Crain's Cleveland Business

VOL. 38, NO. 50

DECEMBER 11 - 17, 2017

Source Lunch

Akron Video production firm hits big stage with Vegas NHL team. Page 20

John Telich, Fox 8 Cleveland sports anchor Page 23

CLEVELAND BUSINESS

Real estate Could revived Bridgeview include IKEA? Page 6

CLEVELAND CLINIC

FINANCE

The Cosgrove era comes to a close

Bank On initiative could aid Akronites Project hopes to help lower-income demo

By LYDIA COUTRÉ lcoutre@crain.com @LydiaCoutre

By JEREMY NOBILE

Dr. Delos “Toby” Cosgrove has always been in search of a better way to do things — for patients, for Cleveland Clinic, for its caregivers. ¶ In his near 30-year career as a cardiac surgeon, he would look at every step of the process, every stitch and think, “How can we do this better?” according to those who’ve worked alongside him in the operating room. ¶ The first time he addressed staff during his tenure as CEO, Cosgrove handed out buttons with a simple phrase: Patients First, the mantra that would come to define the Clinic and guide all that the system does.

jnobile@crain.com @jeremyNobile

A new project targeting Akron and Summit County aims to fix one of Northeast Ohio’s underlying symptoms of economic inequality: proper and affordable access to financial services for those who need it most.

But truly correcting that complex problem involves undoing years — and in some cases, generations — of mistrust lower-income citizens harbor against banks, while simultaneously encouraging those institutions to develop products that work both for them and that financially vulnerable demographic.

The city of Akron, in partnership with United Way of Summit County, in November was awarded a $90,000 grant by the New York nonprofit Cities for Financial Empowerment Fund as part of its nationwide Bank On initiative to establish a local coalition dubbed Bank on Rubber City. The grant covers the salary of a two-year fellowship position that will oversee those efforts, which involves bringing together stakeholders including local government, nonprofits, consumers and banks themselves.

While there are now 70 active Bank On coalitions — and another 20 in different pre-launch phases — across the country that have formed in the past decade, this marks the first one targeting an Ohio market.

Of 20 groups that applied, Akron is one of five cities or regions awarded one of these new fellowship grants to spur the formation of a local coalition. The intent is for the coalition to support those efforts itself when the grant expires.

SEE COSGROVE, PAGE 4

INSIDE Q&A with the Cleveland Clinic’s incoming president and CEO, Dr. Tomislav “Tom” Mihaljevic

Page 5

Illustration by Robert Carter for Crain’s

SEE BANK, PAGE 21 Entire contents © 2017 by Crain Communications Inc.

SPECIAL REPORT

The future of public transit << Northeast

Ohio transit agencies search for solutions to more funding cuts. Page 11 Tech simplifies riders’ experience. Page 15 Sprawl can stifle job access. Page 14

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State retirement plans plot future health Ohio pension funds seek to reduce cost-of-living adjustments in effort to steady finances

By JAY MILLER jmiller@crain.com @millerjh

The problem in Ohio isn’t perilous, as it is in several states, but concern about the long-term health of Ohio’s public pension funds has pushed fund overseers to seek a little more financial room to maneuver.

Legislation is working its way through the Ohio General Assembly to allow several of the larger state pension funds to reduce their cost-of-living adjustments (COLA) to ensure that the funds can meet their longterm obligations to retired and retiring public employees. Tinkering with COLAs is one of the few ways the state’s five pension funds can regulate their long-term financial health.

Last Wednesday, Dec. 6, state Rep. Gary Scherer of Circleville told the Ohio House Aging and Long Term Care Committee that legislation he has introduced, H.B. 413, will allow that tinkering for one retirement fund.

“This legislation is intended to strengthen the financial status of the Ohio Public Employee Retirement System (PERS),” he said. “Although financially strong today, OPERS continues to explore ways to ensure that the retirement system is able to weather economic downturns that are an inevitable part of the lifecycle of long-term institutional investors like OPERS.”

The bill would allow the PERS board to lower the COLA built in to retiree benefits from a fixed 3% to a rate tied to the U.S. Consumer Price Index (CPI), but capped at 2.25%.

State employees and public employees in most of Ohio’s cities, counties, schools, libraries and related agencies contribute to one of five state public pension retirement systems: PERS, the Ohio State Teachers Retirement System (STRS), the Ohio School Employees Retirement System (SERS), the Ohio Police and Fire Pension Fund (OP&F) and the Ohio State Highway Patrol Retirement System (HPRS). Combined, the pension funds had 971,264 contributing members at the end of 2015 (the most recent year for which data is available) and 468,076 retirees and beneficiaries.

All are making similar plans to steady their finances. In April, STRS, which already had legislative authority, ended its 2% annual COLA, at least temporarily. SERS, which also already has similar authority, in October suspended its COLA temporarily.

Like other investors, public pension plans still are trying to recover from heavy losses during the last decade’s financial crisis. In addition, retirees are living longer, requiring larger lifetime payments to retirees.

As a result, their funding ratios — the percentage of assets they have on hand to pay retiree benefits as much as 30 years out — has declined to

71.1% nationally, from 75.6% in 2014, according to an analysis by Bloomberg News. Ohio’s ratio was 71%. While 100% would be ideal, pension experts generally say an 80% ratio is an acceptable level of funding.

David Draine, a senior officer for public sector retirement systems at the Pew Charitable Trusts, said that

“The three most direct ways are to ask employees for more money, ask employers for more money or lower benefits.

Changing COLAs are the key way states are attacking the problem.”

— David Draine, a senior officer for public sector retirement systems at the Pew Charitable Trusts

public pension funds have few options to boost their financial positions.

“The three most direct ways are to ask employees for more money, ask employers for more money or lower benefits,” he said. “Changing COLAs are the key way states are attacking the problem.” He said 30 states lowered COLAs in recent years.

In November, Karen Carraher, PERS’ executive director, told the House aging committee that changes to stabilize assets committed to active members, current public employees, were made in legislation in 2012. But adjusting the COLA is the only way to adjust the system’s fund for current retirees.

“The current 3% COLA is outpacing inflation,” she said. “The original intent of the OPERS COLA was to mitigate, not fully offset, inflation.”

She added that of the $5.3 billion in payments to retirees, $1.3 billion of that was the result of COLAs. Nearly all Ohio public employees are in traditional defined benefits plans, a percentage of what’s called the final annual salary and the employee’s years of service. In the private sector, defined contribution plans, such as 401(k) plans that are more like savings accounts that grow based on investment returns, have become the norm. Public employees in Ohio do not participate in Social Security.

Employees contribute between 10% and 14% of their gross pay. Most employers kick in between 14% and 18%, though the safety force employers make larger contributions. Public employees in Ohio do not pay into the Social Security system so their state pension is their only retirement program.

The strength of the Ohio system is its comprehensiveness and independence. They are statewide systems fi-

nanced by deductions from workers’ paychecks and by similar payments by their employing government or agency. City councils can’t vote to skip their contributions, as they do in some states, and the pension system can’t tap into the state’s annual budget.

By contrast, Illinois, considered the state with the biggest pension headache, has 667 government pension funds, including seven in the city of Chicago alone, according to a recent study by Illinois Policy, a think tank. That has led local politicians to skip pension fund contributions to balance budgets.

Still, Ohio retirees are not looking forward to any reductions.

“OPERS is strong and getting stronger, and that’s a direct quote from Karen Carraher,” said Geoff Hetrick, president and CEO of Public Employee Retires Inc., a Columbus-based public employee advocacy group. “So if that’s the case, why are we punishing 200,000 retirees, who can no longer, in many cases, go back into the workplace to supplement their income? I think it’s overkill.”

In a mailer to plan participants this summer, Carraher said the plan is on solid financial footing.

“However, we can’t always count on the future reflecting the past,” she wrote. “In order to retain our strong financial position, and continue to offer the COLA to current and future retirees, we are considering these steps now.”

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Holiday decor firm eyes year-round appeal

By RACHEL ABBEY McCAFFERTY

Part of Katherine’s Collection’s new strategy is to make its wares more collectible.

Many of the pieces made at its Cuyahoga Falls factory are done so by hand. This “Thread of Gold” is one of the company’s new lines for 2018.

(Contributed photo)

rmccafferty@crain.com @ramccafferty

Life-size Santas. Dancing reindeer.

All manner of witches and skeletons and pumpkins.

Cuyahoga Falls-based Katherine’s Collection makes high-end home decor for the holidays, though its mission has become a bit broader over the years.

When Gary Giller came on as a turnaround consultant in 2010, Katherine’s Collection’s products were almost exclusively high-end. Since becoming CEO and owner, he has worked to offer products at different price points that appeal to more potential customers. He became the company’s majority shareholder in June 2010 and bought it completely in 2014.

Part of the company’s new strategy is to make products more collectible.

People are more likely to come back and buy a new $100 Santa doll every year, he said, as opposed to one that’s $500. “$100 is not a big spend,” Giller said. “Whereas, when you get to $500, where I started with the company, it’s a commitment. It really is.”

Katherine’s Collection also is trying to move toward becoming more of a year-round decor company, where it used to be very seasonal, to help balance the revenue. For example, its non-Christmas and Halloween product lines used to be holiday-driven, too, focused on Easter or

Valentine’s Day. But those holidays have a short shelf life, Giller said.

Now, the company might offer a more general spring line.

The company creates about 10 themes a year, and keeps each for two years. Two to three usually are focused on Halloween, which Giller said is a big growth area, and about five are Christmas-related.

Katherine's Collection also is adding more functional items, like vases or serving platters, to its collections.

Giller said it started to do this in 2017, but it will be a bigger focus going forward.

The company is working hard to apply its style to more functional pieces, said Lynn Labes, chief operating officer. Younger generations don’t necessarily want products just to put on their shelves.

“So these pieces need to be functional,” she said. “So we’re trying to marry both the functionality and what people want with our design aesthetic. And it seems to be working.”

For instance, the company sold a piece for Halloween that was a witch with a tablecloth for a skirt and foodsafe trays in her hands and on her

hat. The piece sold out, Giller noted, and it wasn’t cheap, retailing at well over $1,000.

Katherine’s Collection for now does not sell direct to consumers. Its core customers are independent retailers, the stores that “want something different,” Giller said. It also sells to major retailers ranging from Neiman Marcus to Frontgate to Anthropologie. And the company has a strong international presence, particularly in Europe.

Katherine’s Collection employs 30 people at its offices in Cuyahoga Falls, plus two showroom managers in Atlanta and Dallas. An outside group manages a showroom in Los Angeles. And its factory in the Philippines employs up to 150 in the busy season. The company’s annual revenue is between $18 million and $20 million, Giller said.

Giller said about 25% of the pieces the company sells are hand-designed in Cuyahoga Falls, but those pieces make up about 60% of its revenue.

Those are the signature items, or what Giller calls the “wow pieces,” like the life-size dolls or the tabletop pieces. Other items are purchased to fill in its lines, like many of the ornaments it sells.

Products are made at the company’s factory in the Philippines, which opened in 2012. Prior to that, Katherine’s Collection contracted with an outside company.

The process starts with trend-spotting, watching what’s going on in fashion, home decor and the world at large, said creative director Deborah

Zadnik. But there’s a lot of behindthe-scenes brainstorming.

About three seasons ago, Giller said the company put up boards in the hallway where employees can post inspiration and ideas as they come to them. Once ideas form into a cohesive theme, it’s time to bring them into the art room, where inspiration can continue to collect in the form of photos, textile samples and more. Katherine’s Collection uses mixed media in its products, combining metal and fabric and whatever else it needs to bring its pieces to life.

Employees at the factory make the Katherine’s Collection pieces by hand — Giller said the most automated piece of equipment they have is a sewing machine — but also private label goods for companies that want exclusive items. One of the lifesize Santa pieces, which is hand-painted, can take up to 25 hours.

Giller said there are always some “must-have themes” like white and gold or red and green, both for Christmas. But those color schemes just serve as a base, as all of the company’s collections aim to tell a unique story.

For instance, one of the themes that will be launched in 2018 is called “Holiday Cheer.” Zadnik said the Holiday Cheer story the collection tells is one of “a special evening of celebration.” It incorporates a lot of sparkle, drawing influence from New York City and Art Deco.

Katherine’s Collection will launch all of its 2018 lines in January.

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With a respected voice and platform in the national health care debate, he’s pushed for cost control, wellness and patient responsibility.

His colleagues past and present use many words to describe the influential leader — consistent, powerful, compassionate, tenacious, genuine, direct — but perhaps what best captures Cosgrove is “innovator.”

“He was and might still be the most prolific innovator in the history of the Clinic,” said Chris Coburn, the former head of Cleveland Clinic Innovations who is now the chief innovations officer at Partners HealthCare in the Boston area. “His creativity was not limited to what he might invent as a surgeon. He brought and really embraced a willingness to envision a different way to do things.”

Cosgrove, who joined the Clinic in 1975, will step down as CEO of the Clinic at the end of the year. Dr. Tomislav “Tom” Mihaljevic, now CEO of Cleveland Clinic Abu Dhabi and one of the Clinic’s prized cardiothoracic surgeons, will take over Jan. 1.

Cosgrove ushered in a new era for the health system, propelling it from a regional system to an international brand. His list of accomplishments and accolades is long, but what he says he’s most proud of is the people of the Clinic.

“The Cleveland Clinic is not a bunch of buildings. It’s a bunch of people who really have done a tremendous job,” he said. “They work very hard. They’re very capable and they really pour their hearts and souls into their work here.”

A closer look at Cosgrove’s time as the Clinic’s CEO

2008: The Clinic opens its iconic Miller Family Pavilion and Glickman Tower, which added 1 million square feet and 100 new beds.

peri the poin 2015 the mos cam A few year that obe gize ploy we ease hea

2009: President Barack Obama praises the Clinic and visits the health system to tout its model of care.

Cha

2004: Dr. Delos “Toby” Cosgrove named president and CEO of the Cleveland Clinic.

2005: The Clinic bans smoking on all its properties.

2006: The Clinic agrees to design and manage Cleveland Clinic Abu Dhabi, a new specialty hospital in the United Arab Emirates.

2007: The Clinic launches its Office of Patient Experience.

2007: The Clinic stops hiring smokers.

2007: The Clinic reorganizes its medical and surgical departments into what it describes as 27 patient-centered institutes.

2010: The Clinic opens its Lou Ruvo Center for Brain Health in Las Vegas.

2013: The Clinic unveils an $80 million alliance with Case Western Reserve University to build a new medical education building on its campus.

2013: Facing uncertainty in the market, the Clinic announces it plans to slash $330 million from its budget. Ultimately, nearly 700 employees accepted early retirement offers, which kept layoffs to a minimum.

2015: The Clinic takes on full ownership of Akron General Health System.

2015: The Clinic reports it had the best financial year in the health system’s history.

2016: The Clinic begins seeing patients at The Roseann Park Family Tower, its new 126-bed hospital in Avon.

2016: The Clinic stomachs a nearly 50% drop in operating income, which Cosgrove attributes to more expensive care, older and sicker patients, insufficient reimbursement rates and more. He says he doesn’t expect to see a “substantial drop” ahead.

2017: Cosgrove announces he is transitioning out of his CEO role.

In his time in the operating room, he developed dozens of ideas that led to new technology innovations and patents, said Bob Rich, chairman of the board of directors for the Clinic, who has known Cosgrove since 1959.

Cosgrove was named chairman of the Department of Thoracic and Cardiovascular surgery in 1989.

‘Master surgeon’ The operating room with Cosgrove was a “magical place,” said Dr. Nicholas Smedira, a heart surgeon at the Clinic. Cosgrove was a fast, efficient “master surgeon,” with a great sense of humor. Smedira learned from him to think creatively and always question how to do things better.

“I’m one of the hundreds if not thousands of surgeons he’s trained that have gone out around the community, the nation and around the world in literally dozens and dozens of countries that have changed how cardiac care is delivered to patients in every country,” he said.

A surgeon in the U.S. Air Force, Cosgrove served in Da Nang, Republic of Vietnam, as the Chief of U.S. Air Force Casualty Staging Flight and was awarded the Bronze Star and the Republic of Vietnam Commendation Medal.

In his near 30-year career as a cardiac surgeon at the Clinic, Cosgrove performed 22,000 operations. He’s a “workaholic,” said Dr. Joe Hahn, the Clinic’s former chief of staff, who has known Cosgrove since the two attended the University of Virginia School of Medicine in Charlottesville, where he received his medical degree.

He completed his undergraduate work at Williams College in Williamstown, Mass., and his clinical training at Massachusetts General Hospital, Boston Children’s Hospital and Brook General Hospital in London.

Many people see Cosgrove as a “hard-charging” thoracic surgeon, a successful CEO running an $8 billion business, said Larry Pollack, a member of the Clinic’s board of directors.

“They don’t see Toby as a surgeon who moved here when he was right out of training and slept in his car the first night,” he said. “They don’t see Toby when he was doing some training in pediatrics in Boston, running through the halls shooting his squirt gun at kids to get them to smile.”

Under the microscope

The Clinic has seen steady growth between 2004, when Cosgrove became CEO after nearly 30 years as a cardiac surgeon, and 2016.

Here are some of the numbers: JJRevenues

more than doubled from $3.7 billion to $8.5 billion.

JJTotal visits grew from 2.8 million to 7.1 million.

JJThe number of physician-scientists has increased from 1,800 to 3,400.

JJResearch funding grew from $121 million to $260 million.

JJIt’s become Ohio’s largest employer with more than 50,000 caregivers.

As for facilities that took shape under Cosgrove: JJThe

Clinic’s main campus saw the addition of the Miller Family Heart & Vascular Institute, the Glickman Urological & Kidney Institute, the Cleveland Clinic Taussig Cancer Center and the Tomsich Pathology & Laboratory Medicine Institute.

JJThe health education campus, a joint effort with Case Western Reserve University, is currently under construction on the Clinic’s main campus.

JJThe Clinic also opened a new hospital in Avon.

JJIn Weston, Fla., the Clinic is building a new five-story tower.

JJInternationally, Cleveland Clinic Abu Dhabi opened two years ago and Cleveland Clinic Toronto just celebrated its 10th year.

JJCleveland Clinic London is expected to be able to start seeing patients in 2020.

In 2004, he was named president and CEO of the Clinic, pushing the heart surgeon into the national spotlight as he stood holding the reins of one of the country’s most well-known health care institutions.

“I was never a public figure before this,” Cosgrove said. “I used to go to a party and I would be introduced as Anita Cosgrove’s husband, because no one knew me because I was locked up in the operating room. And all of the sudden, I became a very public figure in a matter of about three weeks.”

To the C-suite, Cosgrove brought his sense of curiosity and desire to do things right.

He led the Clinic as it grew within the region, solidified its reach across the nation and stretched around the world. Between 2004 and 2016, revenues more than doubled from $3.7 billion to $8.5 billion, and total visits grew from 2.8 million to 7.1 million.

In that time, the Clinic bolstered its research efforts, with research funding growing from $121 million to $260 million and the number of physician-scientists increasing from 1,800 to 3,400.

The Clinic opened new buildings, most recently a hospital in Avon and the Taussig Cancer Center on its main campus, and shuttered some as well.

In his tenure, the Clinic closed both Lakewood and Huron hospitals, decisions that were met with backlash from their communities. Cosgrove stands by the decision, saying that the Clinic did the right thing for both facilities, which were underutilized.

“We put in their place an outpatient facility that was specifically tailored to that community,” he said. “Health care is changing. There’s less inpatient requirements and more outpatient, and that’s what we tried to do.”

The squabbles over hospital closures weren’t the only tumultuous

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periods during his tenure. In 2007, the Clinic stopped hiring smokers, a point of contention for many. In 2015, he closed the McDonald’s on the Clinic’s main campus after an almost decade-long crusade to rid the campus of the fast food restaurant.

And in the spotlight, he has made a few off-kilter statements. Several years ago, he told The New York Times that, if it were legal, he wouldn’t hire obese people. He ultimately apologized for those remarks, but told employees that there’s still “much more we could do to prevent chronic diseases if we take measures to eat healthier, exercise and quit smoking.”

Changing the narrative Cosgrove also used his platform to push for health care reform, to talk about the opioid epidemic, to sound the alarm on drug pricing and more.

Dr. David Perse, president and CEO of St. Vincent Charity Medical Center, was working at the Clinic when Cosgrove became CEO. He remembers being immediately impressed by how quickly and confidently he seized the challenge of running the organization.

“I think that that confidence has changed the national narrative on health and health care,” Perse said.

Dr. Akram Boutros, president and CEO of MetroHealth, said he and Cosgrove have had a “respectful, honest, candid, supportive” relationship over the years.

“He’s a nationally recognized health care leader both for his extraordinary expertise as a clinician and his leadership of the Cleveland Clinic,” Boutros said. “From my point of view, he has been the first individual to successfully create an international health care brand.”

Perse said Cosgrove championed the idea of healthy living and patients’ responsibility for their health and wellness.

“I think that the legacy that’s going to last beyond his lifetime is going to

be the cultural norm of healthy living,” Perse said. “He’ll not get a footnote in history over it … but he owns that. That’s really impressive.”

Cosgrove looks out for individuals and takes care of his team.

Fred DeGrandis, who retired from the Clinic a couple of years ago, said that when Cosgrove heard that his mother was recovering from a cardiac procedure, he asked to take a look at her chart. He reviewed her record and put her on a course that DeGrandis said helped to save his mother’s life.

“People don’t see the side of Dr. Cosgrove that’s a partner with members of his team, a helping hand that he gives you on a personal basis, the genuine desire for people to be satisfied with the professional experience that you have in working in the organization and with him,” he said.

Dr. Marc Gillinov, a heart surgeon and chairman of the Department of Thoracic and Cardiovascular Surgery, was a 16-year-old high school student working at the Clinic when he first saw Cosgrove performing heart surgery. He realized he desperately wanted to learn to do the same.

Cosgrove served as a mentor to him when Gillinov chose a college, then a medical school. Years down the road, he eventually hired him at the Clinic.

What Gillinov admires most about Cosgrove, he said, is that he doesn’t accept the present as being good enough — be it with a patient or the direction of the health system.

“It’s been a privilege for the last 37 years of my life to be influenced by Toby Cosgrove, because I think I am, like everyone else, I am better for having known him,” Gillinov said, a nod to an often said phrase of Cosgrove’s.

If you ask him how he’s doing, he’ll say, “better for having seen you.”

While history will determine his legacy, many who know him agree: The Clinic is better for having known Dr. Toby Cosgrove.

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Incoming president and CEO, Cleveland Clinic As Dr. Tomislav “Tom” Mihaljevic takes over as Cleveland Clinic’s next president and CEO, he brings two values he’s learned in his time working for the Clinic: placing patients at the center of everything the Clinic does and a constant pursuit of excellence. ¶ Mihaljevic, now CEO of Cleveland Clinic Abu Dhabi and one of the Clinic’s prized cardiothoracic surgeons, will become the system’s leader on Jan. 1, replacing Dr. Toby Cosgrove, who announced in May that he would be stepping down by the end of the year. ¶ Mihaljevic, a native of Croatia who is a naturalized U.S. citizen, joined the Clinic in 2004 as a cardiothoracic surgeon specializing in minimally invasive and robotically assisted cardiac surgeries. He took over as the chief executive at the Clinic’s 364-bed Abu Dhabi operation in 2015.

He earned his medical degree from the University of Zagreb before moving to the United States in 1995 to join Brigham and Women’s Hospital in Boston. ¶ Crain’s talked to Mihaljevic about his aspirations for the Clinic and what challenges lie ahead. This conversation has been edited for brevity and clarity. — Lydia Coutré Why do you want to lead the Cleveland Clinic?

Because I believe that we’re a unique health care organization. I firmly believe in our mission and the model that we have to provide our patients with the highest quality accessible and affordable care. And I believe that the Cleveland Clinic has been a leader in the health care landscape in the United States and worldwide, and this is the most exciting health care organization to work for.

What are your immediate goals when you step into this role?

My immediate goal is to continue the trajectory that we have as an organization. We have accomplished a lot under Dr. Cosgrove’s leadership, and I believe that we are a successful and a very healthy enterprise. And my primary goal is to make sure that I continue to support the successful trajectory of our organization going forward.

How about more long-term goals?

I think every physician leader, every CEO ... has the task to continue the evolution of our organization. We’re never quite there. We’re never quite there in our efforts to serve our patients better. The long-term goal is to continue the trajectory of developing our abilities to offer the highest quality care that is affordable and accessible to the largest number of patients.

What do you see as the biggest potential challenges?

I think there obviously is a lot that is happening in the health care landscape. I think everyone, all of your readers are certainly aware of the changes in the legislature that are constant price pressures — all of those things that affect health care in general. But I believe that we as an organization, as I mentioned before, are very healthy. We have a very clear mission and a very engaged workforce, and I really do not fear the future as long as we stay true to who we are as

caregivers. I believe that the Cleveland Clinic has a bright future ahead of us.

What opportunities do you see?

I see opportunities as the Cleveland Clinic’s care model continues to grow, because I think it has withstood the test of time. Our care model where we have, as you know, the salaried physicians, where every physician in the organization is pulling in the same direction. I believe that this type of a model in health care is ideally suited to the requirements that a contemporary health care is putting ahead of us. Those requirements are ... to provide not only the highest possible care, but the highest quality care that is also affordable and accessible. And I believe with our business model, I believe we have phenomenal opportunities for continuous growth.

What do you see as the legacy Dr. Cosgrove will leave behind?

Well, Toby has done a phenomenal job not only as a health care leader of Cleveland Clinic, but as an advocate for the improvement of health care nationally and internationally. His legacy is very layered. In his early career, he leaves a very strong legacy as one of the most accomplished cardiac surgeons in the world. And then the later part of his career as CEO of Cleveland Clinic, he’s a person who has transformed our organization. He has established this patient-centered focus that is going to continue to stay, I certainly believe, for many decades in the future. He has been a patient advocate and he has been an advocate for true health care reform nationally as well. So he has really improved the stature of us as an organization, but he also has put Cleveland on the map as a center for health care in the United States. We’re very proud of it.

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Q&A: Dr. Tomislav “Tom” Mihaljevic

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Stalled Garfield Heights project could get new life

By STAN BULLARD sbullard@crain.com @CrainRltywriter

Grand plans are starting to circulate over and near the massive, longstalled Bridgeview Crossing shopping center site on the northwest corner of Transportation Boulevard and I-480.

The Ohio Department of Transportation plans to award a contract for about $5 million for a contractor to next year widen the Transportation Avenue bridge over I-480 with an additional lane. Other measures will widen the street and exits from the highway to the bridge, as well as widening part of Transportation Avenue.

The changes abut and will connect to a new road leading to the 70-plus acre site, where structural steel for stores in the 800,000-square-foot shopping center has been rusting since work stopped in 2008.

ODOT spokeswoman Amanda MacFarland said the state and the city of Garfield Heights are partnering on the bridge project to aid development of the area. What that development will be remains to be seen, but throwing dirt that goes with widening the bridge follows ownership filings for the land that will clear the way for construction of something — exactly what remains to be determined — after the conclusion of eight years of litigation in Cuyahoga County Common Pleas Court and the loss of tens of millions of dollars.

Steven Craig, owner of Newport Beach, Calif.-based outlet shopping center firm Craig Realty, through Garfield Hope Partners, received a deed from court-appointed receiver David Browning, managing director of CBRE’s Cleveland office, that was filed Nov. 17 in Cuyahoga County.

Even though the deed was issued under a Sept. 15 decision by Judge John Sutula to conclude a massive court fight that has swirled over the site since 2009, it carries some striking provisions. Chief among them is that Craig’s Garfield Hope concern

Court settlements and land records are clearing the way for a California-based developer to pursue another project in place of the one-time Bridgeview Crossing plan near I-480 in Garfield Heights. (2009 file photo)

assumes the risk for other unknown claims associated with the site.

What's in store?

Although rumors have circled in realty and legal circles since August that much-sought Swedish furniture firm Ikea may plant a store on half the Bridgeview site, principals on both sides of the potential deal say nothing is certain.

In a phone interview, Craig told Crain’s that the Ikea talk is “new to me.” He later added that Ikea has looked at multiple sites in Northeast Ohio.

“They’re not a tenant that moves quickly. They’ve looked for a site in Cleveland for 10 years,” Craig said.

However, he said he is pushing ahead to try and develop a shopping center on the site because “I’m a retail guy.”

Currently he plans to attend an upcoming International Council of Shopping Centers meeting to try to recruit tenants among the few retailers who are expanding today.

Craig confirmed he had discussed the location with one big-box retailer, but those talks came to naught. Meijer, the Grand Rapids, Mich.-based hypermarket operator that already has control of multiple Northeast Ohio locations, considered the Gar-

field Heights site but sought tough terms.

“At the end of the day,” Craig said, “we would have wound up owing them money.”

His original plan for the site was for an outlet center was deep-sixed because retailers are cautious about expanding, even if they want to exit existing locations.

Although the Bridgeview site has potential for office-warehouse development in the busy industrial market, Craig said he’s not yet ready to look at other alternatives. However, he does not rule out alternatives to retail development.

For its part, Ikea spokeswoman Latisha Bracey wrote in an email that the company has not announced any formal plans for a store in the Cleveland/Garfield Heights area and would not confirm considering one.

“Until we have found a location and completed an evaluation, we cannot commit to announcing plans for a Cleveland-area store,” Bracey wrote. “As we continue to expand our presence here in the United States, we will, however, continue to evaluate opportunities as they arise. We are constantly evaluating opportunities to expand our presence, and Cleveland is a significantly major and largely populated metropolitan area.”

SEE BRIDGEVIEW, PAGE 21

Ohio City office building to be restored to its apartment roots

By STAN BULLARD sbullard@crain.com @CrainRltywriter

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A cyclone fence has gone up and the lights are back on at the threefloor Heyse Building in Cleveland’s Ohio City neighborhood.

Construction crews are starting what’s estimated by the state of Ohio as a $5 million project to install apartments in the building on Franklin Circle.

In a switch from other adaptive reuse projects in Cleveland that are turning office buildings into apartments, the structure at 1702 W. 28th St. is being converted back to rental residences. State records show the building was one of the first recorded apartment buildings in Cleveland when it went up in 1897. But it was converted to offices in 1982.

Kirt Montlack, the owner of Cleveland Shaker Heights-based Montlack Realty, said that when he bought the empty building at an auction in 2006, he thought he could rent it out as of-

fices. That didn’t prove to be the case.

So he switched direction to apartments.

“It’s really just a shell,” Montlack said of the building with intricate designs in its brick exterior. “Vandals tore out the electrical wiring and plumbing years ago. But it’s a solid building and the masonry is in good shape.”

Plans call for installing 31 apartments ranging in size from 400 square feet to a two-story penthouse with 2,400 square feet of space.

Rents will be about $1.75 a square foot when the structure opens in a year, ranging upwards from $700 monthly based on the suite’s size.

Cuyahoga County land records show that Nyman Construction of Warrensville Heights is the general contractor and First Federal of Lakewood the lender.

Montlack declined to say how much the loan is for or to disclose a budget for the project. However, the Ohio Development Services reported it would be a $5 million project when it awarded a $570,000 state historic preservation tax

credit to the project in December 2015.

The apartment will be Montlack Realty’s first in Ohio City. The third-generation realty firm owns 34 other apartment buildings between Cleveland Heights, Shaker Heights and Lakewood, according to its website.

Montlack said he originally hoped to do the project in 2008, but financing was not available.

“So far, it’s been the worst deal I’ve ever made,” Montlack said. “Architecturally, it is a beautiful building. I think that the location is a good one. It’s on a quieter street than West 25th Street or Lorain Avenue, but within walking distance of the bars and restaurants. That’s why I kept it. The land is valuable.”

Montlack said his father, Malcolm Montlack, who died last April, had advocated for property in Ohio City for years because he felt the market there was improving. Now, with new apartment buildings rising nearby commanding rents of more than $1,000 monthly and single-family homes with similar asking rental rates, his dad has proven to be right.

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PA G E 8

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CRAIN’S CLEVELAND BUSINESS

Opinion From the Editor

Boot camp put KLN in position to excel in crisis

Editorial

Getting on track As a series of stories in this week’s edition of Crain’s shows, public transit in Northeast Ohio is in something of a jam.

State financial support for transit has been sliding for years, prompting belt-tightening, service reductions and fare increases for the Greater Cleveland Regional Transit Authority and other systems in the region. And, as sections editor Timothy Magaw points out in a story on Page 11, the situation is about to get worse due to the likely cutoff of Medicaid managed-care organization sales tax revenue, stemming from a change in federal regulations.

That tax has provided about $20 million a year to RTA, or roughly 7% of the agency’s operating budget. The Green City Blue Lake blog last week noted that state Sen. Matt Dolan, a Republican from Chagrin Falls, “has introduced an amendment that would increase the franchise fees on medical providers, but Senate leadership has not budged on it.” Even if it were enacted, the Dolan amendment would provide only $5 million back to RTA. Solutions to the funding challenges aren’t coming from Columbus, at least not anytime soon. Joe Calabrese, RTA’s general manager and CEO, is an advocate for a more regional transit system and thinks such a move “would reduce overhead and cost by 5% to 7%,” but that’s a politically sensitive move that to date hasn’t gained serious steam. RTA draws most of its general fund revenue from the Cuyahoga County sales tax, and an additional hike is expected to be proposed in a report to be issued this week by the county’s Regional Transportation Advisory Subcommittee.

That’s not ideal, but it’s preferable to further cuts in service, which carry negative economic consequences.

As reporter Jay Miller writes in a Page 14 story, Amazon site selectors took into account how potential locations were served by public transit when they were scouting locations for two fulfillment centers in Northeast Ohio. Their choices — sites in Euclid and North Randall — will employ about 3,000 people, some of whom would not be able to get to work without public transit options.

Employers frequently cite access to a quality workforce as one of their major challenges. The migration of work to more far-

flung suburbs already creates a problem for many workers, particularly those in low-skilled or low-paying jobs. A strong public transit system is an important asset to linking businesses with the workers they need to thrive. The medical and tech businesses in Cleveland’s Midtown Corridor, for instance, have benefited from the strength of the transit service offered by the HealthLine.

In an interview last week with The Charlotte Observer, Bruce Katz, a Centennial Scholar at the Brookings Institution, said a combination of federal and state government dysfunction/hostility/indifference to transit nationwide means that cities increasingly are on their own and can’t count on larger governments to underwrite ambitious projects.

Katz said he encourages cities to look to “foundations, private businesses and other, non-governmental groups” to partner with on major projects, including those in the transit realm.

It will take that kind of creativity to put transit on a more sustainable path.

On the rise

Rise of the Rest, an effort launched by billionaire Steve Case and “Hillbilly Elegy” author J.D. Vance to spark more investment in the middle of the country, now has a prominent local figure on board.

The campaign, which for the last few months has featured a national bus tour and entrepreneurship competitions to call attention to the cause, last week announced the formation of the Rise of the Rest Seed Fund. Among investors in the $150 million fund, which will invest in startups outside the usual coastal stomping grounds, is Cleveland Cavaliers owner Dan Gilbert.

The city of Cleveland and Cuyahoga County did a solid for Gilbert this year in providing financial backing for the Quicken Loans Arena renovation. We encourage Gilbert to be a strong advocate for Northeast Ohio as the seed fund gets down to business and starts making investments.

Publisher and Editor: Elizabeth McIntyre (emcintyre@crain.com)

CLEVELAND BUSINESS

CLEVELAND BUSINESS

Managing Editor:

Scott Suttell (ssuttell@crain.com)

Sections Editor:

Timothy Magaw (tmagaw@crain.com)

Contact Crain’s:

216-522-1383

There is a valuable adage, attributed to Benjamin Franklin, that goes like this: “By failing to prepare, you are preparing to fail.”

Preparing, as a business, means having the culture and structures in place to be ready to handle whatever may come, whether it be difficulty or opportunity. Don’t prepare and you’re bound to fail.

For KLN Logistics, preparation put the company in a position to help deliver critical medical supplies to Floridians in the midst and aftermath of Hurricane Irma, and to help it seize on an opportunity for new business.

When Hurricane Irma was barreling toward Florida in September, the Middleburg Heights full-service freight forwarder got a call from Cardinal Health. The drug distributor needed help getting medical supplies to those potentially affected by the Category 4 storm.

Could KLN position trucks in Florida in Elizabeth case Cardinal Health’s resources were McIntyre overwhelmed with requests?

The answer, of course, was a “yes, we’re ready,” said Kim Martinez-Giering, president of KLN Logistics.

So while Floridians jammed highways under mandatory evacuation orders, KLN sent in drivers to make same-day deliveries of medical supplies.

“The drivers did not know where they would be going or with how many stops,” said Tony Parisi, vice president of operations and sales for KLN. “We instructed them to do whatever it takes to get the job done.”

Despite the obstacles — impassable roads, traffic jams and power outages — KLN made up to 11 deliveries per truck, per day over the course of five days.

“We understood that when the phone call came in, we would have to perform to the same levels of excellence that Cardinal performs to on an everyday basis,” Martinez-Giering said.

KLN got that insight this summer after attending an educational boot camp for suppliers in the transportation industry put on by Cardinal Health’s Supplier Diversity team.

“Having the boot camp enabled us to foresee some of the situations that their logistics department were prepared for. The urgency of the supplies was their top priority. Of course Irma was unpredictable. The flexibility needed during this time we were somewhat prepared for, because of the boot camp. Well, as much as possible,” Martinez-Giering said.

Her advice to other minority- and women-owned businesses is to attend boot camps like these, and then, “Be prepared and ready to go when you get the call.”

Another thought about being prepared: Diversity and inclusion happen through intention and preparation. It might be easy for a company to claim that diversity, while a worthy ideal, falls on the list of priorities in the case of crisis, like responding to a hurricane with needed medication.

But that excuse dissolves when intention and preparation are applied. Cardinal Health intentionally sought diverse suppliers, and then helped to prepare them to succeed when the call came.

Abigail W. Kofete, manager of supplier diversity for Cardinal Health, said the key to the boot camps is to provide intense, targeted training to a diverse group of suppliers.

“Our philosophy is that partnership begins with education,” she said. “The better both partners understand each other, the better able we are to make the relationship mutually beneficial.”

Reliable suppliers like KLN help ensure that deliveries get to where they’re going on time. Diverse suppliers help the bottom line.

Said Kofete: “It’s not only good business for Cardinal Health, it enhances innovation across the full supplier network and enriches communities where we live and work.”

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing ClevEdit@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.

Sound off: Send a Personal View for the opinion page to emcintyre@crain.com.

Please include a telephone number for verification purposes.

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PA G E 9

Personal View

Ohio’s global connections show why free trade matters

By JOE CIMPERMAN

As the world becomes increasingly interconnected, states like Ohio reap the benefits of foreign exchange and international migration. Free trade deals help to open Ohio businesses and industries to new markets and attract new talent from around the world.

One such trade deal, the Korea-U.S. Free Trade Agreement, or KORUS-FTA, is now being targeted by the Trump administration. The White House has threatened to pull out of a pact forged with an important ally and trading partner unless it is renegotiated.

We’ll let the experts decide whether America deserves better terms. Our fear is that our willingness to walk away from a five-year-old agreement reflects a larger, anti-trade agenda that fails to see the importance of international relations in a global economy.

Our state is an example of how the United States benefits from maintaining key alliances with nations that share our values and interests. For many communities in Ohio, and throughout the country, trade deals have opened up markets and created new business opportunities.

At Global Cleveland, we are committed to creating an atmosphere where Cleveland residents and businesses can contribute to and benefit from the city’s transformation as a global hub. We support the global

exchange of ideas, cultural collaboration and diversity that spurs regional economic prosperity.

On Nov. 14, we co-hosted the Ohio Asian American Economic Summit, a business conference designed to help Ohio companies do more business in Asia.

South Korea, an economic powerhouse, is an important and strategic partner for our community and for Ohio.

The United States has a $112 billion trade relationship with South Korea, and a good part of it is focused on the auto industry, an Ohio expertise. More Koreans are buying American cars. Meanwhile, KORUS-FTA makes it easier for South Korean-owned businesses to operate and invest here.

There are currently 16 South Korean companies with operations in Ohio, according to the Ohio Development Services Agency. We would like to see more.

Ultimately, our state’s cities are attractive to companies and foreign workers because of trade agreements that foster reciprocal business relationships.

Now is the time to seek and reinforce global alliances, not to retreat from the global economy.

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Cimperman is the president of Global Cleveland, an economic development nonprofit that aims to attract and welcome from across the world to Cleveland.

As a business, you can’t stand still

By TOM SUDOW

Where the retail giants of the late 20th century once stood, soon will stand the retail giant of the 21st century. To understand the irony of this turn of events, you only need to look at the history of retail shopping.

In a major city, to go shopping once meant you got dressed up, boarded a street car and went downtown to where major department stores stood as shining statues to capitalism. You would ride the elevator, with the elevator attendant announcing the floors — “second floor, women’s clothing and shoes.” Mixed in with the large department stores were locally owned retail establishments.

If you did not live in a major city or lived removed from the city center, you could rely on catalog shopping from companies like Sears and Montgomery Ward that would send items to your home. Often these retailers would have large buildings close to, but not in, downtown.

Following World War II, as suburbs began to develop, the major department stores often would open a branch in a shopping center or standalone building to serve those who had moved further out from downtown. Suburban shopping was born, and shopping centers started to sprout across the landscape. Shopping moved closer to where you lived, and downtown shopping began to suffer.

But shopping centers were outdoors, and weather would play a role in deciding whether you went shopping, and the idea took root to create malls. Beginning in the second half of the 20th century, malls were being built with major department stores as anchors and national chains filling in-between. Malls were costly to operate as you need to heat and cool them, but they became centers for not only shoppers, but for people just looking to walk when the weather was uncooperative.

As we moved through the second half of the 20th century, another dynamic hit shopping — cheaper shopping alternatives. First it was places like Kmart that built buildings across the United States, then Target and Walmart quickly followed. Target was the spinoff of a major department store chain — Dayton-Hudson — while Kmart was born from S.S. Kresge.

The old department stores started to suffer and later closed their doors or merged with others. Many did not change with the times, were not innovative and

could not sustain themselves with new markets, new ways of pricing or better logistics. As they closed, malls that relied on them began to struggle. And as other national retailers also began to suffer, the malls started to deteriorate and close.

How the U.S. population shopped also changed as we entered the 21st century. You could now shop on your computer from the comfort of your office or living room. Cyber Monday became as big, if not bigger, than Black Friday.

As someone who looks at this history, I am struck by the lack of innovation of the established companies that continued down paths that were most comfortable for them and did not change with the times and thus became dinosaurs.

How Dayton-Hudson launched Target should have been the model for others to follow. Management guru Tom Peters has a slide that says, “It was too hard to change Sears so we created Kmart.” Moving from that slide, Kmart and Sears combined and together they rank behind Walmart. Those who do not embrace change are doomed.

One more word on Sears, which was selling from catalogs. It had the infrastructure in place to take over web commerce. It had the logistics. But sadly, early on, it did not see or embrace the opportunity, and along came Amazon, which now is a retail leader.

So where those mighty malls once stood in the Cleveland area will soon be Amazon distribution centers employing thousands at higher pay than retail. While I find this ironic, the true lesson is every business must innovate and cannot rely on its past or current situation. All must look to the future and embrace it.

Innovation should not be a scary word to businesses; it should be where they spend at least 25% of their time and resources. The world changes; you cannot stand still. To paraphrase Nobel laureate Bob Dylan, “Where have all the malls gone, long time passing gone to distribution centers.” The question is, “Where have all the distribution centers gone, long time passing gone to ______________? (You fill in the blank.)

Sudow is the director of the Burton D. Morgan Center for Entrepreneurial Studies at Ashland University and an adviser to eHealth Ventures and to SCI, a Chinese investment group.

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D E C E M B E R 11 - 17, 2 017 |

CRAIN’S CLEVELAND BUSINESS

At the Table

These dining spots are welcome holiday retreats It may well be “the most wonderful time of the year,” but it’s also — easily — the most expensive time of the year. And time-crunched, too.

And that makes it all the harder to cram in all those long-postponed get-togethers with old friends and family members: the kids who are only back in town for a few days, that buddy you’ve been meaning to see for months.

With that in mind — and the demands of the season, rapidly melting credit cards and trying to make the most of the waning hours before the new year — here’s a list of some places you might want to tuck away in the back of your mind.

Some are kid-friendly. Some are family friendly. Some are budget friendly. A few are for those of us who want to get away with friends after the last gifts are unwrapped and Uncle Smedley starts retelling his most embarrassing stories.

To begin, why not kick things off with a bargain-basement drink special?

Through December, loyal guests can order a $1 Long Island Iced Tea at Applebee’s Restaurants. And from there …

With the kids: How about making a gingerbread house with your child?

From 5 to 6:30 p.m. Thursday, Dec. 14,

Luna Bakery & Cafe (2482 Fairmount Blvd., Cleveland Heights) in Cleveland Heights will help you and another “decorator” put together the Joe holiday house of Crea your dreams. For $65 per duo, they’ll provide all the fixings, plus cookies and hot chocolate.

days and $10 burgers-and-a-beer Thursdays, each from 5 to 10 p.m.

And Sunday through Friday nights, Corky & Lenny’s (27091 Chagrin Blvd., Woodmere) offers a daily special: 10% off senior meals on Mondays; a free kid’s meal for a child 10 or younger accompanied by an adult spending $10 or more on Tuesdays and burger night on Wednesday. And consider the $22-for-two chicken dinners with two sides, rolls and butter, and a fountain drink on Thursdays.

Share: Anyone who has ever faced a tight budget, or who likes to pass plates to share good flavors, knows that one of the best ways to party is to order a bunch of stuff and grab bites from every plate. Order a few pastas or other less expensive dishes and a couple of higher-priced proteins, then have at it. You can do that at all but the stuffiest places (and really, who wants to eat there anyway?).

Some menus are perfect for sharing. The D.C. Pasta Co. (one of Dante Boccuzzi’s spots; 12214 Pearl Road, Strongsville) is a great example. A broad selection of pasta dishes isavailable in half- or full portions, polpettes (meatballs) are $3 each and a variety of appetizers call out your

Christmas escape: I don’t know about you, but back in the day, one of the best parts of Christmas was finishing dinner with the family then heading out to meet friends at someplace cool. If you’re looking for a place that’s open, Ohio City’s Sam McNulty will have tables ready on Christmas night at Bier Markt and Bar Cento (1948 West 25th St., Cleveland; call ahead to ask about chef Sean Conroy’s family-style Italian dinners), Market Garden Brewery (1947 West 25th St., Cleveland; Conroy will serve Grandma’s Christmas Ham Dinner with all the fixings, Dec. 18-25); and Nano Brew Cleveland (1859 West 25th St., Cleveland; burger specials each week in December).

At Nano Brew Cleveland, 1859 West 25th St., come for the December burger specials and stay for the beer. (David Kordalski) MORE PLACES: Find a list of an array of brunches, late-night and early bird specials, and special events at crainscleveland.com.

hunger as you comb through the menu of salads, entrees and sides.

Sunday specials: You’ll find a nice prix fixe menu at Delmonico’s Steakhouse (6001 Quarry Lane, Independence), with a choice of salad or soup, any one of three entrees and

dessert. Normally $39, you’ll get the full meal for $10 off on Sundays.

Or consider the $39.95 Sunday dinner for two at The Woods Restaurant and Lounge (21919 Center Ridge Road, Rocky River). The Italian-themed restaurant also offers a $12 steak night on Thursdays.

Nights: As in “specials nights.” Check out Deagan’s Kitchen & Bar (14810 Detroit Ave., Lakewood) for its taco Tuesdays, breakfast-for-dinner Wednes-

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PA G E 11

Focus

SPECIAL REPORT: THE FUTURE OF PUBLIC TRANSIT

The Greater Cleveland Regional Transit Authority’s rail fleet remains one of the oldest in the country. Ongoing funding woes have prevented upgrades. (CLE.photo)

Transit sputters as state falls short

Local transit is eyeing regional solutions to a statewide problem as funding woes mount

By TIMOTHY MAGAW tmagaw@crain.com @timmagaw

Public transit in Northeast Ohio is at a reckoning point.

The reason, many transit advocates say, is obvious: The state of Ohio’s support for public transit has slowed almost to a halt. At the turn of the 21st century, more than $40 million from the state’s coffers went toward public transit — a figure that has dramatically slid to roughly $7 million, or less than 1% of the total cost. By comparison, other states typically cover about 20% of the total spend. And as Ohio’s largest system by far, Cleveland’s transit authority has been hit particularly hard by the state’s lack of investment.

“Over the years, we’ve made a lot of cuts, tightened our belt. There is less and less fat in the system to cut out,” said Joseph Calabrese, CEO and general manager of the Greater Cleveland Regional Transit Authority, in a recent meeting with Crain’s reporters.

So as Northeast Ohio transit agencies face another round of losses because of the likely cutoff of Medicaid managed-care organization sales tax revenue (thanks to a change in federal regulations), transit agencies more than ever are racing for a solution. That solution, of course, isn’t expected to be found in Columbus — but perhaps regionally.

The talk of a true, multicounty transit system has been

Typical transit funding in the state

55%

Recommended transit funding

Local funds

40%

Federal funds

25%

Fares

15%

13%

State/ ODOT

10%

3% 4%

Other

10%

25%

Source: ODOT report, 2015

floated for years in the press without gaining any serious traction. After all, the merging of transit systems is a politically sensitive issue, particularly when it comes to finding a funding mechanism that would satisfy all participants.

That’s a significant roadblock when you have rural and anti-tax counties like Geauga, or poor counties like Lorain, trying to work in concert. But given the precarious funding picture, some transit advocates think regionalism at some level could play a stronger role in the future.

“If not now, when?” Calabrese said when asked about the likelihood of a truly regional transit system. “I think a more regional system would benefit the customers. A more regional system would reduce overhead and cost by 5% to 7% by my estimations.”

Regional systems are hardly an anomaly. Illinois’ Regional Transit Authority, for example, oversees three separate transit agencies that serve the six-county Chicagoland area. Before arriving in Cleveland in 2000, Calabrese served as executive director and president of the Central New York RTA in Syracuse, which covers transit services in a seven-county area.

“Whether real or perceived, the local concern is, ‘I give up control,’ ” Calabrese said about transit consolidation.

“There has been a lot of discussion about regionalism in this county. There is much more talking than doing, quite honestly. It’s very difficult. When it happens, it happens because of a crisis. And right now, public transit is in crisis.”

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SPECIAL REPORT: THE FUTURE OF PUBLIC TRANSIT

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Lake County’s Laketran system makes more than 700,000 passenger trips a year. (Contributed photo)

TRANSIT

CONTINUED FROM PAGE 11

He added, “I think this might be a good time to have those discussions again if in fact the state is not going to fix this issue.”

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Calabrese said RTA’s board has had discussions with other transit agencies’ boards in the region about coming together, though not in the past year or two.

But given the current state of affairs, he expects those sorts of conversations to accelerate. In particular, those talks are expected to happen through the Northeast Ohio Areawide Coordinating Agency (NOACA), one of the region’s federally mandated transportation planning organizations that covers Cuyahoga, Lorain, Medina, Lake and Geauga counties. And while Summit and Portage’s transit agencies fall outside the agency’s parameters, Calabrese said there’s no reason talks shouldn’t include those agencies.

Sometime next year, NOACA hopes to have an analysis performed by an outside consultant to explore a regional approach to public transit as well as a formal study of the state of transit across the agency’s five-county footprint. Any and all ideas are on the table, according to NOACA executive director Grace Gallucci.

“This is not something that’s going to be directed at them to do, but we want to work with the agencies to understand how the system could be improved,” Gallucci said. “It could be something like central route planning, but service would be delivered by individual agencies. There are a number of different ways to be fully regional.”

Concerning mergers, Lake County’s Laketran general manager Ben Capelle is less optimistic than Calabrese about the efficiencies that could be gained.

Capelle is quick to say he’s not against any sort of regional approach. Laketran already works closely with RTA on transfers, and the two have done some procurement together.

Concerning efficiencies, though, he pointed to recent diesel emission reduction grants from the Ohio Environmental Protection Agency that maxed at $2 million per agency. Both RTA and Laketran secured grants, but as a combined agency they would have left $2 million on the table.

That’s something that could be fixed, Capelle said, but it goes back to the root of the problem: Transit funding at the state level is simply broken.

“If you could save money by doing something, I’d be surprised if we’re not already trying to do it,” Capelle

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said. “We’re all cheap.”

Laketran recently joined NEORide — a consortium founded in 2014 by Akron Metro, the Portage Area Regional Transit Authority and Stark Area Regional Transit Authority to develop ways to make it easier for riders to use public transit across the region.

The group’s latest effort includes developing mobile fare technology that can be used across the four systems — and eventually transit systems across the state. The NEORide agencies are now reviewing prospective vendors.

“It’s something that is really in high demand because it’s so much easier than any traditional fare payment system,” Capelle said. “Fare boxes are expensive to maintain and purchase, and customers don’t want to use them anyway.”

A broader fix The level of efficiencies that can be gained through mergers or consolidation is certainly up for debate, though all transit agencies agree the lack of revenue is the most pressing issue.

For the RTA, a 1% Cuyahoga County sales tax enacted in 1975 provides the lion’s share — more than 70% — of general fund revenue. At 8%, Cuyahoga County already boasts one of the highest sales taxes in the state, so some observers question whether levying a higher tax to buoy the transit authority’s coffers would be palatable to voters.

The idea for an additional hike in Cuyahoga County is expected to be floated in a report set to be issued this week by the county’s Regional Transportation Advisory Subcommittee, which includes representatives from the RTA, the Clevelanders for Public Transit advocacy group, NOACA and others. In a draft of the report shared with Crain’s, the subcommittee also notes that the RTA is authorized under state law to levy property taxes of up to 5 mills for up to 10 years at a time with voter ap-

proval. The report notes that 1 mill would be sufficient to replace the lost revenue, with some leftover for service enhancements.

Ballot issues concerning transit have been relatively well received nationwide. Transportation ballot measures in 2016 across the country boasted a 71% passage rate, according to a tally from the Washington, D.C.based Center for Transportation Excellence. The advocacy group’s 2017 tally thus far points to an 88% success rate for ballot measures.

That said, Ohio has seen some failures. Last month, voters in Allen County near the western edge of the state, nixed the idea of a 0.25% sales tax to fund transit. Likewise, voters in Lorain County in 2016 shut down a sales tax increase that would have partially supported transit.

The former state sales taxes on managed care payments brought in almost $200 million annually for Ohio’s 88 counties and eight transit systems. Of that, RTA averaged about $20 million, or about 7% of its operating budget. That’s a sizable budget gap to fill, Calabrese said — one that could result in as many as 200 layoffs and even more service cuts. Gov. John Kasich vetoed a measure that would have offset the losses through an increase in the franchise fee on health insurance corporation. And while the House overrode the governor’s veto, the Senate thus far has failed to act — and it must do so by the end of the year for the override to stick — despite repeated calls from transit advocates.

In a 2015 report that many argue has fallen on deaf ears, the Ohio Department of Transportation said the state should provide 10% of transit’s funding. Many argue that even half that would offer some relief.

“When you go down to Columbus, they see us a different animal — almost like a different state. The attitude has been, ‘We’ll fund highways out of Columbus, but if you want public transit, it needs to be funded locally,’” Calabrese said.

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Regional transit Q&A: Akshai Singh by the numbers Organizer, Clevelanders for Public Transit Greater Cleveland Regional Transit Authority

Service area: 458 square miles Population served: 1.4 million Passenger trips: 49.2 million Average annual operating expenses: $253.3 million Projected operating expenses through 2040: $5.8 billion Average annual capital expenses: $83.7 million Projected capital expenses through 2040: $1.9 billion

Laketran Service area: 227 square miles Population served: 229,885 Passenger trips: 728,029 Average annual operating expenses: $12 million Projected operating expenses through 2040: $278 million Average annual capital expenses: $5 million Projected capital expenses through 2040: $115 million

Lorain County Transit

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Service area: 493 square miles Population served: 284,664 Passenger trips: 70,152 Average annual operating expenses: $1.5 million Projected operating expenses through 2040: $34.4 million Average annual capital expenses: $525,759 Projected capital expenses through 2040: $12 million Source: Northeast Ohio Areawide Coordinating Agency

The way Akshai Singh sees it, the ongoing debate concerning the future of public transit in Northeast Ohio, especially in Cleveland, was lacking a certain voice: the rider. Enter Clevelanders for Public Transit, a relatively young organization that charges itself with ensuring safe, accessible, affordable, reliable and sustainable public transit for the city’s residents. As for Singh, a Case Western Reserve University graduate with a degree in economics, he’s a lifelong transit rider and sees his organization’s goal as “improving the value of riders’ time and money.” “These people are taking transit daily to get to work or school, but over the last couple of decades, we’ve seen a lot of deterioration of that value — both their time and money,” Singh said. “We’re trying to figure out how to stop that backslide.” Over the last year, Clevelanders for Public Transit has been a key voice in the ongoing debate over transit funding at the state level and also views itself as crucial in ensuring the public knows about the Greater Cleveland Regional Transit Authority’s looming fare hikes. This interview has edited for length and clarity. — Timothy Magaw Where did this passion for public transit come from?

My background is in organizing, and I want to make public finance digestible at a grassroots level for people who don’t have access to what the public budget process looks like but are very much impacted by it. I always got to ride the bus as a kid growing up in Iowa and visiting Chicago. But after the invasion of Iraq — I was vehemently opposed to it — I was trying to figure out domestically what the continued drive for oil supremacy impacted.

What’s the biggest challenge to confronting this transit issue?

It’s typical for there to be a disconnect between an agency and riders, but here there’s a big disconnect between what people’s stated goals are — like economic development — and the stigmatization of transit riders and

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what it means to have transit access in an area. Public Square was the embodiment of that, and that debate took up a year of our time. One of the things we’ve been fighting for is basic dignity in public space for all riders.

You couple that with talking about economic development. Despite that being a stated goal for Ohio, the major metros and chambers, transit doesn’t seem to be on the radar. This next cut (due to a change in federal regulations resulting in the loss of Medicaid managed-care organization sales tax revenue for transit) isn’t even on the radar of the county properly. They don’t realize what it means in terms of service and for people’s ability to get to work.

RTA acknowledges this reality. The state is the obvious problem, but are there other solutions?

Dollar-to-dollar for state money, Ohio

puts in less than Iowa, Vermont or Alaska — and those are not urban powerhouses. This MCO cut is pretty drastic. This governor has been anti-transit and anti-local government for his entire tenure. But the county is letting its bond rating deteriorate because it’s throwing money at a renovation deal for The Q while the key public assets the arena relies on are deteriorating. The reason the Red Line wasn’t up for the holidays was because the upgrades were being pushed back because we thought we were getting the World Series. So, there’s an acknowledgment stadiums need transit. But there’s been no one to ask Dan Gilbert to put money into transit like he did in Detroit (Gilbert’s Quicken Loans purchased naming rights to Detroit’s M-1 Rail streetcar line). If the state wants to kill our transit system, you need to react to that reality. It shouldn’t be on riders to have to do that work.

There’s been talk of increasing the county sales tax to support transit. Do you think there’s an appetite for that?

Lorain County had attempts to get funding for transit, which failed.

That’s going against the grain a bit because the public across the country tends to support increasing revenue for public transit. Cuyahoga County has one of the highest sales taxes in the state, so asking for more is a big challenge for voters at this point. But if we had to make an ask of RTA, it would be that they make things interesting for voters.

How so?

By improving the quality of the rider experience. One thing would be to

introduce smart cards. Also, this proof of payment situation on the HealthLine is a mess. You’re not going to attract more money if riders are uncomfortable because of the presence of transit police or bus delays. That’s going to be an impediment. But whether looking at Cuyahoga County or broader tax. If the system looks good and is usable, there would be a will. There are people who see the value in whatever town who know this is important. Mayors from all over need to be engaged in this conversation.

They’re going to need to sell it, but RTA is going to need to put itself in a position to be sellable.

How has the whole Public Square debacle — the debate over whether buses should be allowed to go through the Square, rather than around it — colored regionwide transit debate?

Public Square piqued people’s interest because it is iconic. Some people were blasé about sending buses through the Square, but once they knew there was an agreement and $12 million in funding was at risk, they backed off. That was a moment we could engage in this conversation a little more seriously. I think Ohio City is ready to talk about bus lines on West 25th. How do we use these sort of moments like Public Square to move to this next step? Next year’s governor’s race is going to be huge.

We are looking to make sure this is part of the conversation. A lot of times everyone will say the state is the problem, but you need to say what the state needs to do. There is a lot of federal funding we could be moving to transit.

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THE FUTURE OF PUBLIC TRANSIT

Experts say sprawl can stifle job access

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When Amazon.com site selectors were scouting locations for two fulfillment centers in Northeast Ohio, how potential locations were served by public transit was important to them.

“We met with Amazon’s developers and engineers early on in the process,” said Joseph Calabrese, CEO and general manager of the Greater Cleveland Regional Transit Authority. “Even before they finalized on both locations they wanted to be sure those two areas had good transit service, and they do, and they are served by multiple routes today, seven days a week, 24 hours a day.”

The online retailer will hire about 3,000 people at the centers in Euclid and North Randall — pickers and packers — to work three shifts pulling items off warehouse shelves and packaging them for shipment to customers. The jobs will pay about $12 an hour, with good benefits.

Amazon’s desire to put these centers where people without cars can reach then — without burdensome long commutes involving multiple changes of buses or high commuting costs — has not been a high priority for picking sites until now, but it is something many civic leaders hope can be the new normal. Indeed, access to a pool of labor within reach of both highways and public transit was a key criterion in Amazon’s requirements for its highly sought second North American headquarters.

It’s spawned a nascent movement to champion what the planners call “job hubs.”

Northeast Ohio boosters like to tout the region’s low cost of living when wooing new businesses. But there is a growing belief among area planners that that cost advantage has dwindled as sprawl has spun jobs farther and farther from the metropolitan core, increasing employee transportation costs and the time to get to work.

The effort is championed by the Fund for Our Economic Future, a nonprofit effort to build a globally competitive regional economy. The Fund and its allies are looking at a group of studies which suggest to them that the region needs to do a better job of putting jobs as close as possible to the people who need them and can fill them.

The focus is on jobs in what are called “traded sectors” of the regional economy. These are jobs with companies that deliver products or services that are, or could be, sold internationally, as opposed to jobs or businesses that serve a regional or even local population, such as grocers or auto dealers.

Brad Whitehead, president of the Fund, points to a study by the Center for Neighborhood Technologies, a Chicago nonprofit that focuses on making cities work better, that found that housing costs in Greater Clevelanders are low, but people here spend more of their money on housing plus transportation — 41% of their income — than people in Boston, 38%, or New York, 39%.

Similarly, a 2015 study by the Brookings Institution, a Washington, D.C., think tank, found that between 2000 and 2012, the number of jobs near the average person in the Cleveland met-

ropolitan area declined by 26.5%, the steepest decline among 96 metropolitan areas. The Akron metro ranked 84th. Part of that loss of job access is the result of an overall decline in jobs in the region, a 2.5% loss between 2002 and 2014, according to the U.S. Census, and part is the movement of jobs, of employers, from the central cities.

And finally, the Federal Reserve Bank of Cleveland in a 2015 study found that low-skilled and low-paying jobs are the hardest to get to. It also found that, “Millennials and baby boomers alike want more accessible communities, whether that means a workplace within reach of transit or downsizing from large suburban homes to areas where amenities important to them are just a walk away.”

“Job sprawl,” is what the planners call the problem and they believe the region needs to overcome it.

“Jobs are moving farther from people at rates far worse than other parts of the country and people have access to fewer jobs in their vicinity at rates far worse than other parts of the country,” said Peter Truog, director of civic innovation and insight at the Fund.

“These growth patterns and the disconnect between jobs and homes creates a strain around the region. In a tightening workforce, manufacturers in far-flung suburbs in particular are finding it difficult to find workers.”

The fund and its partners, including the regional transportation planners in Northeast Ohio and Team Northeast Ohio, the regional business development nonprofit, are trying to identify places, job hubs, and how to promote and enhance the competitiveness of these places. The longterm goal is to cluster business activity as much as possible to places that have a large pool of potential employees nearby and don’t need new roads or transit investments to grow.

Truog said Cleveland’s Midtown Corridor, with a growing concentration of medical device businesses and good transit service — the HeathLine that runs through the corridor from downtown Cleveland to University Circle — is a good example of a growing and attractive job hub.

But it won’t happen overnight.

First, there is no consensus on what a job hub is, said Grace Gallucci, executive director of the Northeast Ohio Areawide Coordinating Agency, one of the region’s federally mandated transportation planning organizations. While she believes any talk soon developing any consensus on which locations should be promoted to site selectors, she is optimistic that employers are catching on.

“I think a lot of employers have realized it isn’t easy to get people to remote locations, particularly when the jobs aren’t high paying,” she said.

“When they are high paying people are willing to commute a little bit more. But when they are low-paying, they’re not, or they can’t afford to.”

Still, Whitehead is confident that a movement is afoot to bring jobs and workers closer together.

“In an environment where businesses face labor shortages, workers confront stagnant wages with longer, more expensive commutes, and where car ownership is not a given, better connecting people to jobs is an economic imperative for our community,” he said.

“Mobility is rapidly emerging as a business development battleground.”

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PA G E 15

Transit tech desired but comes at a cost

By LYDIA COUTRÉ lcoutre@crain.com @LydiaCoutre

Greater Cleveland Regional Transit Authority riders had long wanted real-time data to tell them: When’s my bus coming? Is the Cleveland State line running behind? Is the 26 route running ahead?

RTA had already installed signs that displayed the information — at about $10,000 apiece — at about 163 of its stops. But that only covered a fraction of the transit agency’s roughly 7,000 stops, and they were expensive to maintain and mobile technology was really where the transit industry was headed.

Though the buses all had computers, they were 14 years old and didn’t provide the right kind of data needed for today’s technology. They simply weren’t compatible with the apps that could feed riders updates on their bus.

With a lot of work and creativity, the team at RTA found a workaround to properly process the old computers’ data. They then made that data available to third-party apps whose bread and butter is transit tracking. And by spring of this year, with no added cost and a workaround with 14-year-old computers, the authority was able to answer for riders: When’s my bus coming?

Northeast Ohio’s public transit systems are taking strategic steps to offer technology to simplify regular riders’ experience and hopefully attract new riders. Given the state of Ohio’s lack of investment in public transit, local agencies have found it difficult to invest in desired rider-facing technologies, especially considering the agencies’ unfunded capital needs that, for example, total about $500 million for RTA, according to Joseph Calabrese, the agency’s president and general manager. About $350 million of that is to replace rail cars, which are among the oldest in the country.

“We’re not behind the eight ball in any way,” Calabrese said about the agency’s technology. “We have to be discriminating as to where we spend our money.”

Agencies and public transit systems want to be innovative and offer a better customer service experience, but finding resources to invest in all the technological amenities that riders may want is a challenge, said Randy Clarke, vice president of operations for the American Public Transportation Association, a D.C.-based trade association.

“We have to balance doing what is seen as a really good amenity or making service better but at the same time balancing actually delivering really good, safe, reliable service every day,” Clarke said.

Public transportation systems in Northeast Ohio are finding ways to balance that and have been investing in technology in recent years.

In 2016, Lake County’s regional transit authority, Laketran, launched technology that allowed riders to access next bus departure information and locate their bus in real-time on a map. The transit system upgraded its tracking technology for about $1.8 million — about $500,000 of which allowed that technology to be used by the public.

“I don’t want to say that it’s expected today, but if most people can’t get the information readily and easily, they don’t consider transit as an option,” Laketran general manager Ben Capelle said.

The Greater Cleveland Regional Transit Authority’s ticketing app now accounts for 3% to 4% of its annual revenue. (GCRTA app)

Riders can now track transit rides in real time in both the Akron and Cleveland markets. (myStop/ TransitApp )

Also last year, Akron’s Metro RTA launched a bus-tracking system at a cost of about $3 million in the hopes of making riders’ lives easier, said Claire Merrick, senior communications specialist at Metro RTA. “Also, it certainly makes it easier from a new user standpoint,” she said. “We were also hoping that somebody who might not be a regular rider, who maybe has been intimidated by reading paper bus schedules or that kind of thing, you know, it would be much more user-friendly.”

The Portage Area Regional Transit Authority and Stark Area Regional Transportation Authority both work with Google Transit and each have a secondary GPS-powered rider tools, according to NEORide, a consortium formed in 2014 that works to coordinate the work of four transit systems in the region: Akron Metro, PARTA, SARTA and, as of 2017, Laketran. NEORide’s latest effort includes developing mobile fare technology that can be used across the four systems — and eventually transit systems across the state. The NEORide agencies are now reviewing prospective vendors.

Because of the limited resources, Clarke said it’s important that systems don’t just chase the latest technology but rather, take a step back and look for flexible, sustainable technology investments.

“I think it’s critical that as stewards of public money, we really think strategically about our technology investments, so we’re not just chasing that shiny object,” he said.

While there are the customers who are attached to their smartphone and always looking for the latest app, there remain a number of customers who may not have a smartphone or who may want to pay in cash for a variety of reasons.

Akron’s Metro RTA learned this in

recent years. Following feedback from customers that they’d rather be billed, the system tried going cashless with its service for older adults and persons with disabilities.

“So we tried that, and it turns out that everyone decided, our riders included, that cash was the better way to

go,” Merrick said. “I think it’s just trying to determine if it’s time for that, when is the best time? When is the public ready for that? It’s kind of, I think, if it’s not broken right now, don’t fix it.”

In Cleveland, however, RTA has a mobile app that allows users to pay for their fare and display the ticket on

their smartphone to the driver. It was introduced in time for the Republican National Convention last year, and now represents 3% to 4% of revenue.

Clarke stressed that with a significant infrastructure need and repair backlog across the country, public transit agencies need to balance their technology investments.

“I think as much as the technology is great and people want more technology,” Clarke said, “they would all agree that the bus and train being safe and on time is more important than knowing the data that the bus and train is on time.”

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THE PANEL JAMES E. MCLEAN JR.

ROUNDTABLE DISCUSSION ENERGY

Associate General Counsel Duke Energy

As an associate general counsel in the Cincinnati office of the Duke Energy Office of General Counsel, James McLean is responsible for all Duke Energy litigation in Ohio and Kentucky and Piedmont Natural Gas litigation. He has represented Duke Energy in utility relocation disputes, wrongful death actions, natural gas incidents, land rights disputes and employment litigation.

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He is co-chair of the Greater Cincinnati Minority Counsel Program, former president of the Cincinnati Alumni Chapter of Kappa Alpha Psi Fraternity Inc. and a former board member of the Cincinnati Community Action Agency and Cincinnati Legal Aid Society. A native of Cleveland, James earned a bachelor of arts degree from Wittenberg University and his J.D. from University of Cincinnati College of Law.

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hio’s energy industry is bustling, with cleaner fuel development, mass infrastructure improvements and new pipeline projects fueling economic growth and opportunity. Surges in natural gas production are yielding lower prices for customers. New wind, solar and battery power projects are in the works. Companies are creating subterranean power lines and smart grids to minimize or even eliminate power disruptions to customers during storms.

These and other activities in the energy industry not only present new opportunities, but also regulatory, compliance, staffing and other business challenges. Crain Content Studio — Cleveland asked three professionals in the industry to weigh in on some of the trends facing the sector, and what they mean for those involved in the exploration, production and distribution of safe and reliable power.

JEFFREY A. MURPHY

Vice President and General Manager, Ohio & West Virginia Distribution Dominion Energy Ohio

As vice president and general manager, Ohio & West Virginia Distribution Operations, Gas Infrastructure Group, Jeff Murphy oversees all aspects of Dominion Energy Ohio’s natural gas distribution company, including gathering, storage, distribution and transmission assets, and Dominion Energy West Virginia. In 1986, Jeff joined East Ohio Gas Co., then a subsidiary of Consolidated Natural Gas, and held various positions in the corporate planning, finance, regulatory affairs and other departments before assuming the role of general manager of commercial operations in 2014. He was named to his current post in 2015. Jeff earned his bachelor’s and master’s degrees in economics from The University of Akron and an executive MBA from Baldwin Wallace University. He is a member of the boards of directors of the Greater Cleveland Partnership, Greater Akron Chamber and OPEN M, a community outreach ministry in South Akron.

MICHAEL L. SNYDER

Vice Chair of the Litigation Practice, Chair of the Energy Practice and Member of the Executive Committee Benesch

Michael L. Snyder is vice chair of Benesch’s Litigation Practice, chair of Benesch’s Energy Practice and a member of Benesch’s Executive Committee. He has served as lead counsel for public utility companies for more than two decades. He currently represents multiple public utilities in Ohio and other states. He also serves as counsel for various midstream and E&P companies. Michael also serves as lead counsel for a number of companies involved in various aspects of shale exploration, drilling and extraction. Mike is a member of the Trial Attorneys of America. His bar admissions, licenses and certificates are applicable to Ohio, Cleveland Metropolitan and Ohio State bar associations. He graduated from Brigham Young University and earned his J.D. from George Washington University.

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Q&A What changes are you seeing in the Ohio region (Ohio, West Virginia, Pennsylvania, Kentucky) in the oil and gas industry, and what do they mean for your firm or company?

JEFF MURPHY: For Dominion Energy, the biggest change has been — and continues to be — the sharp run-up in natural gas production from shale formations, particularly in Ohio, Pennsylvania and West Virginia.

It’s hard to overstate the impact that it has had on our business and our customers, who are now paying some of the lowest prices for natural gas in the country. That puts more money into the hands of our customers. This change has also led to a resurgence in industrial process load and has significantly expanded the use of natural gas for electric power generation, all of which have spurred broader economic development across the region.

MICHAEL SNYDER: There are a number of changes taking place in the oil and gas industry throughout the Ohio region, and they continue to evolve on a daily basis. Not only are there marked changes in the way exploration and production companies are evaluating and analyzing fracking and drilling, but there continues to be a significant evolution in the building of infrastructure necessary to transport and supply oil and gas to the market. Moreover, the construction of multiple pipeline projects throughout the state of Ohio has also resulted in increased litigation and issues dealing with landowners.

Benesch continues to play a significant role in assisting its clients to navigate through these issues, actively avoiding obstacles and impediments in realizing their objectives.

What changes or proposed changes have there been in state or federal laws, and what do they mean for your company or firm?

MICHAEL SNYDER: There has been a significant amount of proposed rulemaking in the industry during the past few years. While the majority of these proposed rules have not gone into effect, the possibility of these changes — coupled with increased public scrutiny — create a greater importance for our clients in terms of both compliance and legislation. Benesch lawyers continue to assist their clients in avoiding the legal and procedural pitfalls presented by these proposed legislative enactments.

Currently, the Pipeline and Hazardous Materials Safety Administration has proposed two rules that will potentially

ENERGY

ROUNDTABLE DISCUSSION

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Duke Energy develops renewable and clean energy, such as wind and solar. In the last 10 years, Duke Energy has invested over $4 billion on wind and solar projects.”

—JAMES E. MCLEAN JR., Associate General Counsel, Duke Energy

impact our clients in the natural gas industry. The first involves regulations concerning the safety of gas transmission and gathering pipelines. The second establishes federal safety regulations for underground natural gas storage facilities.

Our team continues to work closely with our clients who have natural gas production, transmission and distribution issues to ensure they are ready for any rule changes eventually implemented.

JEFF MURPHY: With more than 20,000 miles of pipelines in our system within the Ohio region, some of the biggest changes affecting Dominion Energy involve pipeline safety regulations. Even though a number of previously pending regulations are on hold, we’re taking steps to stay ahead of the curve and ensure that our system continues to provide safe and reliable service. To that end, we’re spending nearly $15 million per year above previous levels to implement a Pipeline Safety Management Program.

That program reflects expanded efforts in training our workforce, preventing damages to our pipelines by those digging near our facilities, and ensuring that we have timely and accurate data on all of our facilities.

What plan has your company implemented to strengthen the energy grid to make it more safe and reliable?

JAMES MCLEAN: Our customers over the years have become increasingly dependent on the grid and, as you might imagine, less tolerant of outages. Duke Energy has a 10-year plan to improve power quality and reliability.

One common theme is to protect power lines. Trees are one of the biggest threats to power quality and reliability.

For this reason, we are moving hundreds of miles of overhead power lines located in areas dense with trees and other vegetation underground. This significantly reduces outages, but also helps us restore power more quickly after major storms. We are also installing protective equipment on poles to help keep animals such as squirrels from

interfering with and damaging lines.

Another way to prevent outages and improve time to restore power is to improve the quality of the equipment in the field. Duke Energy’s plan includes replacing hundreds of miles of aged overhead power lines and poles, and replacing or refurbishing almost 2,000 miles of underground power lines in the Midwest alone.

In addition to protecting power lines and replacing aged equipment, Duke Energy’s plan includes making the grid self-optimizing. That is, making it more efficient by adding automation and intelligence to the grid. In the past, we often had to wait for customers to alert

us of an outage, and then we would deploy workers to perform repairs. With automation, the grid can self-diagnose problems and automatically react and reroute power where necessary. This will reduce the length of power outages and in many instances, our customers will not even experience an outage.

JEFF MURPHY: Many people think of the energy grid as electrical power lines and transformers. However, a major part of the overall energy grid is composed of natural gas pipelines owned by local gas utilities and interstate pipeline companies. In our case, we’re in the midst of a 25-year

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program to replace older pipelines that will ultimately cover one-fourth of our system. We also play an important — and expanding — role in delivering natural gas for new power plants, including the still-under-construction Lordstown Energy Center. We’ve also built new pipelines to deliver Utica shale natural gas production to our market and to interstate pipelines, which has been a key contributor to the successful development of that homegrown resource. In all of those areas, Dominion Energy has adopted stringent environmental safeguards and construction best practices as part of our commitment to responsible pipeline construction.

How have your clients’ legal needs changed, and how has it affected your firm’s energy group?

MICHAEL SNYDER: Our clients’ legal needs are constantly changing. Benesch’s Energy Team is involved daily in matters involving litigation, mergers and acquisitions, real estate, restructuring, financing, environmental and tax implications.

While each client is unique and presents its own opportunities and challenges,

M re

Today, we can connect more, play more and do more.

At Duke Energy, we’re doing more too. We’re developing more innovative technology, like ways to fix outages before they happen, for more reliable service every day.

So no matter how much ‘more’ you do, we’re always here… with power for your life.

We’ve invested $1 billion+ to modernize how we distribute energy, making the grid smarter, more efficient and more reliable.

www.duke-energy.com/More

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ROUNDTABLE DISCUSSION

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there are certain client objectives that remain constant. For example, each of our clients wants to provide services safely, efficiently, and in compliance with all laws, rules and industry standards. To assist our clients in meeting their objectives, Benesch’s Energy Team continues to expand the type and scope of legal services available to its clients, adding experienced attorneys with industry knowledge and expertise.

What is your company doing to develop renewable sources of energy to decrease its environmental footprint? How is that plan impacting customer energy prices?

JAMES MCLEAN: Duke Energy develops renewable and clean energy, such as wind and solar. In the last 10 years, Duke Energy has invested over $4 billion on wind and solar projects.

In selecting suitable locations for wind and solar projects, the first criteria are obviously the strength of the wind and the availability of sunshine. Wind and solar facilities generate zero-emission electricity, which helps reduce the risks associated with carbon dioxide emissions and climate change. Taking it

ENERGY

‘‘

Dominion Energy has built new natural gas infrastructure to expand the availability of this cleaner fuel, particularly for electrical generation, which helps reduce emissions and promote energy and economic security in the U.S. and abroad.”

— JEFFREY A. MURPHY, Vice President and General Manager, Ohio & West Virginia Distribution, Dominion Energy Ohio

a step further, we also select wind and solar sites where there will be a minimal impact to habitats and wildlife.

Duke Energy is also developing expertise in battery storage. We operate one of the nation’s largest battery storage projects, located at a wind farm in Texas. The ability to generate energy when the wind is blowing, store it in large batteries, and dispatch it when the wind is not blowing eliminates one of renewable energy’s largest hurdles — the fact that wind and sunshine are not always available.

The cost associated with developing renewable energy sources is rapidly decreasing. For example, the cost per

watt to install utility-scale solar has decreased from approximately $5 to less than $1 during the last five years.

As the costs continue to decrease, we are creeping closer to a point where renewable energy becomes more costeffective than conventional sources of electricity. Solar costs, in particular, are rapidly approaching this “grid parity” threshold in many U.S. states, and in some cases such as in Hawaii, this has already occurred.

JEFF MURPHY: Dominion Energy has built new natural gas infrastructure to expand the availability of this cleaner fuel, particularly for electrical

The power of sticking together.

We’re helping the communities we serve become even stronger.

generation, which helps reduce emissions and promote energy and economic security in the U.S. and abroad. Dominion Energy also is founding partner in the U.S. Environmental Protection Agency’s Natural Gas STAR program, which focuses on reducing methane emissions from our natural gas storage, transmission and distribution systems.

The vast majority of Dominion Energy Ohio customers buy natural gas through Energy Choice or governmental aggregation supplier contracts. Choice-eligible customers not participating in Energy Choice or aggregation programs may buy natural gas through Dominion Energy Ohio’s market-based Standard Choice Offer rate. The net result is that environmental stewardship and alternative energy investments have not had a major impact on customer prices.

On the electric side of the business, Dominion Energy’s current renewable generation fleet, either under development or in operation, exceeds more than 1,900 megawatts of clean energy in nine states throughout the U.S. The company’s 2017 Integrated Resource Plan calls for at least 5,200 megawatts of new solar generation by 2042, enough to power 1.3 million homes at peak output.

How have your clients’ or customers’ needs impacted how your group or company deals with diversity in the workplace?

There are many things we can do to help hold our communities together. And at Dominion Energy, that means we do more than write checks. So while we’re very proud to invest more than $23.4 million in our communities annually, we’re even prouder of Dominion Energy’s employees for volunteering more than 100,000 hours of their time.

From refurbishing homeless shelters to replenishing local food banks to cleaning up parks to helping soldiers and their families, we’re donating t he most precious resource of all: our energy. Learn more by visiting dominionenergy.com/foundation.

JEFF MURPHY: Dominion Energy is committed to recruiting qualified and talented employees who reflect the communities we serve. The differences our employees bring to work strengthen the company through breadth of experience, perspective and talent.

Our goal is to offer a safe, inclusive and productive work environment that rewards superior performance and provides meaningful opportunities for career growth and satisfaction.

We also strive to create and reinforce an inclusive, creative and productive work environment, in which our employees can grow and succeed. We want our employees to feel valued and

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respected, as our company provides them every opportunity to reach their full potential.

MICHAEL SNYDER: Our clients have made it clear that they need — and want — the skills and benefits derived not only from a diverse group of employees but from their outside counsel as well.

Benesch’s Energy Team shares these core values with its clients and is an industry leader in this area. Now, more than ever, careful consideration is taken when staffing client projects to ensure Benesch provides not only the most capable attorneys, but attorneys with diverse backgrounds and expertise. There is no doubt that client demand for skilled attorneys from a wide range of backgrounds will continue to grow. Benesch’s Energy Team is attracting and retaining legal professionals from all backgrounds and above all else, this involves listening to people and earnestly working to create a lasting culture that values and respects everyone equally.

JAMES MCLEAN: Our customers expect reliable and safe power, but also demand a better customer experience, more choices on how to interact with us and more ways to manage their power options. In short, our customers expect excellence. This has required us to think more creatively to meet our customers’ changing needs and wants. Duke Energy believes that a diverse workplace means better decision-making and better outcomes. Diversity helps prevent us from falling into the trap of “groupthink.” Employees are more likely to come up with their own opinions and think critically to challenge others when there is diversity in the workplace. To help achieve diversity in the workplace, Duke Energy first tries to ensure that there is a diverse panel of job candidates to choose from to fill open positions.

Duke Energy annually conducts an employee engagement survey, and one consistent finding across all departments is that Duke Energy employees genuinely enjoy their co-workers.

What is your company doing to recruit and train skilled employees as your aging workforce retires?

What types of skills and experience are necessary?

JEFF MURPHY: The baby boom retirement wave presents us with significant workforce planning challenges, including recruiting and developing the next generation of company leadership. Changing demographics and skilled-labor shortages could have an even greater impact on our long-term success than technology, commodity prices or any number of other important concerns.

Accordingly, military and veteran recruiting is a special focus area at Dominion Energy. We have found that veterans possess many of the skill sets

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we seek in our workforce, including safety consciousness, civic mindedness and a strong work ethic. In 2011, Dominion Energy piloted its Troops to Energy Job Program, designed to link military veterans leaving the service with energy industry jobs. Today, veterans now account for 20% of Dominion Energy new hires.

MICHAEL SNYDER: While the issues of an aging workforce may not impact Benesch as directly as some of our clients, we are well aware of the obstacles this issue presents and we work with our clients to address both staffing issues and proper succession planning. All of our clients are seeking the most talented, qualified young professionals as a foundation for future services. As a result, competition for these potential employees can be both robust and intense. Retention is critical to developing young talent. The

ROUNDTABLE DISCUSSION

ENERGY

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The Benesch Energy Team invests significant resources to identify and understand new and developing industry trends.”

— MICHAEL L. SNYDER, Vice Chair of the Litigation Practice, Chair of the Energy Practice and Member of the Executive Committee, Benesch

Benesch Energy Team addresses these issues by providing challenging and meaningful opportunities to each of its lawyers, ensuring that Benesch’s Energy Team will have the skill sets and experience to meet clients’ expectations and assist them to remain successful not only now but in the future.

What are some of the greatest challenges and opportunities facing your company or firm, and the energy industry, in Ohio

in the next three years?

What do they mean for you?

MICHAEL SNYDER: The energy industry changes very quickly. Whether it is electric, coal, natural gas, nuclear or renewables, staying on top of the latest trends and evolving statutory or regulatory enactments requires constant attention. Additionally, shifts in policy and market dynamics can severely impact energy companies and their legal needs. Given this fact, the Benesch Energy Team invests significant resources

to identify and understand new and developing industry trends. These actions permit Benesch to not only identify potential challenges and opportunities, but to effectively guide our clients through the changing landscape.

JEFF MURPHY: Our current challenges and opportunities are often closely tied to one another.

For example, one of our greatest challenges is driven by one of our greatest opportunities — that is, taking full advantage of the economic development benefit provided by

Advertising director: Nicole Mastrangelo, nmastrangelo@crain.com Managing editor, custom and special projects: Amy Ann Stoessel, astoessel@crain.com

December 11, 2017 S4

the bounty of shale natural gas production. We’re partnering with JobsOhio and others to secure new prospects and have continued to expand our pipelines to serve new loads. Legislation signed earlier this year expanded our ability to support economic development upon approval by the Public Utilities Commission of Ohio, which has been a key player in utility-driven economic growth.

Another strategic challenge — the need to train the new employees who replace the valuable experience leaving with a wave of retirements — gives us the opportunity to improve the diversity of our workforce and take advantage of the tremendous talent available here in our own backyard.

Even the challenge of changing regulations presents an opportunity as we look at new ways to ensure that we continue to provide safe and reliable natural gas service in the years ahead.

Project editor: Kathy Ames Carr Graphic designer: Staci Buck

For more information about custom publishing opportunities, please contact Nicole Mastrangelo.

WE’RE

GROWING FOR IT

With a re-energized Energy Practice Group.

Energy will always be a vital—and complex—component of our nation’s economy and security. Rising demand coupled with decreasing resources, increasing prices, and environmental concerns present a mix of challenging legal, business and regulatory issues as well as exciting new opportunities. Benesch’s Energy Practice Group is growing to better serve clients throughout the energy sector in the Midwest and nationally.

Our multidisciplinary team, led by an Energy Law veteran, draws on the knowledge of attorneys in corporate law, public and private finance, public utility and regulatory, litigation, environmental, real estate, public law, intellectual property, transportation and logistics, and construction. We represent businesses and utilities in all streams of the industry to help them tap into opportunities, avoid and overcome obstacles, and operate with confidence.

If you are interested in joining our growing, dynamic team, please contact Laura Dutt, Director of Recruiting, ldutt@beneschlaw.com.

www.beneschlaw.com

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Video maker PEG gains national attention

By JUDY STRINGER clbfreelancer@crain.com

It’s easy to assume Ryan Pritt, co-owner of Pritt Entertainment Group, would consider the 2017 NHL Awards Show and Expansion Draft the high point — at least thus far — for his downtown Akron firm.

The nine-person company created and produced the video screen and ribbon board content used inside Las Vegas’ T-Mobile Arena for the June 21 event, which officially launched the Vegas Golden Knights.

It was a big deal. The Golden Knights are the first major professional sports franchise to be based in Sin City and the first NHL expansion team since 2000.

Still, Pritt’s “passion project” was much closer to home — a nearly six-minute long video showcasing the city of Akron’s gritty and progressive character. “#WhyNotAkron” debuted on Feb. 28 at Akron mayor Dan Horrigan’s State of the City address and was shared widely over social media after the event.

“It was far and away the mostshared content on any of the city’s social media accounts,” said Pritt, whose company has grown from one part-time employee four years ago to a full-time staff of nine with a dozen more freelancers working as needed.

“For someone who lives in Akron and is loyal to the city, it was awesome to be a part of something that residents really connected with.”

Pritt started PEG with his younger brother, Jeffrey, in 2008. Earlier this month, the video creative appeared for the second year in a row on Weatherhead’s list of fastest-growing Northeast Ohio companies with 25 or

Pritt Entertainment Group turned the northwest corner of Cedar and Main streets into its three-story headquarters. (Shane Wynn for Crain’s)

Brothers Ryan Pritt, left, and Jeffrey Pritt started the company in 2008. (Contributed photo)

fewer employees. It earned the second spot on the 2017 list with sales rocketing 548% between 2012 and 2016.

Pritt attributes the firm’s growth to attention to quality but admits being from Northeast Ohio helps. The

brothers initially focused their new enterprise on helping local teams manage the digital aspects of the fan experience at sporting events — all of the sights and sounds that keep fans entertained and engaged from the time doors open until the final buzzer sounds.

Clevelanders, Pritt said, have come to expect a certain level of production when they step into The Q or Progressive Field, whether it’s the pre-tipoff hype video or comedic movie clips between innings. That’s not the case everywhere, although the race to lure fans out from in front of their HD flat screens at home means teams and leagues across the country are upping investments in game-day technology and digital content.

“I don’t think it is incorrect to say the stuff being done in Northeast

Ohio is a lot of times five years ahead of what you see in a lot of other markets. Just look at the Cavs. They have been setting the benchmark for many years, and we get to see all of that,” he said.

To be fair, PEG does more than “see” the sensory revolution taking over arenas and stadiums. It is an active participant. While a University of Akron student, Pritt oversaw game operations for the Youngstown SteelHounds, a minor league professional hockey team that played at the Chevrolet Centre, now known as the Covelli Centre. That’s when he first hired his little brother — then just a high school student — to help produce graphics and animations.

After the SteelHounds folded in 2008, Pritt worked briefly in video board operations for Kent State University before getting a call from the owners of a new Youngstown-based junior league hockey outfit, the Phantoms. Surveys of SteelHounds season-ticket holders revealed that the team’s use of videos and graphics ranked high among things that drew fans to the arena.

Pritt was intrigued.

“I was disappointed when (the SteelHounds) folded,” he said. “I felt like we were building toward something, but we were not really at a 10 out of 10 yet. We were at like an 8.”

With Jeffrey on board as co-owner and creative director, PEG was born.

The duo worked initially from a spare bedroom until 2013, when they leased a South Main Street storefront.

Two years — and four new employees — later, PEG bought a historic building across the street from its first digs and turned the northwest corner of Cedar and Main streets into a three-story video production studio

and headquarters.

While many of PEG’s clients are still in the sports world, about half of its revenues come from corporations (GE is among its clients), nonprofits (like the Akron-Canton Regional Foodbank) or municipalities (like the city of Akron).

Turns out, a lot of the same visual and audio techniques used to elicit immediate responses from fans also work very well at grabbing the attention of employees or potential customers, clients or donors. PEG produces everything from promotional plugs to product videos that accompany press releases and has even done a few commercials that ran on national television.

“We have a group of people who are really, really good at creating pieces that get people to respond to them and get reactions from people because that is what our company started from,” he said.

Pritt can’t talk about many of the company’s corporate projects but is thrilled that PEG can brag about its recent work with the new Vegas Golden Knights. Jonny Greco, vice president of events and entertainment for the Golden Knights, had hired the Pritt brothers for various projects when he was with the Cavaliers and the University of Akron.

When it came time to create digital content for a new franchise out West, he knew where to turn.

“Even as the company has grown, they have been able to maintain that family-style boutique studio edge that a lot of firms lose,” Greco said.

“When I got out to Las Vegas, the expectations were insanely high. I needed to go with my bread and butter. I knew what they were capable of.”

Medical virtual reality company lands in Akron

By DAN SHINGLER dshingler@crain.com @DanShingler

Downtown Akron might soon be a virtual hot spot for advanced medical training.

It’s already a real hot spot: Akron Children’s Hospital conducts thousands of simulations and other training sessions, for its own staff and others, at its Austen Simulation Center for Safety and Reliability at the Austen BioInnovation Institute.

While mannequins, cadavers and a warren of simulated emergency rooms, surgical suites and equipment can provide some of the most realistic training available in the region, they aren’t perfect.

Some things are better done with virtual reality, or VR, and Los Angeles-based BioFlightVR hopes to use Akron’s medical expertise to develop virtual and augmented reality medical training tools.

BioFlightVR co-founder and chief operating officer Rik Shorten moved to the Rubber City this year from California for family reasons and is working to expand BioFlightVR into Akron. It won’t be huge in terms of personnel — probably about six or seven engineers, by the time he’s done staffing up, according to Shorten. But it would be a feather in the cap of Akron, which is trying to grow its reputation for innovation and

Rik Shorten, co-founder of BioFlightVR, left, is shown with Michael Deckard, Akron Children’s business development manager.

(Dan Shingler)

high-tech industries.

BioFlightVR just might punch above its weight, too, said Bill Manby, managing director of Akron’s Acquire Investments who’s investing in BioFlightVR. Manby is well-known to many Akron startups and has been instrumental in getting funding for companies like WasteBits and Segmint. He thinks BioFlightVR represents an opportunity for him to invest in a local company on the cutting edge of new technology.

Manby said the company is beyond its early stages and has garnered support from Facebook, Samsung, Oculus, Children’s Hospital Los Angeles and others.

“They’re already cash-flow positive, so they don’t need a lot in terms

of capital,” he said.

Shorten described BioFlightVR as a software company that works with mostly off-the-shelf hardware to provide interactive solutions to medical training and practice.

“It’s gaming, but it’s serious gaming,” Shorten said, explaining that the technology has much in common with video games that use VR and augmented reality headsets.

Except instead of a doctor seeing other players or animated characters in a game, he or she sees and hears a patient with a very realistic medical situation. They also see other doctors and nurses — even the patient’s loved ones — all making the situation as realistic as possible.

For example: “You have a 1-yearold male who was having a prolonged seizure at home, his parents just brought him into the emergency room — now go!” Shorten said, mimicking the urgency that would be conveyed with even more force in an immersive experience like VR. Or trainees could use VR to learn and practice complex surgical techniques so that when they work on a real patient, it’s not their second or third time with a procedure, but their 300th.

If Shorten sounds like he’s got some showman in him, he does. And if you’ve never heard of him, there’s still a good chance you’ve seen his work. Before helping to found BioFlightVR in 2014, he produced comput-

er-generated special effects, often with a medical theme, for the TV show “CSI: Crime Scene Investigation.”

Shorten said he’s found a gold mine of resources at the Austen Simulation Center. Between the surgical suites that can simulate all sorts of procedures, to the emergency and hospital rooms designed to simulate patient-care scenarios, the center is one of the best he’s seen, he said. And it’s invaluable for someone trying to turn real-world medical situations into virtual scenarios.

“The majority of hospitals don’t have these sorts of facilities available — no way,” Shorten said.

That brings a grin to the face of Michael Deckard, Akron Children’s business development manager and the man primarily responsible for seeing that the center is fully used.

“There aren’t many other facilities like this within a three- or four-drive,” said Deckard, who’s thrilled to see BioFlightVR working at the center and hopes it will be a major player there.

Shorten said he’s working on creating VR modules to recreate emergency room scenarios and likes that there’s a training ER on site at Austen, complete with ambulance doors and everything else a patient and doctor would encounter.

Shorten said the facility should make it easier to make his product and test it.

“We could create (a center),” he said. “But if you’re talking about developing something we can validate, we need expertise. We’re not doctors.

We’re programmers and artists and engineers, so we have to work in lockstep with a facility like this to develop a product that’s going to do what it’s supposed to do and be validated.”

The next steps are to test BioFlightVR products with Duke University and Children’s Hospital Los Angeles, Shorten said. He’ll continue to work on modules to simulate ER scenarios while building his company’s Akron staff and offices at Austen along the way.

He thinks he eventually can use the center to branch out into augmented reality, where headsets work in conjunction with mannequins to provide even more realistic training.

And, of course, there’s no reason that the products can’t go online, where they would function even more like a game, albeit one with an important purpose. Many scenarios require multiple participants to simulate a hospital environment, he said.

“VR training eliminates the need to get all members of the team together at once. That’s a tremendous thing in medicine,” Shorten said. “Our idea is multiplayer … but they don’t have to all be in the same place. They could even be around the globe.”

With an engineer in Akron putting it all together.

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The city of Cleveland did not apply for the fellowship grant, said David Rothstein, a principal at the CFE Fund and director of the national Bank On movement who is based in Cleveland.

But Rothstein said he’s still in contact with groups in the city about launching a coalition there in another way.

Rothstein said a driving reason Akron was selected was because of the collective buy-in from groups like the United Way and the city, and interest from local financial institutions.

“We are trying to build a substantial movement, and these local groups based around the fellowship are a huge part of that,” Rothstein said. “We wanted to make sure the city or country of places we choose put a lot of weight behind this.”

The other grants target New Haven, Conn., which has some of the largest gaps between rich and poor in the country; the Florida Suncoast; southern Alabama, which is one of the most underbanked regions of the country; and Houston.

“From the city perspective, the fiscal health of residents is tied to the fiscal health of the city,” said Annie McFadden, Akron deputy chief of staff. “It’s an important issue (Mayor Dan Horrigan) wants to push and get the gravitas of city administration behind … because we want to make this a priority for residents. The ultimate goal would be to make financial empowerment and access to financial services a public right.”

Deep-seated problem According to a 2015 report (the most recent) by the Federal Deposit Insurance Corp. and the Washington, D.C.based nonprofit Corporation for Enterprise Development (which recently rebranded as Prosperity Now), 7% of U.S. households were unbanked that

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That approach is more muted than what Ikea executives told The Columbus Dispatch when the firm opened its store last June in Columbus. The newspaper filed a story saying Cleveland is the firm’s next Ohio target after having opened stores in Cincinnati and central Ohio.

Ikea is known to have sought a site last year in Brooklyn that came a

year, meaning no one in the house had a checking or savings account.

An additional 20% were underbanked, which applies to households in which someone may have a checking account, but still relied on alternative financial services, such as payday loans, check-cashing services or refund-anticipation loans.

In that study, 57% of unbanked households cited not having enough money to keep in an account as a driving reason for their situation.

Locally, according to CFED, 13% of Akron households are currently unbanked. That's nearly twice the national average. Another 20.5% are deemed underbanked.

Meanwhile, according to United Way, 57% of Akron households earn less than Ohio’s basic cost of living. And when considering an average full-time worker without a bank account is estimated to spend $40,000 over their lifetime on check-cashing services alone, the impact the lack of access to proper banking services becomes striking.

“That’s money you’re sucking away from a person who could otherwise have that money to spend elsewhere,” said Greg Sain, a staff attorney with Akron’s Community Legal Aid who’s worked with the lower-income population for decades. “It’s this way, unfortunately, because of the way the payday loan industry is condoned in the state of Ohio. It means people are separated from their money without really a value of return.”

The payday loan industry is a factor in all this. While it serves a shortterm lending need banks often don’t service, the terms on loans effectively force financially vulnerable borrowers into a cycle of debt.

And while some discussions are happening today with Ohio lawmakers to close loopholes that, according to the Small-Dollar Loan Project of The Pew Charitable Trusts, allow those alternative lenders to charge typical annual percentage rates of cropper. The maker and purveyor of modern, low-cost furniture considered Cleveland-area locations as long ago as 2002.

However, the 250,000to 400,000-square-foot stores it is currently building require huge sites zoned for retail or a suburb willing to rezone land to retail. Such large development sites are scarce in slow-growing Northeast Ohio, which explains the Bridgeview property’s allure.

Garfield Heights Mayor Vic Collova is excited about the cloud of litigation

591% — which is up to four times what borrowers pay in other states, like Colorado — lawmakers have failed to enact meaningful change as industry lobbyists resist anything they tend to claim would damage the survival of those businesses.

It's expensive being poor “From our clients’ perspectives, it’s hard to keep a bank account for a variety of reasons, including their income is so limited and they’re living so close to the edge that any unexpected expense sends this spiral of overdraft fees and insufficient funds fees,” said Katherine Hollingsworth, a staff attorney with the Legal Aid Society of Cleveland.

That forces those people to turn to payday lenders and other alternative services, often as many get blacklisted from opening bank accounts after overdrawing and failing to maintain minimum balances banks tend to require.

“They get into this hole they can just never get out of,” Hollingsworth said. “We often talk about how expensive it is to be poor. And it gets to be very expensive to be in that verylow income bracket.”

But the issues with underbanked and unbanked households, as Sain points out, are complex.

As a banking market, Akron doesn’t have any true hometown banks left following Huntington Bank’s acquisition of FirstMerit.

There are just 159 branches in that market today, according to the FDIC, and many are difficult for lower-income people to reach. And mobile banking isn’t helpful when you can’t afford a smartphone, Hollingsworth points out.

And lower-income demographics have been “historically marginalized” in the past, Sain said. That’s what bore the Community Reinvestment Act of 1977 to address the practice of redlining by banks: the pracbeing lifted from the site. He said the news Dec. 5 that ODOT is getting ready to move on the Transportation Avenue bridge project is encouraging because the site demands improved access.

“I honestly don’t know what is planned,” Collova said in a phone interview. “I know it will be big and good for Garfield Heights.”

Troubled history The site originally was launched by an affiliate of Snider-Cannata Inter-

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D E C E M B E R 11 - 17, 2 017

tice of denying services to lower-income people by avoiding the areas they live in, or otherwise achieving that by pricing them out of products. Practices like that have created a deep-seated distrust of banks for some consumers that could be passed on to their families.

More recently, the mortgage crisis, which hit Ohio and its poorer regions in the Northeast especially hard, only made matters worse.

The working poor build wealth through home ownership, notes Sheri Dozier, director of economic opportunity for Cleveland Neighborhood Progress. Yet the financially insecure in Northeast Ohio who lost their homes are either distrustful of banks, have credit histories that preclude them from the sort of loans they need, or both.

“There’s a tsunami of factors that culminated into why this has more deeply impacted Northeast Ohio,” Dozier said.

And while many banks focus on financial literacy for these people, many of them don’t have the luxury of taking a multi-week course on maintaining budgets when they need money yesterday to pay bills, keep their car or feed their kids.

“The transferring or knowledge of financial literacy is not enough,” she said. “The real work happens through the integration of products.”

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Adrienne Bradley, director of financial empowerment for United Way, notes that education is part of the plan for Bank On Rubber City. It still remains a critical part of the solution.

But education also involves trying to repair that distrust of banks.

The goal of the program, which the coalition intends to fund and support beyond the grant — which will pay

for Nicole Chavers as the corresponding fellow, a banker from the market who has worked with Huntington for 15 years — is to “financially empower” 11,000 people by 2025.

That means increasing credit scores, decreasing debt, creating banking relationship and decreasing use of payday lenders and other alternative financial services, Bradley explained.

A brick-and-mortar facility where financial coaching and outreach will be based in Kenmore is part of the effort. It’s expected to open in the first quarter of 2018.

Meanwhile, the coalition will work with banks to create products for lower-income people that meet Bank On national account standards.

Those include accounts with low, waivable or zero fees, minimum required balances of $25 or less, cheap money orders and zero overdraft penalties.

An example of that would be KeyBank’s Hassle-Free account, Rothstein said, which meets those Bank On national standards. (Key, Huntington, Fifth Third Bank and Wells Fargo, whose contributions to the CFE Fund helped support these grants, are just some of the institutions that will be working with the coalition.)

The intent is for groups to come up with products that will then be offered nationwide, not just in Northeast Ohio silos. In theory, those efforts should lead to change across the country in terms of supporting the nation’s un- and underbanked.

“It’s all about building momentum,” Rothstein said. “What Akron is doing should have ripple effects in markets where all these banks are located.”

Saino added, “This is absolutely a step in the right direction. People have to come together on this. And if the people in the banks work on developing positive working relationships with these people, there’s no reason both cannot be successful.”

ests, a Brecksville real estate company. Construction on the site stopped in 2008 as major retailers dropped the project.

Huntington National Bank launched a lawsuit in January 2009 to collect on a $29 million judgment lien against Bridgeview Crossing LLC to recoup construction financing on the project. Craig’s Garfield Hope Acquisition LLC bought Huntington’s note in 2011 for an undisclosed amount and took its place in the legal fight.

Craig’s Garfield Hope Acquisition

also joined a Bank of America in another, parallel lawsuit, the same year that was settled Dec. 1.

Panzica Construction Co. of Mayfield Village led a suit filed in August 2009 to collect more than $6 million in unpaid bills for construction work at Bridgeview. Its suit was settled in an out-of-court agreement Dec. 1 and its liens on the land record removed Nov. 28, according to public records.

Browning, the court receiver, said removing the contractor liens was a breakthrough in resolving the case.

Going national with local solutions

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weatherhead.case.edu

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HOSPITALITY & TOURISM Andrew J. Rebholz

Barry A. Richards

Chief Executive Officer

President and Chief Operating Officer

TravelCenters of America LLC A 20-year veteran of TA, Mr. Rebholz was recently appointed to lead the company’s hospitalityfocused travel centers, convenience stores and restaurants serving professional drivers and the motoring public.

Previously, he was Executive Vice President and served as CFO and Treasurer since 2007. Prior to that, he served as Senior Vice President and Controller, Vice President and Controller, and Corporate Controller.

TravelCenters of America LLC Mr. Richards is a 17-year veteran of TA and recently was appointed to lead operations for all TA’s business units. Previously, he served as Executive Vice President, Commercial Operations.

Prior to that, he filled the roles of Executive Vice President, Operations; Senior Vice President, Food Operations; and Regional Vice President. He joined TA in 2000 with more than 25 years’ experience in the food service and hospitality industries.

William E. Myers

Karen Kaminski

Executive Vice President, Chief Financial Officer and Treasurer

Senior Vice President, Human Resources

TravelCenters of America LLC

TravelCenters of America LLC

Mr. Myers was recently appointed to lead TA’s financial, human resources and information technology functions. He joined TA in 2014 as Senior Vice President and Chief Accounting Officer.

Previously, Mr. Myers served as Vice President, Technical Accounting and Reporting of Eaton plc. since 2010. Prior to that, he was Director of Financial Reporting at Whirlpool Corporation from 2007 to 2010.

Recently promoted to Sr. Vice President, Karen joined TA in 2015 as Vice President of Human Resources, leading the function for the organization. She previously worked for Caesars Entertainment, Jo-Ann Stores, LLC, and the law firm of Duvin, Cahn & Hutton. Karen holds a bachelor’s degree from Cleveland State University, J.D. from Cleveland-Marshall College of Law and Executive MBA from Kent State University.

Mary McPherson

Sara Frank

Vice President, Retail Merchandise

Vice President and Controller

TravelCenters of America LLC

TravelCenters of America LLC

Recently promoted to Vice President, Mary joined the company in 1988, where she has served in a variety of roles on the retail side of the business. Her responsibilities include directing category management, procurement and marketing for more than 500 retail stores, inventory management, and overseeing the company’s national distribution facilities. Mary is originally from Oregon.

Recently promoted to Vice President and Controller, Sara was previously the Assistant Controller for TravelCenters of America. She joined the company in 2014 as General Accounting Manager. She previously held positions at PricewaterhouseCoopers LLP, First Solar and Eaton Corporation. Sara received her bachelor’s degree in accounting and finance from the University of Toledo and holds a CPA certification.

Debra A. Chionchio

Mary Jo Harris

Vice President - Legal, Assistant General Counsel

Vice President - Legal, Assistant General Counsel

TravelCenters of America LLC

TravelCenters of America LLC

Recently promoted to Vice President, Debra has filled the role of Assistant General Counsel for TravelCenters of America since 2007.

Her focus is on contracts for the company’s various retail business units. She also oversees the trademark portfolio. Debra received her J.D. from Northeastern University School of Law in Boston, Mass., and is based out of TravelCenters of America’s Newton, Mass. office.

Recently promoted to Vice President, Mary Jo has filled the role of Assistant General Counsel for TA since 2007. She handles all general liability, employment and environmental litigation.

Previously she worked at two Boston law firms and the City of Boston. Mary Jo earned her J.D. from Northeastern University School of Law in Boston, and is based out of the company’s Newton, Mass. office.

Jessica Trivisonno Associate

Walter | Haverfield Walter | Haverfield is pleased to announce that Jessica Trivisonno has joined the firm as an associate in its Public Law Group. She is particularly passionate about land use and zoning, and she serves as an at-large executive board member with the Cleveland section of the American Planning Association. Trivisonno obtained her B.A. degree from American University and earned her J.D. degree from Case Western Reserve University School of Law. For more information, visit www.walterhav.com.

PROFESSIONAL SERVICES Jason T. Parker Executive Recruiter

Anderson|Biro, LLC Anderson|Biro, LLC announces that Jason T. Parker has joined us as Executive Recruiter. Jason brings to the firm extensive knowledge of interpersonal skills, team leadership, and consultative selling. Jason has cultivated a skill set that includes the precision, creativity, and agility needed to exceed our client’s high expectations. He will primarily serve in our Real Estate Financial services group on a national basis. Jason received his degree from the University of Cincinnati in 2008.

KNOW SOMEONE ON THE MOVE? For more information or questions regarding advertising in this section, please call Lynn Calcaterra at (216) 771-5276 or email: lcalcaterra@crain.com

CRAIN’S CLEVELAND BUSINESS

Source Lunch

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John Telich

Sports anchor, Fox 8 Cleveland In more than 37 years on the air at Fox 8, John Telich said he’s “worn every possible hat at the station.” ¶ The 64-yearold, an 11-time Emmy winner, was at the Richfield Coliseum for “The Shot,” was in the end zone in Denver for “The Fumble,” was on the field in Miami after the Marlins beat the Indians in Game 7 of the 1997 World Series, and was in Oakland, Calif., when the Cavs ended Cleveland’s 52-year championship drought. ¶ “I’m incredibly blessed to be able to cover that stuff,” said Telich, who returned to his native Northeast Ohio in 1980, after serving as an assistant sports director at a TV station in Buffalo, N.Y. ¶ He’s seen and done it all, yet one of Telich’s most vivid memories wasn’t the result of a game, but because something he said angered a very big defensive lineman for the Browns.

— Kevin Kleps

Five things Favorite TV show “Breaking Bad” — the first program Telich said he ever binge-watched.

Fitness buff Telich has competed in more than 100 triathlons, including three Ironman long-distance events.

Hours, not miles Telich has transitioned from triathlons to trail running. He will spend a combined five hours on the trails in a given weekend “and think nothing of it.”

There’s no place ...

Telich lives in his native Euclid with Jane, his wife of 41 years. They have three adult children — Courtney, Patrick and Joseph.

Broadcast idol The late Jim McKay, who is best known for hosting ABC’s “Wide World of Sports.” Telich on McKay: “He was a storyteller, a commentator, he was a great newsman who did sports.”

Lunch spot Beach Club Bistro 21939 Lakeshore Blvd., Euclid 216-731-7499

The meal One had the pork belly BLT with cole slaw, a cup of wedding soup and a Coke; the other had a house salad with chicken, a cup of creamy chicken soup and a Diet Coke.

The vibe The restaurant, which took the spot of the former Lakeshore Tavern in 2001, has become a Euclid staple.

Beach Club is known for its pizza, but the other options are tasty, too.

The bill $36.72, plus tip

The changes you’ve seen in 40-plus years in the business are obviously pretty crazy. What are the most significant?

I would have to say in the last 10, 15 years, it’s been how the internet has influenced our business. ... The tenements of the business still are there — there’s a story, you’re inquisitive about it, you try to find out the accurate information and you disseminate it. Now you’re tempted so much to disseminate before it’s actually been out of the oven, and that’s the tough ask. There are more people in the business, either real or not real, who would be happy to report anything that’s not locked down and firm, and ready to go. That’s been the real chore, dealing with so many sources of information that are out there now, what’s real and how many brush fires do you have to put out on a weekly basis about specific stories. My gosh, it’s been crazy. It really has.

We’ve talked about our instant-reaction society. How does local news stay relevant in this type of environment?

I think you have to be aware of the pulse of what’s going on around you.

I think social media helps that. That’s one factor. But obviously the biggest way is to be observant of what’s going on news-wise and sports-wise in your domain, if you will. Feel the pulse, make phone calls.

What are some of the most significant challenges you face in that respect?

The toughest thing for me is I’m not the beat writer for the Cavs, I’m not the beat writer for the Browns, I’m not the beat writer for the Indians, but yet I’ve got to stay relevant and in touch with all of those things. I’m not at practice every day — I can’t possibly be because we have so much news that we do. It’s a double-edged sword. I go to a Cavs shootaround some days, I go out to a Cavs practice, I’ll be at a Browns thing, but it’s nothing like being there each and every day. But I try to be. I just don’t want to be the guy pontificating on the air, “Blah, blah, blah,” without talking to Terry Francona occasionally or whatever it may be.

Did you ever envision doing anything else, or is this always what you wanted to do?

When I was in high school, there was a show Bill Cosby starred in where he was a gym teacher (“The Bill Cosby

Show”). ... But by the time I was like a junior or senior in high school, I was more fixed on my love of sports, my love of broadcasting and wanting to be a broadcaster. I was the stereotypical kid who would watch a game and do play-by-play into a recorder. I was going to be the next great Indians announcer or Browns announcer.

You mentioned that you wrote letters to the likes of (Cleveland broadcasting icons) Gib Shanley and Jim Graner when you were in high school. How did that work?

They allowed me to come to the station and see them do their job.

That was just another window to the world I wanted to be in — actually meeting Gib Shanley, or meeting Jim Graner, going to the studios and seeing them do what they do. My dad was very instrumental in that.

He could make things happen. I remember seeing them before they went on camera. It seemed like almost otherworldly to see this guy (Shanley) just sitting back. And, of course, back then, everybody smoked.

He just jawed with the floor director, then you’d hear them say like, “10 seconds,” and I was spellbound. He’d be gabbing away with this individual, and then for them to say “10 seconds” and for him to just sit there and casually put down the cigarette, and boom, the light would go on. And there he was. That got my attention.

You’ve done a ton of stories. Are there a select few that stand out?

My second or third year covering the Browns, saying on the air that Lyle Alzado was past his prime, and then having Lyle Alzado confront me the next day. That got my attention. I didn’t know it at the time, but I think he was probably ’roided up. (Alzado, who had a rare form of brain cancer, died at age 43 in 1992. He attributed his disease to his use of steroids and performance-enhancing drugs.) He picked me up and tried to throw me into this big trash can. And then two weeks later, he was doing some type of charitable thing, and I went to cover it. He came up to me and he apologized, and then it was like we were best buddies. From then on, he was so good to me that I couldn’t fathom why a guy would be so upset.

How did he not end up throwing you? Did someone intervene?

Yeah, someone came over and said, “Back off,” and I didn’t end up headfirst in a trash can.

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