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$1.50/MARCH 22-28, 2010
Vol. 31, No. 12
Avon’s income tax base up as neighbors toil with losses
“We’re seeing more private sector applicants because they realize academia is one of the few growth areas in the city.” – Stephanie Weaver (below), district director of talent acquisition, Cuyahoga Community College
Firms say government friendly to businesses By DAN SHINGLER dshingler@crain.com
See AVON Page 19
INSIDE Now that’s the ticket The Cleveland Browns are telling former season ticket holders that they can receive full credit for previous PSLs if they renew by April 15. Read Joel Hammond’s story on Page 12.
Survey shows glut of empty space in NE Ohio; observers predict turnaround By STAN BULLARD sbullard@crain.com
JASON MILLER
Take a little hands-off attitude, add a municipal government that is fast and responsive and mix it all with an unknown amount of plain luck, and what do you get? The city of Avon and an income tax base that grows even during one of the worst recessionary years the nation and region have ever seen. In 2009, the city kept its wits — and tax base — as others around it lost ground. In that year, Avon actually saw its income tax revenues rise by 5.5%, to $9.4 million, according to city finance director Bill Logan. So far this year, revenues almost are exactly where they were a year ago, down by only about $15,000, Mr. Logan said. “I am happy for the mayor of Avon. But, his situation is extremely unusual. Virtually nowhere else in Ohio is having the same positive tax revenue experience right now,” said Cleveland economist George Zeller, who tracks tax and employment data for Cuyahoga County and other local governments. Mr. Zeller said Avon’s performance is even more impressive considering it is located in Lorain County, which he said has been one of the hardest hit counties in Ohio, losing more than half of its manufacturing jobs since 2001, including a 7.8% loss in 2009 alone. “By inference, it is very bad news for Lorain and Elyria. If Lorain County is
New retail vacancy numbers distressing
FACULTY GOING TO COLLEGES Northeast Ohio institutions tap accomplished talent pool to bolster staff as enrollment levels swell By SHANNON MORTLAND smortland@crain.com
T
hough their tuition bills have risen, many local college students might be getting more for their money thanks to a weak economy. As some colleges have set out to hire more faculty and adjunct professors to handle increased enrollment, they’ve found that the recession has enabled them to garner a stronger, larger pool of applicants than they otherwise might have seen in healthier economic climates. “It’s a really great time to be hiring,” said Sean Decatur, dean of the College of Arts & Sciences at Oberlin College. “All of our searches are getting a very
Drive along Pearl Road from Cleveland through Strongsville. Prepare to get overwhelmed by the number of empty stores you see as the long-established shopping corridor becomes better known as U.S. Route 42 down Brunswick way. That profusion of empty stores epitomizes the sour outlook for empty retail space in the region for Keith Hamulak, a specialist in retail real estate at the Cleveland office of CB Richard Ellis. Mr. Hamulak said the drive reflects the increase in INSIDE: Retail vacancies empty store space seen in throughout Northeast CB’s annual retail survey, Ohio counties have been which he and four colleagues building. Page 8 produce; the situation worsens as one heads from Cleveland and Akron inner suburbs to outlying areas. The just-completed survey shows retail vacancy in Northeast Ohio climbed to 12.49% effective March 1 from 10.34% in last year’s statistics. Mr. Hamulak and his colleagues do not expect the retail vacancy to worsen beyond this. However, the survey reveals what a punch the recession dealt the region’s shopping centers. The volume of empty retail space climbed a whopping 22% over the last year, to 9.6 million square feet from 7.9 million square feet a year ago. Retailers shed 1.7 million See RETAIL Page 8
See COLLEGES Page 14
KATHY AMES CARR
12
The new Plaza at SouthPark in Strongsville has many vacant stores.
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COMING NEXT WEEK Pleased to meet you The Great Lakes Expo Center is the newest venue to join Northeast Ohio’s meeting and convention industry. Event planners say the region is not oversaturated with space, and that having a variety of facilities will foster industry growth. We explore the market in our Meeting and Event Planner section.
REGULAR FEATURES 30 Years and Counting ..10 Best of the Blogs .........23 Classified ...............21-22 Editorial ......................10 Going Places ...............13
List: Shopping centers ..20 Reporters’ Notebook....23 The Week ...................23 What’s New..................23 What’s Cooking ...........11
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MARCH 22-28, 2010
BELABORING THE POINT About 685,000 Ohio workers in 2009 belonged to a union, accounting for 14.2% of the state’s work force, according to data from the U.S. Bureau of Labor Statistics. The unionized work force percentage was the same as 2008, though it’s quite a bit off from 1989, the first year for which comparable state data were available, when Ohio’s union membership rate was 21.3%. The Ohio rate last topped 20% in 1993. Members of unions as a percent of the work force in the United States and Ohio, 1999-2009
Year
Ohio
U.S.
2009
14.2%
12.3%
2007
14.1
12.1
2005
16.0
12.5
2003
16.7
12.9
2001
17.6
13.3
1999
17.9
13.9
SOURCE: U.S. BUREAU OF LABOR STATISTICS; WWW.BLS.ORG
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Lakewood building in bad place Suburban office tower faces higher vacancy, is latest property to be returned to lender By STAN BULLARD sbullard@crain.com
Lakewood Center North, the tallest rental office building in the Cleveland suburbs, is the latest structure to join the growing list of lender-owned suburban office properties.
The Tomorrow Fund, a German investment fund that buys U.S. properties and owned the 15-floor tower through Lakewood Tomorrow VIII Fund LP, on March 2 surrendered the building to CWCapital Asset Management of Washington, D.C. , according to a “deed in lieu of foreclosure” filed in Cuyahoga County.
Lakewood Tomorrow VIII acquired the building, 14600 Detroit Ave. in Lakewood, for a healthy $14.45 million in January 2007 from BGK Group of Santa Fe, N.M. The original loan that Lakewood Tomorrow used to buy the building was for $8.5 million, according to county land records. The transfer to the lender occurs as the outlook darkens for the 258,000-square-foot Lakewood Center North. In June, it will lose its largest tenant, the United Transportation Union,
which will move to a North Olmsted office complex, emptying more than two floors, about 50,000 square feet. Realty data provider CoStar reports that the structure currently is just 4% vacant. Robert Nosal, managing director of Cleveland’s Grubb & Ellis brokerage office, said his company will continue to manage and lease the building for CWCapital, as it did for the prior owner. Mr. Nosal said CWCapital managers have not told him if they See LAKEWOOD Page 19
INSIGHT
CBiz sells IT divisions to refocus operations
TICKETS TO RIDE Akron-Canton airport’s fares, which typically are lower than Hopkins’, help passenger levels take off
Firm commits to providing core professional services By CHUCK SODER csoder@crain.com
By JAY MILLER jmiller@crain.com
R
ichard Knoth’s friend had to be in Atlanta early last Tuesday, so he gave him a lift to the airport. The Cleveland lawyer got his friend from Shaker Heights to the AkronCanton Airport in time for a 5:30 a.m. direct Delta Connection flight to Hartsfield-Jackson Atlanta International Airport. “Akron-Canton had the first flight out,” said Mr. Knoth of the airport in Summit County, which is 25 minutes and 25 miles farther from Shaker Heights than the busier Cleveland Hopkins International Airport. “You see people using it more and more. “My kids use it all the time,” he continued. “Sometimes the (departure) times are pretty decent and the fares are unbelievable.” Though airline fare structures are complex and highly volatile, and the price gap will be narrower or wider for any given itinerary, the Baker Hostetler attorney concisely summed up the See AIRFARE Page 22
THE WEEK IN QUOTES “It’s a really great time to be hiring. All of our searches are getting a very large number of applicants.” — Sean Decatur, dean of the College of Arts & Sciences, Oberlin College. Page One
STAN BULLARD
“I’m getting to know the cultural partners who work with us and I also want to get to know the community leaders ... so I can form a picture of Cuyahoga County.” — Karen Gahl-Mills, executive director, Cuyahoga Arts & Culture. Page 6
“It’s not just about cashing that check. … It’s about building a relationship that’s able to support whatever your financial goals are.”
“My customers stuck with me; they had my back through these difficult times. … I feel like I should do the same with my people.”
— Poppie Parish, KeyBank senior vice president of community development banking. Page 15
— Russell Rybka, president of Express Lane Transportation Inc. Page 16
CBiz Inc. doesn’t want to be in the technology business, but other local companies do. The Independence-based business services provider has sold two of its information technology business units to other companies with offices in Northeast Ohio, and it is talking to another local company about buying another IT division. CBiz is selling the three businesses in an effort to put more focus on its core professional services, which include accounting, tax and other financial services, employee benefits management and physician practice management, said Lori Novickis, director of corporate relations for CBiz. The company earlier this month sold the IT consulting division of its CBiz Technologies unit to InterDyn Socius, a Dublin-based consulting firm with a Brecksville office. It also sold its CBiz Network Solutions unit, which sells IT repair services and phone systems to businesses, to IT services firm Thinsolutions of Lakewood. None of the companies would disclose terms of the deals. CBiz also is working to sell an IT staffing business that operates under the CBiz Technologies name. Among the potential buyers it has talked to is data center maintenance firm Park Place Technologies of Chagrin Falls. Ms. Novickis noted that the three technology businesses generated about $13.5 million of the $739 million in revenue that CBiz received in 2009. “We were never a big tech company,” she said. The purchases will have a bigger impact on the companies buying the business units. Thinsolutions is keeping nine of the roughly 20 employees who worked for CBiz Network Solutions, which was based in Mayfield Village. As part of the purchase, the Lakewood company, which already employed 30, will gain the ability to sell traditional and Internet protocol-based phone See CBIZ Page 8
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MARCH 22-28, 2010
Community nonprofit plants seeds for market Proposed open-air center could benefit Cleveland By JAY MILLER jmiller@crain.com
With spring comes planting season down on the farm, which leads to the opening of farmers’ markets all across Northeast Ohio. This spring also includes the planting of an idea for a new retail produce market that would breathe life into what was once one of Cleveland’s busiest retail intersections. Maingate Business Development Corp., a nonprofit community devel-
opment group, has won city approval of a master plan for Maingate Market Place, a 20,000-square-foot produce market at East 55th Street and Woodland Avenue, once a thriving Jewish and then African-American neighborhood. Today, the area is largely commercial and industrial, with little retail, only two gas stations and several fast food restaurants. Michael May, executive director of Maingate, envisions an open-air building that would be a fair weather farmers’ market, flanked by year-
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round enclosed structures. He would like to assemble a 12-acre site for the market at the southwest corner of the East 55th-Woodland intersection, which now is a vacant patch of land. Project tenants could include a retail presence for some of the 40-plus wholesale food businesses in the area, in addition to regional farmers. The wholesale firms have gravitated to the area because of the nearby Northern Ohio Food Terminal, the 81-year-old central receiving and distribution center for produce in the region. “Hopefully, we will provide the products for the marketplace,” said Joe Cavalier, president of Cavalier, Gulling and Wilson Inc., a wholesale produce firm at the food terminal. Mr. Cavalier also is a member of the Maingate board of trustees. Maingate is a 20-year-old development corporation that serves the business needs of 500 businesses in a five-square-mile area that stretches from the Innerbelt south of downtown and Woodland Avenue and east to East 93rd Street. The idea for now is just a plan. Mr. May said the concept is not far enough along to be shopped to developers. Acceptance by the city of Cleveland’s planning commission, which happened on March 19, is a first step. Cleveland planning director Robert Brown said in an e-mail that the Maingate plan to expand on the produce business is consistent with the city’s plan to build on existing assets. “The proposed produce market is a great way to leverage the presence of the wholesale food terminal to create additional jobs and to make fresh produce more readily available to city residents,” he said. “The development of a produce market near East 55th and Woodland also is consistent with the city’s initiatives to make fresh, healthy food more available to local residents, particularly those who now have limited access” to such food. Mr. May hesitated to put a price tag on the project, which would include land assembly as well as construction, but he said it could be a $30 million undertaking if all he envisions comes to pass. He said the city owns five acres, and six other parcels are owned by six different owners. Beyond the first phase, Mr. May imagines a new refrigerated warehouse, a drug store and, if all goes well, restaurants and even a cooking school in a building now owned by the Cleveland Metropolitan School District. ■
Volume 31, Number 12 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 © 2010 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $1.50. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. (888)909-9111. REPRINT INFORMATION: 800-290-5460 Ext. 136
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MARCH 22-28, 2010
Arts leader navigates landscape New exec of Cuyahoga cultural group draws up future plans, becomes familiar with region
million in three years to support more than 100 organizations and 40 individual artists. A fellowship program lets individual artists complete dream projects, Ms. Gahl-Mills said. By SHANNON MORTLAND Cuyahoga County,” Ms. Gahl-Mills “It allows them to innovate and smortland@crain.com said. “The picture I have is old.” take risks that, in the day-to-day life Though she’s still studying the of trying to keep it together, wouldn’t Karen Gahl-Mills keeps a region’s economy, she said it resem- have happened,” she said. makeshift calendar on the wall in bles Syracuse, a city that has lost a lot The tax also has enabled arts orgafront of her desk. of manufacturing. And like Syracuse, nizations to break out of the mold. At the bottom of a yet-undefined Cleveland seems to have difficulties For example, the Dobama Theatre in plan for the next six years is recruiting and retaining a Cleveland Heights has received two the phrase “2016-Reauthoquality work force, said Ms. grants from the tax totaling about rization.” It’s a reminder Gahl-Mills, who studied $54,000. that one of her ultimate music at DePaul University The money was used to goals is to convince Cuyain Chicago. produce plays by local playwrights who hoga County voters to Though the presence of “put an artistic voice to some of the renew a 10-year cigarette arts and cultural organiza- local, specific issues” in Cleveland, tax that supports arts and tions is known to help in such as foreclosure, negativity and cultural organizations. the talent quest, Ms. Gahl- brain drain, said Dianne Boduszek, “It’s my job to remind Gahl-Mills Mills wants local business managing director of Dobama. (voters) that they did someleaders to tell her what else Those plays were followed up by thing cool in 2006 and to let them Cuyahoga Arts & Culture can do to community forums with local know that those public tax dollars are help them. She wants to understand government leaders discussing those being used to make their community the challenges they face. issues, Ms. Boduszek said. We know this much is true: small clients become big a better place,” said Ms. Gahl-Mills, Ms. Gahl-Mills The cigarette tax clients and big clients still have small needs. who last month became executive also will need to also has been a “It’s important when director of Cuyahoga Arts & Culture, familiarize herself lifeline in a recesyou’re the head of a the group whose trustees determine with how public sion that could So we approach every opportunity - large or small - as if public agency to be able have caused many which organizations and artists processes affect our reputation is on the line. Because it is. receive the cigarette tax money from a nonprofit and to communicate on a arts organizations pool of applicants. for-profit instituto go under, Ms. regular basis with Ms. Gahl-Mills, who most recently tions, said Thomas Gahl-Mills said. Contact Jones Lang LaSalle today. We’re the one institutions ...” spent four years as CEO of the Syra- Schorgl, presiThough flagship company that ¿ts all your real estate needs. – Thomas Schorgl, president and organizations such cuse Symphony Orchestra, will dent and CEO of CEO, Community Partnership for as the Cleveland begin moving toward that goal with the Community Arts and Culture a four-step plan that essentially lays Partnership for Museum of Art, the foundation for the next six years. Arts and Culture, PlayhouseSquare For real estate services: First, she will become reacquainted which provides services for local arts and the Cleveland Orchestra likely Robert J. Roe with Greater Cleveland after leaving and cultural organizations and acts come to mind when people think of Managing Director here upon graduating from Westlake as a consultant to Cuyahoga Arts & the arts, Cuyahoga Arts & Culture High School in 1986. Culture. funds smaller arts groups as well. + 1 216 861 7171 “I’m getting to know the cultural “As a public grants maker, there’s a Ms. Gahl-Mills said she wants partners who work with us and I also whole set of requirements that are people to realize how those groups want to get to know the community about transparency, equity and fair- are using the arts to boost various www.us.joneslanglasalle.com/cleveland leaders, business leaders and political ness,” Mr. Schorgl said. “It’s important pockets of the community and © 2010 Jones Lang LaSalle IP, Inc. All rights reserved. leaders so I can form a picture of when you’re the head of a public Cuyahoga County as a whole. agency to be able to communicate on For instance, Ms. Gahl-Mills a regular basis with institutions, indi- wants people to understand the viduals and groups of individuals” in impact of an after-school music and out of the arts and cultural sector. program on a neighborhood. For her part, she wants to gain a deeper Cigarette tax a spark understanding of the changes the 3_15_10_We fit all sizes submission.indd 1 3/15/2010 11:34:11 AM As she learns more about Cuyahoga tax has enabled and whether the County, Ms. Gahl-Mills also plans to changes have made a permanent spread the word about Cuyahoga Arts dent in the community. & Culture and the impact the cigarette Mr. Schorgl said he believes Ms. tax has had on the community. Gahl-Mills is on the right track in her “I think it’s a story that we need to first weeks on the job and, with her tell,” she said. “It’s important for propensity toward research and people to sit up a little straighter and analysis, she can achieve her goal of Cedar Point is the perfect place for a company outing! It’s say the arts are not extra,” but rather renewing the cigarette tax. affordable, and easy to plan too. We do all the work for you. a vital part of the local economy. “I think she’s got the chops to do So your only job is to have fun! So far, the tax has generated $48 it,” he said. ■
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No matter how big your group is, we can plan a fun-filled day for everyone. Plus, for Group Events we offer a wide variety of tasty meal options. And at Cedar Point, you only pay for members of your group that show up! There’s also the Good Any Day Program where employees can purchase a discounted park ticket to use any day all season long. You can even set this up online for free, and make things even easier. So pick something everyone will love and come to Cedar Point. Sandusky, OH Go to cedarpoint.com/groups for details and pricing info. Or call 1-800-448-2428.
Cleveland new home for plastics event Cleveland next month will play host to the North American debut of an established European conference focused on how plastics are enabling the design and development of the next generation of advanced medical devices. The event, “Plastics in Medical Devices 2010,” kicks off April 12 with a pair of concurrent, afternoon workshops at LaCentre conference center in Westlake, followed by a 30speaker conference program April 13 and 14. The event’s organizer, the Akronbased Plastics News Global Group of Crain Communications Inc., chose to import the event from Brussels, Belgium, to tap into both Northeast Ohio’s growing high-tech medical business and the state’s stature as the nation’s secondlargest maker of plastic products.
“Plastics in Medical Devices 2010” aims to bring together all segments of the supply chain under one roof for two intensive days. Participants will include polymer and equipment suppliers, product designers, plastics processors, medical device makers and pharmaceutical company end users. Numerous organizations based in Northeast Ohio are participating, including the Cleveland Clinic, Frantz Medical Development Ltd., Parker Hannifin Corp. and Balance Product Development Inc. So are health care giants such as Johnson & Johnson and GlaxoSmithKline. The two-day conference costs $795, and a combination workshop /conference discount is available. Full program and sponsorship details are online at www.plastics inmedicaldevices.com.
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Stimulus for community colleges reduced
ON THE WEB
Tri-C mobilizes capital campaign as federal government set to distribute less grant money
Barberton firm acquires GE units
By SHANNON MORTLAND smortland@crain.com
Once promised $12 billion in federal stimulus money, community colleges nationwide now are slated to get only $2 billion for new programming, making it more difficult to expand and enhance programs that would have helped improve student success. Congress announced last week that the American Graduation Initiative, which would have provided $12 billion in grants to community colleges, would not be included in the Student Aid and Fiscal Responsibility Act, which would overhaul the student loan program. This act is still being debated and could be part of the health care reform bill. After heavy lobbying by the American Association of Community Colleges and their members, Congress instead chose to make $2 billion in grants available to community colleges through the Trade Adjustment Assistance Act. The money will be distributed evenly over four years, said David Baime, senior vice president of government relations at the American Association of Community Colleges in Washington, D.C. Under the act, community
colleges will be able to apply for grants to fund programs that will help retrain dislocated workers, he said. Though $2 billion is a fraction of the initial $12 billion pot, he said the association is viewing the announcement as a victory for community colleges because something is better than nothing. “We’d rather have $10 billion than $2 billion, but this is good,” Mr. Baime said. However, local community colleges said the diminished amount of grant money will make it harder for them to provide additional services to an increasing number of students. “It’s a blow to higher education in general,” said Craig Foltin, executive vice president of administration and finance at Cuyahoga Community College. Tri-C had planned to apply for $2 million to $3 million to expand programs and add new technology and equipment, specifically in the new health careers center set to open in January 2011 in Highland Hills, he said. Now, initiatives such as adding counselors and providing programs at additional times likely won’t happen, he said. “We’re still providing everything, but we would’ve liked to have
“We’ll just continue operating as we have. We do provide services but we just won’t be able to enhance them.” – Stephanie Sutton, director of financial aid services, Lorain County Community College expanded things, maybe reached deeper into the (high) schools,” Dr. Foltin said. “We could have expanded programs like health careers more broadly across our three campuses.” Tri-C instead will launch a capital campaign to raise money for new equipment, he said. Though an exact amount has not yet been determined, he said it would be at least $5 million over two years. “We easily have $15 million in needs that we could reach out for,” Dr. Foltin said. “The needs are limitless here.” For instance, he said the new classroom building in Westlake needs to be equipped and new computerized equipment used to train people for various trades is needed to replace manual machines. “These are things we used to buy normally in our operating budget but, with the state budget cuts, we’ve been unfunded in all of our enrollment growth,” Dr. Foltin said. Tri-C’s enrollment jumped about 16% from fall 2008 to fall 2009, but county property taxes have declined and state support only has remained
steady, he added. Lorain County Community College saw its enrollment spike 18% in the same time period, but it has not received additional operating funds, said Stephanie Sutton, director of financial aid services at Lorain County Community College. The college had hoped to boost services to retain students and to prepare them for graduation, but that likely will not happen, she said. “We’ll just continue operating as we have. We do provide services but we just won’t be able to enhance them,” Ms. Sutton said. “We won’t be able to be creative and innovative without that new money.” Morris Beverage, president of Lakeland Community College, said he was hoping to get grants that would fund programs to help students to be successful in school. He said many Lakeland students are returning to school after having been out for a long time, while others are single parents who are working multiple jobs. He said Lakeland will try to fund new and enhanced programs with foundation grants, private donations and state and federal appropriations. “Everyone is looking for how they can access the funds to do what they need to do,” Mr. Beverage said. “To not have that (federal stimulus) funding is a significant disappointment.” ■
Story from www.CrainsCleveland.com.
Babcock & Wilcox Power Generation Group Inc. in Barberton said it has signed a contract with the GE Energy division of General Electric Co. to acquire for an undisclosed price its electrostatic precipitator and emissions monitoring business units. The B&W unit, a part of McDermott International Inc., said the products and services it’s acquiring are used to monitor and control particulates and other emissions from power plants, factories and other facilities. The two GE Energy businesses employ about 220 at offices in Kansas City, Mo., Folkston, Ga., Newport News, Va., and Hatfield, Pa., in the United States, as well as locations globally. Richard L. Killion, president and chief operating officer of B&W’s Power Generation Group, said the units “will be a valuable addition to our strategic growth plan.” Babcock & Wilcox Power Generation Group has been busy this month. On March 10, it announced it has formed a joint venture with Indian energy-environment products company Thermax Ltd. to build highly efficient boilers and pulverizers for the Indian utility boiler market.
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CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
MARCH 22-28, 2010
Retail: Malls strongest performers continued from PAGE 1
square feet of additional space last year — enough to more than fill Westfield SouthPark mall in Strongsville. “When I first saw it, I said, ‘Whoa!’ I was surprised,” Mr. Hamulak said of the huge increase in the amount of empty selling space. “This says there were a lot of stores that were not really needed. There was saturation in multiple retail segments. In this downturn, there are no winners, only losers.”
Achieve. BILL COLEY
STATE REPRESENTATIVE CLASS OF ‘86
Learn how our alumni engage at: www.csuohio.edu/alumni
NORTHEAST OHIO REGIONAL SEWER DISTRICT
SMALL BUSINESS ENTERPRISE PROGRAM
WIDE OPEN SPACES The following figures show percentage of retail vacancy in Northeast Ohio between 2006 and 2010.*The overall figure includes Stark County.
County
2006
2007
2008
2009
2010
Cuyahoga
7.06%
8.61%
10.37%
10.75%
13.15%
Geauga
11.00
20.37
8.38
9.18
10.56
4.90
6.10
8.87
10.19
13.59
Lorain
11.60
12.52
11.59
13.90
13.12
Pain all around
Medina
9.90
7.08
5.40
9.14
15.40
No winners, indeed. Medina County’s retail vacancy at 15.4%, up from 9.14% a year ago, tops that of any of the eight counties in CB’s survey. The reason for that, Mr. Hamulak said, is the increase in the number of empty stores along U.S. 42 in Brunswick in Medina County. Retailers have either shut down or gravitated to stronger locations near Interstate 71 or near the Kmart Supercenter on U.S. 42 near downtown Medina, an area that has boomed the past 15 years. David Browning, CB managing director, said that most of the past decade retailers and shopping center developers followed newly built housetops for new locations, locally as well as nationally. As a result, some of the outlying centers are suffering in the downturn, depending on the economic strength of the surrounding area. In Medina, older shopping centers and smaller stores along the county’s traditional market street — U.S. 42 — felt the pain of the county’s rapid retail expansion. Lake and Lorain counties, which have had considerable recent retail growth, also logged high vacancy numbers, increasing to 13.59% from 10.19% a year ago in Lake, and actually falling to 13.12% from 13.9% a year ago in Lorain. In Portage County, vacancy climbed to 12.75% this year from 9.3%, primarily due to added vacancy in Streetsboro, where shopping center development boomed the last decade and Walmart shed one store for a bigger one, leaving the old one sitting empty two years later. Vacancy in Geauga County climbed less, to 10.56% this year from 9.18% a year ago, which Mr. Browning attributes to the moderating impact of additional leasing at Marketplace of Four Corners in Bainbridge. Within Cuyahoga County, which
Portage
3.70
10.2
11.45
9.30
12.75
Summit
8.60
8.96
8.89
8.62
8.39
Overall
7.50
8.76
9.49
10.34
12.49
Lake
SOURCE: CB RICHARD ELLIS
*— 2010 FIGURES EFFECTIVE MARCH 1; ALL OTHERS EFFECTIVE JAN. 1.
has nearly half the 77 million square feet of retail space that CB surveys in the region, the city of Cleveland has the highest vacancy rate, 15.44%, while the east suburbs of Cuyahoga County have 14% vacancy and the west suburbs have 11.8% vacancy.
Building blocks The steady drumbeat of local retail closings, which included 11 Hollywood Video and Movie Gallery stores, 14 InkStops, three Kmarts and others, grew to this crescendo of vacancy. One factor that typically adds empty selling space to the market — construction of new shopping centers and freestanding stores — proved even less a factor in the vacancy rise last year than usual. CB estimates construction of such space fell 21% this year, to 541,900 square feet, from 684,568 square feet the prior year. Much of that figure stems from expansion at existing stores, such as Walmarts in Strongsville and Medina. However, the small building figure shows how much the shopping center industry continues to veer from historic norms. Through prior recessions, it was typical for construction in the category to top a million square feet annually, Mr. Browning said. Developers are not adding space because construction loans are not available, even if they found new locations for retailers. CB also analyzes selling space by type of center. Regional centers, which have two anchors and range from 300,000 to 500,000 square feet,
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continued from PAGE 3
systems, CEO Michael Fischer said. The acquisition also gives Thinsolutions a whole new list of clients to whom it can sell its IT services, which are more focused on preventive maintenance and network monitoring than CBiz Network Solutions’ services. Such synergies should help Thinsolutions double its revenue by the end of February 2011, he said. He declined to give revenue figures for the company. Likewise, Socius, which employs 65 people, plans to consolidate the 20 employees in its Brecksville office with 26 former CBiz Technologies employees this May, once the company finishes renovating 6,000 square feet of office space on West Snowville Road, said Socius marketing coordinator Julie Stankey. Socius decided to lease more space in the new building, located just down the street from its
current 2,858-square-foot office, after opting to buy the CBiz unit, Ms. Stankey said. The acquisition will give Socius a broader geographical footprint, as it will retain the CBiz offices in Memphis, Kansas City and northern California. Most of the unit’s employees joined Socius, though Ms. Stankey declined to confirm how many did not. The acquisition should be a good fit, Ms. Stankey said: Both companies provide IT consulting services, specializing in Microsoft Dynamics and other business software products, and Socius over the years has grown familiar with CBiz’s work and its people. “We’ve been in the Microsoft Dynamics business for 25 years, and CBiz has been a major player in that business for about as long,” she said. Both CBiz Inc. and Park Place
are in the worst shape, with 19.2% vacancy. Neighborhood centers — which range from 30,000 to 100,000 square feet in size are home to grocery stores and retailers meeting local market needs — are in almost as poor a condition with a 16.59% vacancy rate. Conversely, enclosed malls — which CB classifies as superregionals with 600,000 to about 1.5 million square feet in size — have the best occupancy with just 6.86% vacancy. “Malls remain the strongest performers,” Mr. Hamulak said. “They are the dominant centers in their trade area. They have the anchors.”
What’s in store For all the bad news, Messrs. Hamulak and Browning believe the upswing in retail realty is beginning. “Our tenant reps are busy,” Mr. Browning said of retail brokers who specialize in representing retailers rather than properties. However, he said, part of the action stems from retailers seeking to land better locations, perhaps at a lower rent. Likewise, Mr. Hamulak looks for improvements this year. “Everyone has recognized where we are at. We’re in a recession,” he said. “It’s not that anyone is looking for a huge influx of activity. But everyone, lenders, retailers and owners, are focused on making things happen.” The CB survey covers 406 retail buildings of more than 50,000 square feet in size in Cuyahoga, Geauga, Lake, Lorain, Medina, Stark, Summit and Portage counties. ■
Technologies confirmed that they are discussing the prospect of Park Place, which is looking at several possible acquisitions, buying the IT staffing unit within CBiz Technologies. The two companies target some of the same customers, but Park Place has yet to decide if the company would be a good fit, said marketing manager Megan Tobin-Jones. The growing company, which employs about 100 in Chagrin Falls and 170 nationwide, is looking at several possible acquisitions, but most are focused on data center maintenance. Taken together, the three units lost money each of the past two years, and they weren’t big enough to warrant more investment, according to statements CBiz Inc. CEO Steven Gerard made during a conference call regarding the company’s results for the fourth quarter of 2009. Ms. Novickis described the units as “good businesses” that were hit hard by the recession. “In a down economy … clients are putting off or canceling expansions and upgrades,” she said. ■
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CRAIN’S CLEVELAND BUSINESS
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MARCH 22-28, 2010
PUBLISHER/EDITORIAL DIRECTOR:
Brian D. Tucker (btucker@crain.com) EDITOR:
Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:
Scott Suttell (ssuttell@crain.com)
OPINION
It’s alarming
H
ear the alarm bell in the distance? It’s sounding a warning to the executive and legislative branches of Ohio government. Its message is that the state will face a massive budget deficit once federal stimulus money runs out next year, and that elected officials already should be working on ways to deal with it. Ohio isn’t the only state in the Union that is staring into a financial abyss — far from it. But Ohio happens to be the state where we and our readers live and do business. And we’re concerned that the governor and the Legislature lack a sense of urgency in figuring out how to contend with a deficit that easily could total several billions dollars in the twoyear budget period that begins July 1, 2011. More than $4 billion in federal stimulus money that Ohio was promised last year helped fill an $8 billion gap in the current two-year state budget. President Obama’s generosity gave state leaders the gift of time to get serious about coming up with a plan for addressing a problem that isn’t going to go away just by waiting it out. Our view is that they’re frittering that gift away. Late last summer, state legislators created a six-member Budget Planning and Management Commission to take on what they knew would be a mammoth challenge come 2011. Nearly eight months later, that commission has yet to meet. Ohio’s budget problems aren’t going to be fixed with a nip here and a tuck there, nor can legislators expect to tax their way to a balanced budget without further damaging the state economy. Substantive, dramatic changes in the way state and local governments operate are necessary if the governor and Legislature hope to avoid a mad scramble every two years to make Ohio’s ends meet. Such work can’t be done on the fly or up against a deadline. It is going to take the type of deliberate, purposeful effort described by the Brookings Institution think tank and the Greater Ohio Policy Center in their recent report, “Restoring Prosperity: Transforming Ohio’s Communities for the Next Economy.” The report correctly observes that, because of the ongoing recession, “there is not enough lowhanging fruit left to pluck on the spending and revenue side to close the budget gaps that Ohio and its municipalities will face for the next biennium and likely beyond.” “In order to continue to make strategic investments and maintain decent levels of service provision, Ohio will have to do more to encourage money-saving or efficiency-enhancing consolidation and collaboration between local governments, including school districts,” the report states. One suggestion the report makes for spurring innovation and savings among communities is using state dollars as carrots, “giving bonus points or other means of priority consideration for projects involving multijurisdictional collaboration.” We’re sure our elected leaders can come up with many other ways to improve government efficiency — if only they put their minds to it. So, stop wasting time and get to work.
FROM THE PUBLISHER
Government collaboration a necessity
T
that show how many more school hose planning Cuyahoga County’s districts we have than other states of transition to a new form of similar population? How many more government would do well by experts have to point out our crazy-quilt reading — and re-reading — this duplication of services? How many more quote from Summit County Executive school systems have to cut busing and Russ Pry in his annual state-of-the-county foreign-language and honors programs speech, delivered last week to a gathering because of failed tax levy votes? of civic, business and government leaders: Can you imagine how much “I ask each of you to join me more we could have gained from over the next year and find a BRIAN this massive federal stimulus partner. Go out and look for an TUCKER spending if the grants had been agency, a government or a busidependent on service collaboraness that you can work with to tion and stopping this duplicabuild a new partnership. tion of government? “Our survival depends on For example, I live in Montville this.” Township, just a couple miles As we begin the process of south of Medina’s historic square. changing Cuyahoga County to a Our township has a police force, similar government structure of as does the city of Medina, as do an elected county executive and the other two townships that abut Medina. council, collaboration should be a There’s also the county sheriff’s departcentral guiding principle. I know the ment. What sense does that make? transition team has been saying that Recently, Hiram College president economic development is the priority, Tom Chema, writing an opinion piece but changing the ways — and costs — on this page, opined that we have too of how governments deliver services much government, and even more should be every bit as important. importantly, too many elected officials. How many more studies do we need
And too many of those elected officials are in public service so they can pile up lucrative public retirement credits. The fact is we have way too many governmental entities doing the same things within a few miles of each other, and it’s that way across Ohio. We know we have too many school districts, and we let it stay that way because nobody wants to lose theirs. Regional problem-solving is coming, and the question is whether we wait for it and then try to clean up the mess, or do we stay ahead of the curve and make it work in productive ways? In his recent state-of-the-city speech, Cleveland Mayor Frank Jackson repeated his call for some sort of countywide approach to public education. And while that might terrify those who fled to the suburbs to get away from a certain racial or ethnic presence, the fact is that Cleveland has a handful of schools that are so good they should be drawing more students from other parts of the county. We must face these problems and create solutions that involve us all. And we should do it before it’s our last hope of avoiding economic and/or social collapse.
AND COUNTING ... Where do you live now, and why? And where have you lived in the past 30 years?
Crain’s Cleveland Business is celebrating its 30th year as Northeast Ohio’s premier source for business news with a special double issue, which will feature profiles of 30 of the most influential Clevelanders. As part of the celebration, we also are reflecting on the most memorable events of the past three decades with weekly polls — some of which can be found in this space — trivia questions, online content and video interviews. You can get in on the fun by visiting CrainsCleveland .com/30thanniversary.
FRANK ZAGAMI
MOLLY ENDERS
ERIN RODENO
Old Brooklyn
Cleveland Heights
Lakewood
Cleveland, because I’m a police officer and until very recently, I didn’t have a choice in that. But for the last 30 years I’ve lived in the city of Cleveland. I lived in Slavic Village growing up and went to high school there. I lived in Parma for a couple years, but other than that I’ve moved around the city of Cleveland.
I live in Cleveland Heights, because I have a young daughter and it’s close to my parents and I work part time, so they babysit. Before coming back to Cleveland, I lived in Chicago. But I grew up in Cleveland, but I went to Chicago for school purposes and I like a big city.
I live in Lakewood, because it’s convenient. And for the past 20 years, Westlake, Lakewood and (Rocky) River.
20100322-NEWS--11-NAT-CCI-CL_--
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MARCH 22-28, 2010
Management feedback affects job performance Report: Communication influences engagement levels By GARRY KRANZ Workforce Management
The best way to drive employee engagement is for managers to accentuate the positive in employee performance. The second best engagement approach is to focus performance discussions on employee weaknesses. Worst choice: Give no feedback at all. That is the synopsis of “The Relationship Between Engagement at Work and Organizational Outcomes,” by Gallup Inc. More than 1,000 U.S. employees were interviewed for the report. Gallup broke management styles into three categories, based on employee perceptions: ■ Managers who focus mostly on employee strengths; ■ Managers who focus mostly on employee weaknesses; ■ Managers who focus on neither strengths nor weaknesses. Thirty-seven percent of employees say their bosses concentrate on strengths, while 11% say their managers focus solely on negative characteristics. Gallup says 25% of employees surveyed fall into an “ignored” category, in which their supervisors address neither strengths nor weaknesses. Twenty-seven percent of people did not express strong opinions about their managers either way. The differing approaches reflect varying levels of engagement. Sixtyone percent of employees in the “strengths” group report being engaged in their jobs. Still, 38% of those workers remain disengaged despite the positive feedback, perhaps because they believe the praise is not sincere, according to Gallup. About 1% of employees whose managers are focused on strengths are considered to be “actively disengaged,” meaning they may act out on their job frustration. By contrast, engagement is considerably lower — just 45% — for employees whose managers focus primarily on negative characteristics. One-third of such workers are disengaged. Most alarming: 22% are
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deemed to be actively disengaged. The worst engagement scores can be found in the “ignored” category, where only 2% of employees are highly engaged. Fifty-seven percent report being not engaged and 40% are actively disengaged. So while emphasizing strengths gives the strongest boost to engagement, even negative feedback is better than no feedback at all, according to Gallup. “We found that it is better for managers to dwell on some aspect of employee performance — even if it is a focus on negatives — than to avoid the matter altogether,” says Jim Harter, a Gallup research scientist and co-author of the report. Mr. Harter says negative feedback “at least lets people know that they matter,” while neglecting them can be far worse. Engagement — or lack of it — carries huge implications for how well companies achieve their business goals, especially amid recession, Mr. Harter said. “The growth trajectory for companies with highly engaged workers, on average, looks good compared against their competitors. These types of companies are holding their own while competitors are dropping off” on key variables, he said. Organizations with high engagement scores exceed their peers in nine areas of business performance, including customer loyalty, profits, productivity, quality, turnover and absenteeism. For instance, organizations with the highest engagement scores in Gallup’s database have an 83% chance of achieving aboveaverage business performance. Organizations at the lowest levels of engagement have a 17% chance. The report is based on Gallup’s Q12 Index, which measures a dozen factors that are known to affect engagement. ■ (Garry Kranz is a contributing editor to Workforce Management, a sister publication of Crain’s Cleveland Business.)
11
WHAT’S COOKING ■ For the last year, Corbo’s Bakery has been rolling in some more dough. The bakery in Little Italy began last April a partnership with Marc’s grocery stores that has become so successful, co-owner Selena Corbo said the shop is looking to expand its distribution business. “We’ve had other local vendors calling, and we’re looking to distribute to local restaurants as well,” Ms. Corbo said. The partnership began because Marc’s wanted to be a full-service grocery but didn’t have a fresh bakery, Ms. Corbo said. So the bakery began supplying the Eastgate store in Mayfield Heights with fresh bread and cookies. Nearly one year later, anything from fresh pizza dough to cookies, cakes, pastries and pasta sauces can be found in 14 Marc’s stores throughout Northeast Ohio. “We deliver fresh products to Marc’s seven days a week,” she said. Corbo’s previously had supplied products to two Rego’s grocery stores that shut down. Pierre’s also distributes Corbo’s Italian Lemon Ice to Heinen’s, and Corbo’s supplies Sidari’s Italian Foods in Cleveland with coconut bars and Italian cookies. The bakery moved two years ago into a larger space from its previous home next door, in which it had been located since it opened in 1958. Corbo’s is in the middle of a “huge transition,” with adding cold and hot food to its menu, Ms. Corbo said. ■ Constantino’s Market has begun construction for an expansion that should be complete by early June and increase the downtown Cleveland grocery store’s space by 45%.
ON THE WEB Check out the What’s Cooking blog on Mondays at www.CrainsCleveland.com.
The expansion will increase the store’s real estate by about 4,400 square feet, from 9,600 square feet to about 14,000 square feet, said owner Constantine “Costas” Mavromichalis. When construction is complete, the store will have a salad bar, a larger deli with more prepared foods and cheese, a larger bakery, an expanded produce section, a flower case, a beer and soda cave, a larger frozen foods area and a gourmet pizza kitchen. The store also will feature more café seating. The expansion utilizes vacant space in the back of the store, and one nearby apartment in the Bingham Apartment complex for storage and office space. “We think enhancing the area and the services we provide will be good for our customers and increase sales,” Mr. Mavromichalis said. ■ Magnolia House was the first beneficiary of this year’s Cleveland Renegade Lunch Project, held March 9 inside Tower City in front of the water fountain. The lunch project is a pseudounderground initiative presented once a month by Marigold Catering and Spice of Life Catering. Magnolia Clubhouse, a Cleveland nonprofit that provides
services for adults with mental illness, received $400, said Joan Rosenthal, founder and owner of Marigold Catering. For smaller nonprofits, the extra cash is a big help. The Cleveland Renegade Lunch Project each month brings a free two-course gourmet lunch for the first 20 to 25 passersby at a location that is kept secret until the day the lunch is announced. Patrons, in turn, have the opportunity at the end of the lunch to donate money for that day’s designated charity. The Cleveland catering companies launched the lunch project in 2009 and held 10 renegades that raised thousand of dollars for nonprofits. ■ Tommy’s in Cleveland Heights was recognized by Esquire as one of the best restaurants in the United States to have breakfast. “As much a block club as it is a restaurant, Tommy’s has a reputation among locals as a hipster hangout. Pity. Look past the graybeard Wobblies still waiting for Lefty and the occasional Harvey Pekar sighting and you’ve got genuine diner chops,” according to the magazine. “Much of the menu is mournfully macrobiotic, but tempeh tomorrow: For now try some hotcakes topped with strawberries and a Matterhorn of whipped or sour cream.”
What’s Cooking looks at the business of Northeast Ohio’s restaurants, breweries and wineries. To submit information, please e-mail Kathy Carr at KCarr@crain.com.
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MARCH 22-28, 2010
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The Cleveland Browns are becoming more creative in trying to attract fans to the football games. The team is providing incentives for nonrenewing season ticket holders.
Browns throw out new incentive Team enticing ex-season ticket holders with full credit for previous personal seat licenses By JOEL HAMMOND jmhammond@crain.com
It appears the Browns are becoming a bit more fan friendly these days. The team, which has taken a beating from fans for poor play on the field, mismanagement off it and what fans have called poor customer service, have extended an offer some former season ticket holders may not be able to pass up. In a letter dated March 9 from Mike Holmgren, the team’s new president, the Browns tell nonrenewing season ticket holders that they can receive full credit for their previous personal seat licenses — which can range from $375 to $1,500 per seat — and will retain all seniority and priority seat selection, provided they renew by April 15. Not bad. Also, as Crain’s Cleveland Business wrote in December, the Browns are touting their new “personal ticket services representatives,” which were first advertised just days after a November Crain’s story detailing unrest among season ticket holders. In addition, literature that included
Mr. Holmgren’s letter offers a 15% team shop discount for season ticket holders. Browns spokesman Bill Bonsiewicz said the team extended the offer to season ticket holders who haven’t renewed over the past three offseasons. A Browns ticket official, through Mr. Bonsiewicz, said there has been call activity on the offer, though as noted above, it’s in its infancy. “This is an offer that hasn’t been done very often, that’s for sure,” Mr. Bonsiewicz said. Of course, there’s a flip side to the offer: Many fans have held on to their season tickets for the very purpose of avoiding re-paying a PSL fee if the team rebounded from its poor performance. The risk to the team is that these fans may feel abused for their loyalty. “Generally, the stakeholder you want to make sure you treat the best is your season ticket holders,” said Jim Kadlecek, vice president of industry relations at the Sport Marketing Association and chair of the Department of Human Perfor-
mance and Sport Business at Mount Union College in Alliance. “You have to be careful when you put out offers that devalue the commitment other people are making.” Painesville native Richard Selby, an outspoken critic of the Browns’ PSL policy, told Crain’s in November that he had heard from fellow season ticket holders who were considering not renewing their tickets and forfeiting their PSL investment. The Browns’ latest offer is a step in the right direction, he said. “I think that is a great move on their part to try to get back season ticket holders who have left,” Mr. Selby said. “I’d love for them to do something along the lines of adopting a standing policy that you could choose to not buy tickets for some period of time without losing the PSL.” That practice, he said, would allow people with family or business issues, for instance, to opt out of their tickets while not losing their PSLs; it also would put all season ticket holders on equal footing. “If I pay full price for mine and you’re sitting right next to me paying a third of what I paid,” Mr. Kadlecek said, “I might ask myself, ‘Why am I making this commitment if I’m not seeing the benefit to us?’” ■
Indians hope for attendance swing in Ariz. By JOEL HAMMOND jmhammond@crain.com
In at least one area, the Indians hope for a repeat of 2009. While last year’s big-league club underperformed on the field, it picked up box-office steam as spring training went along, dramatically increasing its attendance in its first season at Goodyear Ballpark in Goodyear, Ariz. This year’s attendance, though, is off to another rocky start. The Indians, in four games, are averaging 3,936 fans per game at the 10,000seat stadium. But Indians officials aren’t without hope, and that’s because of last year’s uptick: After averaging 3,762 fans through four games in 2009, the Indians ended with a 5,452 average over 17 games, including five games over 6,000 and 10 at 5,000 or more.
Indians director of communications Curtis Danburg said teams that play in Arizona’s Cactus League depend more on day-ofgame sales than their counterparts in Florida’s Grapefruit League due to the Cactus League’s concentration near Phoenix. Once the Colorado Rockies and Arizona Diamondbacks leave their spring training home of Tucson after this season, all Cactus League clubs will be within an hour of each other. That proximity presents fans with many options, unlike in Florida, where teams are as far as three hours apart. “In Florida, there wasn’t much competition for us,” Mr. Danburg said, referring to the Indians’ former spring training home in Winter Haven, which is in the middle of the state. “Here, there are so many opportunities; fans can decide on the
day of the game where to go.” Another Arizona issue the Indians are keeping their eyes on is the battle over the Chicago Cubs, with the city of Mesa attempting to keep the Cubs there as Naples, Fla., makes eyes for the long-suffering — and very popular — franchise. There currently is a bill in the state legislature that would impose taxes on every Cactus League ticket sold — including at Goodyear Ballpark — as a way to pay for a new, $84 million complex in Mesa. The Cubs and Mesa officials are trying to sell the other Cactus League teams on the benefits of the team remaining, as other Cactus League clubs charge premium prices for games in which they play host to Chicago. “We’re watching that, but staying on the periphery,” Mr. Danburg said. “We’re the new guys out there still.” ■
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CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
Brinda to director of advancement.
GOING PLACES
REAL ESTATE
to manager, non-ferrous trading.
JOB CHANGES ARCHITECTURE MIDDOUGH INC.: Peter J. Baka to marketing manager.
EDUCATION HIRAM COLLEGE: Christine KohlsHunder to director of corporate, government and foundation relations; John Coyne to director of alumni relations; Jenifer Warren to assistant director of major gifts.
FINANCE FIRSTMERIT CORP.: Randall J. Smith to senior vice president, senior lender; Angela N. Ward to senior banking assistant.
Breedlove
Walsh
Goldberg
Golovan
Matticola
Misconish
TRANSACTION REALTY: Bill Behrens and Annie Starks to sales associates.
SOUTHERN OHIO SAND: Dave English to engineering and process control manager.
SERVICE
MARKETING CHARTREUSE INC.: Sara Misconish to designer.
CEFARATTI GROUP: Carmen Petrello to major account representative.
INSIVIA MARKETING: Chris Schmitt to chief strategist.
THE DROSTE GROUP: Pam Linger to vice president.
POINT TO POINT: Scott Moss to director of business development.
NONPROFIT
INFOCISION MANAGEMENT CORP.: Steve Brubaker to chief of staff; Michael Van Scyoc to chief strategy officer; Michael White to chief technology officer; Bert Turner to vice president, Christian fundraising operations.
THE DIABETES ASSOCIATION OF GREATER CLEVELAND: Holly C.
TRN TECHNICAL: Jim Day to director of contract services.
WHITESPACE CREATIVE: John Puglia to director, creative department.
SE BLUEPRINT INC.: Brittany Langel to new account manager.
BOARDS BUSINESS ADVISERS OF CLEVELAND: Arthur Horner to president; John S. Harston to first vice president; Roger S. Vail to second vice president; James E. Moyse to secretary; Henry Chisholm to treasurer. CLEVELAND SCHOLARSHIP PROGRAMS INC.: Patrick Mullin (Deloitte & Touche LLP) to chairman; David Inglis to president; George Hawk to treasurer; Sanjiv Kapur to secretary; Sue Tyler to vice chair. FIELDSTONE FARM THERAPEUTIC RIDING CENTER: James B. Naylor to chairman; Elizabeth B. Juliano to president; Allen K. Wiant to vice
president. SOUTH POINTE HOSPITAL: Medical executive committee, Dr. Modish Lane and Dr. Dennis Kane to co-chiefs of staff; Dr. Michael Kalus to vice chief of staff; Dr. Rick Gemma to secretarytreasurer.
AWARDS AMERICAN ASSOCIATION OF CARDIOVASCULAR AND PULMONARY REHABILITATION: Dr. Melissa Zullo (Kent State University) received the Beginning Investigator Award. NAI GLOBAL: Bob Brehmer (NAI Daus) received the 2009 Chairman’s Award.
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FINANCIAL SERVICE NORTHERN OHIO ASSET SERVICES LLC: David McGlynn to operations manager.
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HOSPITALITY THE INTERCONTINENTAL CLEVELAND: Jennifer Walsh to sales manager. MARIGOLD CATERING: Phil Goldberg to general manager. SAWMILL CREEK RESORT & CONFERENCE CENTER: Kelly Brewer to director of sales.
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INSURANCE MEDICAL MUTUAL OF OHIO: Kathy Golovan to vice president, internal audit; Steffany Matticola to vice president, individual and small group sales and chief underwriter.
LEGAL MANSOUR, GAVIN, GERLACK & MANOS CO. LPA: Meghan B. Kilbane to associate.
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MARCH 22-28, 2010
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 SSuttell@crain.com.
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■ Case Western Reserve University and the Western Reserve Historical Society have agreed to digitize and share some of their library contents. The two institutions this year plan to launch five pilot projects with the idea of forming a longterm partnership to share resources. CWRU and the historical society will take inventory of their digitizing and microfilm equipment, will share cataloging tools and will apply for Pell work/study grants to hire one or two student assistants. “The historical society’s primary research materials overlap with CWRU’s strategic plan initiatives in many areas,” said John Grabowski, historian and vice president for collections at the historical society and CWRU’s Krieger-Mueller Associate Professor of Applied History. “This includes social justice; business and entrepreneurship; medicine; and histories of the numerous ethnic, cultural, religious and identity groups in our region, such as the Jewish community and LGBT (lesbian, gay, bisexual and transgender).” The outcomes of the pilot projects will be examined in September, and the potential for future collabo-
ration then will be discussed. ■ Diabetes Daily, an online support network based in Cleveland that helps people with diabetes live better and happier lives, said it has reached 20,000 registered members and 2 million annual visitors to its web site, www.diabetesdaily.com. The network started in 2005, shortly after founder David Edelman met his future wife, Elizabeth, who recently had been diagnosed with type 1 diabetes. The couple began the network by blogging and participating in online discussions. Today, Diabetes Daily offers peer support, menu planning, educational resources and management tools for people with type 1, type 2 and gestational diabetes. ■ Eye Lighting in Mentor, a maker of lamps and lighting products, has been selected as the primary lamp supplier for the “Women & Spirit: Catholic Sisters of America” traveling exhibition, which is appearing at the Smithsonian International Gallery in Washington, D.C., through April 25. The 6,000-square-foot display, produced by Seruto & Co. of Pasadena, Calif., tells the history of the Sisters’ contribution and devotion to the nation through stories and personal artifacts. One standout of the exhibit is a letter from Thomas Jefferson assuring religious freedom following the Louisiana Purchase.
Ryan Raica, lighting designer on the project, said the exhibition is lit by Super Soft MR16 Halogen lamps from Eye Lighting. ■ Baldwin-Wallace College has launched the Institute for Sustainable Business Practice to help Northeast Ohioans integrate sustainability into their business plans. The institute will provide consulting services such as audits and sustainability planning to local small businesses and nonprofits and educational programs for larger companies. Students will be a big focus of the institute as it looks to infuse sustainability into undergraduate and graduate programs. The college also will launch an MBA program in sustainability next fall to add to its undergraduate major in sustainability. ■ BaseTek, a Newbury Township company that designs and builds polymer composite bases and filled weldments for a range of industries, said it recently achieved a milestone in the pump and rotating equipment industry: delivery of its 10,000th nonmetallic polymer concrete baseplate. That 10,000th baseplate “symbolizes the steady growth of our company since its founding in 2001,” said Scott Sapita and Tim Marklay, the partners who run BaseTek. BaseTek last year moved to a new, 12,000-square-foot manufacturing plant in Newbury Township.
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large number of applicants.” The recession also has benefited the University of Akron, which has hired 110 new and replacement faculty members since August 2008, president Luis Proenza said. “We’ve been able to recruit exceptional individuals who might not have come in a better market,” Dr. Proenza said. Cuyahoga Community College found a rich pool of adjunct faculty candidates to help educate 30,325 students last September, when enrollment was 16% higher than the 26,048 students the college had a year earlier, said Stephanie Weaver, district director of talent acquisition at Tri-C. As a result, Tri-C boosted its adjunct faculty staff to 1,075 last September, up 23% from 875 in September 2008. Ms. Weaver said Tri-C chose to hire adjunct professors instead of full-time, tenure-track professors because the school is unsure whether enrollment will remain high. “We’re seeing more private sector applicants because they realize academia is one of the few growth areas in the city,” she said. Many professionals who have been laid off are willing to work parttime in hopes that it will lead to fulltime employment, Ms. Weaver said. Others are looking to supplement incomes that might have been reduced during the recession. Though Notre Dame College is just beginning to advertise for more faculty members, it has received a larger number of applications for adjunct positions from people with impressive credentials gained in private business, said Mary Breckenridge, vice president for academic affairs at Notre Dame.
“The lure of money in corporate America has been hard to resist,” she said, but “bad economic times can be good in the hiring world.” Hiring has been easy at Ursuline and Lake Erie colleges as well. In the current school year, Ursuline College has hired two more faculty members in both its nursing and graduate education programs. The college now has about 85 fulltime faculty members, said JoAnne Podis, Ursuline’s vice president for academic affairs. In its quest for six more faculty members since August 2008, Lake Erie College has been able to attract “high-quality individuals,” said Scott Evans, its vice president of institutional advancement. Lake Erie expects to hire even more faculty members to add to its existing roster of about 50 full-time professors in the next few years as it expands programs in various math, science and health care fields, Mr. Evans said. Stagnant faculty salaries have helped some colleges compete for top-notch talent because they now can hire people they might not have been able to afford when the economy was booming. According to a study released in early March by the College and University Professional Association for Human Resources in Knoxville, Tenn., about 21% of faculty members across the country did not receive a pay increase in the current fiscal year and another 33% saw their salaries drop.
Schools of thought Still, boosting the faculty ranks can be tricky, Ursuline’s Dr. Podis said. Schools must provide attractive compensation packages while
continuing to offer affordable tuition, so they must be careful when adding positions, she said. For that reason, some local colleges only are replacing professors who leave. Hiram College has spent the last several years replacing retirees. As a result, about half its 78 full-time faculty members are in their first three years of service, though all the new professors have impressive backgrounds, said Cheryl Torsney, vice president and dean at Hiram. In the coming years, however, Hiram will be looking for grants from individuals, foundations and federal institutions to fund additional faculty and program expansions, she said. “We’ll still be going forward with new programs, but we’ll just be looking for someone to fund them,” Dr. Torsney said. Baldwin-Wallace College is controlling its bottom line by scrutinizing whether a faculty member needs to be replaced once he or she leaves, said Mary Lou Higgerson, vice president for academic affairs and dean. As student interest shifts to different programs, an empty faculty position might be switched to a more popular major or department, such as sports management, public relations or health care management, Dr. Higgerson said. Though the recession caused some schools to temporarily freeze hiring of faculty, those that were able to forge ahead will come out on top, predicts Akron’s Dr. Proenza. “There will be a significantly different kind of adjustment,” he said. “The places that were able to attract (top-notch) faculty will be the places you will want to be.” ■
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CRAIN’S CLEVELAND BUSINESS
MARCH 22-28, 2010
INSIDE
15
FINANCE
16 COMPANIES FORCED TO MAKE TOUGH 401(K) DECISIONS.
By ARIELLE KASS akass@crain.com
TAKING EVERYONE INTO ACCOUNT Institutions aim to wake up ‘unbanked’ to value of saving money, dealing in financial mainstream
N
ot everyone has a bank account. There are some people — many people, in fact — who deal on the outskirts of the financial system. They go to check cashers or payday lenders; they keep their money on their person or under their mattress. They are, in the words of mainstream financial institutions, the unbanked, and efforts increasingly are being made to bring these people into the fold. From financial literacy courses to special products, banks in this area have been reaching out to the unbanked both to better their own bottom lines and as a service to people who may have never before set foot in a bank. For KeyBank, one of the banks doing the most outreach, it’s a way to make mission and margin work together. In 2009, the bank hosted about 900 people for classes at its KeyBank Financial Education Center on Buckeye Road in Cleveland, where photos of people who managed to save enough money to buy a house or pay off a car are displayed in a sort of hall of fame on the wall. Another 2,000 in Greater Cleveland received financial literacy training through Key’s outreach to schools, churches and other organizations. “It’s not just about cashing that check,” said Poppie Parish, senior vice president of community development banking. “It’s about building a relationship that’s able to support whatever your financial goals are.” KeyBank vice president of community development banking Emmanuel Glover said his bank also started the KeyBank Plus program, a low-fee check-cashing service that charges between 1% and 1.5% to cash a check. Mr. Glover said nationally, See UNBANKED Page 16
THE UNBANKED, BY THE NUMBERS ■ An estimated 7.7% of U.S. households, about 9 million, are unbanked. At least 17 million adults live in unbanked households. ■ An estimated 17.9% of U.S. households, roughly 21 million, are underbanked. (Underbanked households are defined as those that have a checking or savings account but rely on alternative financial services, such as nonbank money orders, nonbank check-cashing services, payday loans, rent-to-own agreements or pawn shops.) ■ Taken together, at least 25.6% of U.S. households, close to 30 million, are either unbanked or underbanked. Approximately 60 million adults reside in these households. ■ Households with income under $30,000
WHAT BANKS ARE DOING TO LURE THEM IN account for at least 71% of unbanked households. In contrast, only 4.2% of households with annual income between $30,000 and $50,000 and less than 1% of households with yearly income of $75,000 or higher are unbanked.
Many Northeast Ohio banks are reaching out to potential customers who are unbanked or underbanked in an attempt to bolster their customer base and as a service.
■ U.S. Bank has a second-chance checking program, a card onto which customers can load unemployment benefits and other government assistance and a rewards program for those able to save.
■ Households with an annual income between $30,000 and $50,000 are almost as likely as lower-income households to be underbanked.
Here’s a snapshot of what some local banks are doing:
■ PNC Bank, which in 2008 bought National City Bank, has savings and checking accounts that include no minimum balance and place limits on debit card transactions and ATM withdrawals.
■ 6.2% of all households in the ClevelandElyria-Mentor metropolitan statistical area are unbanked, while 14.2% of the area’s households are underbanked. ■ 7.1% of all households in Ohio are unbanked. SOURCE: FDIC NATIONAL SURVEY OF UNBANKED AND UNDERBANKED HOUSEHOLDS, DECEMBER 2009 REPORT
■ KeyBank hosts classes at the KeyBank Financial Education Center and through schools, churches and other organizations; the bank also has a low-fee check-cashing service, which charges far less in fees than check cashers.
■ Fifth Third Bank also offers classroom training, and has a Goal Setter account, in which customers receive a bonus once a target is reached.
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16 CRAIN’S CLEVELAND BUSINESS
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MARCH 22-28, 2010
FINANCE
401(k) matches have costs, benefits
Unbanked: Education part of outreach
By SHANNON MORTLAND smortland@crain.com
check cashers charge on average between 3% and 10% for the service. Every fifth time a customer comes in, Key’s fee is waived, and each time a check is cashed, customers receive five free money orders, Mr. Glover said. The check-cashing service is available to people who previously had been flagged for mishandling checking and savings accounts, those who have just one form of identification — a normal checking or savings account would require two — and people who would be rejected for a loan, among others. It also appeals to people who prefer to work exclusively with cash. Other banks have created services for people who had no banking relationship in the past or who did have one and had trouble managing it. At U.S. Bank, for example, a second-chance checking program is geared toward people who had problems with overdrafts on a previous account. U.S. Bank also offers a pre-loaded
T
he 401(k) program went through a bit of a dark spell during the recession, but it seems the sun might be rising again on what was once a mainstay in corporate America. Like many other job perks, matches to 401(k) retirement plans took a hit last year as profits dwindled during the recession, but some companies are reinstating their contributions to those plans as their revenue recovers. “As the instability of last year’s economy becomes somewhat stable, a lot of employers are reinstating or creating a match,” said Brent Besinger, a partner at Waypoint Beacon Retirement Partners in Woodmere. His firm manages 401(k) plans for 80 companies. About one-third of those companies suspended their contributions to 401(k) plans last year, but half of those already have reinstated their matches to employees’ contributions, he said. Similarly, a survey by Hewitt Associates, a global human resources consulting and outsourcing services company, found that 80% of companies nationally that suspended or reduced their company match in 2009 are planning to restore it in 2010. However, some Northeast Ohio companies still haven’t seen the market bounce back enough to reinstate their contributions to the 401(k), said Scott Ziska, a founding partner and wealth consultant at the Solon office of Stratos Wealth Partners. He said about 30% of his
clients stopped matching their employees’ 401(k) contributions last year and they have not yet reinstated those matches. “Everybody is being kind of cautious,” he said. “No one is jumping to do anything too quickly.” ERC, the former Employers Resource Council in Mayfield Village, last year completed a study of 145 local businesses, and it found that the majority of employers offering 401(k) plans matched employees’ contributions. Only about 28% of the manufacturers who provided 401(k) plans said they did not match employee contributions, while about 26% of nonmanufacturing firms said they did not match employee contributions. In ERC surveys in 2005 and 2006, it was slightly more common for manufacturers to match 401(k) contributions by employees but participation by nonmanufacturing firms has been consistent in recent years. Overall, companies want to help people save for retirement and they use 401(k)s and the employer match as a tool to boost employee morale, Mr. Ziska said. “They see it as a pretty strong benefit to keeping people happy when they can’t give raises,” he said. Russell Rybka, president of Express Lane Transportation Inc. in Solon, felt that maintaining company matches to the 401(k) program was the least he could do for his employees during the recession. “My customers stuck with me; they had my back through these difficult times,” he said. “I feel like I should do the same with my people.”
Mr. Rybka’s bottom line is hurting after customers have reduced the amount of money they’re willing to pay for his trucking services. “In all honesty, I should probably get rid of (the 401(k) plan) since our profits are down,” he said. “(But) it’s going to stay.” As a result, none of his 14 employees stopped contributing or reduced their contributions to their 401(k), though a few have taken out loans against their 401(k) savings that they must repay, Mr. Rybka said. Only one employee at TrustPoint Technologies Inc. in Strongsville reduced a contribution to the 401(k) plan last year as the recession deepened, said David Basile, president of TrustPoint, which sells computer hardware, software and technical support services. He said he did not change the company’s contribution to the employee 401(k) plan because last year ended up being a decent year financially for TrustPoint and this year is looking even better, he said. As the value of 401(k) plans dropped last year and salaries got cut, many people stopped contributing to those plans or reduced their contributions, Waypoint Beacon’s Mr. Besinger said. Employers now must remind workers why it’s important to save for retirement. “When people lose 35% to 40% of their 401(k) plan, it makes for some apprehension in putting money in,” he said. “If they’re getting squeezed and their expenses are increasing, people are definitely more reticent to squirrel money away.” ■
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“When people come into our doors, they see people who look just like themselves,” she said. She said, too, that those first efforts can help encourage people to reach minor savings goals that can give them peace of mind in an emergency. “As these individuals grow and grow their financial needs, maybe one day they’ll need help with home ownership or college,” she said. “We view this as an opportunity to grow our customer base.” When PNC formally enters the market next month by switching over National City branches, it will bring a new tool for the unbanked, she said. The Foundation savings and checking accounts are designed for those who have never used a bank before or who have had minor problems managing an account in the past. The accounts include no minimum balance and limits on debit card transactions and ATM withdrawals. Some legacy National City products will remain, including an autosave partnership with Welcome
“A lot of times, people are uncomfortable with traditional bank settings.” – Pat Ramsey community development manager in Northeast and Central Ohio, U.S. Bank ReliaCard that can be loaded with unemployment benefits or other government money. The bank rewards people who are able to save, giving them a $50 Visa card when they reach a $1,000 balance in their accounts, through the Savings Today and Rewards Tomorrow, or START, program. And a network of in-store branches is designed to make going to the bank for the first time less intimidating. “A lot of times, people are uncomfortable with traditional bank settings,” said Pat Ramsey, community development manager in Northeast and Central Ohio for U.S. Bank. “It helps break down barriers.” Tom Zirbs, U.S. Bank’s regional manager in this region, said the programs provide a “great opportunity” for the bank to create a relationship that can be built on over the years, while also doing good.
Opening doors Andrew Kaplan, executive vice president of the financial solutions group at AmTrust Bank purchaser New York Community Bancorp, said the challenge his bank and others face is convincing people who see the marble and columns of many bank buildings as impenetrable that they can, in fact, relate to the bankers inside. In addition to teaching people that a check can bounce or that money deposited one day may not be available immediately, he said bankers have to work past preconceived notions of traditional banking and bankers. For that reason, he said, NYCB bankers are encouraged to volunteer and be involved in charitable events where they can be seen outside of the bank. “It’s the best way to touch people,” he said. “Now we’ve put a face to that.” Maria Thompson, vice president of community development banking at PNC, said diversity at the bank is also imperative.
House and a scholarship match with the Cleveland Scholarship Program.
Reaching out Louise Gissendaner, director of community development and a senior vice president at Fifth Third Bank in the Northeastern Ohio region, said it is “critical” that a bank provide as much support as possible to as many people as it can. According to the 2000 Census, she said, nearly a quarter of all houses are unbanked or underbanked — a term meaning they lack access to credit. A disproportionate number of those people are low-income or minorities, she said, but Key’s Ms. Parish also said there are doctors, lawyers and other professionals who live paycheck to paycheck and fall into those categories. Ms. Gissendaner said Fifth Third’s strategy — like that of many banks — is to participate in classroom training about financial matters, where they hope to reach children when they are young. The bank also sends a bus into many neighborhoods so financial lessons can be taught outside the bank. Fifth Third has a Goal Setter savings account with no minimum balance that promises a bonus once that goal is reached. Customers cannot make online banking transfers or ATM withdrawals, but can access their money by visiting the bank. It has a Basic53 Checking account that allows unlimited checking, checkwriting and withdrawal with a debit card, but has no deposit access to an ATM for one year and will not allow access to funds if they are not there. And the DreamGuard program pairs financial calculators with budgeting tips and advice. “There’s a lot of explaining involved with this,” Ms. Gissendaner said. “Most of the time, one session is not enough. Some people just haven’t grown up with a bank. … I do think they need more handholding.” ■
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CRAIN’S CLEVELAND BUSINESS 17
FINANCE
Feds looking more closely at worker classification; risks extensive
T
he Internal Revenue Service is in the beginning stages of a three-year plan to audit approximately 6,000 U.S. employers, with a focus on whether those employers have been paying their share of employment-related taxes. A key component of the audits is worker classification: Are workers misclassified as independent contractors when they really are employees? The IRS is not alone in its efforts. Legislation is pending that would close a safe-harbor provision in the Internal Revenue Code that, in some circumstances, protects employers who misclassify workers. Secretary of Labor Hilda Solis also has stated that improving the classification of workers is critical to the mission of the Employment Standards Administration, the Department of Labor division responsible for administering laws related to working conditions and wages. Why does it matter that the government is looking more closely at the status of workers? While misclassification is not illegal, the results of the misclassification often are, and the resulting liabilities can be significant. Employers who misclassify workers may be liable for unpaid state and federal payroll taxes, including interest and penalties, workers’ compensation premiums and up to three years of unpaid overtime compensation, including liquidated damages and attorneys’ fees. Misclassified workers may be entitled to retroactive participation in qualified pension plans, welfare benefit plans and stock option plans, potentially leading to additional significant out-of-pocket costs for the employer. There are different tests for determining who is an employee and who is an independent contractor. However, regardless of the legal issue and government agency involved, there are several factors that are the same across the tests that, if they exist, will go a long way toward minimizing an employer’s risk of incurring liability for misclassification. The first, and perhaps most important, step is to ensure that the worker is free from the control of the employer. An independent contractor may be fairly obligated to reach the employer’s end goals in compliance with the employer’s standards. The means and methods used to accomplish those goals, however, should be left up to the contractor. This means that the employer should not have control over when and where to do the work, what tools or equipment to use or what sequence to follow when performing the work, nor should the employer have the right to control those things. The second is that an independent contractor is financially independent and should have the ability, based on his or her efficiency or lack thereof, to make a profit or sustain a loss. An independent contractor’s services should be available to the market, not limited to just the employer. Employers that pay contractors a flat fee per project but do not provide the contractor with the tools, equipment or materials necessary
for the project, do not reimburse the contractor for expenses and do not provide fringe benefits will be in a much better position to defend themselves in an audit or in court. The third is that employers should make sure that each party takes the steps necessary to demonstrate that the relationship is an independent contractor relationship. In most cases, employers should not use independent contractors to perform the core aspects of their business or perform the same work that other employees perform. Employers should report pay-
CHRISTOPHERJOHNSON ANGELASIMMONS
ADVISERS ments made to the worker via Form 1099 and require the worker to carry his or her own workers’ compensation insurance. Finally, the parties
should have a written agreement in which, among other things, the employer renounces any right to control the means and methods of work and in which the worker acknowledges independent contractor status. We mention the contract last, even though it is normally the first part of the process, because government agencies and courts consider the terms of a written contract to be much less important than the actual working relationship; if there are inconsistencies between the contract and the actual work practices, courts and government agencies will make their decisions based
on the work practices. While the proper use of independent contractors may lead to cost savings, misclassification can lead to significant liability and expense. And in light of the government’s renewed emphasis on misclassification, it is imperative that employers take the steps necessary to make sure that contractors are, in fact, contractors. ■ Mr. Johnson is a partner in Thompson Hine’s Labor & Employment practice, and Ms. Simmons is an associate in the firm’s Labor & Employment practice.
A SECOND OPINION SAVED US *
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* Results may vary depending on your business situation.
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18 CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
MARCH 22-28, 2010
FINANCE
Chap. 11 can be used as mechanism to sell a business For many small, mid-size companies, reorganization too expensive By CHUCK SODER csoder@crain.com
G
rowing up, Mary Whitmer loved hearing her lawyer dad tell stories about how he helped all sorts of businesses — from grocery stores to coal mines to pallet manufacturers — emerge from bankruptcy intact. Ms. Whitmer would like to tell such stories herself now that she is a bankruptcy attorney at Kohrman Jackson & Krantz PLL of Cleveland. Since then, however, the process — governed under Chapter 11 of the Bankruptcy Code since 1978 — has grown too expensive for most small and mid-size businesses, she said. Now, those that do go through Chapter 11 often end up under new ownership, said Ms. Whitmer, who also is president of the Cleveland Metropolitan Bar Association. “I just don’t see Chapter 11 being a constructive way to reorganize unless you’re a huge company,” she said. Chapter 11 filings in Greater Cleveland more than doubled last year, jumping to 53 in 2009 from 22 in 2008, according to statistics from the U.S. Bankruptcy Court of the Northern District of Ohio. The increase indicates more area business owners are using the statutes as a way to sell their companies while under court protection from creditors, according to Ms. Whitmer and other area lawyers. The section of the bankruptcy
code is meant to give businesses time to reorganize debt and balance sheets and continue operating. By contrast, in Chapter 7 bankruptcy, a court-appointed trustee sells off a firm’s assets piece by piece. Owners of smaller firms often use Chapter 11 as a way to sell their business free of liens and claims because they can’t afford to go through a lengthy reorganization, Ms. Whitmer said. For one, renegotiating contract terms, creating a revised business plan and finding new sources of capital can take a long time. All the while, the filing company often ends up paying their own lawyer as well as attorneys representing the bank and a committee representing everyone else owed money. And good bankruptcy attorneys often charge more than $400 per hour, Ms. Whitmer said. Still, for businesses that can find a buyer, filing for Chapter 11 is way better than having a courtappointed trustee take control of the business and sell its assets separately as part of a Chapter 7 bankruptcy, said attorney Jean Robertson, a bankruptcy partner at Cleveland’s Calfee Halter & Griswold law firm. “You want your management running the enterprise, not a bankruptcy trustee,” Ms. Robertson said. “The goal here is to maximize value for creditors.”
Desperate times … Adding to the number of new Chapter 11 filings is the fact that
some well-managed businesses that happen to be short on cash can’t find temporary financing to get them through the downturn because of the tight credit market, Ms. Robertson said. In normal times, she said, they wouldn’t have to sell their companies. “I’m seeing Chapter 11’s that shouldn’t be filing,” she said. Even during the Chapter 11 cases where companies are willing to take on the higher administrative costs related to restructuring — which increased as a result of changes to the federal bankruptcy code in 2005 — they can’t find financing to keep them operating throughout the process because of the credit market, said Scott Opincar, a partner in McDonald Hopkins’ business restructuring practice in Cleveland. “Liquidating the business is simpler and quicker,” he said. Struggling firms that can’t afford Chapter 11 do have other options, Mr. Opincar said. For one, over the past four years more companies, instead of filing for bankruptcy, have sought protection under receiverships in which they are put under the control of state courts or federal courts if they have substantial assets in several states. Receiverships are cheaper, and banks are becoming increasingly more comfortable with case law related to the process, Mr. Opincar said. Filing companies also can use a method called the assignment for benefit of creditors, which involves putting the company in
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TRACKING BANKRUPTCIES Chapter 7 and Chapter 11 filings in U.S. Bankruptcy Court’s Northern District of Ohio generally are on the rise, according to statistics on the court’s web site.
Cleveland
Chapter 7
Chapter 11
2009
9,950
53
2008
7,464
22
2007
6,104
20
Chapter 7
Chapter 11
2009
4,738
22
2008
3,664
27
2007
2,953
10
Chapter 7
Chapter 11
2009
31,463
146
2008
23,791
87
2007
19,120
63
Akron
Overall*
* — INCLUDES CLEVELAND, TOLEDO, YOUNGSTOWN, CANTON AND AKRON
possession of a local probate court. Through that method, the company often is sold, but it can continue operating under current ownership with court approval, Mr. Opincar said. Such arrangements aren’t popular in Ohio, but more companies might use the option as lenders grow comfortable with it, he said. “Four years ago receiverships were not very common at all, but now they’re very common,” he said. Consulting a bankruptcy attorney as soon as possible helps ensure that businesses thinking about filing for Chapter 11 have as many options as possible, said Daniel DeMarco, a partner with Hahn Loeser & Parks LLP of Cleveland. Tackling the problem early can help businesses line up a strategy before they lose any major customers, for instance, or trigger undesirable provisions in any of their contracts. “We as attorneys always say, ‘Gee, I wish I could’ve started on this project a week earlier, a month earlier,’ because there are always more options,” Mr. DeMarco said.
A new start Nationally, only about 10% to 15% of businesses filing for Chapter 11 continue operating, including those that undergo significant changes in ownership and management, Mr. DeMarco said. Anymore, cases in which a company’s ownership and structure remain
for the most part in place are “extraordinarily rare,” he said. However, he did represent Medina Glass Block Inc. during what so far has been a successful restructuring of the company. The maker and distributor of glass block windows last summer emerged from Chapter 11 bankruptcy after about seven months of working with creditors and devising a plan that included closing seven stores and eliminating a division that sold and installed residential windows. It still sells residential windows through distributors, as well as commercial windows. The company remains in “survival mode” but has been profitable every month since it emerged from bankruptcy, said Bud Kirkpatrick, chief operating officer. Medina Glass Block chose to restructure under its current ownership because, though profitable entering bankruptcy, the company had so much debt that selling would have left the owners with nothing, Mr. Kirkpatrick said. In the end, it was worth the massive attorney bills and the work sessions that sometimes lasted up to 20 hours, he said. “It’s a very expensive process, but the alternatives seemed more expensive,” he said. ■ (Crain’s Cleveland Business reporter Dan Shingler contributed to this story.)
Fitch revises Cleveland schools’ rating The Fitch credit ON THE WEB Story from expenditure adjustrating services has www.CrainsCleveland.com. ments,” Fitch affirmed its BBB+ stated. “The district rating on two series of general is currently negotiating bargaining obligation bonds of the Cleveland unit contracts, which will be crucial Metropolitan School District, but to its ability to reduce spending.” has revised its rating outlook for the Fitch said the district’s general district to negative from stable. fund reserves “were minimal in 2009 Fitch said the negative outlook and are expected to be nil in 2010.” reflects the district’s weakened “The district has approved and financial position “and the need for will implement a transformation plan significant changes to align spending which includes spending cuts, with available revenues.” including a sizable number of “With a lack of voter support for school closures; this and other operating levies and few other actions will be necessary to restore options to increase revenue, the fiscal balance in 2011 and beyond,” district must make meaningful Fitch stated.
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Avon: Location, some luck a boost continued from PAGE 1
down by almost 8%, and if Avon is up in manufacturing, then that must mean that the rest of Lorain County (notably Lorain and Elyria) has to be down by more than 8%,” Mr. Zeller said in an e-mail correspondence. Across the state, numbers from Ohio’s Office of Budget and Management indicate income tax revenues have been falling almost universally, he noted. “From all of that reasoning, I conclude that Avon’s situation is an extremely unusual anomaly, both in Ohio and in Lorain County,” said Mr. Zeller.
Not-so-dumb luck So how does Avon do it? More importantly, can other local communities successfully copy it? Avon Mayor Jim Smith said the city’s success has not been the result of any grand plan. “A lot of it’s luck — 90% of what you do as a mayor is luck, and 10% of it is you don’t screw up your own luck,” he said. Avon also has some factors working in its favor, such as abundant green spaces on which to build for the first time. “We’ve got a great location, that’s part of that luck equation,” Mayor Smith said. But, he adds, Avon has a city government that tries to work with businesses and that means sometimes putting developments on a fast track. “The only thing businesses want you to do is get ’em through the process,” Mayor Smith said. “If you have a special meeting of the planning commission, and they don’t get
it all done in one night, then you have a meeting the next night.” Avon has had some fortunate breaks. For instance, when Skill Tool and Die went out of business and up for sale in late 2009, it looked like the end for the firm and its more than 30 employees. A buyer purchased the entire operation and restarted it eight days later with the same workers. Area businesses give Mayor Smith and the city credit for helping them grow and stay in Avon. And they say the mayor not only had a plan, he stuck to it. “One of the best attributes of Jim Smith is he had a master plan years ago with a mix of residential and commercial,” said Chris Haas, CEO of Avon-based All Pro Freight Systems, a freight and distribution company. In the 12 years that All Pro has been in Avon, it has built most of its 500,000 square feet of space from scratch, including a 200,000-square-foot distribution facility it built for a tenant serving Ford at the end of 2008. That project had to be completed in four months in order to win the work from Ford, and it couldn’t have happened without the city’s help, Mr. Haas said. To expand, All Pro needed to purchase land adjacent to its present facility on Chester Industrial Parkway. The land was available, but the railroad that owned it only wanted to sell it as one 270-acre parcel, which was far more than All Pro needed. “Believe me, (the city) had a lot more clout than I did,” said Mr. Haas, who added he was unable to change the seller’s mind by himself. “They pieced off the 15 acres and got me
Lakewood: Change may be a plus continued from PAGE 3
plan to retain or dispose of the building. The prospect of new ownership for the office tower that dominates downtown Lakewood sounds good to Nathan Kelly, the city’s director of community and economic development. He hopes the next owner hails from the region and will compete for office tenants. He maintains Lakewood Tomorrow VIII fund “was not competitive” as it lost the union and other tenants and did not respond to demands of tenants in the building. The Tomorrow Fund’s U.S. office in Houston referred calls about the building to BGK, which provided asset management services for the building. BGK did not return three calls left last week by Crain’s Cleveland Business. CWCapital did not return two calls. CWCapital manages and sells lender-controlled properties as well as sour loans associated with them, according to its web site. This is the second time Lakewood Center North has gone back to a lender. The structure that dates to
1974 went the same route in 1993 near the end of the commercial real estate credit crunch of the early 1990s. Lakewood Center North joins a growing roster of Northeast Ohio commercial real estate undergoing foreclosure or owned by lenders. In the office category alone, the list includes the landmark Commerce Park Square I, II and III buildings in Beachwood, the Summit Office Park in Independence and Key Investment Center in downtown Cleveland. RCA Capital Analytics of New York, which tracks investment sales and troubled real estate globally, lists nine Northeast Ohio office properties with a total market value of $80 million as distressed as of March 8, compared with eight buildings with a market value of $73 million in its Dec. 3, 2009, report. RCA’s distressed property data is not limited to public court or landrecord filings, but also incorporates information on souring loans it obtains from lenders and other sources. ■
ROLLING IN THE DOUGH The city of Avon’s income tax base has been increasing over the last few years, despite a recession that has roiled other cities throughout Ohio.
Year
Value
% increase
2010*
$9.40M
0.3%
2009
9.37
5.5
2008
8.88
13.4
2007
7.83
0.4
2006
7.80
14.4
2005
6.82
10.9
2004
6.15
6.0
2003
5.80
41.3
SOURCE: CITY OF AVON * — ESTIMATE
what I wanted.” After that, the city expedited his permits and the project was completed on time — and in an almost unheard of time frame to complete a building of that size, Mr. Haas said.
Willing to play ball All Pro — and other businesses — in turn have shown their support for
CRAIN’S CLEVELAND BUSINESS Avon. When the city wanted to build a baseball park to host the Frontier League’s Lake Erie Crushers, All Pro stepped up to the plate and bought naming rights from the Crushers for an undisclosed sum. Other companies also have grown in Avon and give the city high marks, including Carroll Manufacturing & Sales, which produces the nets that go around turkeys and hams, as well as “Flavor Seal” bags used by consumers to store and prepare food at home. In the last five years, the company’s payroll has increased from 50 employees to 75, said marketing manager Stacey Brown. “During our recent expansion, the mayor’s office was invaluable in working through all of the stages that needed to occur, including the tax abatement process,” Ms. Brown said in an e-mail. “In turn, we feel it’s important that CMS shows our appreciation and commitment to the community as well, so we advertise at All Pro Stadium and support the new French Creek YMCA.” Mayor Smith said he uses abatements when necessary, and since Mr. Smith became mayor in 1994, the city has so far only reduced property values by a total of $43 million. All of the firms that received abatements have so far stayed during the abatement period and kept growing in Avon. That may be in part due to some savvy on Mr. Smith’s part. He said
19
whenever a company asks for an abatement, he insists they buy more land than they need because Ohio law requires that abated firms use all of their existing land before moving or else forfeit their abatement savings. “Don’t come to me for a tax abatement if you’re going to buy a footprint,” Mayor Smith said. Avon has also found ways to keep corporate giants happy, such as Parker Hannifin Corp., which has a division making aviation wheel and brake components in Avon. Parker’s division operations team leader Dennis Richards said the city has been effective in working with Parker ahead of time on future developments and that the city’s building department has been particularly responsive.
Looking over his shoulder So far so good, but Mayor Smith said he still worries. He said that if the city’s income tax revenues are growing it has more to do with the companies in Avon being well run than anything else. But even well-run companies have felt the pinch of the economic downturn, and Mayor Smith said he sees the recessionary effects on the coffers of cities all around him — and wonders if Avon will be next. “We’re doing great. … We may be the only city in Northern Ohio that’s up,” the mayor said. “I keep wondering when it’s going to hit us.” ■
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CRAINâ&#x20AC;&#x2122;S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
MARCH 22-28, 2010
SHOPPING CENTERS RANKED BY TOTAL RETAIL AREA
Shopping center Address Rank Phone/Web site
Total retail Total % of retail area number space (square feet) of stores occupied Anchor tenants
Year opened
Owner
Management company Phone number
Mall manager
1
Eastwood Mall 5555 Youngstown-Warren Road, Niles 44446 (330) 652-6980/www.eastwoodmall.com
3,319,113
190
NA
JCPenney, Macy's, Dillard's, Target, Sears, Old Navy, Food Court
1969
The Cafaro Co.
NA
Ken Kollar
2
Westfield SouthPark(1) I-71 & Route 82, Strongsville 44136 (440) 238-9000/www.westfield.com/southpark
1,626,198
183
NA
Dillard's, Sears, JCPenney, Macy's, Kohl's, Dick's Sporting Goods, Cinemark Theatres
1996
Westfield Corp.
Westfield Corp.
NA
3
Great Lakes Mall(1) 7850 Mentor Ave., Mentor 44060 (440) 255-6900/www.simon.com
1,306,016
120
NA
Dillard's, JCPenney, Macy's, Sears
1961
Simon Property Group Simon Property Group Inc. Inc. (330) 867-6997
NA
4
Westfield Great Northern(1) 4954 Great Northern Mall, North Olmsted 44070 (440) 734-6300/www.westfield.com/greatnorthern
1,228,969
143
NA
Dillard's, JCPenney, Macy's, Sears,
1976
Westfield Corp.
Westfield Corp.
NA
5
Sandusky Mall 4314 Milan Road, Sandusky 44870 (419) 626-8575/www.sandusky-mall.com
1,152,302
86
NA
JCPenney, Macy's, Sears, Elder-Beerman, T.J. Maxx, Best Buy
1976
The Cafaro Co.
NA
Neal Gray
6
Midway Mall 3343 Midway Mall, Elyria 44035 (440) 324-6610/www.midwaymallshopping.com
1,104,697
NA
NA
Best Buy, JCPenney, Macy's, Sears, Staples
1967
Centro Properties Group
Centro Properties Group (513) 728-6625
Mark Bressler
7
Parmatown Mall 7899 W. Ridgewood Drive, Parma 44129 (440) 885-2090/www.parmatown.com
992,000
NA
NA
Macy's, JCPenney, Walmart, Dick's Sporting Goods
1960
Parmatown One LLC
RMS Investment Corp. (440) 885-5506
Nick Rudy
8
Beachwood Place 26300 Cedar Road, Beachwood 44122 (216) 464-9460/www.beachwoodplace.com
975,000
130
93
Dillard's, Saks Fifth Avenue, Nordstrom
1978
General Growth Properties
General Growth Properties (312) 960-5000
Rob Clarke
9
Richmond Town Square(2) 691 Richmond Road, Richmond Heights 44143 (440) 449-3200 /www.simon.com
921,026
90
99
Barnes & Noble, JCPenney, Lowe's Theatres, Macy's, Sears
1966
Simon Property Group Simon Property Group Inc. Inc. (330) 867-6997
NA
10
Southern Park Mall(2) 7401 Market St., Youngstown 44512 (330) 758-4511 /www.simon.com
900,000
174
99
Dillard's, JCPenney, Jillian's, Macy's, Sears, Tinseltown Cinema
1970
Simon Property Group Simon Property Group Inc. Inc. (330) 867-6997
NA
11
Chapel Hill Mall(1) 2000 Brittain Road, Suite 830, Akron 44310 (330) 633-7100/www.chapelhillmall.com
865,000
100
NA
JCPenney, Macy's, Sears
1966
CBL & Associates Management Inc.
CBL & Associates Management Inc. (800) 333-7310
NA
12
Ashtabula Towne Square 3315 N. Ridge Road E, Ashtabula 44004 (440) 998-2020/www.ashtabulatownesquare.com
814,026
40
NA
Sears, JCPenney, Kmart
1992
Cabot Ashtabula Lease Co. LLC
Zamias Services Inc. (814) 539-3845
Vince Coneglio
13
The Strip I-77 & Portage Road, North Canton 44720 (216) 464-2860/www.starkenterprises.com
800,000
27
96
Lowe's, Walmart, Giant Eagle, Best Buy, Borders, Bed Bath & Beyond
1996
Stark Commons Ltd.
Stark Enterprises (216) 464-2860
NA
14
Westfield Belden Village(2) 4230 Belden Village St. NW, Canton 44718 (330) 494-8815/http://westfield.com/beldenvillage
798,893
119
100
Dillard's, Sears, Macy's
1970
Westfield Corp.
Westfield Corp.
NA
15
Southgate USA Shopping Center 20950 Libby Road, Maple Heights 44137 (216) 663-3850/www.southgateusa.com
788,130
NA
NA
Home Depot, Giant Eagle, Southgate Bowling Lanes, Dept. of Human Services
1955
SG USA Ltd.
McKinley Inc. (216) 663-3850
Denise Ann Armstrong
16
Southland Shopping Center Pearl Road & W. 130th St., Middleburg Heights 44130 (513) 521-4350/www.centroprop.com
778,500
38
73
Giant Eagle, Burlington Coat Factory, Marc's, BJ's Wholesale Club
1950
Centro GA Southland LLC
Centro Properties Group (513) 521-4350
NA
17
Summit Mall 3265 W. Market St., Akron 44333 (330) 867-1555/www.simon.com
766,324
120
NA
Dillard's Men and Home, Dillard's Women, Macy's
1965
Simon Property Group Simon Property Group Inc. Inc. (330) 867-6997
18
Crossings at Golden Link Aurora Road & state Route 8, Macedonia 44056 (216) 464-5900/www.thekronegroup.com
725,000
12
99
Target, Lowe's, Giant Eagle, Great Escape
2004
RLP Group
The Krone Group (216) 464-5900
NA
19
Steelyard Commons 3447 Steelyard Drive, Cleveland 44109 (216) 381-2900/www.first-interstate.com
692,528
34
NA
Walmart Supercenter, The Home Depot, Target, Best Buy
2007
First Interstate Properties Ltd.
First Interstate Properties Ltd. (216) 381-2900
Chris A. Goodrich
20
Cobblestone Square(1) 5500 Abbe Road, Sheffield Village 44035 (440) 892-6800/www.carnegiecorp.com
680,000
NA
NA
Sam's Club, Regal Cinema 20, Gander Mountain, Litehouse Pools
2001
Carnegie Management and Development NA Corp.
NA
21
Howland Commons 2070-2390 Niles Cortland Road, Warren 44484 (330) 652-6980/www.eastwoodmall.com
650,488
10
NA
Borders Books, Gander Mountain, Home Depot, Kmart, Kohl's, David's Bridal
1996
The Cafaro Co.
NA
Ken Kollar
22
The Cascades of Brimfield 3975 Cascades Blvd., Kent 44240 (216) 896-5609/www.kowitpassov.com
650,000
NA
NA
Walmart Supercenter, Lowe's, Kohl's, Applebee's, Dollar Tree, Home Savings & Loan
2006
3D Cascades LLC
3D Real Estate Mgt. Co. (216) 641-1400
NA
22
University Square Warrensville Ctr. Rd. & Cedar Ave., University Hts. 44118 (216) 297-9510/www.inlandgroup.com
650,000
14
40
Target, Macy's, Jo-Ann Superstore, Pier I, T. J. Maxx & More
2003
Inland US Management
Inland US Management (216) 297-9510
NA
24
Severance Town Center(1) 3640 Mayfield Road, Cleveland Heights 44118 (216) 381-5762/www.pinetreecommercial.com
633,000
33
NA
Walmart, Home Depot, Dave's Markets, OfficeMax, Marshalls, Borders
1963
Tree Commercial Realty Pine Tree Commercial Pine LLC NA Realty LLC (847) 735-0600
25
Avon Commons 35974 Detroit Road, Avon 44011 (216) 381-2900/www.first-interstate.com
630,646
36
NA
Heinen's, The Home Depot, Kohl's, Target, Costco
2000
First Interstate Properties Ltd.
26
Great Northern Plazas 25859 Great Northern Blvd., North Olmsted 44070 (216) 755-5500/www.ddr.com
627,060
38
40
Home Depot, Marc's, Jo-Ann Etc, Best Buy, Bed Bath & Beyond, K&G Menswear, DSW, PetSmart
1958
Developers Diversified Developers Diversified Realty Gary Jeziorski Realty (216) 755-5500
27
Westgate Center Ridge Road & W. 210th St., Fairview Park 44125 (440) 324-6610
600,000
NA
NA
Kohl's, Lowe's, Petco, Target, Books-aMillion, Marshalls, Ulta Beauty
2007
Centro Properties Group
Centro Properties Group (513) 728-6625
NA
28
Legacy Village 25001 Cedar Road, Lyndhurst 44124 (216) 382-3871/www.legacy-village.com
595,942
NA
NA
Dick's Sporting Goods, Giant Eagle, Crate and Barrel, Joseph-Beth, Nordstrom Rack
2003
Legacy Village Investors LLC
Bayer Properties LLC
Marcie Gilmore
29
Marketplace at Four Corners Aurora Road & Marketplace Drive, Bainbridge 44202 (561) 629-5520/www.mpgpropertygroup.com
579,488
NA
NA
Kohl's, Marshalls, Walmart Supercenter, Babies R Us, Famous Footwear, Michaels, Dick's Sporting Goods
2002
MPG Property Group
MJM Property Management (561) 629-5520
NA
30
Ridge Park Square 4798 Ridge Road, Brooklyn 44144 (216) 464-5255/www.zeislermorgan.com
562,842
43
79
Lowe's, Marc's, T.J. Maxx, AMC Theatre, Bed Bath & Beyond
1987
Ridge Park Square LLC
ZM Management (216) 464-5255
Shannon P. Blackwell
Source: Information is supplied by the companies unless footnoted, numbers as of Jan. 1, 2010. 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. (1) Information from shopping center and management company websites. (2) Information from CoStar Group, www.costar.com.
First Interstate Properties Ltd. (216) 381-2900
David Huesser
Chris A. Goodrich
RESEARCHED BY Deborah W. Hillyer
20100322-NEWS--21-NAT-CCI-CL_--
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MARCH 22-28, 2010
Contact: Phone: Fax: E-mail:
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CRAIN’S CLEVELAND BUSINESS
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MARCH 22-28, 2010
Airfare: Airports complement each other continued from PAGE 3
reasons why Akron-Canton is growing. As a result, Hopkins has had to watch the small airport in the city of Green bleed passengers away from the larger air hub as careful travelers watch fares rise and flight choices decline. Indeed, since the first quarter of
1997, the average domestic airfare for flights originating at CAK — as the airport is identified on everything from baggage tags to air traffic control screens — have been consistently lower than flights from CLE — Hopkins — according to the latest U.S. Department of Transportation’s
bureau of transportation statistics. The data cover through the end of the third quarter of 2009. The figures show that for the third quarter of 2009, the average air fare for flights departing from Cleveland Hopkins was $337.49, or 28.5% higher than the $241.40 average
fare at Akron-Canton. That gap has widened and narrowed over time. For flights to Atlanta, the transportation department reported an average fare from Cleveland Hopkins of $184.39 while the average fare from Akron-Canton was $111.85, or 39.3% lower. Other common routes have similar spreads. The Department of Transportation fare survey includes all fares charged by the airlines, including first-class and business-class fares, and any taxes and fees levied by local and federal governments. They do not include fees for baggage or fares that are reduced by frequent-flyer programs.
Slump-busters Those low fares have helped Akron-Canton avoid the slump in air traffic that has affected most U.S. airports. Passenger traffic at CAK is up 0.78% between 2005 and 2009, at a time when traffic nationally is down 8.5%. The number of passengers flying through Cleveland Hopkins is off 14.5% over the same time period. The air fare report also shows that average fares at both airports declined over the last four quarters by about 16.7% for Akron-Canton and 14.2% for Cleveland Hopkins. Nationally, average fares fell by 14.4%. Low average fares notwithstanding, travel agents and officials from both airports were quick to point out that coming out on top statistically doesn’t necessarily mean Akron-Canton will consistently have the lowest fares on any specific itinerary. “There is no logic to it,” said Lisa Sward, president of Kaufman Travel in Cleveland. “I always check (for comparable fares at Hopkins and Akron-Canton).” Ruth Nagy, director of travel operations for the East Central AAA, which serves Northeast Ohio, said that as air carriers have cut back on the number of flights to reduce the number of empty seats they fly, time of day, or even what dates flights are available, are growing factors in
choice of flights and airports. Ms. Sward said that Akron-Canton can be best for travelers flying on short notice. In particular, she cited the Cleveland-to-New York route, which AirTran serves from Akron-Canton with several nonstop flights per day. “If you don’t have much advance notice, you can’t get good rates from Cleveland Hopkins, but from AkronCanton, you can,” she said.
Friendly competition Todd Payne, chief of marketing and air service development at Hopkins, had only nice things to say about the operation at Akron-Canton, but he defended the air service offered at the city of Cleveland-owned Hopkins. “We’ve got value fares and for someone who wants to travel first class at a premium fare, we’ve got that, too,” he said. Even officials at Akron-Canton, who have trumpeted their airport’s advantages over Cleveland Hopkins in advertising, concede the relationship between the two airports is more symbiotic than antagonistic. Kristie Van Auken, senior vice president for marketing and communications at Akron-Canton, said both airports are important. And she pointed out it is the carriers, not the airports, which set fares. Akron-Canton, she said, has grown by bringing in low-cost air carriers, who offer low-cost service to a limited number of airports. That keeps the airport’s average fare low. She said Continental Airlines’ hub operation, which brings passengers into the airport from many small Midwest cities to change planes and continue on to dozens of destinations, is an important regional air asset. But Hopkins’ status as a hub airport, which Akron-Canton is not, raises average fares in Cleveland. Ms. Van Auken said that’s because Continental, a so-called legacy carrier with a higher fare structure than the low-cost carriers, flies to so many cities that have limited air service. “There is not going to be a low-cost carrier who is going to compete (with Continental) on the Cleveland-toGreen Bay route,” she said. ■
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MARCH 22-28, 2010
1:29 PM
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CRAIN’S CLEVELAND BUSINESS
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23
THEINSIDER
THEWEEK MARCH 15 - 21 The big story: It turns out that FirstEnergy Corp. will be doing more repair work at the Davis-Besse Nuclear Power Plant than it planned when the electric company shut the unit down at the end of February for refueling. FirstEnergy said it will be performing repair work on several control rod nozzles that penetrate the reactor head vessel at the nuclear plant at Oak Harbor, near Toledo. FirstEnergy said ultrasonic inspections conducted on 49 of the 69 nozzles detected what it termed “indications” in 12 of them.
New station in life: The Lyden Co., a Toledobased gas station operator, is moving its headquarters to Brecksville. The company said it will break ground this summer at a 22-acre site for a building that will consolidate corporate staff in Toledo with the staffs of two regional offices, bringing together 25 employees. The move is part of an expansion of True North Energy LLC, a firm jointly owned by Lyden and Shell Oil Products U.S. True North has operated Shell gas stations in Ohio and Michigan since 1999. It recently acquired 109 gas stations in the Chicago area from Equilon Enterprises LLC, a Shell Oil subsidiary, bringing its station count to 320.
Man overboard: The Cleveland-Cuyahoga County Port Authority unceremoniously replaced its vice chairman and approved renegotiated contracts with its major tenants to help them get through the slump in cargo business. Richard Knoth was replaced as vice chairman by Robert Smith. Mr. Knoth laid the blame for his ouster on his disagreements with the board majority and former president Adam Wasserman over the Port Authority’s expansion plans and his “temerity to speak” publicly about his concerns. He said that at a meeting last October he was confronted by Mr. Wasserman, board president Steven Williams and other board members and told to “resist any public questioning of the Port’s finances and other business dealings.” Looking up: Polymer producer PolyOne Corp. is projecting first-quarter results considerably above analysts’ expectations. The Avon Lakebased company said it expects revenue to exceed $600 million for the first quarter, an increase of about 30% from the like quarter of 2009 and 10% higher than last year’s fourth quarter. Earnings per share before special items and tax adjustments are expected to be about 15 cents per share in the first quarter; the First Call consensus estimate currently is 9 cents per share. Stephen D. Newlin, PolyOne chairman, president and CEO, said auto demand “appears to be picking up.” This and that: Casnet, a provider of document management software and services in Akron, acquired the software division of NCD Corp. in Eastlake under undisclosed terms. The acquisition will give Casnet access to NCD’s Electronic Worldwide Information Exchange software, which allows customers to access their documents via the Internet. … The Cleveland Clinic received a $1 million federal grant to research treatments for spinal cord injuries. The National Institutes of Health grant will help lead investigator Yu-Shang Lee develop surgical treatments that might allow nerves to regenerate and the bladder to recover after a spinal cord injury. … KeyCorp promoted Christopher M. Gorman to senior executive vice president and head of its National Banking business. He previously was president of KeyBanc Capital Markets. To keep up with local business news as it happens, visit www.CrainsCleveland.com.
REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS
It’s never too early to think about March Madness 2011 ■ Looking for tickets to the NCAA men’s basketball tournament’s first-round games at Quicken Loans Arena for next March? You might be out of luck, or as close to it — at the mercy of scalpers and ticket brokers — as you can get. Carrie Neville, the ticket and merchandise manager at Cleveland State, which is serving as the host school for the first- and second-round games here next year, said the NCAA hasn’t yet told CSU and Quicken Loans Arena officials how many tickets are available. The process, Miss Neville said, works like this: CSU first offers a pre-sale — which ended March 1 — for donors, faculty and staff and season ticket holders. The Q and the Cavs then offer seats to their own constituent lists, likely season ticket holders and probably advertisers. After that, any available tickets will be made available to the public starting today, March 22, in a lottery format: Via the Internet, interested parties will register with the school, and names randomly will be drawn until the tickets are gone. After that, the school keeps the registrants’ information in case schools don’t use their entire allotment. Miss Neville also said buying CSU season
tickets for the 2010-11 season won’t help any ticket seekers’ causes. — Joel Hammond
Foreclosure prevention group at home on the web ■ Empowering and Strengthening Ohio’s People, the group that has been a persistent thorn in the side of many banks seeking to foreclose on residents’ homes, has started a blog. It can be found at esopblog.wordpress.com. In entries dating back just more than a week, the organization has focused mainly on the “Hardest Hit Fund” that distributed money to five states to help with foreclosure prevention, but left Ohio off the list. “One week after the Hardest Hit Fund announcement, Phyllis Caldwell, who heads Treasury’s Homeownership Preservation Office, testified before a Congressional subcommittee hearing that Ohio was getting $145 million of neighborhood stabilization grants (NSP), $40 million of which was for Cuyahoga County’s new land bank initiative,” spokeswoman Charu Gupta wrote on the blog. “Here’s the problem with this logic: None of that money does anything for foreclosure PREVENTION — the key word in this crisis — and what’s needed most in embattled
WHAT’S NEW
BEST OF THE BLOGS
COMPANY: Adalet, Cleveland PRODUCT: Explosion-proof pendant stations
Excerpts from blog entries on CrainsCleveland.com.
Adalet, a Scott Fetzer company (a subsidiary of Warren Buffett’s Berkshire Hathaway), has introduced a line of explosionproof stations for push-button control in hazardous locations. The line’s cast aluminum enclosure and heavy-duty operators “provide a rugged solution for operating overhead cranes, hoists, lifts and other remotecontrolled equipment,” Adalet says. The enclosures are available in one- through 18hole configurations and can be assembled with Adalet’s line of explosionproof pushbuttons, pilot lights and selector switches. Optional side handles, hanging brackets and strain relief provide accessories for safe hanging and operation, Adalet says. Yellow safety paint provides visibility in high-traffic industrial applications. Adalet makes explosion-proof enclosure systems and cable accessories, enclosure thermal management products and industrial sheet metal enclosures and related accessories. For information, visit www.Adalet.com. Send information about new products to managing editor Scott Suttell at ssuttell@crain.com.
Music is international, but it still has borders ■ The New York Times took a look at what it called the “byzantine process” of getting U.S. visas for visiting musicians, a process that recently led to a headache for the Cleveland Orchestra. The piece is something of a feature on Tamizdat, a nonprofit group in New York “with an official mission of promoting international cultural exchange, and a docket each year of hundreds of visa applications that need I’s precisely dotted and T’s precisely crossed.” Its clients include classical, ethnic and pop musicians from around the world, and it seems it’s constantly in business. Recently, The Times said, the Cleveland Orchestra’s application for Martin Mitterrutzner, an acclaimed young Austrian tenor, “was denied for reasons that left the orchestra perplexed: the report from immigration officials said, among other things, that the scheduling of Mr. Mitterrutzner’s performances did not indicate prestige, since he was booked for matinees, not evening performances.” After two denials, the orchestra retained a lawyer and got the decision reversed in the nick of time — but only after considerable expense, the newspaper reported.
Word to the wise: Read the benefits policy closely ■ Tammy Wise, owner of the Wise Group marketing firm in Cleveland, was quoted in a March 18 Wall Street Journal piece about how entrepreneurs focused on growing their businesses sometimes are caught off guard when employees start growing their families. Various experts offer sound advice on
states like Ohio.” She added, “Nice try, Treasury, but try again.” As of last Thursday afternoon, the blog had five entries and more than 130 hits. — Arielle Kass
Credit where credit is due ■ Clients across Ohio were awarded more than $93,000 this month after attorneys were found to have misappropriated their funds. In Cuyahoga County, 12 people received a total of $24,617 either because their attorney died and was unable to perform services they had paid for (that was the case with five people) or because their lawyer was suspended, reprimanded or had resigned from the practice of law. In Stark County, two former clients received a total of $1,293; three former clients of a Summit County attorney received a total of $14,500 after that attorney died. Statewide, 34 people received a total of $93,494 from the Board of Commissioners of the Clients’ Security Fund of Ohio. The fund, founded in 1985, is financed by the registration fees of attorneys and was created in 1985 to reimburse victims of attorney theft, embezzlement or misappropriation. Less than one-tenth of 1% of the state’s 42,000 attorneys are involved in such claims. — Arielle Kass
studying the Family and Medical Leave Act and consulting with an employment lawyer when creating a maternity-leave policy. “Another piece of advice for business owners: Find out if you can tap your insurance provider’s disability coverage,” The Journal said. Ms. Wise “says she didn’t realize she could’ve done that when she agreed in 2004 to give her nine employees — all women — up to 12 weeks off for maternity leave at 70% of their salary for eight of those weeks,” the newspaper reported. Ms. Wise later expanded her coverage “but learned a valuable lesson this past July when her provider changed its benefits policy,” according to The Journal. “She failed to read the new version carefully and when two employees took maternity leave, she discovered that coverage had dropped to four weeks from six. Had she paid closer attention, she says she would’ve adjusted her firm’s policy in this area accordingly.”
Smart use of vacant land is a welcome development ■ Next American City magazine’s Spring 2010 edition includes a comprehensive and laudatory feature on Cleveland’s efforts to return vacant land to productive use. The process called “Reimagining a More Sustainable Cleveland” is unique for the level of cooperation among foundations, government agencies, nonprofit organizations and private citizens, Next American City said, and it is producing a vision for greener, more cohesive neighborhoods. “We’re talking about pushing people together into dense urban nodes,” said Terry Schwarz, interim director of the Urban Design Collaborative. “We’re coming up with a way of managing the landscape enough so it looks like an intentional wildlife corridor. It makes the spot where development occurs obvious.”
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