family and our communities to eat properly and to exercise adequately.
There’s a failure of education, (especially) at the lowest income levels. … (Education and) subsidies should be tailored to nutritious food. There are opportunities for government to be involved.
No. There’s already too much government influence in our lives. … But I think it is a major issue. We have to police ourselves, so to speak.
➤➤ Watch more of these responses by visiting the Multimedia section at www.CrainsCleveland.com.
DECEMBER 5 - 11, 2011
CRAINâ€™S CLEVELAND BUSINESS
Fudge, other pols have compromised â– Following the failure of the congressional super committee to find solutions to our federal deficit, Brian Tucker in his Nov. 28 commentary stated, â€œRight now, none of them â€” except for Rep. LaTourette â€” has had the courage to say that itâ€™s time to compromise and do whatâ€™s right,â€? a reference to Steve LaTouretteâ€™s renounced pledge to Grover Norquist to never raise taxes. If courage is measured in compromise, Mr. Tucker completely overlooked or was unaware that Rep. Marcia Fudge has called for compromise and recognized the need for it â€” before the column was written. Let me share with your readers some of the statements she made in a recent radio interview: â€œWhen you are in a legislature, the whole thing is the art of compromise. If you are unwilling to compromise, you are really not doing justice to your position. â€œTwo-thirds of the American people â€” that being Republicans and Democrats alike â€” want a balanced approach to balancing the budget. Which means looking at the revenue side and looking at the deficit side, but nobody wants to do that. â€œI talk to a lot of people just to find out where we can find some common ground.â€? Still not convinced? â€œI mean, we all have what we call our sacred cows. Everybody has them. But at some point we have to be able to find something that is going to move us forward.â€? The congresswoman said and believes all of those things. She has reached across the aisle numerous times in her first two terms. In July, she successfully worked with Republicans to win approval of the Schiff-Fudge-Bass Amendment to the Energy and Water Appropriations bill. This measure boosts funding for ARPA-E (Advance Research Projects Agency-Energy). Modeled after the highly successful defense program, DARPA, the ARPA-E initiative will enable companies and academic researchers to pursue highrisk/high-reward research on energy. The boost in funding was appropriately offset with cuts elsewhere in the federal budget and will reverberate directly in our local economy with projects under way or being sought by local partners such as Case Western Reserve University. Mr. Tuckerâ€™s column missed the mark regarding Congresswoman Fudge. Mr. Tucker is correct â€” compromise is urgently needed to move this nation forward. So is a policy to responsibly address the fact that approximately five Americans are looking for work for each available job. The complex issues facing our nation require someone willing to look at all sides. Sheâ€™s demonstrated that over time, with no pledge to back off from now when the going gets tough. Belinda Prinz Communications director U.S. Rep. Marcia L. Fudge
Cutting deficit may start with healthier lifestyles â– In Brian Tuckerâ€™s Nov. 28 commentary headlined, â€œA pox on the cowards in Washington,â€? he congratulated U.S. Rep. Steve LaTourette for declaring that he would no longer feel compelled to abide by Grover Norquistâ€™s â€œno new tax pledgeâ€? as he works to develop solutions to our current federal fiscal crisis.
LETTERS He also encouraged readers to contact the rest of the congressional delegation representing Northern Ohio to â€œdemand that they start acting like responsible adults who care more about their constituents than they do about their powerful Washington positions.â€? He specifically named U.S. Reps. Marcia Fudge, Dennis Kucinich, Betty Sutton, Marcy Kaptur and Jim Renacci. I totally endorse Mr. Tuckerâ€™s praise of Steve LaTourette, and I called his office to thank him. The last thing we need is to have our members of Congress pandering to the demands of lobbyists over the needs of their constituents. However, I take issue with Mr. Tucker lumping all the other delegates into the same basket. Of the group he listed, Jim Renacci is the only one who signed Grover Norquistâ€™s pledge ... and he did it this year. Readers should call him at 202225-3876 and tell him to renounce his pledge to lobbyists. I have been following the work of the other representatives, and I donâ€™t see them kowtowing to â€œWashington positionsâ€? as Mr. Tucker suggests. I see them fighting for the programs their constituents tell them they want supported. So, your readers need to call them to clarify which programs to support and which ones to oppose. Quite frankly, the domestic discretionary programs that get the most attention donâ€™t matter very much from a budget deficit perspective and they already have been cut significantly. These include all earmarks, and most of the budgets of the Departments of Agriculture, Education, Energy, Health and Human Services (excluding Medicare and Medicaid), Housing and Urban Development, and Justice, as well as the Environmental Protection Agency and the National Aeronautics and Space Administration. Since 1960, domestic discretionary spending has ranged from 3.2% to 5.2% of total federal government spending. They are projected to account for 4.3% in 2011, drop to 3.2% by 2014, and reach a new record low of 2.8% in 2016. To put this in perspective, 24% of our federal budget was spent on military in 2010, not including veteransâ€™ benefits. Should we keep cutting discretionary programs? In my opinion, the answer is no, for the most part. We need to make sure our spending is limited to programs that are efficiently managed and producing outcomes we value, but we should avoid most cuts that will result in job loss or harm our still-fragile economy in any way. Our current deficit is caused by two basic problems: During the past 10 years, federal spending has been increasing and tax revenues have been decreasing. Historically, tax revenues and spending have been about 20% of gross domestic product (GDP), but in 2011, tax receipts are expected to be only 14.4% (the lowest of any major nation in the world) while spending is expected to reach 24.1%. So, we are literally spending 67% more than we are taking in. Tax revenues dropped because of the Bush-era tax rate cuts, and because the people who had lower earnings during the recession paid lower taxes. These two factors cost about $3.2 trillion and $3.9 trillion respectively.
Spending increased because of the wars in Iraq and Afghanistan ($2.3 trillion), the economic stimulus ($1.7 trillion including TARP and the recent payroll tax cuts) and President Bushâ€™s Medicare prescription drug program ($600 billion). We did not raise taxes to pay for our new spending and we did not cut spending to pay for the tax cuts. Were these good investments? In my opinion the recent stimulus spending was a very good investment. It prevented a depression despite precipitating economic conditions that were worse than those of the Great Depression; shifted our GDP from declining at a 6% annual rate to increasing at a 2% annual rate; doubled the value of the stock market; stopped job losses that reached a high of 800,000 jobs per month; and stimulated an average of 100,000 new private-sector jobs per month for nearly two years. Where should we focus our attention going forward to reduce the deficit? Economists project that 52% of our long-term spending will be on Medicare and Medicaid, 20% will be on Social Security and 28% will be on everything else, assuming we donâ€™t get involved in any more wars. As such, we need to control the costs of Medicare, Medicaid and Social Security. How can we do that? Helping people improve their health may be the best way to control these costs, and improving lifestyle practices may be the most effective way to improve health. In fact, 70% of chronic diseases (such as cancer, heart disease and diabetes) are caused by tobacco, lack of exercise and poor nutrition. Chronic diseases account for 75% of all medical costs, 83% of Medicaid costs and 96% of Medicare costs. If
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CRAIN’S CLEVELAND BUSINESS
DECEMBER 5 - 11, 2011
GOING PLACES JOB CHANGES DISTRIBUTION ROSCOE MEDICAL: Daniel A. Radish to CFO.
EDUCATION NORTHEAST OHIO MEDICAL UNIVERSITY: Fayez F. Safadi to professor, Department of Anatomy and Neurobiology and Ohio Research Scholar.
FINANCE FIFTH THIRD BANK, NORTHEASTERN OHIO: David Dannemiller to senior commercial banker.
FINANCIAL SERVICE MCMANAMON & CO.: Daisy Yu to associate. WESTERN RESERVE PARTNERS LLC: James R. Petersen and Alexander J. Trouten to analysts.
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BENESCH: Michael J. Meyer, LaVonne E. Pulliam, John J. Thuermer and Megan C. Zaidan to associates. DAY KETTERER: Blake R. Gerney
to partner; Mark J. Scarpitti and Kimberly K. Wyss to members; Danielle A. Higgins to associate.
MANUFACTURING BRENNAN INDUSTRIES: Matt Stahr to customer service manager.
MOEN INC.: Andrea Conroy to director of marketing, Retail Business Unit.
NONPROFIT AIDS FUNDING COLLABORATIVE: Melissa Federman to director. CLEVELAND HEARING & SPEECH CENTER: Dr. Maria O’Neil Ruddock to coordinator, Training and Outreach Services; Jinai Amos to development associate; Katie L. Richlick to development coordinator; Eugene Carroll to billing specialist; Roberta Peterson to outreach specialist; Raisa Santana to data specialist; Jill Hazelbaker to speechlanguage pathologist. THE HOLDEN ARBORETUM: Stephen Sedam to senior director of development. SHAKER HEIGHTS PUBLIC LIBRARY: Maureen Nicholas Brodar to youth services manager.
SERVICE ANDERSON BIRO LLC: Kent Bondi to director, Credit and Collections Division. S&P DATA LLC: Charisse Sayles to human resources director, North America.
TECHNOLOGY PARAGON CONSULTING INC.: Anne Smith to office administrator; Nicole Kuzius to quality assurance consultant; Mark Merritt to network support technician; Barb Anthony and Adam Rock to developers.
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ASSOCIATION OF CORPORATE COUNSEL — AMERICA, NORTHEAST OHIO CHAPTER: Elizabeth A. Rader (Cleveland Clinic Foundation) to president; David G. Slezak to vice president; Dena Kobasic to secretary; John D. Moran to treasurer.
CJN FOUNDATION: Susan C. Levine to president; Gayle I. Horwitz and Eric Rubin to vice presidents; John B. Hexter to secretary; Alan Yanowitz to treasurer.
ASSOCIATION OF INDIAN PHYSICIANS OF NORTHERN OHIO: Dr. Arun Gupta (South Pointe Hospital) received the Distinguished Physician of the Year Award.
CLEVELAND INSTITUTE OF ART: Michael Schwartz to vice chair and chair-elect.
NATIONAL ACADEMY OF HUMAN RESOURCES: Joseph B. Ruocco (Goodyear Tire & Rubber Co.) was named a Distinguished Fellow.
NATIONAL ORGANIZATION OF SOCIAL SECURITY CLAIMANTS’ REPRESENTATIVES: Debra S. Shifrin (Shifrin Newman Smith) to vice
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we improve health, we not only reduce the cost of Medi-care and Medicaid, we also increase the number of years people are able to work so they do not need to retire early. This increases tax receipts paid to Social Security and decreases the number of years people collect Social Security. To increase physical activity, improve nutritious eating and reduce tobacco use, we need to improve access to affordable nutritious foods, provide places and time for people to be physically active and help people quit smoking or never start. We also need to reform
our tax system to make sure we collect enough taxes to cover the costs of whatever we decide is most important for our nation. I am willing to pay more taxes to do that, and I think most citizens are as well. Michael P. O’Donnell Editor in chief American Journal of Health Promotion
WRITE TO US Send your letters to: Mark Dodosh, editor, Crain’s Cleveland Business e-mail: email@example.com
CRAIN’S CLEVELAND BUSINESS
DECEMBER 5 - 11, 2011
16 IN SOME CASES, PARALEGAL HIRING ON THE RISE.
The renovated Calfee Building was home to East Ohio Gas Co. in 1916.
CALFEE BUILDING ON HISTORY Law firm set to move into renovated structure that first opened in 1916 as home to East Ohio Gas By AMY ANN STOESSEL firstname.lastname@example.org
here have been times when Brent D. Ballard, managing partner of Calfee, Halter & Griswold LLP, has felt like he was living out an episode of “This Old House.” “Every time you open a wall, there’s something that needs to be done,” Mr. Ballard said during a recent tour of the circa-1916 building that soon will be home to the law firm’s downtown Cleveland offices.
But the attorney’s personal version of reality TV soon will be coming to an end. Calfee’s nearly 300 employees are slated to move into the renovated space at the end of this month, occupying 100% of the 115,000-square-foot building, which will carry the law firm’s name. Located at East Sixth Street and Rockwell Avenue, the historic seven-floor structure that originally was constructed for the East Ohio Gas Co. had in recent years fallen into a state of disrepair and neglect. What once served as East Ohio’s See CALFEE Page 17
ABOVE: Brent D. Ballard, managing partner of Calfee, Halter & Griswold LLP, says the new Calfee Building represents an investment both in the firm and in downtown Cleveland. LEFT: As part of the renovations, what once was used as a parking garage is undergoing a transformation back into a lobby. JANET CENTURY PHOTOS/ RENDERINGS AND PHOTOS PROVIDED
Managing partner title harder to define in a few words By MICHELLE PARK email@example.com
Leaders’ roles expand as organizations adjust to new industry realities
Aronoff LLP characterizes his debut as “walking into a tsunami.” Months after Mr. Kaplan became the attorney responsible for running the firm while maintaining a book of business, The Great Recession began, hurtling challenges at him he hadn’t anticipated.
ra C. Kaplan thought he had the wind at his back when he became managing partner of a local law firm in January 2008. Business had boomed the year before. In retrospect, the leader of Benesch, Friedlander, Coplan &
He and other managing partners continue to grapple with added pressures. A survey conducted in April and May revealed that law firm managing partners and chairs across the country are concerned about pricing pressures, erosion of demand,
continuing growth in profitability and the retirement and succession of Baby Boom lawyers. “Being managing partner is a lot easier when everybody’s making plenty of money,” said Eric Seeger, a principal with Newtown Square, Pa.-based Altman Weil Inc., the
legal consulting firm that conducted the survey. “When money gets tight, minor issues become major, and major issues become lifethreatening.” Today’s firm leaders are questioning their service delivery models and seeking ways to improve efficiency, Mr. Seeger explained. Perhaps this is a sign of how See PARTNERS Page 18
14 CRAIN’S CLEVELAND BUSINESS
DECEMBER 5 - 11, 2011
Patent law now focuses on first to file vs. first to invent
What do you look for in a law firm?
n Sept. 16, President Barack Obama signed the Leahy-Smith America Invents Act, or AIA, the most comprehensive overhaul to the United States patent system since 1836, to encourage invention and create jobs.
Here are some highlights of the new law:
First to file replaces first to invent Under the America Invents Act, the U.S. patent system is changed from a first-to-invent to first-inventor-to-file system, which is similar to most foreign jurisdictions. However, there is a one-year grace period for public disclosures made by the inventor or by someone who obtained the subject matter from the inventor. (Effective for patent applications and patents issued 18 months after enactment.) Interference proceedings eventually will be replaced by derivation proceedings, with the current system remaining available for certain legacy patents and applications. Derivation proceedings can be initiated by inventors who believe that a published application or patent covers an invention that was derived from their own work. A newly formed Patent Trial and Appeal Board will hear the arguments. Publicly known information, or prior art, will be measured against
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the application filing date, instead of the date of invention, and it will include public use or sale in and outside the United States. The prior art status of a U.S. patent or patent application claiming the benefit of a previously filed foreign patent application will be determined from the foreign priority date and not the U.S. filing date. Determining whether an invention is obvious will be analyzed as of the effective application filing date and not the date of invention.
Third-party challenges Currently, third parties may request an issued patent be re-examined by requesting ex parte (limited participation by the requestor) or inter partes (greater participation by the requestor) re-examination. Under the AIA, third parties will have more opportunities to participate during the examination process and after issuance. During examination, a third party may submit prior art, along with an explanation of its relevance to a pending application. After issuance, a third party will have two new post-issuance review proceedings at its disposal effective one year after the enactment of the AIA: ■ A new inter partes review proceeding will require a third party to request a re-examination of an issued patent by showing a reasonable likelihood of prevailing as to the invalidity of at least one claim. Third parties requesting ex parte re-examination still will only have to present a substantial new question of patentability. ■ A post-grant review proceeding, which must be filed within nine months of a patent’s date of issuance, may be based upon several grounds, including anticipation and obviousness. The new proceeding also may consider any failure to satisfy the enablement and written description requirements for filing a U.S. patent application.
A petitioner will be required to show that it is “more likely than not” that at least one claim is unpatentable. Post-grant review proceedings will take effect one year after enactment and apply to patents filed 18 months after enactment. In subsequent U.S. Patent and Trademark Office or litigation proceedings, the petitioner will be stopped from raising invalidity arguments that were raised or reasonably could have been raised in prior post-grant and inter partes review proceedings.
Litigation-related provisions While a patent application still must disclose the best mode of use, failure to disclose the best mode is no longer a basis to claim invalidity. Individuals may no longer bring false marking claims without proof of actual damages. The recovery of $500 per article is limited to the U.S. government. Inventors may “virtually mark” products with the word “patent” or “pat.” and a publicly available Internet address associating the patented article with a patent number. Failure by an accused infringer to obtain the advice of counsel with respect to any allegedly infringed patent or to present such advice at trial may no longer be used to prove either willfulness or intent to induce infringement. Different accused infringers of the same patent, making different products, no longer can be joined in the same lawsuit.
Miscellaneous provisions The USPTO may set its own fees necessary for recovering its operating expenses, which will result in a 15% increase in many fees charged to applicants. Within 10 days of enactment of the AIA, for a $4,800 fee, applicants may request for expedited examination of a filed application in which a final determination of patentability is made within one year of filing their application. These are only some of the provisions of the America Invents Act. Understanding all of the changes and implications requires a far more detailed analysis. ■ Mr. Diamant is a partner in the Cleveland office of Taft Stettinius & Hollister LLP. Also contributing to the article was Stephen F. Rost, an associate in the firm’s Indianapolis office.
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16 CRAINâ€™S CLEVELAND BUSINESS
DECEMBER 5 - 11, 2011
Firms cite economic reasons for rise in paralegal use By MICHELLE PARK email@example.com
mid the gloomy reports about fewer job prospects for recent law school grads comes a sunny forecast for another law profession: The hiring of paralegals is up and projected to stay that way. Ursuline College in Pepper Pike has seen a moderate increase in the number of paralegal jobs employers are advertising to its list of students and alumni, said Anne Murphy Brown, assistant professor and director of the schoolâ€™s legal studies program. â€œItâ€™s been very encouraging,â€? Ms. Brown said, noting how recruitment of paralegals had slowed when the economy tanked in 2008. Major Legal Services LLC in Cleveland has observed a similar trend. Though the legal executive search firm does not keep hard statistics on paralegal job searches, it has received calls from in-house legal departments seeking to increase their paralegal staffs, said Deborah Peters, director of recruiting. In addition, smaller law firms have been hiring paralegals to assist with work that may have been handled previously by junior attorneys. â€œDuring recessions, corporations tend to retain more (legal) work inhouse, so the increase in corporate
recruiting fits that pattern,â€? said Dennis J. Foster, president of Major Legal Services. â€œSmaller firms tend to charge less, so their firms benefit during a tough economy.â€? Employment of paralegals and legal assistants is projected to grow 28% from 2008 to 2018, much faster than the average for all occupations, according to the U.S. Department of Laborâ€™s Bureau of Labor Statistics. â€œEmployers are trying to reduce costs and increase the availability and efficiency of legal services by hiring paralegals to perform tasks once done by lawyers,â€? the BLS reported in its 2010-2011 Occupational Outlook Handbook. â€œDemand for paralegals also is expected to grow as an expanding population increasingly requires legal services, especially in areas such as intellectual property, health care, international law, elder issues, criminal law, and environmental law.â€?
What clients want The increased use of paralegals â€” who often are tasked with gathering and summarizing a variety of documents â€” is not occurring everywhere in Northeast Ohio: A number of area law firms reported their paralegal use has not spiked. However, many local law professionals are seeing increased paralegal hiring by in-house legal de-
partments. Most of the postings to Ursulineâ€™s network have come from corporations, Ms. Brown said, though she declined to identify them. Cleveland law firm Tucker Ellis & West LLP has been growing its paralegal ranks probably 10% year over year for a few years, according to managing partner Joe Morford. Today, the firm employs 35 paralegals and 105 lawyers in Cleveland â€” â€œa big ratio,â€? Mr. Morford says. Client demands are a big reason for that situation, he said. â€œTimes are tough for companies, and they want efficiency from their outside counsel, and paralegals can help us provide that,â€? Mr. Morford said. â€œThe clients are more concerned with cost control than they ever have been before.â€? Also, Tucker Ellis has ramped up the nationwide litigation itâ€™s doing out of Cleveland, and that means more need for paralegals, he said. â€œI think, across the board in the legal industry, thereâ€™s a lot more respect for the paralegal position than may have existed decades ago,â€? Mr. Morford said. â€œWhen the economy was starting to turn, people started turning to paralegals and saw the terrific work that they could do for them.â€? Squire, Sanders & Dempsey is using paralegals for more than it has in the past, though Joe
Rodgers, the principal who oversees paralegals in the firmâ€™s Cleveland litigation department, canâ€™t say thereâ€™s been a marked increase in their number in the recent year. He, too, cited cost as a motivator. â€œYou may have in the past used (paralegals) for organizational purposes. Now, theyâ€™re being asked to bring different skills to the legal environment,â€? Mr. Rodgers said. â€œTheyâ€™re on the cutting edge of technology.â€?
Putting the â€˜eâ€™ in paralegals Employers today expect more experience, particularly in technology such as e-discovery, from paralegals, Ursulineâ€™s Ms. Brown said. Most also are seeking candidates with bachelorâ€™s degrees whoâ€™ve been trained by programs approved by the American Bar Association. To that end, Ursuline Collegeâ€™s program became ABA-approved in 2007, and two years ago added an advanced legal technology class to its curriculum. â€œThe paralegals that are coming into the field need to know how to use this stuff,â€? Ms. Brown said. Some argue the increased use of paralegals is more bad news for recent law school graduates, but Ms. Brown doubts it. â€œItâ€™s not the same job,â€? she said. Leaders at Tucker Ellis say theyâ€™re not hiring fewer lawyers because
theyâ€™re hiring more paralegals. And Squire Sandersâ€™ Mr. Rodgers notes that paralegals are working hand in hand with attorneys. â€œWhat a first-year (associate) might have been doing can now perhaps be done by a paralegal, and a younger associate can turn to other things instead of spending time and client resources on something that can be done by a skilled paralegal,â€? Mr. Rodgers said. In the short term, lawyers may need to work to figure out where in the legal service delivery chain they can add the most value as they delegate more tasks to paralegals, said James Wilber, a principal with legal consulting firm, Altman Weil Inc. Lawyers no longer may be paid for content and process, but for counseling and advocacy only, he said.
â€˜Efficiency means everythingâ€™ Mr. Wilber isnâ€™t saying itâ€™s going to happen quickly, but he believes the legal profession is on the brink of a new surge in the use of paralegals. He cites, as others do, the intense focus on legal expenses by clients and changes to the law firm business model. As more attorneys make the move away from the traditional billable hour to fixed fees, â€œefficiency means everything to make a profit,â€? Mr. Wilber said. He cites, as an example, his current
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Calfee: The Right Move
1405 East Sixth Street, Cleveland, OH 44114 | calfee.com
DECEMBER 5 - 11, 2011
CRAIN’S CLEVELAND BUSINESS 17
Calfee: Energy efficiency features integrated continued from PAGE 13
showroom for gas appliances was even being used as a parking garage. “You could see what that lobby used to be like,” said architect Bob Porter of his first impressions of the building. Mr. Porter’s firm, Vocon Inc., is designing Calfee’s space. The building, on the National Register of Historic Places, also served as home to a number of other businesses, including KWY radio and WKYC-TV, Channel 3, before going dark after a failed attempt to put condominiums in the building. Vacant since the early 2000s, the structure now has a more certain future; Calfee has signed a 20-year lease with options for additional years. “What we’re doing, the investment we’re making, is not only good for our law firm but the city of Cleveland,” said Mr. Ballard, who did not disclose Calfee’s costs for the renovations, which started in summer 2010.
Making it work The newly named Calfee Building — for which the developer is Steve Calabrese and the structure’s architect is Sandvick Architects — ultimately is a mix of old and new. “People work differently today,” Mr. Ballard said. “We’re able to drop into this historic structure a 21st-century law firm.” The building features smaller individual offices (even for the firm’s partners), with more emphasis placed on open spaces for informal gatherings and meeting with others. “This really is about the way lawyers are working,” Mr. Ballard said. “This is about firing people up.” It’s an office design that is catching up to the legal industry, according to Mr. Porter. “The trend is more work gets done when we collaborate with other people,” he said. Historic tax credits were used for the project, which means there were added stipulations to the design. For example, all aspects of the twostory atrium’s historic shell needed to remain visible, meaning ceilingto-floor walls could not be used in the wide open space. The solution: glass dividers, some of which can be made temporarily opaque for privacy purposes. Also now located within the parking-garage-turned-lobby are a fountain, seating and reception area. Conference rooms and a food service section, including café-style booths and seating as well as space set aside for a market, are on the upper level. Calfee also has incorporated other amenities such as an exercise room and rooftop garden. “Ultimately you want people to be healthier,” Mr. Ballard said. Plans are in place to apply for gold level Leadership in Energy and Environmental Design (LEED) certification, standards that are particularly challenging given the age of the building, according to Mr. Porter. Green features include waterconserving fixtures, efficient lighting controls and a white roof, which reduces heat gain and will lessen the building’s overall energy usage.
Cleveland pride For Mr. Ballard, a native of Northeast Ohio, the project is nothing short of a labor of love. “We’re really part of the revitalization of downtown Cleveland,” he said. “Look at all the things that are happening a block from where
JANET CENTURY PHOTOS
ABOVE, RIGHT: Calfee law firm employees soon will move into the new Calfee Building at East Sixth Street and Rockwell Avenue, which is undergoing major renovations, as managing partner Brent D. Ballard demonstrates. we’re standing.” Not only is the managing partner excited to be close to projects such as the medical mart and convention
center, he sees the building as the perfect place for his law firm. “It sort of fits us like a glove, now and in the future,” he said. ■
MY BENESCH “Technology companies face unique legal issues. Thankfully, we don’t face them alone.” MIKE BRODERICK Co-founder & CEO Turning Technologies
According to Inc. magazine, Turning Technologies is the fastest-growing privately held software company in the nation. They also top the Weatherhead 100 list. In less than seven years, Turning Technologies has grown to 110 employees with distribution in 84 countries, which presents some interesting legal challenges. That’s why they trust Benesch as their general counsel. Our team approach gives Turning Technologies access to legal experts with a wide array of specialties ranging from global IP protection and human resources to mergers and acquisitions.
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Featured attorneys (left-right): GREGG EISENBERG, CHRISTOPHER REUSCHER, ROSS J. KIRCHICK, MARK AVSEC, BRYAN SCHWARTZ, STEVE AUVIL, M. CASEY KUCHARSON, RICK TRACANNA, BRYAN JAKETIC and JOSEPH GROSS. © 2011 Benesch Friedlander Coplan & Aronoff LLP
18 CRAINâ€™S CLEVELAND BUSINESS
DECEMBER 5 - 11, 2011
Partners: Time management one of biggest challenges continued from PAGE 13
daunting leading a firm is today: Altman Weil is working with a number of firms that need to transition to the next managing partner but are having difficulty finding candidates willing to do the job, Mr. Seeger said.
â€œYou canâ€™t be complacent. ... Itâ€™s a constant effort to try to be better tomorrow than we are today.â€? â€“ Ira Kaplan (below), managing partner, Benesch, Friedlander, Coplan & Aronoff LLP
â€˜Multi-ring circusâ€™ Even in better economic times, the role is a challenge. At the same time managing partners are tasked with running a firm, they also serve clients. James Aronoff cites Oct. 28 as a prime example. Mr. Aronoff, who became partner-in-charge (or local managing partner) in Cleveland for Thompson Hine LLP on Jan. 1, had spent months, probably a year, planning the firmâ€™s annual lawyers meeting in the city. Mayor Frank Jackson was scheduled to greet some 350 people at 4 p.m. that Friday. The phone rang at 1. A local company had just finished negotiating the terms of the sale of a couple properties it had developed and would need a draft of the deal doc-
uments by Saturday morning. Mr. Aronoff gathered a team to handle the matter and, with a cou-
ple minutes to spare, arrived to greet the mayor and introduce him to the lawyers. Later, Mr. Aronoff
returned to finish initial drafts. â€œIt was classic, it really was,â€? Mr. Aronoff said of the dayâ€™s â€œmultiring circus.â€? â€œThe biggest challenge is time and time management,â€? said Mr. Aronoff, who oversees approximately 330 people in Thompson Hineâ€™s largest office, including 130 lawyers. â€œFrom my perspective, to manage an office of our size, to do it right, is effectively a full-time job. To practice and serve the clients that I serve in a way that I would like could also be a full-time job. So the biggest challenge has been figuring out where to find that balance.â€? Naturally, a managing partner ends up spending less time on client matters. â€œYou really donâ€™t have a choice,â€? said Mr. Kaplan, who oversees seven Benesch offices and approximately 350 staff and attorneys. As Mr. Kaplanâ€™s days have involved more travel and strategic planning, other partners have assumed added responsibilities and stepped into relationships with firm clients, he said.
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Orchestra leader and team psychologist are two descriptions Larry Oscar gives the job he, too, performs. Mr. Oscar, whoâ€™s CEO (in essence, managing partner) of Hahn Loeser & Parks LLP in Cleveland, measures his success, in part, in the growing number of projects the firm, which employs 267, is being hired to handle. â€œThose things donâ€™t happen without tremendous amounts of teamwork,â€? he said. Mr. Kaplan accepted the reins of Benesch with the goal of helping it reach the â€œnext plateauâ€? through growth and â€œhopefully effective management.â€? The firm was among many to reduce its spending and to cut staff and compensation after the economic downturn. â€œThat was not fun,â€? he said. â€œA lot of really wonderful people â€Ś were affected in not a good way.â€? Another challenge to the job, Mr. Aronoff said, is managing dozens of partners, many of whom, if not all, want a say in decision-making. To tackle the challenge, he has worked to improve communication and
collaboration. Today, as he enters his fifth year as managing partner, Mr. Kaplan is proud of the way Benesch is implementing its strategic plan. He notes, for example, how the firm closed a merger with an Indianapolis firm in March 2010 and has completed a lot of lateral hiring that has been accretive to the firm. â€œI think itâ€™s exciting because you can make a difference in your business,â€? Mr. Kaplan said of being managing partner. â€œThe jobâ€™s not done by any means,â€? he added. â€œNever. You canâ€™t be complacent about how you run your business. Itâ€™s a constant effort to try to be better tomorrow than we are today.â€?
A penny for her thoughts For Anne L. Meyers, the job is done. Ms. Meyers shed her managing partner title in September after 17 years of leading the small firm she founded, Meyers, Roman, Friedberg & Lewis in Woodmere. It has been an interesting transition to no longer be responsible for what needs to happen, she said. Indeed, a friend gave her a piggy bank, and Ms. Meyers inserts coins when sheâ€™s not minding her business. She put in a handful of quarters the first week alone, she admitted. But donâ€™t let her piggy-bank deposits fool you: This former managing partner is glad not to wear that hat anymore. â€œI now have the benefit of being able to practice law â€Ś without having to carry the weight of the day-to-day and the ongoing responsibility to manage the firm,â€? she said. Her successor, Peter Turner, has found his first three months on the job â€œextremely demanding,â€? particularly mastering the juggling act between managing his law practice and the firm. He doesnâ€™t take for granted that Ms. Meyers is around, and consults with her probably weekly, he said. â€œShe formed the firm and has been managing it since 1995,â€? Mr. Turner said. â€œSo sheâ€™s been there, done that. â€œThereâ€™s a lot to be done,â€? he added. â€œItâ€™s a learning experience. Iâ€™ve got a lot to learn; I know that.â€? â–
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DECEMBER 5 - 11, 2011
CRAINâ€™S CLEVELAND BUSINESS
LARGEST OFFICE LEASES RANKED BY SQUARE FEET
Address City, Zip
Adecco USA Inc.
US1 Real Estate
The Timken Co.
Allegro Realty Advisors Ltd.
Ohio Realty Advisors
The Plain Dealer Building
1801 Superior Ave. Cleveland, 44114
Allegro Realty Advisors Ltd.
Cresco Real Estate
200 Public Square
Cliffs Natural Resources Inc.
Jones Lang LaSalle
Grubb & Ellis
6060 Parkland Blvd. Mayfield Heights, 44124
1240 Huron Road
Greater Cleveland Partnership and COSE
PlayhouseSquare Real Estate Service
4781 Richmond Road
Warrensville Heights, 44128
Marcus Thomas LLC
Grubb & Ellis
47 N. Main St.
Austen BioInnovation Institute of Akron
Allegro Realty Advisors Ltd.
S. Water St. & Erie St.
CB Richard Ellis
US Bank Centre
1350 Euclid Ave. Cleveland, 44115
Grubb & Ellis
6400 Rockside Road
Miami Jacobs Career College
One Cleveland Center
1375 E. Ninth St. Cleveland, 44114
Vorys, Sater, Seymour and Pease LLP
Allegro Realty Advisors Ltd.
3875 Embassy Parkway Fairlawn
Munsell Realty Advisors Inc.
9199 Market Place Broadview Heights, 44147
United Food and Commercial Workers Union, Local No. 880
Skylight Office Tower
1660 W. Second St. Cleveland, 44113
SSA- Office of Disability Adjudication and Review
CB Richard Ellis
190 Montrose West Ave. Akron, 44321
Bryant & Stratton College
Cresco Real Estate
Titan Realty Group LLC
4875 Higbee Ave.
CB Richard Ellis
1 2 3 4 5 6 7 8 9 10 11 12
16 17 18
Corporate Park of Beachwood
3355 Richmond Road Beachwood, 44122
1100 Cherry Ave. SE
124 E. Hines Hill Road
Luttner Real Estate Investment Services
25777 Detroit Road Westlake, 44145
R.E. Warner & Associates Inc.
Jones Lang LaSalle
Park Center Plaza III
6050 Oak Tree Blvd. Independence, 44131
Jones Lang LaSalle
Commerce Park IV
23240 Chagrin Blvd. Beachwood, 44122
Howard Wershbale & Co.
Jones Lang LaSalle
Southwest General Middleburg Medical Center
18780 E. Bagley Road Middleburg Heights, 44130
Southwest General Health Center
Crescendo Commercial Realty LLC
700 Graham Road
Cuyahoga Falls, 44221
Metropolitan Regional Service Council
3875 Embassy Parkway Akron, 44333
Virtual Hold Technology
Grubb & Ellis
John Dellagnese & Associates
City Center Tower
300 Tuscarawas St. W. Canton, 44702
Tri-State Realty 244 LP
1621 Euclid Ave., Suite 610 Cleveland, 44115
24950 Country Club Blvd.
North Olmsted, 44070
CB Richard Ellis
CB Richard Ellis
The Genesis Building
6000 Lombardo Centre, Suite 200 Seven Hills, 44131
Cresco Real Estate
222 S. Main St. Akron, 44308
Arcadis U.S. Inc.
Jones Lang LaSalle
Jones Lang LaSalle
Massimo D'Milano Building
1400 W. 25th St. Cleveland, 44113
Grubb & Ellis
Grubb & Ellis
Landerbrook Corporate Center One
5900 Landerbrook Drive Mayfield Heights, 44124
The King Group
1255 Euclid Ave., Suite 300 Cleveland, 44115
4141 Rockside Road
The King Group
Crown Centre 1
5005 Rockside Road Independence, 44131
Cresco Real Estate
One Chagrin Highlands
2000 Auburn Drive Beachwood, 44122
RAV Financial Services LLC
Jacobs Real Estate Services LLC
Embassy Corporate Park
3700 Embassy Parkway Fairlawn, 44333
Munsell Realty Advisors Inc.
24651 Center Ridge Road Westlake, 44145
CB Richard Ellis
400 Third St. SE
Chesapeake Energy Corp.
Cresco Real Estate
23293 Commerce Park
Mercantile Property Management
One Harvard Crossing
20800 Harvard Road Highland Hills, 44122
The King Group
Summit Park Square, Bldg. A
3320 W. Market St. Fairlawn, 44333
Dan Marchetta Realty Inc.
65-75 Erieview Plaza Cleveland, 44114
City of Cleveland, Department of Health
Cresco Real Estate
One Cleveland Center
1375 E. Ninth St. Cleveland, 44114
Mobile Hyperbaric Centers LLC
CB Richard Ellis
Gatto Group Inc.
King James Office Park, Point VI
24651 Center Ridge Road Westlake, 44145
Premier Physicians Center
CB Richard Ellis
22 23 24 25 26 27 28
32 33 34
37 38 39
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. Individual lists and The Book of Lists are available to purchase at www.crainscleveland.com. Source: Information provided by CoStar Group Inc. www.costar.com and the tenant and landlord representatives. Information is for Ashland, Ashtabula, Cuyahoga, Erie, Geauga, Huron, Lake, Lorain, Mahoning, Medina, Portage, Stark, Summit, Trumbull and Wayne counties for Oct. 1, 2010, through Sept. 30, 2011 and includes new leases.
RESEARCHED BY Deborah W. Hillyer
CRAIN’S CLEVELAND BUSINESS
DECEMBER 5 - 11, 2011
Taxes: Drillers fear adjustment in budget shortfall 401(k) auto enroll option increases participation continued from PAGE 1
About $670 million of the increased receipts would go to the state itself. Another $129 million would go to Ohio’s counties, while municipalities would see an estimated $255 million in additional revenues. The association did not estimate what it thinks drillers’ total tax contribution will be, just the amount of new taxes it estimates will be generated by work in the Utica shale. It engaged economist Jack Kleinhenz, president of Kleinhenz & Associates in Cleveland Heights, to make the estimates. “It’s not small potatoes,” Mr. James asserts, noting that total state, county and local government tax receipts in Ohio could grow by 4% by 2015, just from the Utica shale activity. Total tax revenues taken in by all state and local government entities in Ohio was about $23.8 billion in 2010, according to the association. On top of the taxes that all businesses pay, Ohio currently taxes natural gas that’s extracted from anywhere in the state with a severance tax, which other producing states also have in place. In Ohio, the tax is a flat fee — 2.5 cents for every thousand cubic feet (MCF) of gas that is produced, according to Heidi Hetzel-Evans, spokeswoman for the state’s Division of Oil and Gas Resources Management. According to data from the Commonwealth Foundation, a freemarket think tank that has been fighting higher taxation of shale gas in Pennsylvania, most other states tend to have severance taxes that are expressed as a percentage of what the driller receives when it sells the gas. Those taxes range from as low as 2% for some produc-
tion in Colorado to as high as 7.5% in Texas and 8% in Kansas, Commonwealth found. For comparison purposes, Ohio’s flat fee of 2.5 cents per MCF works out to be about 7.5% of the roughly $3.30 per MCF that Ohio producers currently receive when they sell their gas, according to Mr. James. But the current sale price of that gas is quite low, he said, and if the price eventually goes up as drillers hope, Ohio’s take remains the same — and thus decreases as a percentage of drillers’ revenues. If gas were to go to $4.50 per MCF, which still is a low price by historical standards, Ohio’s tax would amount to about 5.6% of a driller’s revenue from gas sales. Before the shale gas boom reduced the price for natural gas in 2009, drillers were getting about $8 per MCF — and at that price, Ohio’s severance tax would be only 3.1% of their revenues. Right now, Ohio is offering drillers a fair deal, according to Mr. James, and that’s one reason they are eager to develop the state’s shale gas deposits. “The state’s current tax and fee structure is very fair and ensures that Ohio can compete with other oil-and-gas producing regions worldwide,” Mr. James said.
A tempting goose However, oil and gas producers worry that Ohio legislators will turn to them for more revenue by taxing them more heavily in the future, especially if the state faces budget shortfalls like it has in recent years. Squeezing producers in that manner could turn out to be counterproductive, according to Mr. James. “Eventually, because profits are small and fleeting, they kill the goose
“Eventually, because profits are small and fleeting, they kill the goose that could lay the golden eggs.” – Jerry James, president, Artex Oil Co.; president, Ohio Oil and Gas Association
that could lay the golden eggs,” Mr. James said. There likely will be calls for higher taxes on the industry, though, and some observers already say drillers should pay more in taxes to operate in the state. Among them is Teresa Mills, founder of the Buckeye Environmental Network and currently the Ohio children’s health organizer for the Center for Health, Environment and Justice in Columbus. Ms. Mills said she fears the industry already is gathering its forces to escape paying for damage to roads and other infrastructure near the operations. The damage is caused largely by the truck traffic required to conduct a hydraulic fracturing operation, which involved drilling into deep shale beds and breaking them up with hydraulic pressure to release gas and oil. Each well that extracts oil and gas via so-called “fracking” requires hauling up to 1,000 tanker trucks of water, according to industry data, and many rural road systems weren’t designed to handle such loads, Ms. Mills said. “Should they be taxed more? Yes, and some of that money should go to the affected local communities that are going to be hit and have no funding for (road) repairs,” Ms. Mills said. Ms. Mills said some areas, such as Jefferson County in Ohio, near Steubenville, have forced gas companies to enter road-use agreements that require drillers to repair and maintain the roads they use.
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Already, though, some state legislators are considering a law banning local communities from entering such agreements, said Ms. Mills, whose assertion is backed in recent news items on the situation in Jefferson County.
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The industry isn’t opposed to paying its fair share, Mr. James said, but is concerned when it hears comments such as those expressed by Ms. Mills. For every dollar a driller now makes in revenue, Mr. James said, about 75 cents goes toward construction and drilling of the well, and another 12 to 15 cents is paid in royalties to the owner of the land where the drilling takes place. After paying taxes that already are in place, drillers make only about six cents in profit for each dollar of gas they sell, he said. If those profit margins decrease further, drillers may go elsewhere, he said. Ms. Mills doesn’t buy that argument. The gas under Ohio won’t go away, even if drillers do leave. So the state should be less afraid of taxing this industry than it is of taxing others, such as manufacturing, she said. “Of course they’re going to say that,” Ms. Mills said. “They’re saying the same thing in Pennsylvania: ‘If you don’t let us do this, we’re going to take our rigs out of your community.’ … That’s just blackmail.” Mr. James said it isn’t blackmail; it’s simple economics. Ohio’s shale gas is a major find, but it’s far from the only one in the United States, let alone the world. And most of the companies grabbing up leases in Ohio are big producers — the kinds of companies that have the resources and abilities not just to pack up and move to Pennsylvania, but to move to Arkansas, Montana or even other countries such as Brazil, or on the continent of Africa. “It’s already a tough business to make money in,” Mr. James said. “If you raise taxes, you decrease investment.” ■
Adding an automatic enrollment feature to 401(k) plans can have a significant impact on plan participation, according to a new analysis. On average, 82% of employees whose employers have an automatic enrollment feature participate in 401(k) plans compared with an average participation rate of 55% for plans without the feature, according to the Fidelity Investments analysis. The difference in plan participation rates is especially striking among younger employees. The average participation rate among eligible employees ages 20 to 24 is 76% in plans with automatic enrollment, compared with 20% in plans without automatic enrollment. At the same time, more employers are embracing automatic enrollment. This year, 21% of 401(k) plans that Boston-based Fidelity administers offer automatic enrollment, up from just 2% five years ago, according to the Fidelity analysis, which is based on plans its administers for about 11.7 million participants. Among the largest plans — those with at least 50,000 participants — 63% offer automatic enrollment, up from 12.5% in 2006. Under such programs, employees who don’t choose one way or another are automatically enrolled unless they specifically object. Automatic enrollment was given a big boost in 2006 when Congress passed legislation removing certain roadblocks that discouraged employers from offering the feature, while later Labor Department rules gave employers offering automatic enrollment programs protection from fiduciary liability if they met certain requirements. ■
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DECEMBER 5 - 11, 2011
CRAIN’S CLEVELAND BUSINESS
WEEKEND OUTLOOK The National Retail Federation commissioned a nationwide survey to gauge shoppers’ holiday shopping attitudes, and found a record 226 million shoppers visited stores and websites over Black Friday weekend, up nearly 7% from 212 million last year. More findings: Have you or will you go holiday shopping this Thanksgiving weekend?
Retailers: Shoppers cross off holiday list, buy for themselves continued from PAGE 3
and accessories boutique was one of an “overwhelming” number of stores at Eton that recorded better sales this year over last, said Aryn Derryberry, Eton’s general manager. About half of the 48 shops and restaurants there are locally owned. Likewise, traffic during Black Friday and the following Saturday at Legacy Village “definitely felt pre-recessionary,” said Marcie B. Gilmore, the lifestyle center’s general manager. Fourteen of its 56 retailers are locally owned, she noted. “I don’t think I talked to a single retailer … that said their traffic was down,” Ms. Gilmore said. Legacy Village has been open for eight Thanksgiving weekends, and this year’s traffic probably cracks the top two or three, she noted. “I think consumers’ confidence is up,” Ms. Gilmore said. Nationwide, the amount of money spent — $52.4 billion — and the number of consumers shopping this Thanksgiving weekend were the highest since the National Retail Federation began tracking the figures in 2005, said the group’s spokeswoman, Kathy Grannis. However, the National Retail Federation does not break out whether shoppers patronize large or small retailers.
Barking up the right tree Several Cleveland-area business owners said 2011 is a better year to be a small retailer, thanks in part to the mass advertising of Small Business Saturday, an effort launched last year by American Express. The Furry Nation, a Lakewood shop that sells pet supplies and American-made toys for cats and dogs, doubled the sales on Small Business Saturday that it normally does on a “good Saturday,” and probably did 125% of what sales are on an average Saturday, said owner Kat Berger. In contrast, last year was not terribly successful, Ms. Berger said. And Revive, which sells fair trade items including handcrafted apparel, over the Thanksgiving weekend recorded about 75% more sales year-over-year at its Cleveland Heights shop, while its Legacy Village location did fewer sales on Black Friday and about the same on Saturday and Sunday. Owner and director Lisa Dunn found it “fascinating,” as the Legacy Village location regularly outperforms the other store on those days. Some customers preferred the intimate, non-mall experience, she said. Another thing Ms. Dunn and other business owners credit for their early holiday success: Shoppers didn’t need to go dashing through the
snow to get to them, as the weekend was atypically warm. Ms. Dunn is among the optimistic who believe better sales during the Thanksgiving weekend will mean higher sales throughout the season. “I am seeing more people purchasing for themselves, and that has not been as frequent or as common in the past few years,” she said. “If people are purchasing, rather than just going and buying for others, that’s a pretty big indicator that things are looking up for them.” Another indicator, she added, is the customers she saw were more relaxed, staying and talking longer, rather than displaying the “buy and leave mentality.”
On the other hand … Stephen Hotchkiss isn’t convinced. An assistant professor of international business at Notre Dame College in South Euclid, Mr. Hotchkiss predicts seasonal spending will be up only marginally when all is said and done. He cited “very high” consumer debt, “very low” personal savings, the spottiness of new employment opportunities and the federal government’s political indecision. Jagdip Singh also is skeptical. “By all accounts, the Thanksgiving weekend sales numbers have raised hopes and renewed national optimism,” said Mr. Singh, the H. Clark Ford professor of marketing at Case Western Reserve University’s Weatherhead School of Management. “Yet, they represent an unexplainable and, largely unsustainable, consumer exuberance that fails to fit other economic data.” Several economic challenges still loom, he said, citing Congress’ challenge to balance the budget and elevated unemployment. “In my mind, the jury is out if the shift in consumer confidence is going to be lasting,” he said. “We need to see more data over time (that’s) not driven by deep discounting.” The retail practice of Deloitte, one of the Big Four accounting firms, forecasts that total holiday spending will be up a moderate 2.5% to 3% nationwide from last year. According to the firm’s survey of holiday spending, 36% of Ohio respondents plan to spend less on the holidays than last year, 53% said they would spend the same and 11% said they would spend more. Among the 36% of Ohioans who say they’ll spend less, the top reason cited was higher food prices (66%), followed by higher gas prices (55%), concern about the economy (52%) and a worse household financial situation (51%). ■
Computer: Students praise program continued from PAGE 3
OneCommunity in March 2010 received $18.7 million from the American Recovery and Reinvestment Act of 2009 to help organizations in eight cities ramp up efforts to help people on low incomes learn to use a computer and help them find a way to afford Internet access. Participating organizations provided those services on a smaller scale before the stimulus dollars arrived and will continue to do so once the money is spent, Mr. Callahan said. However, if training providers can get partner organizations to share some of the costs, they could prevent their programs from shrinking too much, he said, noting that Cleveland-area organizations are training about three times as many people as they were before the stimulus money arrived. “Nobody involved wants or intends to go back to where they were at,” he said. For instance, the Cleveland Housing Network, which provides training to Cleveland-area residents, has been talking to the Cleveland Metropolitan School District about incorporating the courses into the district’s programming for
parents, Mr. Callahan said. In some cities, participating organizations have worked with businesses, colleges, government agencies and other nonprofits interested in training their employees and others with whom they work. “There’s a value to (the employers) as well as a value to their employees,” he said.
Golden opportunity About 98% of the 624 program graduates who completed the phone survey said they would recommend the program to a friend. Nearly half of the respondents said they entered the Cleveland Housing Network’s training program partly to expand their job opportunities. Of that group, 44% since have found a new job, received a promotion, entered work training programs or started a business. Myra Golden falls into that group. After graduating, Ms. Golden formed a consulting company that works with a local nonprofit, helping low- income parents receive public money for child care. Ms. Golden recently retired from Cuyahoga County’s Employment and Family Services Department because some of the early childhood-related func-
tions she focused on now are handled at the state level. The simple computer skills she gained at that job wouldn’t be enough to do the work she does now. “When you get up to date with technology, it really does increase your confidence,” Ms. Golden said. All survey respondents were drawn from a list of 1,800 graduates of the Cleveland Housing Network’s training program, all of whom had Internet connections as of June 30. About 1,500 had entered the Cleveland Housing Network’s program by that date, including many who did not get Internet access and some who did not complete the training, Mr. Callahan said. He noted that OneCommunity recently reached an agreement with a nonprofit called Mobile Citizen that would give all Connect Your Community participants the option to buy a low-cost computer and a year of cellular Internet service for $120 to $160. People who take the courses like them because they understand they need to know how to use a computer, given that it’s hard to apply for jobs without one, Mr. Callahan said. “It’s the everything machine,” he said. ■
CRAIN’S CLEVELAND BUSINESS
DECEMBER 5 - 11, 2011
Beachwood: Cohesive economic development strategy in works continued from PAGE 3
“Am I disappointed? Probably,” he said. “We know we have to do certain things to attract development.”
seeing the cost of in-house economic development soar to $500,000 a year, which included overseeing a business incubator program, Beachwood decided it couldn’t afford the effort. The city lost its economic development director, Vincent Adamus, last March, and closed the incubator a year ago. It since has commissioned two consultant studies to help the city develop a strategy for going forward. It hired Brad Sellers to oversee its economic development plans on an interim basis, but Mr. Sellers, now mayor-elect of Warrensville Heights, will leave at the end of the month. Mayor Gorden said a search is under way for staff to replace Mr. Adamus, now vice president of real estate and business development at the Greater Cleveland Partnership business advocacy group. The mayor said the decision of developers to scuttle plans for a 135-room, $12 million Aloft hotel was a disappointment, and he acknowledged the city needs to do a better job of planning to attract new development.
Contact: Phone: Fax: E-mail:
Ready to spend? Beachwood has two consultant reports in hand — one on developing a strategy for Commerce Park and the other the first step in developing a master plan for marketing the city for business attraction and retention. The mayor and a fractious city council now must come up with that master plan. How much division exists among city leaders is unclear. The council never took a formal vote on the hotel rezoning. However, veteran council member Saul Eisen said last Wednesday, Nov. 30, that he had the four votes needed on the sevenmember council to block the rezoning supported by the mayor. Hotel developer Scott Berkowitz told Crain’s last Thursday, Dec. 1, that he will pursue other locations in the eastern suburbs for the hotel. Mr. Eisen said he believes business retention and attraction need to be near the top of the city’s priorities, along with bolstering the housing
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– Saul Eisen, council member, City of Beachwood stock and improving traffic, especially along the Chagrin Boulevard corridor. The difficulty of moving traffic through areas where residential streets intersect with Chagrin and Richmond Road was a factor in organized resident opposition to the new hotel. “We are developing a plan,” Mr. Eisen said. “We know it’s going to cost money to make money.” In October, a team of consultants led by Columbus-based SZD Whiteboard advised the city to consider offering grants or tax credits to companies that add jobs. They also suggested creating a tax increment financing program that would redirect new property tax revenue to pay for property or infrastructure improvements. For its first step, city council is expected to approve at its next
meeting, which is today, Dec. 5, the purchase of a building at 23456 Mercantile Blvd. for $1.5 million. The city intends to tear down the building to make way for a road that would connect Commerce Park to Chagrin Highlands. The city believes a physical connection between the two adjacent business districts will help it redevelop and market the older area. “We know that as new businesses open up in Chagrin Highlands we’ve had inquiries for office space” in Beachwood, Mayor Gorden said last Wednesday. “We have space available.”
In need of an update The Ahuja Medical Center of University Hospitals opened in Chagrin Highlands earlier this year. Mayor Gorden said he expects the hospital and the planned opening in late 2012 of Eaton’s headquarters will attract new businesses to the city. But Commerce Park needs sprucing up to complement Chagrin Highlands. Commerce Park once was an area dominated by light manufacturing
“We are developing a plan. We know it’s going to cost money to make money.”
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and warehousing, but has become home to training facilities, schools and other nonindustrial uses to the point where 15% of the land area is in the hands of tax-exempt or government agencies, according to the city’s Commerce Park study. In addition, Mayor Gorden estimated that Commerce Park has a vacancy rate approaching 30%. The Commerce Park study, produced by Oxbow Engineering Inc. of Painesville, noted that buildings in the 200-acre district are approaching obsolescence and need either extensive remodeling or demolition to make way for more attractive new properties. The city also is considering allowing office buildings in the northwest corner of Commerce Park to be replaced by a residential or mixed-use project. In September, three office buildings facing foreclosure — Commerce Park I, II and III — were bought for $4.1 million by a development group that includes NRP Group LLC, a Garfield Heights developer known for its residential projects. No plans have been announced for the complex. ■
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DECEMBER 5 - 11, 2011
CRAIN’S CLEVELAND BUSINESS
THEWEEK NOVEMBER 28 – DECEMBER 4 The big story:
Shale gas development is pumping more money into Northeast Ohio, as Houston-based VAM USA announced it will spend $57 million to build a steel finishing mill in Youngstown. The company said the new mill would be attached to a $650 million tubular steel mill V&M Star is building in Youngstown. VAM said its finishing mill would open in phases, beginning in the middle of 2012, and would encompass 200,000 square feet. The company said it expects to hire 100 people for the plant, which is to be fully online by the end of 2013. The larger V&M Star plant, about a million square feet in size, is expected to open by the end of next year and employ as many as 400 people.
A race for deals: SuperTrapp Industries announced its second acquisition in a little over a month by unveiling its purchase of Fluidyne Powersports Inc. of San Bernardino, Calif. SuperTrapp, a maker of performance exhausts for automotive and recreational vehicles, bought Fluidyne, which it will operate as a subsidiary called FPS Racing, for an undisclosed sum. FPS manufactures high-performance radiators, oil coolers and accessories for dirt bikes, ATVs and other off-road vehicles. On Oct. 27, SuperTrapp acquired JayBrake, a Springville, N.Y.-based manufacturer of custom hand and foot controls for Harley Davidson and other high-end motorcycles.
Making us hungry: A local food truck pioneer and an established area restaurateur are shifting the mobile street fare concept into a 6,400-square-foot bricks-and-mortar site in downtown Cleveland that’s scheduled to open by the end of March. Chef Chris Hodgson, of food trucks Hodge Podge and Dim and Den Sum, and Scott Kuhn, owner of Washington Place Bistro & Inn and three other restaurants, are opening Hodge’s in the space occupied by the Hodgson French eatery Zinc, 668 Euclid Ave., which is within shouting distance of East Fourth Street. The restaurant will employ about 50 individuals. Zinc is scheduled to close at the end of December. Ready to roll: Forest City Enterprises Inc. said its Forest City Real Estate Asset Services unit was selected by the Georgia Department of Transportation to lead a project team in the development of a multimodal transportation hub in downtown Atlanta. Forest City is partnering in the project with Cousins Properties Inc. and The Integral Group, both based in Atlanta. Forest City will be responsible for fee-based master planning for the project, which will be developed on a 119-acre site in the city. The Cleveland-based real estate giant said specific responsibilities will include coordinating planning, engineering and architectural activities.
Priming the pump: The state of Ohio began accepting applications for InvestOhio, its new small business job creation tax credit program. InvestOhio offers a 10% state income tax credit on cash investments in qualifying small businesses of up to $10 million. To qualify, the investment must add to an existing business. It cannot be used for the purchase of the entire business or for an asset acquisition.
In the mood to expand: Ambiance Inc. is spreading the love to Columbus. The Clevelandbased retailer of women’s intimate apparel this month will open its eighth location, at 175 E. Campus View Blvd., just north of Interstate 71 off state Route 23 in Columbus. It currently has four stores in the Cleveland area and one each in the Akron, Canton and Youngstown markets.
REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS
Fast money, and more of it ■ Running in Cleveland just became a little more profitable. Prize money at the Rite Aid Cleveland Marathon will increase for next May’s race and its sister 10-kilometer event, organizers said last week. It will rise to $3,000 for the men’s and women’s marathon winners — up from $2,000 apiece last May — and $2,000 for the men’s and women’s 10K winners — up from $1,500 each. The men’s marathon winner will receive an extra $3,000 if he breaks 2 minutes 20 seconds, and the women’s winner will earn the same bonus if she beats 2:40. Course records are 2:10:29 and 2:30:15, respectively. “The increase in prize money should draw more elite runners in our marathon and 10K events and make for an even more exciting finish line,” executive director Jack Staph said in a news release. Participation rose to 18,300 runners in May, and race officials report registrations already are up 30% over this time last year. — Joel Hammond
encourage hospitals to find ways to reduce unnecessary and costly emergency room visits. MetroHealth has done similar work with its heap of uninsured patients through its “partners in care” program, where each patient is assigned a medical team to help manage his or her care. — Timothy Magaw PHOTO PROVIDED
Runners start the 2010 Rite Aid Cleveland Marathon in downtown Cleveland.
■ MetroHealth is getting more hands-on with Medicaid patients who use its emergency room a tad too frequently, and the effort appears to be paying off for the hospital that is subsidized by Cuyahoga County. As part of an 18-month pilot project, the health system targeted 15 patients who
repeatedly came to MetroHealth’s emergency room for non-emergency conditions. Using a team of case managers, managed care representatives and primary care docs to design a specific care plan for each patient, the health system was able to reduce the number of emergency room visits for the pilot group by 36%. Dr. Alice Stollenwerk Petrulis, MetroHealth’s medical director for case management, said the health system was able to better coordinate patient care by essentially hounding patients to follow up with primary care doctors. The effort was so successful that MetroHealth has expanded the program to as many as 50 emergency room regulars, Dr. Petrulis said. The hope, she said, is to share MetroHealth’s model with other hospitals in the city and across the state. “As a single system, it’s getting to be a big load, but what it tells me is that intensive case management works,” Dr. Petrulis said. The original pilot project was spurred by a statewide initiative by the Ohio Department of Job and Family Services to
BEST OF THE BLOGS
A payoff for hounding patients at MetroHealth
Excerpts from recent blog entries on CrainsCleveland.com.
COMPANY: Ridgid Tool Co., Elyria PRODUCT: TriStand chain vise Model 460-12 The company says it has expanded its line of portable TriStand chain vises with the introduction of the Model 460-12. Ridgid’s TriStand vises are intended to hold PVC, steel and copper pipes. The Model 46012 has a 12-inch jaw and an extended chain to grip pipe diameters ranging from ½ to 12 inches. The chain vises are durable and are designed for rugged jobsites. Ridgid says the base is optimized to provide more working area, with the pipe benders located at the rear of the base for bending or adjusting pipe. The large vise base also overhangs the front legs to allow for clear tool swing. The 460-12 and the updated Model 460-6 vise feature an integrated ground lug that provides a conductive surface to connect the weld ground, and a jack screw to help stabilize the unit during use, Ridgid says. Both are self-hooking for pipe up to 4 inches. “The portable 460-6 and 460-12 TriStand chain vises provide a variety of features that are designed with tough welding, threading and grooving demands in mind,” says Larry Feskanich, product manager, pipe tools at Ridgid. For information, visit www.Ridgid.com.
But mom, it was only dinner and a movie ■ By now it’s no surprise to learn that many young adults have moved back in with their parents due to the severity of the recession. Indeed, one in four people age 18 to 24 did just that during the downturn, according to Pew Research survey data cited in a Wall Street Journal story. Beyond numbers, though, the story offers practical advice for parents, as well as a helpful anecdote from a suburban Cleveland family. “While living at home makes financial sense for cash-strapped twentysomethings, it’s important for parents to establish that it’s not an open-ended arrangement,” The Journal said. The Journal said Jon Marshall, 23, moved back in with his parents in a Cleveland suburb after graduating from college in May, to save money for graduate school. “His parents don’t expect him to pay rent or household expenses, but he must put aside about $20,000 of his salary at an architecture firm,” the newspaper reported. His parents have access to his bank account to make sure his saving stays on track. Mr. Marshall told The Journal that when he goes out and spends more money than usual, “I have my mom the next morning asking me why I spent so much.”
Here today, gone in a couple weeks ■ A promising Cleveland startup will be gone in a flash. The Boston Business Journal reported
What’s fowl is fair in Beachwood ■ There’s no better model of modern suburbia then Beachwood — good schools, well-kept homes, plentiful nearby shopping and chicken coops. Chickens? Yes, and now, maybe a goat or two. “We have a number of chicken coops around, believe it or not,” said longtime Beachwood City Council member Saul Eisen. City council has been reviewing its longstanding farm animal ordinance that allows chickens on lots greater than one acre, in response to a resident who would like to add a goat to her flock of chickens. Mr. Eisen said it’s never been a real problem, though he does recall a complaint he fielded from a Cedar Road resident who angrily reported that a neighbor’s rooster was perched on his porch. The city asked the resident to move the coop further away from the neighbor’s house. “Now, there’s no problem, except it might cock-a-doodle-do at 5:30 in the morning,” Mr. Eisen said. — Jay Miller
that FlashNotes, an online marketplace for college students to buy and sell their course notes, is moving from Cleveland to Cambridge, Mass., as it finalizes its first major financing round, led by Atlas Ventures. FlashNotes expects to move into the Atlas offices in the next two weeks, its cofounder and chief operating officer, Dave Petruziello, told the Business Journal. Along with the Atlas backing, Boston’s density of colleges is a big draw, he told the newspaper. FlashNotes allows students to upload their notes, often in PDF format, and set their own prices, the newspaper reported. The company keeps 20% of the sale price and the student takes the rest. Mr. Petruziello told the Business Journal that it launched last spring and focused on four universities, but students from another 40 colleges have started using the marketplace since then.
The blot thickens in Cleveland and beyond ■ “Blotting” is all the rage in Cleveland and other older cities. TheAtlantic Cities.com reported that across troubled Midwestern cities, “homeowners in failing neighborhoods are snapping up adjacent vacant lots for their own use, creating block-lots, or blots.” Blotting “is an opportunistic response to urban decline that has been around for decades,” the website said. In Chicago the price for most blots is $1,000, while in Cleveland lots “go for as little as $1,” according to the website. A spokeswoman for Cleveland’s Community Development Department had no readily available data on blotting but said the practice had been increasing.
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