Crain's Cleveland Business

VOL. 38, NO. 6

FEBRUARY 6 - 12, 2017

Akron

Money talks State budget gets some pushback from business groups. Page 2

Larger wheels are charting future path for Goodyear. Page 16

The List

CLEVELAND BUSINESS

The region’s largest auto dealerships Page 18

IMMIGRATION

Leaders’ concerns centered on future

SPORTS BUSINESS

MLB could be serving up a home run

By KEVIN KLEPS kkleps@crain.com @KevinKleps

By LYDIA COUTRÉ, JEREMY NOBILE and RACHEL ABBEY MCCAFFERTY

As Northeast Ohio businesses work to address and mitigate immediate impacts of the White House immigration action, leaders worry about long-term effects for the region.

Short term, there will be vacancies, delayed starts for research, postponed travel plans and general uncertainty. In the long run, leaders worry about the economic impact and Northeast Ohio’s ability to recruit top talent and brains from around the world.

“Fear is so easy politically. Hope is hard. Building an economy is the hardest of all,” said Joe Cimperman, president of Global Cleveland, a nonprofit whose aim is to attract skilled immigrants and refugees to Northeast Ohio. “You don’t build it by telling people with talents who want to come here to get out.”

On Jan. 27, President Donald Trump signed an executive order designed to bar people from the countries of Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen from entering the United States for 90 days while banning all refugees for 120 days — and Syrian refugees indefinitely.

The order itself is confusing to many immigration experts who question its purpose and legality. The order has been called a Muslim ban because the countries targeted by the order feature majority Muslim populations — and because of language Trump has used in the past. The Trump administration has denied it's a ban.

Even though some people still are making it to the United States, the overall lack of clarity behind the order is feeding the chaos, said Stacy Cozart, an immigration lawyer at Independence law firm Sharon & SEE IMPACT, PAGE 19

The Major League Baseball AllStar Game no longer determines which league has homefield advantage in the World Series.

The outcome of the game might be as crucial as an Indians spring training contest, but its impact on Cleveland — which on Jan. 27 announced that it landed the 2019 event — could be profound.

Just ask Cincinnati.

The Queen City, the third-largest city in Ohio (one spot below Cleveland), hosted the 2015 MLB All-Star Game. Dan Lincoln — the president and CEO of Cincinnati USA, the city’s convention and visitors bureau — said the event exceeded every expectation.

“It was fantastic. Absolutely fan-

tastic,” Lincoln said. “You throw around the word transformative.

Cleveland has had a lot of big events.

(The All-Star Game) is one of those tent-pole events that are highlights on a timeline of renovation and rejuvenation of the whole city.”

Lincoln said his group estimates that about 200,000 out-of-town visitors attended the All-Star festivities — a number he said is conservative because “day-trippers” from such cities as Columbus and Dayton aren’t factored into the total. Major League Baseball alone accounted for 17,000 room nights at Cincinnati hotels, Lincoln said.

Cincinnati USA estimated that the economic impact of the All-Star Game — a five-day event that includes a fan fest, celebrity all-star game, the Futures Game and annual Home Run Derby — was in the $60 million to $65 million range. Again, Lincoln said the figure was conservative.

Cincy’s economic impact is similar to ones reported by other All-Star cities — though sometimes that’s because cities piggyback on their predecessor’s research. San Diego, which hosted last year’s All-Star event, estimated the impact at $80 million, which was $30 million above the revised, and downgraded, figure for Minneapolis in 2014.

David Gilbert, the president and CEO of the Greater Cleveland Sports Commission and Destination Cleveland, told Crain’s the groups had been trying “in earnest” to land the MLB All-Star Game for more than 18 months.

Destination Cleveland is going with Cincinnati’s 2015 estimate — $60 million to $65 million — for its impact for the 2019 event. Gilbert said the city will get “a far more detailed number” as the game gets closer.

SEE ALL-STAR, PAGE 19

All-Star Game economic impact The estimated impact of the last five Major League Baseball All-Star Games, according to MLB and numbers reported by the host cities: 2016: San Diego 2015: Cincinnati Indians All-Star Corey Kluber was the winner of the 87th MLB All-Star Game at Petco Park in San Diego in 2016.

(Mark Cunningham/Getty)

2014: Minnesota 2013: New York 2012: Kansas City $0M

$50M

$100M

$150M

$200M

DEVELOPMENT

$250M Stark project is stalled, but ‘alive’

By STAN BULLARD sbullard@crain.com @CrainRltywriter

More than two years after Stark Enterprises and J-Dek Investments lofted plans for a 48-floor downtown Cleveland skyscraper, the site remains a sea of parking lots.

Ezra Stark, chief operating officer of the family-owned Cleveland real

Entire contents © 2017 by Crain Communications Inc.

estate company, said in an interview that the nuCLEus project remains in the works, but he wouldn’t project when construction might start or when the mixed-use building might be completed.

Previously, the company had said work would start by the end of 2016 and the project would hit the market in 2018. Substantial delay can be attributed in part to the Republican National Convention in July 2016, which turned the nuCLEus site between Huron Road and Prospect Avenue near East 4th Street into a buzz of activity.

Aside from cars coming and going from the lot, though, nothing has stirred since.

The final, missing piece? Stark said the project is in negotiations with the city of Cleveland to put in place the public financing portion of the $250 million project.

SEE NUCLEUS, PAGE 2

The design for the complex of retail, apartment, office and hotel properties on a parking lot at East 4th Street and Prospect Avenue is a spare, modernist structure with oodles of angles. (Contributed photo)

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CRAIN’S CLEVELAND BUSINESS

Budget brings biz pushback NUCLEUS CONTINUED FROM PAGE 1

By JAY MILLER jmiller@crain.com @millerjh

The sales tax increases that Gov. John Kasich wove into the $66.9 billion executive budget he rolled out last week are not being well-received by some business and government groups in the state.

They're uniformly opposed to how the governor is seeking to replace revenue lost to income tax cuts with tax increases that affect them or their customers or, often, both.

The biggest impact would be from the governor’s proposal to raise the basic statewide sales tax rate by onehalf percentage point to 6.25%. He’s also taking another pass at expanding the services covered by the sales tax, as he did in 2015, though his additions are fewer this time around.

Kasich's plan also increases taxes on cigarettes and other tobacco products, as well as on beer and wine.

The lame duck governor is touting his 2018-2019 general revenue budget as one that cuts income taxes by 17%.

But the budget doesn’t cut spending by 17%, so the tax increases are needed to match revenue with expenditures.

This is not Kasich’s first try at expanding the sales tax. He was successful in 2013, when the rate was raised from 5.5% to 5.75%. In 2015, he unsuccessfully pushed for the same, half-percentage point statewide increase that he is seeking in this new budget. At that time, Kasich also sought to expand the tax to include a broad range of services.

Little of Kasich’s 2015 tax expansion, including the rise in the general sales tax, survived the legislative sausage-making in a General Assembly not terribly receptive to tax shifting. It didn’t help the governor’s cause that many of the business services hit by the new taxes proved to be effective

Kasich

lobbyists against his plan.

So maybe it’s not surprising that Kasich is again trying to add lobbying services to the list of covered business and consumer services this time around. Although the actual budget bill has not been introduced in the General Assembly, the governor’s Office of Management and Budget has prepared a series of documents, including 859 pages of budget recommendations that OBM director Tim Keen reviewed last Wednesday, Feb. 1, with the Ohio House Finance and Appropriations Committee.

Those hit by the changes who were contacted by Crain’s Cleveland Business tread carefully with their criticism because they have not seen a submitted budget bill. But they were consistently opposed to how the governor is seeking to replace the revenue lost to the income tax cuts with other tax increases.

The point that the increases hit both them and their customers was made by Zach Doran, president of the Ohio Automobile Dealers Association, who said the impact is not just an increase in the cost of cars to buyers. Sales taxes on car sales made up 12.5% of all sales taxes collected in the first six month of 2016, a typical percentage over time.

He said that, in addition, since sales taxes have been tacked on to business services, they become a more significant cost to auto dealers and all other businesses.

"There’s a number of different services we buy, (and dealers) pay a large chunk of sales taxes in the course of our transactions,” Doran said.

Gary Gudmundson, a spokesman for the Ohio Department of Taxation, said in an email that two studies by the department on sales taxes paid by business estimated that businesses paid between 34% and 43% of all sales taxes.

Among the other services the Kasich budget would put under the sales tax umbrella are cable television services, interior design, landscape services and repossession services, services used by auto dealers.

The cable TV industry also is opposed to being taxed, arguing that its customers already pay what is called a local gross receipts tax to communities they serve. Kasich’s plan argues that the tax would bring cable in line with its satellite competitors who already pay a state-level tax.

But Jonathon McGee, executive director of the Ohio Cable Telecommunications Association, argued that cable television customers already pay a local gross receipts tax to their communities, while federal law prohibits satellite television companies from being taxed by local communities.

“Imposing a state and county sales tax on cable is double taxation, and that’s wrong,” McGee said in an email. “Further, it would put cable television operators at a competitive disadvantage compared with its wireless and internet-based video competitors, whose customers do not pay the same taxes as cable.”

The plan would also tax non-medically necessary cosmetic surgery.

Reginald Fields, director of external and professional relations at the Ohio State Medical Association, said the group isn’t exactly sure what will be taxed and how the state will be able to figure out how to collect it, but it opposes the concept.

“We’ve spent a lot of time negotiating with the city, schools and county.

We’re awaiting a decision,” Stark said.

“It’s not a simple tax abatement.”

However, he declined to specify what aid the developer wants that the public bodies have not delivered.

The city and county confirmed talks with Stark, but not much more than that.

Daniel Williams, spokesman for Cleveland Mayor Frank Jackson, issued an email saying, “The city continues to work with Stark Enterprises to address the complex issues associated with the nuCLEus project. Financing such a large project is complex and multi-layered, and these discussions are on-going.”

Meantime, Mary Louise Madigan, Cuyahoga County spokeswoman, said, “There are ongoing discussions about the project.” However, like Williams, she declined to provide any details on the discussions.

Madigan noted any incentive package the county grants nuCLEus would need to go through Cuyahoga County Council before it could proceed.

Cleveland city councilman Kerry McCormack, whose Ward 3 includes downtown, said negotiations between the developer and city administration have “gotten sensitive around the schools. Normally with tax increment financing plans, they don’t include funds from the schools (just the city). From what I understand, there are some solutions for the schools, and Stark wants to get creative how it does it.”

However, McCormack said it’s his understanding that the talks and the nuCLEus project “are absolutely alive. It’s a great project, and it’s important to get creative with it.”

Since Stark secured an approval from Cleveland City Planning Commission for preliminary design of the

project in November 2014, some steps toward advancing the project with the city have been taken.

According to Cuyahoga County land records, the first step in putting a TIF in place was taken on Dec. 4, 2014, as the site was deeded to the city, which clears the way for legal work to allow a bond to be issued supported by future non-school tax receipts of the site. Legislation updating the zoning of the site to allow the scale and mix of office, retail and residential uses at nuCLEus was adopted Sept.

17, 2016, by Cleveland City Council.

Stark in 2016 recorded a lease for a HopCat brewpub, part of a Grand Rapids, Mich.-based chain, on the site.

A lease for a Starbucks at nuCLEus also was executed recently, according to Steve Altemare, a senior vice president at Lyndhurst-based Goodman Real Estate. In an email, Altemare said the lease is fully executed but does not include a specific delivery date for the shop.

Stark said the scope of nuCLEus is unchanged. It still includes a hotel, 150,000 square feet of national restaurant and retail space, 500 residential units in a mix of rentals and condos, 200,000 square feet of office space and a massive parking garage capable of serving 1,500 cars.

As time passes, the limbo that nuCLEus is in is beginning to become more dangerous. Interest rates are starting to rise from levels that make many real estate developments relatively easy to finance. Moreover, looming tax reform by the Republican-led Congress and White House may change the ground rules for future real estate development.

Although delay typically builds skepticism among realty pros, support for an expansive project with contemporary design — and nuCLEus certainly registers on both fronts — remains strong.

Chandler Converse, a CBRE managing director who heads its Cleveland office tenant rep practice, remains enthusiastic about nuCLEus.

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Summa Health System had a tumultuous start to 2017 following messy contract negotiations that ultimately culminated in the resignation of its CEO Dr. Thomas Malone, but system officials are pressing forward as they search for a new leader.

Summa, along with the rest of the health care industry, faces uncertainty with the likely repeal of the Affordable Care Act. That uncertainty is compounded at Summa given the sudden leadership change, but system officials are confident they can weather the storm and move ahead, as planned, with an ambitious $350 million facilities plan. In particular, Summa leadership points to success with its accountable care organization, the launch of an electronic medical record and favorable ratings from Moody’s Investors Service and Fitch Ratings.

With any leadership transition comes some uncertainty and instability, “and we’re certainly going to experience that over the next couple of weeks,” said Ben Sutton, senior vice president for strategy and performance management. But leaders at all levels of Summa “firmly believe” in the system’s vision and direction going forward, he said.

Malone, who had served as CEO for only about two years, resigned Jan. 26 after vocal opposition to a decision to not renew the contract of the independent physician group that had staffed its emergency departments for decades. Upon reaching an impasse in negotiations, Summa brought in new ED physicians at midnight on New Year’s to replace Summa Emergency Associates.

Still, details remain scant regarding Summa’s search for a new leader.

System spokesman Mike Bernstein said the search is “progressing well” but he declined to confirm whether there is a search committee in place and whether the system is looking at internal or external candidates. Sutton and Bernstein also both indicated the board is seeking an interim CEO, but a memo from the board last week regarding Malone’s resignation makes no mention of the role being interim. It said Malone will continue in the role of CEO for up to 60 days as the board “conducts a search for his successor” and focuses on “finding the best leader.” It remains unclear whether the board is seeking an interim or a permanent role.

A curious timeline Health care organizations are unique in the number of stakeholders often consulted during an executive search, including board members, physicians, other providers, hospital contributors and community officials, said Ralph Dise, president of executive recruitment firm Dise and Co. Dise, whose company has not been contacted for Summa’s search, said that a CEO search typically takes 90 to

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120 days, plus an additional two to four weeks for the candidate to move and begin a job. Ninety is on the fast side.

Bernstein said it was the board’s intention to complete the process in up to 60 days. But it remains unclear whether this is an internal or external hire for an interim or permanent role, all factors that would change the pace of a search.

If Summa is aiming for the 60-day mark, “It would be hard to get it done in 60 days,” said Dise, who also stressed that leading Summa would be the “opportunity of a lifetime” for a candidate who’s the right fit.

“People who operate at the highest levels of health care are turned on by challenge,” Dise said.

Tom Campanella, director of the health care MBA program at Baldwin Wallace University, said that trust and communication will be critical for the new leader.

From his perspective, an internal hire or someone who has a history with the system would be ideal — someone who has already developed trust with some of the key players.

“But it can’t just be a trust issue; this person obviously now more than ever needs to be a visionary, somebody that really can motivate people and really work to evolve the organization to even being that much more of a winner in this time of change,” Campanella said.

“And my hope is, because I have a lot of respect for the people at various levels from physician and administrators at Summa, that they do have some internal viable candidates.”

A sudden shift In mid-January, less than two weeks prior to Malone’s resignation, Summa’s board announced a series of steps giving it more direct oversight of administrative moves following the controversy regarding the sudden change in ED staffing.

The moves included hiring an “executive coach” to report directly to the board, as well as creating an advisory medical staff panel, taking on direct oversight for all physician contracts for the rest of 2017 and revising its contract renewal process “to avoid a repeat of the recent emergency department transition.”

Valerie Gibson, chief operating officer of Summa and president of Summa Health System hospitals, said they are still working on forming the physician advisory panel, “but as a team, we’re fully focused on moving forward and continuing our relationships with our physicians.”

The panel was expected to be made up of independent and employed physicians and advise the board on medical staff issues.

Bernstein declined to confirm whether the board would continue with the other initiatives publicly shared last month, saying that the board “has asked that those details remain internal.”

Gibson said leaders are also working with existing committees, including medical staff executive commitVolume 38, Number 6 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly at 700 West St. Clair Ave., Suite 310, Cleveland, OH 441131230. Copyright © 2017 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00.

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tee and department chairs. She said she has no other indications of leadership changes and that “we feel very solid about our executive leadership team and that we’re going to be carrying the mission forward.”

Changes in the market The contract turmoil and leadership change come as competition heats up in the Akron health care scene, particularly given that in 2015 the Cleveland Clinic took on full ownership of Summa’s rival, Akron General. University Hospitals too has quietly staked a claim, having acquired several Akron-area physician practices in recent years.

Allan Baumgarten, a Minnesota-based consultant who studies health care markets across the country, said that as the Clinic can sell its broad network of internationally known specialists, it’s important for Summa to counter by touting its own range of highly qualified specialists close to home.

“And that’s important as well because, financially, I would say that most hospital systems are looking to specialties in general — and certain specific specialties like cardiology and orthopedic surgery and oncology — as important sources of patients and revenues,” Baumgarten said.

Sutton said that the Clinic’s presence certainly increases competition in the market, but it doesn’t necessarily change much for Summa. Sutton stressed that Summa’s commitment to population health and value-based care will set it apart. It’s worth noting Summa was one of the early adopters, especially locally, of the ACO model.

ACOs are designed around the concept of providing high-quality, coordinated care at a controlled cost.

Summa’s facility project has been moving ahead as planned. Design work is underway, and Summa’s target is still to break ground on the work at its Akron City campus toward the middle of the year.

For the most part, Gibson said, physicians are aligned with where Summa is headed and they will help move the system forward. While some opposing voices may remain, Summa is focusing on moving forward and putting things in the past, she said.

“We’re continuing to work every day to ensure that we have as much stability as possible in this transition,” Sutton said.

Corrections J Steris plc is no longer a client of Mike Caputo of Capitol Partners, as reported in a Jan. 30, Page One story. The relationship ended Dec. 31. Caputo said in an email that the Ohio Joint Legislative Ethics Committee, which continuously updates a list of registered lobbyists and their clients, failed to update its list before press time.

J Cleveland State University’s wrestling program wasn’t eliminated, as was reported in the Jan. 30 Source Lunch on Page 23. The program was retained in 2015.

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PA G E 5

Everykey trying to regain backers’ trust

By RACHEL ABBEY McCAFFERTY

“I had no idea how much time and money it’s going to take to go from — an early prototype, you can get that done pretty quickly. But to go from that to a consumer ready product, you’ve got all these issues.”

rmccafferty@crain.com @ramccafferty

It’s safe to say Chris Wentz has gotten an education in the ups and downs of entrepreneurship since coming up for the idea for Everykey Inc. as a student at Case Western Reserve University.

Everykey uses Bluetooth technology to essentially unlock customers’ devices, like phones or computers. In terms of fundraising, at least, the Cleveland-based company has been a success. It raised about $1.3 million in its seed round, plus more than $270,000 on crowdfunding sites Kickstarter and Indiegogo. But, more than two years after that first campaign, it only shipped a fraction of the fobs that have been ordered.

Wentz is hopeful that 2017 can be the year Everykey gets its products shipped and rebuilds its trust with consumers.

The first big public push for Everykey came in fall 2014 with the company’s successful Kickstarter campaign, which raised $117,054. Wentz said Everykey then used that funding and traction to raise its seed round of funding.

Since then, Everykey has been building its engineering and business development team — it currently has seven to eight full-time employees — and has secured an office on Ford Drive in Cleveland.

But as of now, Wentz said just about 600 of the approximately 10,000 products on back order have been sent to customers.

Overall, Wentz said he hadn’t really grasped how much work it would take to go from a prototype to a “consumer-ready product.”

“I had no idea how much time and money it’s going to take to go from — an early prototype, you can get that done pretty quickly,” he said. “I mean, you can get that done in like a week or two in some cases. But to go from that to a consumer-ready product, you’ve got all these issues.”

Since its launch, the idea behind the Everykey product switched from a wristband to what Wentz calls a “fob form factor.”

SmartShape Design in Cleveland has worked with Everykey on the de-

The Everykey device, as seen on the Everykey Kickstarter page.

— Chris Wentz, Everykey founder

sign of the mechanical enclosure and the user interface for the app, said the firm’s design director, Patrick Brown.

The original wristband design was limiting, Brown said, but creating more of a fob that could be used with accessories like a wristband or keychain would give them options.

But it’s not the hardware that has been the problem; it’s the software.

Wentz said the biggest challenge has been figuring out how to make sure the product works properly with consumers’ different devices.

Everykey was pitched as a device that can work on all kinds of operating systems, but each handles security differently.

“I think a lot of people might not realize how giant a puzzle it really is,” Wentz said.

To address that challenge, Everykey plans to hire an in-house testing engineer to deal with that “bottleneck” in development, and to work with an outside firm to address this as well, Wentz said. Before, Everykey simply had staff members test the software on devices when they could and report back to engineering.

Bob Sopko, who runs CWRU LaunchNet at Case, has been advising Wentz since he was a student.

Sopko said what Everykey is trying to accomplish is difficult, because if the outside operating systems the company is trying to work with change, it can trip up the whole process.

“They’re in constant update mode,” Sopko said.

But the market indicates that it

Wentz said the company has handled the communication piece “pretty poorly,” especially when it comes to communicating proactively to its backers.

“If you want my completely honest opinion here, I’m just almost embarrassed to talk to them at this point,” Wentz said. “It’s gotten to the point where, you know, we started shipping in March of last year, and we started shipping mostly to a small group of people, and I don’t think that that was communicated correctly, that some people were going to get

wants the product, and Wentz is trying to overcome the challenges, Sopko said.

The other big challenge Everykey has faced is in communication.

The company hasn’t made an official update to its Kickstarter or Indiegogo pages since April 2016. Those pages are now filled with angry backers, asking about shipments and refunds. Everykey does jump in the comment sections from time to time to respond to the comments, but they keep coming.

it but not everybody was.”

That small group has been testing it, Wentz said, but he thinks other customers have felt let down. But Everykey is making an effort to better address its customers and has hired new, in-house customer service staff to quickly work with them.

He hopes to ship out all the products on back order, including the ones sold on the crowd-sourced platforms, once they’re working well on Mac, Windows and Android devices. Wentz estimates that could be this spring.

Until those products have been shipped, Wentz doesn’t want to even think about entering retail markets.

“We wouldn’t be in business if it weren’t for our backers,” he said. “So, I know that some of them are kind of disappointed in us right now, but I do want to build that trust back with them by shipping their units long before anybody else gets theirs.”

Next up for Everykey could be some Series A fundraising, Wentz said.

Wentz said he has yet to take a salary from Everykey, and the company is his primary focus. Despite the challenges he’s faced since starting Everykey, he doesn’t regret doing it.

“I would have done things completely differently, but man,” he said.

“This has been such a fun ride.”

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CRAIN’S CLEVELAND BUSINESS

Opinion Letter to the Editor

Medicaid reform should mimic Ohio

Editorial

Mayor for life?

Frank Jackson has been a solid, if uninspiring, mayor of Cleveland for nearly 12 years. He announced last week that he wants the job for an unprecedented fourth term — a prospect that doesn't alarm us, exactly, but one that nonetheless raises the question of whether it's time for a fresher perspective at the top of City Hall.

The mayor says there’s still work to be done on the big issues that have been his focus during a life of public service: the health of the school system, the safety of city residents, the enhancement of services that improve quality of life, and the spreading of prosperity beyond downtown and into neighborhoods.

Any mayor who has been in office for three terms is going to have some successes and some setbacks on such broad performance measures, and Jackson is no exception.

On the plus side, generally, is his management of Cleveland's finances.

The mayor last week released a 2017 budget for the city that estimates expenditures at around $1.4 billion, about $28 million above estimated revenue. The deficit would be covered by the city’s $305.8 million carryover balance, a testament to careful handling of taxpayers’ money. This is no small accomplishment in an aging, industrial Midwestern city. The bankruptcy of Detroit and the pension mess in Chicago underscore the types of perils that Jackson has helped to avoid in Cleveland.

A municipal income tax increase approved by voters in November will generate about $89 million annually. Jackson wants to use that to add about 350 employees to bolster services primarily in the departments of public safety, public works and public health. The police department, for instance, would add 93 people, including 65 patrol officers.

Of late, though, his handling of a high-profile safety issue — the routing of buses around Public Square — has not inspired confidence.

The permanent closure of Superior Avenue announced by

the mayor last November has led the Federal Transit Administration to demand that the Greater Cleveland Regional Transit Authority repay $12 million in federal funding due to breach of contract. The safety and financial implications of closing Superior to bus traffic, and routing buses around the Square, were not well thought out before the $50 million revamp was completed, and the situation has rankled transit riders and raised tensions with council members.

Homicides have risen sharply in the city in the past year, too.

Reasons for that are complicated, and it's a trend apparent in other cities. (Again, Chicago’s a cautionary tale.) But it underscores the need, perhaps, for new approaches in policing in a city contending with the requirements of a consent decree with the federal government.

Implicit in deciding to run for a fourth term is Jackson’s belief that there’s not another viable candidate who is up to the demands of the job.

So far, seven people have pulled petitions to enter the mayoral race. The most prominent among them is Ward 10 city councilman Jeffrey Johnson, a longtime Jackson critic who believes the mayor has prioritized downtown and corporate projects over neighborhoods.

Late last week, a political novice, Brandon Chrostowski, president and CEO of the nonprofit Edwins Leadership and Restaurant Institute, said he’s thinking about running. He told Cleveland.com that he waited to disclose his potential candidacy until Jackson announced his re-election bid.

“I’ve got true admiration for the man,” Chrostowski, 37, told the website. “I think he’s done a great job. But I’ve just got a different idea of what should work.”

These next few months should feature lots of discussion about different ideas to move the city forward. Jackson has been a hardworking stalwart of a mayor, and he’ll be the favorite to retain the position. But it would be a disservice to the city and its residents if he waltzed to a fourth term without a significant challenge.

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

CLEVELAND BUSINESS

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Contact Crain’s:

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The Jan. 30 Crain’s Cleveland Business editorial suggesting that federal policy makers would be wise to follow Ohio’s lead when it comes to Medicaid reform was right on target. The program now covers more Ohioans than ever and still spends below budgeted levels.

As the CEO of the East End Neighborhood House and the board chair of the Center for Community Solutions, I know firsthand how important Medicaid expansion is to the neighborhood I serve and the community at large. In fact, no county has benefited more from Medicaid expansion than Cuyahoga County, with nearly 100,000 uninsured residents gaining health insurance via the program.

Like you, I appreciate the leadership exhibited by Gov. John Kasich and share his belief that we need to approach issues surrounding the Affordable Care Act carefully since nearly a million Ohioans receive coverage through the law.

The Ohio Medicaid evaluation report you cited found that one of the most important benefits of expansion was better access to care for people with serious mental illness and addiction disorders — eliminating these benefits would be tragic in the midst of the current opiate epidemic. As Kasich has asked, “What happens to the drug treatment? What happens to the mental health counseling?” if the expansion goes away without a replacement.

At East End Neighborhood House, we believe in and envision a world where families are empowered through tools, knowledge and support to become productive, loving and resilient members of their community. One very important tool is health care and the coverage provided by Medicaid through the Affordable Care Act. This is why we believe that Congress should proceed carefully when considering how and whether to repeal and or replace the Affordable Care Act. The hundreds of families we work with at East End are depending on it.

Zulma Zabala Chair, board of directors, The Center for Community Solutions CEO, East End Neighborhood House

Web Talk Re: Northeast Ohio's nursing shortage FACT: There will continue to be a shortage of nurses. The population is aging while fewer people choose nursing WHY?: Increased patient loads, increased compliance costs, capped pay (vs. other business careers), blue-collar treatment SOLUTION: Money talks. Period. If you pay more (e.g., $80K), you WILL attract more people into the profession I am married to an RN and I can tell you what I directly hear on a continuous basis: 1. Patient loads increased (to cut costs): three patients to one nurse in the ’80’s. Then 4:1. Then 5:1. Now sometimes 6:1.

2. Education, training, state testing and compliance demands (which take away from patient care) all got harder.

3. Many choose other careers because, while they might start at lower pay than a nurse, they can make more than the roughly $64,000 nurses top out at.

4. Blue-collar ethos: Even though nursing is a BS-degreed plus state-tested profession, RNs still need to clock in and out, work "shifts" (including nights) and every other weekend and every other holiday. Of course, the hospital can't close on these days. I'm simply STATING WHY people would choose other professions. — Robert Pavlik

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 letters@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.

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CRAIN’S CLEVELAND BUSINESS

With business heating up, Inca Tea is building new HQ

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UOT ZNK cMNZ elkandelk.com/weakstuff Ryan Florio, founder and “TeaEO” of Inca Tea, tours the entry to the Slavic Village headquarters that will become a locavore cafe, with views to the production and packaging area. (Photographs by Peggy Turbett for Crain’s)

Inca Tea is now available in newly designed tins of loose tea, as well as the original cartons of tea bags.

Crushed purple corn cobs, shipped from Peru, are the basis for the antioxidant-rich tea.

Machu Pichu Mango tea is packaged out of state and shipped to Cleveland for distribution.

Florio, the ‘TeaEO,’ purchases space in Slavic Village

By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com @ramccafferty

Inca Tea LLC has grown quickly in its first three years, but founder Ryan Florio wants to take it to the next level.

To do that, Florio — who refers to himself as the purple corn tea company’s “TeaEO” — bought a building in Slavic Village where he can house the company’s assembly work, open a cafe and, he hopes, begin to do more production in-house.

Florio started Inca Tea in February 2014. He had been inspired by a trip to Peru where he first tried tea made from purple corn. Though the health benefits are unproven, he found the tea helped with his knee and back problems. Plus, he liked the taste.

The company started with a Peruvian Spiced Berry blend and now has six blends total.

In 2014, Florio said Inca Tea posted about $46,000 in sales. In 2016, that figure had grown to more than $400,000. The tea is sold online, in stores like Bed Bath & Beyond and Heinen’s, and at Inca Tea’s cafe at Cleveland Hopkins International Airport. Inca Tea has about 10 part-time and full-time employees, and Florio said he expects to hire five to seven people this year.

Inca Tea started out in Florio’s parents’ home and moved to a warehouse owned by one of his investors — free of charge — by the end of 2014. While more costly, this most recent move to the building at 6513 Union Ave. in Cleveland will give Inca Tea room to expand.

The building, which Florio said used to be an electric substation, is about 15,000 square feet in total.

Ryan Florio is transforming a century-old former electrical substation into a production center and cafe.

While he didn’t say exactly how much he and a friend paid for the building that he bought last October, Florio said he has spent more than $250,000 buying the property and renovating it. The production and warehouse space is expected to be up and running by mid-February, and he hopes to have the cafe open later this spring. He also has added a second floor with offices and a conference room overlooking the cafe.

The Inca Tea blends are put together by an outside company, and the teas are bagged outside, too. (Florio hopes someday to buy equipment to bag the tea in-house.) Inca Tea puts the bagged tea into boxes for selling, which is the assembly work that will soon be taking place in Cleveland.

But Florio has a bigger vision for the building. He already has a machine to help him fill the looseleaf tea tins the company sells on site, which

he previously had been filling by hand. And he’s launching a Kickstarter this month to help raise money to begin bottling Inca Tea. Adding prebrewed iced tea to the market would be a new step for Inca Tea, but one Florio had wanted to take on since the beginning. Bottle teas make up the majority of the tea market, he said. While they have a similar profit margin to boxed tea, customers consume them much more quickly.

The Kickstarter will have a goal of $50,000 and will offer rewards ranging from handwritten notes and free tea to a trip to Peru with Florio.

In closer reach is the cafe, though Florio still needs to secure the appropriate approvals to sell food and drinks. The cafe takes up about 350 to 400 square feet at the front of the building. The feel is industrial by design, as Florio is using repurposed materials from throughout the building to decorate it whenever possible: benches made from floor grates, corrugated metal from the wall on the bar. But it’s not to look trendy; it’s part of the company’s environmental focus.

“I wanted that to transcend into everything we do,” Florio said.

And the cafe is distinctly local, also by design. Like its airport cafe, Inca Tea’s Slavic Village cafe will feature mostly locally made products, like Mitchell’s Ice Cream or Erie Island Coffee.

Marilyn Mosinski, director of business development for Slavic Village Development, said the group is “thrilled” to have Inca Tea in the neighborhood and using the Union Avenue building to its potential. The corporation has been looking for socalled makers to join the area, and Mosinski said she thinks Inca Tea’s presence there will draw in others.

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Focus Middle Market

When a new job opportunity knocks, open the door wisely Be like LeBron: Learning from business communication mistakes can pay dividends

By DOUGLAS J. GUTH clbfreelancer@crain.com

E

ven at the highest levels of industry, the manner in which you leave a job reinforces your professional image and keeps doors open for future employer relationships. Just ask LeBron James, who televised his breakup with the Cleveland Cavaliers only to announce his return four years later with a make-good letter addressing both the team and city.

James’ communication methods may have varied in effectiveness, but they did provide valuable insight in how to convey an employment change, said Alperen Manisaligil, a Case Western Reserve University Ph.D. candidate who recently co-authored a research paper on the NBA superstar’s controversial career moves.

In academic terms, James announcing his decision to leave the Cavs for the Miami Heat in 2010 during an ESPN special was textbook use of the “media richness theory” framework, as it helped him quickly transmit his message to a mass audience. However, his choice of communication medium was hampered by the production’s questionable execution and made-for-TV atmosphere.

SEE LEAVING, PAGE 14

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CRAIN’S CLEVELAND BUSINESS

MIDDLE MARKET Tax Tips: Carl Grassi

Is there still a role for S Corps? Most definitely.

With the start of a new year, eligible corporations and limited liability companies once again have a window in which to make an election to be taxed as an S corporation.

We have seen many tax changes in the last five years, and some owners are still trying to decide what is the best type of entity for operating their business.

Since the advent of limited liability companies, many businesses have been formed in this legal format. Is there still a role for the S corporation? The answer is clearly yes, and one significant reason relates to the interplay between self-employment taxes and the net investment income (“NII”) tax.

The NII tax is a 3.8% tax on investment income to the extent that the taxpayer’s adjusted gross income (with some modifications) exceeds certain thresholds. The term “investment income” includes almost any income derived from passive business activities, including allocations of business income from S corporations, LLCs and partnerships if the owner is not active in the business.

Although active owners of partnerships and LLCs will not be subject to the NII tax, they will most likely be subject to a 3.8% tax on self-employment income if their income is above the same thresholds

Carl Grassi is chairman of McDonald Hopkins LLC.

for the NII tax referenced above.

LLC and partnership owners with incomes over the thresholds will therefore in most cases pay the 3.8% NII tax if they are inactive in the business, or the 3.8% self-employment tax rate if they are active.

If the business is operated as an S corporation, while salary payments to the owner would still effectively be subject to the 3.8% Medicare tax on the wages paid by the S corporation, allocations of business income to an S corporation owner who is active in the business are not subject to either the Medicare or NII tax.

Many of the businesses that have taken advantage of this rule are personal, service-type businesses. In these situations, the employee/shareholder service provider is paid a salary from the (usually 100% owned) S corporation, and the remaining profits are allocated and distributed to the employee/shareholder as corpo-

rate earnings. In order for the income to be considered taxable to the corporation and not the employee/shareholder, there are a number of rules including: the compensation paid to the employee/shareholder cannot be unreasonably low; the shareholder providing the services must be an employee of the corporation; and the corporation must have a contractual agreement with the party that is receiving the services.

This third requirement was illustrated in a recent Tax Court case where a taxpayer was a financial planner and entered into a representative agreement in his personal capacity. Several days later, he formed a new corporation and made an election to have it taxed as an S corporation. He appropriately entered into an employment agreement with his new corporation and was paid a salary. Several years later he entered into a broker contract with a financial institution, but again did so in his individual, and not the corporate capacity.

The revenue from these contracts was reported as business income on the S corporation’s return and was allocated to the individual employee/shareholder. No employment taxes were paid on this amount, and although the tax years at issue preceded the imposition of

“Since the advent of limited liability companies, many businesses have been formed in this legal format. Is there still a role for the S corporation? The answer is clearly yes, and one significant reason relates to the interplay between self-employment taxes and the net investment income (“NII”) tax.”

the NII tax, these allocations would have been exempt from this tax also since the individual was active in the business.

The court in this case focused not on the amount compensation paid, but on the fact that there was in fact no agreement between the taxpayer’s customers and his corporation since he had signed both agreements in his individual capacity.

Although the identity of the party to the contract would seem to be a formality since the corporation was completely controlled by the individual employee/shareholder, the Tax Court found that the service contracts were not with the corporation, and therefore the income generated from those contracts was taxable to the individual.

The ability to avoid self-employment (and NII) tax using an S corporation to provide personal services therefore comes with several caveats. First, the wages paid to the service provider by the corporation must be reasonable for the services provided. Second, the appropriate agreements must be in place between both the employee and the corporation, and the corporation and the customers. Failure to meet these requirements will likely result in an IRS challenge upon audit as it did for the taxpayer in the recent Tax Court case.

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CRAIN’S CLEVELAND BUSINESS

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MIDDLE MARKET Adviser: Jonathan J. Shoop

Manufacturing looks good, but there are worries In 2016, Skoda Minotti’s Manufacturing and Distribution Group implemented its inaugural manufacturing and distribution survey to take the pulse of Northeast Ohio manufacturers.

Respondents weighed in on topics ranging from the availability of skilled labor and challenges associated with workforce development, to prospects for pursuing expansion in the region and beyond, and more.

What did we find? Overall, results indicate cautious optimism, but they also point to worrying signs.

Most respondents continue to face the same challenges they have faced for years. Yet they seem unsure whether new strategies or methods to address these challenges will ever surface.

Here’s a synopsis of our findings.

The good news Sixty-two percent of respondents ranked developing new products and services as their company’s top priority. We find this pleasantly surprising. Northeast Ohio, Ohio and the Midwest aren’t generally known as hotbeds of innovation, so this could signal a small but significant paradigm shift among middle market companies toward growth through innovation.

next 12 months. These issues have many possible origins — from operational issues and sales force challenges to underpricing of products — yet they are among several recession indicators, and in no way do they demonstrate a position of strength on the part of many respondents.

Jonathan J. Shoop is a principal leading Skoda Minotti’s Manufacturing and Distribution Group.

The surprising news The not-so-good news Longtime industry challenges, such as finding skilled labor and cutting costs, remain high priorities for most respondents. Also cited among key challenges was dealing with rising costs and compliance issues related to the Affordable Care Act. Additionally, 76.6% of respondents expect their business’ labor costs to increase over the next 12 months.

Several trigger points could cause this to occur, but this finding points to at least some trepidation by our respondent pool. It also helps to explain the number-one cited priority of cost-cutting among respondents.

Adding credence to this sense of unease is concern over lack of orders and sales margins cited by 37.5% of respondents — in fact, it was the number-one response to the question of what poses the biggest threat to respondents’ businesses over the

The world as a global marketplace?

Not so much, according to most respondents. Only 3.1% ranked new operation in foreign markets as their main opportunity to grow over the next 12 months. That ranked seventh out of eight possible responses. None ranked organic growth in existing foreign markets as a top priority.

Chief among the reasons for this may be the dollar. Today, it is strong relative to many global currencies.

Exports, therefore, are a challenge for many U.S. businesses, since the dollar holds higher value than other currencies.

U.S. companies also face far greater barriers to entry for foreign investments then they do for expansion here in the United States. President Donald Trump has talked tough about trade relations, so industry insiders will carefully monitor U.S./ global relations, specifically the status of current trade pacts and negoti-

“The world as a global marketplace?

Not so much, according to most respondents. Only 3.1% ranked new operation in foreign markets as their main opportunity to grow over the next 12 months. That ranked seventh out of eight possible responses.”

ations with the new administration now in place.

In terms of growth closer to home, respondents envision more expansion opportunities outside of Northeast Ohio than within the region. Our analysis suggests that while respondents may not expect deterioration of sales within Northeast Ohio, they

don’t necessarily see it as an area of growth.

The head-scratching news Northeast Ohio manufacturing and distribution businesses can leverage attractive tax incentive programs to offset costs and boost profits, including InvestOhio, research and development tax credits, work opportunity credits, the Ohio Small Business Deduction and the Domestic Production Activities Deduction. More than half of respondents reported utilizing one or more of these programs. Yet overall utilization seemed low. The most popular incentive was the R&D tax credit program, with 31.3% reporting having used it. All other programs listed in the survey averaged a paltry 11.8%. Even at 31.3%, R&D utilization seems low when you consider the numerous potentially qualifying activities inherent in the manufacturing and distribution sector.

Given that 68.8% of respondents cited cutting operational costs as their top priority in 2017, we think tax incentive utilization could represent an opportunity for companies to achieve the cost-savings they desire without impacting product or service quality, delivery time or internal resources.

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MIDDLE MARKET

Q&A: Darrell V. McNair President and CEO, MVP Plastics Darrell V. McNair is a busy man, but he’s not going to let President Donald Trump get in his way. Understandably, the president and CEO of MVP Plastics, a Tier 2 automotive molder in Middlefield, is a bit concerned by the new administration. MVP has a sizable customer base in Mexico and a production plant near the border in Brownsville, Texas.

How’s 2017 shaping up business wise? Any more acquisitions in the pipeline?

We’re expecting ‘17 to be comparable to ‘16. I think we’re well positioned for the future. We have a few under wraps, but it would be too early to disclose those.

Still, his philosophy? Onward and upward. Last fall, MVP purchased Integrity Design & Manufacturing Inc., a small Michigan mechanical design house, and McNair says other deals are in the pipeline. On the personal front, McNair also recently stepped up in a big way for the Urban League of Greater Cleveland when, through an LLC, he purchased and leased back the nonprofit’s headquarters. Crain’s recently chatted with McNair about the current business environment and why he stepped up to help the Urban League. —Timothy Magaw There’s a businessman in the White House, and you’re a manufacturer. What’s the feeling out there in your industry?

I think we’re cautiously optimistic.

The administration seems to be taking a pro-business approach.

Some of us are concerned about all the uncertainty around trade agreements and what the impact will be with those. I’m more concerned about Mexico than any other countries at this point.

not going to stop me from doing what I do.

You’ve talked about opening a production facility in Mexico. Is that still on the drawing board?

It is. Again, it’s still too early to tell what’s going to happen. But as he starts talking about 20% tax on stuff coming out of Mexico, that’s a little concerning right there.

Why is that?

Well, we support Mexico pretty heavily, particularly with our plant on the border there. Will these moves dry up the pipeline going down there? Increase the cost of business? It’s just too early to tell. Like everyone else, I’m anxious to see what’s going to happen but that’s

Are you surprised by the president’s rhetoric when it comes to Mexico?

We were sensitized to it through the campaign. Am I shocked? No, but the concern remains. I have visas for a few folks coming out of Mexico in key positions in our organization. I’m hoping the renewal of those visas doesn’t get impacted by the freezing of the relationship between the countries.

Changing gears a bit, you really helped the Urban League of Greater Cleveland by helping with its headquarters issue. Why did you step up to do that?

I felt a social responsibility to step up to support an important organization that provides critical services to our community. The Urban League, like many organizations, was hurt severely by the recession in 2008 and 2009. And it took longer than others to get out of it. This was the last piece of the puzzle to help them overcome the adversity and challenges they had faced. It was an easy decision for me to do it.

What’s the reception been like?

The funders were ecstatic. Now they know their monies aren’t servicing debt but the constituencies the Urban League’s programs serve. They have some business programs over there that excite me.

They just created an $8 million loan fund (a collaboration between the National Urban League’s Urban Empowerment Fund, Morgan Stanley, National Development Council, Urban League of Greater Cleveland and Cuyahoga County) to support minority businesses. That’s huge right there. It will be a big asset to the community.

We make your ideas …

Potential remains for plastics recycling PLASTICS NEWS

The down market for recycled plastics could get a boost if more plastics companies took advantage of government purchasing policies that give incentives for recycled content in government purchasing, according to a new report.

The Feb. 1 report from the Plastics Industry Association said that 32 states and numerous federal government agencies give some degree of preferential purchasing status to products with environmental benefits, including recycled content.

“In today’s climate where demand for recycled resins is down, (the Plastics Industry Association’s) recycling committee is looking for opportunities that will help drive demand,” said Kim Holmes, vice president of sustainability at the Washington-based association. “State and federal EPP policies have a lot of unrealized potential in terms of better positioning use of recycled content.

“Our hope is that this guide will uncover new opportunities to use recycled content and offer recyclers a new sales strategy for positioning their materials with customers,” she said.

The Environmentally Preferable Purchasing Guide said that institutional purchasing, in both the government and private sector, amounts to $10 trillion a year in the United States.

The report does not present any information on the amount of recycled content purchasing of plastic products. But it noted that federal government requirements on recycled con-

tent copy paper in the 1990s played a major role in helping to build that market.

And it noted ongoing federal work, including a 2015 executive order tasking the Environmental Protection Agency with better defining sustainable purchasing across the federal government.

It said that of the 32 states with general requirements for buying environmentally preferable products, 12 have specific requirements for plastic products.

The report looked at the efforts of one maker of recycled plastic flooring and construction products, EcoStrate SFS Inc. in Arlington, Texas, to try to build sales with government EPP programs.

On the positive side, EcoStrate “found that many government agencies are less driven by price considerations and more driven by their environmental image when EPP policies are in place. So, there’s a great strategic opportunity,” the report said.

“This was particularly the case in California.”

But the association also said the company’s experience points out the significant challenges facing companies in understanding government rules: Texas and California have relatively easy to understand environmental product purchasing systems while others do not.

“While EcoStrate has not yet seen the environmental positioning of their products translate to an increase in sales, it has increased opportunity,” the report said. “One of the biggest challenges is navigating the bureaucratic system.”

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MIDDLE MARKET

City Desk has a unique view of local biz

By DAN SHINGLER dshingler@crain.com @DanShingler

If you want a really good view of what’s going on in the local economy, try looking from atop a few hundred desks.

It works for Rich Fleck and Mark Capuria. The co-owners of Cleveland-based City Desk have amassed an inventory of more than 6,000 desks, nearly all of them purchased from local offices that have either moved, shut down or found another way to use their space.

They opened the business in 2007.

Even though they’ve sold thousands of desks, cubicles and other office furniture, they’ve managed to fill a 40,000-square-foot warehouse and two 15,000-square-foot warehouses, including one they opened last year for more space.

In all, the two say their current inventory is about 1,000 cubicles, about 600 desks, more than 2,000 chairs, and thousands more pieces of art, trash cans, lamps and just about anything else you can think to put in an office.

Each piece represents someone’s former daily work life, if not their career.

City Desk has cleared out the offices of law firms, banks, accounting firms and other local businesses, usually working with the landlord after the tenant is gone.

The company has purchased and removed the furnishings of entire floors of places like Key Tower, PNC Center and other big buildings downtown. Its showroom is crowded with everything from corner-suite executive furnishings, to

City Desk co-owners Rich Fleck, left, and Mark Capuria know who’s coming and going in terms of Northeast Ohio’s businesses. (Dan Shingler)

“Landlords are telling people, ‘You’ve got to get out at the end of your lease, because we’re converting to apartments.

We come in and take everything out.”

— Mark Capuria, co-owner of City Desk

cubicles and basic desks used in call centers.

Along the way, Fleck and Capuria have seen up-close some trends in

the local economy.

For one thing, they’re seeing buildings being converted from offices to apartments. That’s mostly

taken place at smaller buildings so far, but Cleveland properties such as the Tower at Erieview and the Huntington Building have either been working on or considering conversions, and many smaller office buildings have already made the switch.

That means a lot of desks no longer are needed.

“Landlords are telling people, ‘You’ve got to get out at the end of your lease, because we’re converting to apartments,' ” Capuria said. “We

come in and take everything out.”

Another trend the two say they’re seeing is a change in the way people use their space. Businesses are using less space per employee, as more people work from home and those who do work in office buildings rarely have their own private spaces.

“People are vacating real estate so they can get more people into less space,” Fleck said, The two say they’re also noticing that downtown Cleveland, while still a major source of new inventory, is not what it once was. There are simply fewer and fewer big offices downtown each year — and folks like Fleck and Capuria already have cleaned out many of the city center’s former office buildings.

Most of what the two see is a reflection of changing times. More people want to live downtown, and that’s pushing out offices and causing some businesses to move to the suburbs. That’s happening in most big cities across the country thanks to a trend toward urban living.

But one thing Fleck and Capuria see is probably not a great sign for the local economy: They’re shipping more desks and other furniture out of the area than they used to.

That’s likely a sign that there are fewer new businesses in Northeast Ohio than there are in places like Texas or Florida, where City Desk now ships a substantial amount of its product.

City Desk itself, however, is still growing. Fleck said the company has already nearly filled its new warehouse in Valley View, and may need to add to its staff of 22 later this year.

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PA G E 14

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CRAIN’S CLEVELAND BUSINESS

F E B R U A RY 6 - 12 , 2 017 |

MIDDLE MARKET

LEAVING CONTINUED FROM PAGE 8 “The audience could observe LeBron’s body language and the hesitation in his voice when asked challenging questions from host (Jim Gray),” Manisaligil said. “A press conference with the Cavs and other bidding teams would have let him leave on better terms.”

In contrast, James’ 2014 return letter published in Sports Illustrated harnessed empathetic language in thanking Heat fans while expressing the strong emotional ties bringing him back to Northeast Ohio.

“We couldn’t see his body language, but he gave powerful words that channeled his emotions,” Manisaligil said. “Coming back and talking about working hard reinforced the letter’s sincerity.”

If you’re reading this story and planning a career change, chances are you’re mostly likely not going to announce your move on national TV or in one of the nation’s largest publications. Still, James’ boomerang career path can offer some valuable lessons on how to resign from a job. Notably, and perhaps unsurprisingly, face-toface meetings with your employer tend to go over best, according to human resources experts interviewed by

In a textbook example of how not to leave a job, LeBron James announced during a live broadcast on ESPN in July 2010 that he would play for the Miami Heat. (Larry Busacca/Getty Images for Estabrook Group)

Crain’s. Also, that first conversation with your current boss shouldn’t take place when your mind’s made up.

“It’s a good idea to tell your boss about your search, especially if it’s within your current organization,” said Lori Long, a human resources professor at Baldwin Wallace University in Berea. “If you just spring the announcement, it’s going to burn bridges pretty quickly.”

Take Rob Certner, for example. He’s

now a real estate agent with Howard Hanna Real Estate Services, but he has had 11 jobs over his professional career. Certner’s first long-term role was selling bulky typewriters and dictation equipment for IBM. Years later he served as finance director for the city of Cleveland Heights, moving on after 16 years to become CEO of the Cleveland Jewish News. Certner’s job titles have changed, but that hasn’t altered his approach to new employ-

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ment opportunities. While with Cleveland Heights, he informed his supervisor that he was applying for other positions. Upon accepting a new job, he delivered his resignation letter in-person.

“I walked into his office, sat down and handed him the envelope,” Certner said. “Facing someone across a desk is still a sign of respect, and you owe that to the person signing your checks.”

Those goodbyes, too, should be clear, succinct and honest, Long said.

Again, James’ 2014 letter had a bit more finesse than a bloated, 75-minute TV special.

“Explain what your new opportunity provides, such as development of new skills,” Long said. “If a face-toface meet isn’t possible, a telephone conversation is a good alternative method, as you’ll be able to inflect your voice and get feedback.”

Exit chats Leaving a negative situation shouldn’t be an excuse to lash out at management, said Sarah Hihn, human resources director at Dix & Eaton, a Cleveland-based integrated communications firm. Larger firms will have an exit interview or other formal mechanism where departing employees can voice their concerns calmly and professionally.

“If a company is asking good, solid

questions in the exit interview, it’s OK to have some honesty as long as feedback is constructive,” Hihn said. “Never badmouth individuals or the company as a whole. Exiting in a poor manner can put your reputation at stake.”

Exit interviews are perhaps an undervalued channel of communication — both for the departing employee and the company, according to a 2016 article in the Harvard Business Review.

For too long, the article noted, exit interviews have been considered “a discrete event focused on organizational failure.” The authors reported that exit interviews should be the “culmination of a series of regular retention conversations with employees focused on organizational learning and relationship building.” Exit interviews can provide insights about competing organizations, employee perceptions of their work and bring to light HR issues within the organization.

“In today’s knowledge economy, skilled employees are the asset that drives organizational success. Thus companies must learn from them — why they stay, why they leave, and how the organization needs to change,” the article noted.

Choosing the wrong communication channel is a common mistake in a fast-moving era of social media and instant messaging, said Case Western Reserve’s Manisaligil. Under most circumstances, email, text or IM should never be used to relay a job change. Nor is it a great idea to kick your company on the way out via Twitter or Facebook.

“People will choose the more convenient media because they’re scared of challenging communication tasks,” Manisaligil said. “No matter what happened at your job, you must maintain the whole process professionally.”

Manisaligil suggests practicing your leave-taking on film to weed out poor language and body language habits. Workers also can learn from the missteps of others. Both LeBron James and Cavs’ majority owner Dan Gilbert — who wrote a widely lambasted letter to fans following “The Decision” — improved their messaging skills over time.

“It’s inspiring how (James and Gilbert) built on feedback to communicate more effectively,” Manisaligil said.

“We must also overcome our mistakes and do a better job in communicating.”

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CRAIN’S CLEVELAND BUSINESS

F E B R U A RY 6 - 12 , 2 017

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PA G E 15

MIDDLE MARKET

Selman & Co. acquires Vision Financial

By JEREMY NOBILE jnobile@crain.com @JeremyNobile

For Cleveland insurance administrator Selman & Co., the key to growth has been diversification.

And that remains a theme behind its most recent acquisition as the firm keeps its sights fixed on claiming a larger share of a fragmented market.

Selman, a Mayfield Heights-based marketer and administrator of life and health insurance products, on Jan. 31 closed its acquisition of Vision Financial Corp., a third-party administrator of benefits based in Keene, N.H. Terms of the deal were not disclosed.

Vision Financial, founded in 1989, was on Selman’s radar at least eight years ago, said president and CEO David Selman. But the timing wasn't right back then, Selman said.

The company also was in the midst of seeing through some other deals at the time.

“They had some technological success we wanted to take advantage of, investing in systems we thought would benefit our clients and prospective clients,” Selman said. “Evolution and consolidation in the insurance business is creating additional pressure that makes the timing right for this today when it wasn’t eight years ago.”

Vision Financial, under similar pressures to diversify to keep their business strong, saw a fitting partner in Selman’s firm, considering the Cleveland company has been expanding its offerings steadily through the years.

“We’re very proud to deliver customized technology and superior customer service, and now we’ll be able to do so on a much broader scale,” said Jay Pettapiece, president of Vision Financial, in a statement.

This deal marks the firm’s 11th acquisition since its 1980 founding, but it’s the first since 2014.

That year, the company acquired the business and assets of Association & Society Insurance Corp. of Rockville, Md., and the life and accident insurance administration business of MAI Services Corp. in Cuyahoga Falls.

The ASI deal nearly doubled Selman’s staff at the time and added a Washington, D.C., office. It also broke Selman into a business serving retired veterans and their families.

Both acquisitions increased its insurance premium under administration by nearly 30% to $155 million from $120 million — and the Vision Financial deal grows that figure to $300 million.

Through MAI, meanwhile, Selman became the administrator for roughly 60 more credit union and 100 bank clients.

So diversification has been Selman’s gameplan for some time.

Deals like that have helped grow revenues steadily through the years.

Recognized by Crain’s as one of the 52 fastest-growing companies in Northeast Ohio in 2016, the business reported annual revenues of $19.5 million, marking five-year revenue growth of 78%.

Vision Financial has a staff of 60 providing administrative, billing, and

consulting services for nearly 2,000 employer clients.

That brings the total staff at Selman to about 190, about 125 of whom are in the Cleveland area.

With the deal, employer supplemental benefits are expected to comprise 22% of the combined firm’s total business, Selman said.

Not unlike banks, the realm of insurance administration is under pressure to make tech upgrades to keep with regulations and keep the business efficient. Strong tech platforms are also simply necessary components for administering programs to clients’ employees, and the combination with Vision Financial

“Evolution and consolidation in the insurance business is creating additional pressure that makes the timing right for this today when it wasn’t eight years ago.”

— David Selman, president and CEO

instantly enhances that platform for Selman.

Gaining those upgrade and further diversifying the insurance administrator business is particularly key for the company because of those ongoing

pressures and an uncertain outlook for the insurance industry at large.

“There is certainly some uncertainty in Washington, and that makes for uncertainty for a business plan,” Selman said. “For example, we don’t

know whether the (Affordable Care Act) will be repealed or replaced, and no one knows what replacement might look like. Because all benefits revolve largely around what happens to a company’s health care decisions, we certainly are affected by some of those changes.”

That’s why a focus on a diversified business to keep the revenues flowing is so critical in today’s landscape rife with competition and disruption, Selman said.

“You’ve got to be on your toes right now,” he said. “But our goals in 2017 are not about doing another deal. It’s about making sure we do this one correctly.”

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PA G E 16

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F E B R U A RY 6 - 12 , 2 017 |

CRAIN’S CLEVELAND BUSINESS

AKRON

Developers plan phase II for Seasons Road

By STAN BULLARD sbullard@crain.com @CrainRltywriter

With plans on the drawing board for constructing a third large industrial building in less than two years, the joint venture behind Seasons Road Business Park in Stow is taking steps to develop nearby land and nearly triple the park’s size.

The joint venture by an affiliate of Akron-based Brennan Holdings LLC and Brooklyn Heights-based Ray Fogg Corporate Properties received approval Jan. 17 from Stow Planning Commission for preliminary plans to develop 120 acres on the southwest corner of state Route 8 and Seasons Road as a second phase of the business park. The plans cover the installation of a street and other improvements to ready the land for future buildings.

The developers will need to return to the city for additional approvals before constructing a road to access the vacant land on the southwest corner. However, Ray Fogg, CEO of Ray Fogg Corporate Properties, said he hopes the road might go in during the coming construction season or next year.

“Our sweet spot at the park has been 60,000 to 80,000 square feet, and we expect to do more of that,” Fogg said. “We can accommodate much larger users in the second phase. This gives us the ability to talk to some users who want 300,000 to a million square feet in a new building.”

Asked if prospects for a millionsquare-foot rental industrial building are actually afoot, Fogg said his team has talked with such a large tenant, but he declined to identify it.

Meantime, Fogg is in final negotiations with a tenant for 70,000 square feet of space who would take the last half of its second building, Seasons Business Center II, 542 Seasons Road.

A third building will soon be joining the two already at the Seasons Business Center on Seasons Road in Stow, and now developers are looking to expand the complex to nearby land. (Sue Walton for Crain’s)

“Our sweet spot at the park has been 60,000 to 80,000 square feet, and we expect to do more of that. We can accommodate much larger users in the second phase. This gives us the ability to talk to some users who want 300,000 to a million square feet in a new building.”

— Ray Fogg, CEO of Ray Fogg Corporate Properties

“We need to think of another building,” Fogg said. The first two buildings are of 114,000 square feet each, and Fogg said the third will be larger, in the 136,000-square-foot range.

While construction of the first building was started without a committed tenant, since the first phase went in, Fogg said, “We’ve been writing leases as we’re building.”

Joseph Weber, chief financial officer of Brennan Holdings, said his company has been happy with the arrangement and is eager to do more building.

Akron lawyer and business owner David Brennan had owned the 200 acres at Seasons on both sides of state Route 8 for several decades through BH Ohio Leasing LLC. BH selected Fogg as its partner in 2015 to

convert the raw land to commercial use to capitalize on a new interchange at Seasons and the widening of state Route 8 in the 2000s.

The structures are all big white boxes nearly three stories tall. They accommodate ceilings 32 feet above the floor inside, along with sprinklers and multiple truck docks that distribution companies desire.

Robert Kurtz, Stow planning direc-

tor, said the substantial traffic and wetland studies that Fogg and Brennan have to do to develop the next phase typically takes almost two years to work through. The preliminary plans call for the second phase buildings to have a 25-acre green space to separate the commercial buildings from adjoining residential areas.

Kurtz said he was not surprised when the partners behind Seasons Business Center launched talks about the additional acreage.

“They’ve found demand for this type of development in Northeast Ohio,” Kurtz said. “I sense they want to take advantage of that (strong industrial market) before it goes away.”

CoStar, the online realty data provider, reports a 4.7% vacancy rate in industrial properties in the southeast part of the region, which includes Stow.

Larger wheel sizes fueling Goodyear investment

By JUDY STRINGER clbfreelancer@crain.com

Seem like wheels are getting bigger? It’s not your imagination.

About 20 years ago, new vehicles leaving the factory came equipped with 14- and 15-inch wheel-size tires.

Today, 16- to 18-inch rim sizes are common place.

The global market for tires with rims bigger than 16 inches doubled from 98 million 2010 to 222 million in 2015, according to estimates from Akron-based Goodyear Tire & Rubber Co., and is expected to double again before 2020.

Sweetening the pot for tire manufacturers is the fact that these tires are more profitable than their smaller counterparts. Goodyear’s projections for the industry’s average gross margin per rim size is $9 for tires smaller than 17 inches and $25 for tires 17 inches and larger.

Here’s one big reason why: Its 15inch tire averages $50 a pop, while a 19-inch tire brings in more than $100 and a 20-inch tire tops $200.

Not surprisingly, the Akron tire giant is ramping up production of its larger rim-diameter tires with plans to make and sell 20 million addition-

al 17-inch or larger by 2020. The company will not divulge how many of these sizes it currently sells.

It has said, however, that producing 20 million more will require about $750 million worth of capital expansions and upgrades worldwide, including a $210 million expansion of the Pulandian plant in China, a $135 million investment at the Lawton, Okla., and Fayetteville, N.C., factories and a new $200 million facility in San Luis Potosi, Mexico.

“If you look at it from 50,000 feet, a lot of this focus on 17 inch and above rim diameter is being driven by original equipment manufacturers, the car companies, who have for the last several years been increasing the rim diameter of the tires they put on new cars, new pickups trucks, new SUVs,” said Keith Price, Goodyear’s director of national media relations.

And once those original tires get three to four years on them, replacements are needed, which, Price said, “drives the replacement market to that same movement on 17-inch and above.”

Automakers are making the switch to larger rim sizes largely because consumers like how they look, according to tire industry veteran Nat Leonard, president of Smithers Rapra

Goodyear is ramping up production of larger rim-diameter tires, such as the 18-inch Goodyear Eagle F1 Asymmetric tire. (Contributed photo)

and Smithers Pira, which provides tire and materials testing services and market data reports.

A larger-diameter wheel is another way to make a vehicle look distinctive and can be especially appealing to buyers who aspire to own higher-end cars.

Still, larger rim-diameter tires are increasingly popular on less expen-

sive vehicles as well.

Price said the larger rim segment falls under Goodyear’s “high value-added” category and provides attributes such as lower rolling resistance and better wet traction.

“When you are talking about high-value-added tires, everybody in the industry sort of described them differently, so we have settled on the

size as the factor to describe the tires,” Price said.

And 17-inches just happens to be where the rubber meets the road — at least for now. The demand for tires with rims 17 inches or greater is growing at 18% a year, he said, compared with 3% overall growth in consumer tires.

Given that Goodyear tires are used on more factory rollouts than any other brand, Price said, a major focus moving forward is ensuring its original equipment tires are on the “right vehicles” so that owners are “pleased with their tire performance and choose to replace them with what is on the car already.”

The company also is scaling down production of its smaller rim product lines. The first evidence of that came last October, when it announced plans to close a car and light truck tire plant in Philippsburg, Germany, by year-end 2017, which, Price said, mainly produced wheels smaller than 17 inches.

“As those tire sizes age in the life cycle, demand gets lower, there are more people who can supply it and pricing and margins on it will go down. That is why we are focused on the larger, more in-demand portions of the market,” he said.

C R A I N ’ S C L E V E L A CRAIN'S N D B U SCLEVELAND I N E S S | BUSINESS F E B R U A RYμ 6FEBRUARY - 12 , 2 017 | PA G E 17 6, 2017 μ PAGE 17

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PA G E 18

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F E B R U A RY 6 - 12 , 2 017 |

CRAIN’S CLEVELAND BUSINESS

THE LIST

Largest Auto Dealerships

Ranked by Total Vehicles Sold, New and Used NEW VEHICLES SOLD (1)

TOTAL VEHICLES SOLD (1) THIS DEALERSHIP NAME YEAR ADDRESS

2016

2015

% CHANGE

REVENUE FROM 2016 VEHICLE SALES (1)

2016

2015

VEHICLES LEASED

VEHICLES FINANCED

CASH PURCHASES

BRANDS SOLD (NEW CARS)

DEALERSHIP GROUP

1

Brunswick Auto Mart (2) 3031 Center Road, Brunswick

12,839

12,408

3.5%

$354,941,072

10,437

10,040

5,493

5,722

1,624

Chrysler, Dodge, Jeep, Ram, Toyota, Subaru, Mazda, Scion, Volkswagen

NA

2

Fred Martin Superstore 3195 Barber Road, Barberton

5,731

5,606

2.2%

$138,696,545

2,304

2,384

1,126

4,161

444

Chrysler, Dodge, Jeep, Ram, Fiat

Fred Martin Motor Co.

3

Mike Bass Ford (2) 5050 Detroit Road, Sheffield Village

4,565

4,505

1.3%

$106,644,019

2,243

2,349

701

3,156

708

Ford, Mazda, Isuzu

NA

4

Ganley Westside Imports (2) 25600 Lorain Road, North Olmsted

4,236

4,391

-3.5%

$102,402,135

3,156

3,239

1,920

1,879

437

Hyundai, Subaru, Volkswagen

Ganley Auto Group

5

VanDevere Buick 300 W. Market St., Akron

4,203

4,102

2.5%

$77,690,849

244

147

280

3,288

635

Buick

The VanDevere Bunch

6

Serpentini Chevrolet of Strongsville 15303 Royalton Road, Strongsville

3,963

3,859

2.7%

$107,820,460

2,246

2,005

1,377

2,096

490

Chevrolet

Serpentini Auto Group

7

Great Lakes Honda - Akron 43 Pruitt Blvd., Akron

3,862

3,551

8.8%

$92,969,588

2,488

2,195

1,447

1,935

480

Honda

NA

8

Falls Motor City 4100 State Road, Cuyahoga Falls

3,805

3,366

13.0%

$125,086,570

2,554

2,228

605

2,741

459

Chrysler, Dodge, Jeep, Ram

NA

9

Metro Toyota 13775 Brookpark Road, Brook Park

3,582

3,596

-0.4%

$85,245,965

2,263

2,392

1,279

1,671

632

Toyota, Scion

NA

10

Medina Auto Mall (2) 3205 Medina Road, Medina

3,438

3,399

1.1%

$108,163,537

2,161

2,239

1,381

1,516

541

Buick, Cadillac, GMC, Chrysler, Dodge, Jeep, Ram

NA

11

Kia of Bedford 18180 Rockside Road, Bedford

3,359

3,428

-2.0%

$73,372,237

1,881

1,846

903

2,349

107

Kia

NA

12

Lambert Buick GMC Inc. 2409 Front St., Cuyahoga Falls

3,330

3,317

0.4%

$85,555,721

1,095

1,254

721

1,812

797

Buick, GMC

NA

13

Classic Toyota 8510 Tyler Blvd., Mentor

3,302

3,132

5.4%

$79,595,115

2,200

2,193

1,327

1,414

561

Toyota

Classic Auto Group

14

Ron Marhofer Hyundai/Mitsubishi (2) 1260 Main St., Cuyahoga Falls

3,291

3,470

-5.2%

$52,991,980

1,027

1,212

666

1,925

700

Hyundai, Mitsubishi

Ron Marhofer Auto Family

15

Klaben Ford Lincoln 1089 W. Main St., Kent

3,173

2,981

6.4%

$96,610,297

2,294

2,226

1,555

1,350

268

Ford, Lincoln

NA

16

Honda of Mentor 8555 Market St., Mentor

3,146

3,351

-6.1%

$64,839,610

1,716

1,780

867

1,588

691

Honda

Penske Automotive Group

17

Toyota of Bedford 18151 Rockside Road, Bedford

3,136

3,473

-9.7%

$72,473,651

1,634

1,719

937

1,527

672

Toyota

Penske Automotive Group

18

Ganley Honda 25870 Lorain Road, North Olmsted

2,984

2,686

11.1%

$70,349,549

2,053

1,750

1,091

1,574

319

Honda

Ganley Auto Group

19

Ganley Chevrolet 13865 Brookpark Road, Brook Park

2,856

2,358

21.1%

$73,328,941

1,822

1,553

1,019

1,456

381

Chevrolet

Ganley Auto Group

20

Ganley Chrysler Dodge Jeep Ram Inc. 310 Broadway Ave., Bedford

2,849

2,776

2.6%

$78,585,856

1,865

1,816

727

1,871

251

Chrysler, Dodge, Jeep, Ram

Ganley Auto Group

21

Sarchione Chevrolet Inc. 1572 State Route 44, Randolph

2,820

1,766

59.7% (3)

$93,634,504

1,688

1,128

791

1,506

523

Chevrolet

Sarchione Auto Group

22

Ganley Toyota 1395 E. Market St., Akron

2,741

2,945

-6.9%

$78,138,278

1,537

1,681

842

1,348

551

Toyota

Ganley Auto Group

23

Montrose Ford 3960 Medina Road, Fairlawn

2,711

2,215

22.4%

$69,680,114

1,234

1,341

505

1,632

574

Ford

Montrose Auto Group

24

Liberty Ford Brunswick 3101 Center Road, Brunswick

2,647

2,703

-2.1%

$70,360,575

1,405

1,488

584

1,649

414

Ford

Liberty Ford

25

Mentor Mitsubishi 8505 Mentor Ave., Mentor

2,643

2,820

-6.3%

$51,759,495

1,517

1,617

712

1,563

368

Mitsubishi

NA

26

AutoNation Ford - Westlake 23775 Center Ridge Road, Westlake

2,608

2,910

-10.4%

$70,183,811

1,696

1,881

761

1,488

359

Ford

AutoNation

27

Motorcars Toyota 2950 Mayfield Road, Cleveland Heights

2,581

2,311

11.7%

$55,241,187

1,382

1,279

704

1,439

438

Toyota

Motorcars Group

28

Westside Automotive Group (2) 9600 Brookpark Road, Cleveland

2,581

2,444

5.6%

$73,764,219

1,014

886

546

1,738

297

Jaguar, Land Rover, Mazda, Volvo

Montrose Auto Group

29

Sunnyside Honda 7700 Pearl Road, Middleburg Heights

2,569

2,295

11.9%

$57,078,467

1,647

1,443

885

1,202

482

Honda

Sunnyside Auto Group

30

Motorcars Honda 2953 Mayfield Road, Cleveland Heights

2,490

2,116

17.7%

$83,596,752

1,670

1,289

975

1,040

475

Honda

Motorcars Group

31

Halleen Kia 27932 Lorain Road, North Olmsted

2,479

2,599

-4.6%

$50,484,377

1,508

1,661

802

1,437

240

Kia

Halleen Kia Group

32

Park Honda 951 Interstate Parkway, Akron

2,467

2,497

-1.2%

$56,609,439

1,541

1,540

679

1,215

573

Honda

Park Auto Group

33

Sunnyside Toyota 27000 Lorain Road, North Olmsted

2,465

2,515

-2.0%

$55,437,357

1,370

1,408

705

1,184

576

Toyota

Sunnyside Auto Group

34

North Coast Auto Mall of Bedford 333 Broadway Ave., Bedford

2,425

2,268

6.9%

$43,162,943

0

NA

0

2,076

347

Various (used cars)

NA

35

Automax Medina 4160 Pearl Road, Medina

2,404

3,110

-22.7%

$50,863,248

1,395

2,117

643

1,585

176

Kia

NA

RESEARCHED BY CHUCK SODER Information is from AutoView Online, which collects data from title registrations filed with the state. The list includes dealerships in seven counties: Cuyahoga, Lorain, Medina, Summit, Portage, Geauga and Lake. Crain's does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all feedback and will include omitted information or clarifications in coming issues.

(1) Sales that have not yet been registered with the state may be excluded. (2) These dealerships sell cars made by different manufacturers in a campus setting, but the numbers for those campuses are combined. (3) Sarchione

Chevrolet has expanded significantly since the Sarchione family bought it in 2013. For instance, the dealership opened a new $7 million facility in late 2015.

CRAIN’S CLEVELAND BUSINESS

IMPACT CONTINUED FROM PAGE 1 Kalnoki LLC and chair of the Ohio chapter for the American Immigration Lawyers Association.

“Companies hire foreign nationals because these are the people trained to do these jobs,” Cozart said. “And all of this is eventually going to affect the bottom line.”

This order, Cimperman said, “certainly” will not work for a place like Northeast Ohio, where Cleveland’s international-born population held more than $576 million of spending power in 2012, the most recently available data. This group represented 4.9% of the population at the time and 5.1% of the total spending power of Cleveland, according to Global Cleveland.

“I feel like we’re going to wake up in five years and say, ‘My God, what have we done?’ ” Cimperman said.

If it’s found the order is truly discriminating based on religion, it won’t survive, said David Jones, a veteran immigration lawyer and partner in the global immigration practice at Fisher & Phillips LLP. “The administration is relying on the fact that (Barack) Obama labeled these specific seven countries,” he said. “But if the facts are right, there have been no terrorist attacks from those countries in 40 years.”

There’s no modern precedent to look back on to see how everything might unfold, and that’s contributing to the fear.

Brain-drain effect A Cleveland Clinic doctor returning from a trip abroad was diverted. A parent en route to visit a resident at

ALL-STAR CONTINUED FROM PAGE 1 “But to us, that’s a pretty fair number,” he said. “Just from what we know from events of this size and scale, the number of people that come to town, that’s probably a pretty safe estimate.”

What Gilbert and his groups are focused on are out-of-town visitors, whose spending at large-scale events has a much more tangible effect on a community than local residents.

Out-of-towners are key Edward “Ned” Hill — a professor of public administration and city and regional planning at Ohio State University, and a former dean of Cleveland State’s Maxine Goodman Levin College of Urban Affairs — said the “irony” of economic impact for sporting events is it’s inversely related to the number of people from the local region who attend.

“The local folks, all you’re doing is redirecting their entertainment dollars,” Hill said. “They might be delaying paying their mortgage to attend the All-Star Game.”

The visitors from outside a host city’s region, according to MLB and past All-Star cities, is considerable.

Cincinnati’s 200,000 estimate was the largest of the recent hosts, but San Diego projected that the 2016 All-Star festivities brought 160,000 people downtown — 60,000 of whom were from outside the county. Minneapolis also reported 160,000 visitors, plus a taxable sales increase of 9.2% for July 2014. Half of that $55 million increase was attributable to the All-Star Game, the city’s tourism agency said at the time.

St. Vincent Charity Medical Center was stopped on a layover and turned around. A Kent State University student is reportedly in limbo in Toronto with her daughter and has no assurance of when she can return to the United States. Two University of Akron graduate students visiting their home country of Iran are waiting out the 90-day period, effectively missing this semester. Summa Health isn’t sure whether a contracted doctor currently in Iran will be able to begin covering some gastroenterologist services for the system in July, as it had expected.

Health, higher education and technology sectors rely on highly educated foreign nationals to take jobs that can’t otherwise be filled domestically, Jones said. Hospitals in particular often look to fill underserved areas with medical graduates who just happen to be overwhelmingly Iranian and Pakistani.

Dr. Ajay Kumar, a second-year resident St. Vincent, is from Pakistan, which is not one of the seven countries in the executive order — or as he puts it, “not yet.”

People who come to the United States bring an expectation of the free world that, if you work hard, you will get what you deserve, he said.

And now, the stroke of a pen means insecurity for everyone who followed that idea to get here, he said.

“I don’t know how things will work out, but it definitely terrifies everybody, every single resident over here, because now you are afraid to travel somewhere, anywhere,” Kumar said.

“If something happens, I have to choose between either my professional life or my personal life.”

Dr. Keyvan Ravakhah, program director for St. Vincent’s internal medicine residency program, is worried

“I feel like we’re going to wake up in five years and say, ‘My God, what have we done?’ ” — Joe Cimperman, president of Global Cleveland

about what he considers the unnecessary stress this order will place on residents as they work. Already, he has had to give a day off to a resident coping with what the action would mean. It’s a particularly critical time for residents in their final year as they prepare for board exams.

“It’s going to be a disaster for me to

“It’s going to be a disaster for me to have an individual who performed two-and-a-half years pretty good and now this last six months is under par because they’re concerned about their future life.”

— Dr. Keyvan Ravakhah, program director for St. Vincent’s internal medicine residency program

|

have an individual who performed two-and-a-half years pretty good and now this last six months is under par because they’re concerned about their future life,” said Ravakhah, a U.S. citizen originally from Iran.

And even for those who have high scores, are well-educated, have done impressive research and whose work is published, Ravakhah wonders if they will be less competitive simply because they are here on a visa or hold a green card. Ravakhah notes that many of his residents go on to practice medicine in underserved areas.

Jones questions the impact of banning physicians during the provider shortage the country already faces.

“Other physicians in the future may not want to come here because of these issues,” Jones said. “That can have a potential brain-drain effect.”

Institutions respond The reactions to the order from Northeast Ohio’s four-year universities has been near universal, regardless of whether the schools have students from the seven countries named in it. For the most part, they’ve been resolute in their support of international students in statements sent to their campus communities or posted online, though few spoke directly against the order.

Kent State sent out a particularly strong response from President Beverly Warren on Sunday, Jan. 29, just two days after the order was issued.

In it, Warren said she was “deeply troubled” by the situation and that the order could have a “powerfully negative impact on our global community and our climate of inclusion and care.”

Health systems with immediately affected physicians and employees

July hotel occupancy, revenue July is a traditionally strong month for Cleveland hotels, but 2019 revenues could rival 2016, when the Republican National Convention came to town. A look at the July numbers for hotels in downtown Cleveland and Independence since 2010: 0

$5M

$10M

$15M

$20M

$25M

$30M

2010 % Occupancy Revenue in millions

2011

2012

2013

2014

2015 $29,44,388 2016 0

20%

40%

60%

80%

100%

Source: STR

Cincinnati, Lincoln said, turned the 2015 All-Star Game into an extended party.

“We pulled out all the stops,” the Cincinnati USA president and CEO said. “Every day, we had zip lines on the riverfront. The whole Banks area was a huge event. We had about 10 days of celebration. For us, it’s what you do with the event.”

It’s a party MLB hasn’t announced a date for the 2019 festivities in Cleveland, but a source told Crain’s that

the game most likely would be held on Tuesday, July 9. If that schedule holds, the fan fest weekend would begin the day after July 4, which is traditionally a slow time for hotels.

“It’s even slow for Cedar Point,” said Laurel Keller, vice president of Hotel & Leisure Advisors, a Cleveland-based hospitality consulting firm. “It’s more of a family oriented, picnic-in-the-backyard type of event.”

In that respect, the MLB All-Star Game’s timing could be ideal for Northeast Ohio hotels. Overall, July

is one of the better-performing months for hotels, with downtown occupancy rates since 2010 that range between 72.4% and 80.3%, according to STR, a global data and analytics firm that has an office in Rocky River.

But with a six-figure influx into downtown for the All-Star Game, Keller expects room rates and revenue to soar as they did last July, when Cleveland hosted the Republican National Convention. The hotel revenue for the downtown market, which also includes Independence, was $29,944,388 in July 2016 — a year-

F E B R U A RY 6 - 12 , 2 017

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PA G E 19

are taking steps for their safe return.

Those without immediate impact are working to reassure employees they are valued and supported.

Lake Health is unaware of any patients or employees affected. MetroHealth declined to comment other than to say it doesn’t have anyone traveling that would be impacted.

Health care and higher education institutions, as well as businesses and lawyers, here and across the country are suggesting caution in travel and stressing the value diversity brings to the institutions.

Marcello Fantoni, Kent State’s associate provost for global education, said the magnitude of this executive order is pretty extreme. Kent State has students from 105 different countries, of all religions, races, nationalities and cultures, and those students bring value to the university, he said.

They do that through their own research and coursework, but also by enriching the domestic students’ cultural environment.

In fact, Fantoni said, diversity and inclusion are the “basic ingredients” of a successful learning environment.

“We live in a very global and interconnected world,” said David Fleshler, vice provost for international affairs for Case Western Reserve University, which also has a sizeable international population.

While he hasn’t seen it yet, he said the order could have a “chilling” effect as students and researchers decide where to do their work.

Cimperman expressed similar concerns.

“My concern for Northeast Ohio has as much to do with the workplace effect that banning refugees is going to do, as much as the chilling effect it’s going to have on our universities and colleges,” Cimperman said. over-year increase of almost $13.3 million.

With the RNC, the Cavs playing in consecutive NBA Finals and the Indians’ World Series run last fall, Cleveland has had plenty of practice in putting on big events. And while the MLB All-Star Game doesn’t decide a title or bring with it the Donald Trump spectacle, it does include thousands of media members and puts yet another big-game spotlight on the city.

MLB said the 2016 All-Star Game in San Diego was covered by more than 2,500 writers, broadcasters and photographers — a total that exceeds the 2,164 media credentials that were issued for the four World Series games at Progressive Field in 2016.

“Being on the national stage and having Cleveland mentioned on a meaningless baseball game with a large national TV following is a good thing in terms of brand recognition,” said Hill, the former Maxine Goodman Levin College of Urban Affairs dean. “It injects a little excitement into downtown in July, which is a good thing. People will see a very different Cleveland than they saw in the 1990s.”

In 1997, when Cleveland last hosted the All-Star Game, it reported an economic impact of $37.6 million.

Destination Cleveland’s Gilbert expects that to increase by tens of millions.

The dollar figure can be debated, but Lincoln, the Cincinnati USA CEO, said there’s no question that bringing in an event such as the MLB All-Star Game is “invaluable” to a community.

His advice to Cleveland is pretty simple.

“Throw a big ass party,” Lincoln said. “They will come.

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