Crain's Cleveland Business

VOL. 38, NO. 10

MARCH 6 - 12, 2017

Source Lunch

Work together Regional initiative plans to help groups help each other. Page 2

Paul Psota, CEO of the nonprofit Altenheim Senior Living Page 23

CLEVELAND BUSINESS

REAL ESTATE

Changing DDR has to quell concerns

By STAN BULLARD sbullard@crain.com @CrainRltywriter

As David Lukes settles in as DDR Corp’s fourth CEO in three years, his job boils down to becoming the convincer in chief.

Lukes, 47, will need to convince the shopping center ownership and

management company’s staff and investors that he’s there for the long haul.

He’ll also have to convince followers of the Beachwood-based company that he’s not there to pretty it up for sale, a rumor that filtered through DDR talk late last week.

Moreover, that is despite the statement last Friday, March 3, by Terrence R. Ahern, chairman of the

company’s board, that “one of DDR’s key objectives over the past year has been to ensure long-term management succession.”

Lukes replaced Thomas F. August, who became CEO with a three-year contract less than a year ago. At 68, August was also seen as a placeholder for when the right successor surfaced.

SEE DDR, PAGE 8

Lukes

August

NEO’s largest software developers Page 20 SPORTS BUSINESS

Startup sees city as ideal sports fit

By KEVIN KLEPS kkleps@crain.com @KevinKleps

MANUFACTURING

Another smooth ride for the Auto Show

The Cleveland Auto Show concluded its 2017 run at the I-X Center on Sunday. Visitors could get up close and personal with over 1,000 vehicles that were on display, including taking a Jeep for a 4-wheel test drive on an indoor course. See more images on Page 22. (Ken Blaze for Crain’s) Entire contents © 2017 by Crain Communications Inc.

The List

Akron << Q&A with Summit County executive Ilene Shapiro. Page 18 TinyCircuits keeps >> getting bigger. Page 19

Jason Lloyd admits he didn’t take the initial overtures from The Athletic all that seriously.

Lloyd, then the Cleveland Cavaliers beat writer for the Akron Beacon Journal, was at first “mildly intrigued” by The Athletic’s ad-free publishing model. But the more he heard from founders Alex Mather and Adam Hansmann about the startup, which launched Chicago and Toronto sports websites in 2016, the more he thought this was a leap of faith he had to make.

A couple months after those initial discussions, it was Lloyd — the website’s lead NBA writer and recruiting leader — who wrote the welcome letter when The Athletic’s Cleveland operation debuted March 1.

“Of course it’s a risk,” said Lloyd, who spent seven years at the Beacon Journal. “But the way I kinda looked at it, it was risky in the short term to do this, but it was riskier in the long term to stay where I was. We all know the score.”

The newspaper industry has been fighting a losing battle for years, and focusing on digital products, for the most part, has been met with little success.

Mather — who was the vice president of product management and product design at Strava, a subscription-based social network for athletes, prior to starting The Athletic — believes focusing on quality stories and eliminating the annoyances (popup ads, autoplay videos) can be a successful formula.

“It’s so cheap to create content, and there’s so much content out there that isn’t any good,” Mather said. “We think the companies that will succeed long term in media will SEE ATHLETIC, PAGE 17

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CRAIN’S CLEVELAND BUSINESS

Regional workforce plan will put emphasis on collaboration

By JAY MILLER jmiller@crain.com @millerjh

A law signed by President Barack Obama in 2014 may bring a more regional approach to filling the labor needs of Northeast Ohio businesses.

But the effectiveness of this regional approach will depend on the willingness of the five local, federally funded workforce boards as well as area schools, colleges and training programs to work more closely together. It also will need more active participation by employers in the programs.

The five workforce boards in Northeast Ohio released a draft of their plan last Monday, Feb. 27.

The Workforce Investment and Opportunity Act (WIOA) updated the law that created and finances a system of state and local workforce programs. As it stands, Cuyahoga, Lake and Lorain counties each have their own Workforce Development Boards, while Summit and Medina counties, and Ashtabula, Geauga and Portage counties, have shared boards. Each board receives and spends federal worker training funds to help jobs seekers in their own counties, though they all operate under the state-level Ohio Means Jobs program.

The new law directs the states to recreate the system, in part to make it work better and more efficiently in metropolitan areas.

John Weber, deputy director for workforce development with the Ohio Department of Jobs and Family Services, said it’s a matter of catching up with the realities of the labor market.

Since people easily commute across the region, just because there is little demand for a particular skill in Portage County, he said, a job seeker needs to know employers in Lorain County may be looking for people with that skill.

“So one workforce board says a demand occupation is that and another one is saying it’s that,” he said. “This way, they will all be in agreement acting as a whole region. That’s

“We need to get beyond the parochialism and realize economies of scale.”

— William Gary, executive vice president of Cuyahoga Community College for workforce and economic development

better for the employers and better for the jobs seekers.”

The local boards will still operate independently, said Grace Kilbane, executive director of the Cleveland/Cuyahoga County Workforce Development Board. But now it will be easier to spread best practices across the region, ensuring that job seekers have access to the best programs to develop the skills they’ll need for the jobs that are in demand — or will be in demand — by employers across the region.

That means that a quality training program in Lorain County should be available to job seekers in Summit or Lake counties. It also means recognizing that the majority of the jobs in the region are in Cuyahoga and Summit counties (see sidebar) and that getting qualified candidates to distant job sites should be part of the regional planning process.

“It has strategies at the regional level, things that we’re going to do together across the region,” Kilbane said. “And then we’ll have stuff for just Cleveland and Cuyahoga County.”

William Gary, executive vice president of Cuyahoga Community College for workforce and economic development, came to Northeast Ohio from Virginia, where workforce programs were more regionalized. He said he sees this collaboration as a positive approach.

“We need to get beyond the parochialism and realize economies of scale,” he said.

The plan also adopts a guideline mandate by Ohio Means Jobs to put greater emphasis on

training people for the skills employers need rather than simply plugging people into existing jobs. More specifically, it favors on-the-job training over programs that assess a job seeker’s skills, teaching things like résumé writing and job interview skills, and sending people out on interviews.

It also identifies three key industries as regional economic drivers: health care, manufacturing and information technology.

This regional approach is being pioneered in Akron at the nonprofit ConexusNEO. Its mission is to bring businesses with jobs to fill together with county residents who have the skills or are willing to learn the skills needed to fill the in-demand jobs. It has linked with programs across the region, not just in Akron, to make that happen.

It has partnered with organizations such as MAGNET in Cleveland, which is an advocate for manufacturing and consults with manufacturers to help them grow, including through employee development and retention. ConexusNEO president Sue Lacy said her organization and MAGNET are jointly sharing the cost of a staff person to show Akron job seekers the kinds of manufacturing jobs — and training opportunities — available across the region.

ConexusNEO has begun a similar collaboration with the Regional Information Technology Engagement (RITE) board at Lorain County Community College to build a talent pipeline to jobs with information technology companies.

Lacy believes this new regional approach will help grow the regional economy and add jobs.

“We’re working with Progressive Insurance (in Cuyahoga County) and companies outside Summit County because they’re hiring Summit County residents,” she said. “It just makes good sense to be looking at this regionally because we are a regional economy and workforce should be, and will be increasingly, a critical component in a strong economic development strategy for the region.”

Employment in 2014 employment figures 708,468

Cuyahoga County

260,116

Summit County

94,311

Lake County

95,796

Lorain County

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53,537 Portage County 33,459 Geauga County 30,001 Ashtabula County 200,000

The plan rolled out for collaboration among the regional workforce programs includes a lot of dry administrative text describing the work of the local organizations and their collaboration. But it also includes interesting glimpses into the size and shape of the regional workforce, now and in the future.

The reports drew from a variety of employment data sources, each of which looked at different slices of the labor market. Some looked at the whole eight-county region, others looked at the five-county Cleveland metropolitan areas, still others looked at individual counties.

For example, of the 1,334,460 working people in the eight-county region in 2014, more than half, 53.1%, worked in Cuyahoga County, and 19.5% worked in Summit County. The full breakdown: Cuyahoga County, 708,468; Sum-

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Northeast Ohio In 2014, of the 1,334,460 working people in the eight-county region that makes up Northeast Ohio, more than half worked in Cuyahoga County, and nearly 20% worked in Summit County.

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mit County, 260,116; Lake County, 94,311; Lorain County, 95,796; Medina County, 58,772; Portage County, 53,537; Geauga County, 33,459; and Ashtabula County, 30,001.

From 2012 to 2022, total employment across the Cleveland metro area is projected to increase 6.9%, or 73,300 jobs.

The greatest job growth in the eight-county region is expected in health care and social assistance jobs.

The category will add 32,061 jobs, growing from 215,620 jobs in 2015 to 247,681 jobs in 2021.

The greatest loss will come in manufacturing, which is expected to lose 40,199 jobs, declining from 189,220 to 149,021 over the six-year period.

Because of the way people change jobs, however, different kinds of jobs will offer the largest number of actual jobs openings.

The five occupations with the most annual jobs openings in the coming years are food prep and servers, 1,256; retail salespeople, 987; cashiers, 966; home health aides, 931; and registered nurses, 896.

Those RN jobs will be tough to fill. The report indicates there already is a shortage of 750 registered nurses, and that shortage is expected to grow to 3,500 by 2020. â&#x20AC;&#x201D; Jay Miller

M A R C H 6 - 12 , 2 017

|

PA G E 3

State is stressing universities to bring research to market

By RACHEL ABBEY McCAFFERTY

800,000

|

Ohio wants to see more research coming out of its universities make it to market, and a set of proposals in the state budget could contribute to that goal.

The current draft of the 2018-2019 operating budget in the state House of Representatives would require the boards of trustees at state institutions of higher education to update their policies on faculty tenure to â&#x20AC;&#x153;promote excellence in instruction, research, service, and commercialization,â&#x20AC;? letting faculty use their efforts to move technology to market as a factor in earning tenure. Also, any state institution that wants to receive Third Frontier incentive funds through the Ohio Department of Higher Education would be required to have such a commercialization pathway to tenure in place starting Jan. 1, 2018.

While this would be a requirement for public universities looking to receive that research funding if passed, faculty would see more flexibility. In an email, Jeff Robinson, spokesman for the Ohio Department of Higher Education, said the commercialization pathway would be an option for faculty pursuing tenure, not a required component. And it would be up to the universities to decide what that looked like.

Charles See, assistant deputy chancellor for external relations for the department, said Ohio has the capacity and the expertise it needs in its universitiesâ&#x20AC;&#x2122; faculty members. The key is incentivizing them toward research that can be commercialized. See said including that as an option for tenure will help do that. â&#x20AC;&#x153;We think innovation is a cornerstone to economic growth,â&#x20AC;? See said.

This shouldnâ&#x20AC;&#x2122;t come as a big surprise for universities. Commercializing the research done

by Ohioâ&#x20AC;&#x2122;s universities has been a priority of Gov. John Kasich for â&#x20AC;&#x153;quite some time,â&#x20AC;? See said.

In fact, this particular idea is prominently fea-

â&#x20AC;&#x153;We think innovation is a cornerstone to economic growth.â&#x20AC;? â&#x20AC;&#x201D; Charles See, assistant deputy chancellor for external relations for the Ohio Department of Higher Education

tured in a 2012 report issued by the Board of Regents on the condition of higher education in the state. The report noted that Kasich had identified job creation and economic growth as a priority and that technology commercialization â&#x20AC;&#x201D; and the workforce to support it â&#x20AC;&#x201D; is an important component of that in todayâ&#x20AC;&#x2122;s economy.

The report promoted approaches like creating stronger higher education-industry research collaboration and fostering entrepreneurial environments at universities. One of the ways recommended for higher education institutions to create an entrepreneurial culture was by connecting â&#x20AC;&#x153;applied research, the creation of intellectual property, and commercialization activities within the promotion and tenure review process.â&#x20AC;? The report notes that there were few universities offering this at that time and highlighted Northeast Ohio Medical University as an example of one that was.

Since then, See said a number of universities have made steps to include commercialization in some way in the tenure process, but that the proposals in the state budget would formalize it.

See said another proposal in the state budget that could help with the commercialization efforts would be the establishment of the Ohio Institute of Technology. According to the proposal, the institute would â&#x20AC;&#x153;prioritize, coordinate, and focus all state-funded research,â&#x20AC;? including research done at the universities. It would also find ways to help higher education coordinate with other entities to commercialize technology faster.

Sara Kilpatrick, executive director of the Ohio

Conference of the American Association of University Professors, said as long as this is an option for tenure instead of a requirement, the group isnâ&#x20AC;&#x2122;t opposed. Most faculty members are already expected to teach, do peer-reviewed research and take part in some form of service, like overseeing student groups, in order to receive tenure, she said. But Kilpatrick thinks this pathway wouldnâ&#x20AC;&#x2122;t lead to more commercialized research on its own; sheâ&#x20AC;&#x2122;d also want to see more funding.

The Ohio Conference of the American Association of University Professors represents about 6,000 teachers at public and private universities in the state, most of whom are involved in the unionized chapters at their schools.

Martin Abraham, provost and vice president for academic affairs at Youngstown State University, said it wouldnâ&#x20AC;&#x2122;t be too difficult to incorporate commercialization and technology transfer measures into the universityâ&#x20AC;&#x2122;s tenure processes. If this part of the proposed budget is passed, Youngstown will have to make sure commercialization is an option for all faculty, he said, but itâ&#x20AC;&#x2122;s already an option for some programs at Youngstown.

When Abraham was dean of Youngstownâ&#x20AC;&#x2122;s College of Science, Technology, Engineering and Mathematics, he heard the advice that universities should include whatever it is they value into their tenure guidelines. And in the STEM College in particular, that included technology transfer and commercialization, so Abraham made sure it was represented. Faculty members need to identify what theyâ&#x20AC;&#x2122;ve done in that area and demonstrate its value; one way of doing that is through patents, Abraham said.

Abraham is glad to see the commercialization pathway as an option for faculty, as opposed to a requirement. Not all faculty research lends itself to commercialization â&#x20AC;&#x201D; some are doing research that is more fundamental or writing books, and others are in areas that donâ&#x20AC;&#x2122;t lend themselves to commercial products, he said â&#x20AC;&#x201D; but it all strengthens the university. â&#x20AC;&#x153;We need to have a lot of different ways for our faculty to get to tenure,â&#x20AC;? Abraham said.

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Ulmer & Berne is taking less ‘cautious’ approach

By JEREMY NOBILE jnobile@crain.com @JeremyNobile

New leaders at Ulmer & Berne LLP want to take a different, more aggressive approach to growing the business than has been seen in the legacy Cleveland firm’s 109 years in the legal market.

The change starts with newly elected managing partner Scott Kadish, who took over for Harold “Kip” Reader in October as just the fourth managing partner in the firm’s history.

Kadish largely will steer the ship from Cincinnati, where he started his career with Ulmer about 16 years ago, becoming partner-in-charge there only months after joining the firm from a smaller office nearby in the Queen City.

Patty Shlonsky is running the local office as partner-in-charge in Cleveland, a role Reader held concurrently with his managing partner role.

Reader is still with the firm as a partner working a practice that focuses on complex business litigation, insurance coverage litigation and product liability.

Since he was 16, Kadish, now 56, had dreams of working as a banking lawyer in the Grand Cayman Islands. Besides the appeal of the beach, working on “cloak and dagger” banking operations seemed intriguing, he said.

After graduating from American University Washington College of Law in D.C., however, the Brooklyn native was offered a job with Taft Stettinius & Hollister in Cincinnati.

The starting pay in the mid-’80s was around $35,000 — a deal so lucrative at the time he couldn’t say no.

He spent eight years there before joining a firm of about seven lawyers after he was voted down for partner at Taft. That’s when he left for a smaller firm. He returned to a regional law firm upon joining Ulmer in 2001, where Kadish says he quickly doubled his business with a larger firm supporting him.

Kadish likes to tell his story as a mid-career, lateral hire who excelled at Ulmer when courting recruits. It’s one he hopes will resonate with targeted talent as Ulmer looks to rely heavily on lateral hires to grow the firm in a market where demand for legal services is stagnant.

“In terms of the change in management, we are a little more aggressive in terms of growth, and we’re going to be more creative,” Kadish said during one of his bi-weekly visits to the firm’s downtown Cleveland office in the Skylight Office Tower, the firm’s largest location with some 80 attorneys there. “Kip was a great, tremendous person. But our leadership style is a little bit different.”

One way the aggression will be seen is in the lateral hiring process, which the firm intends to speed up.

Kadish said the firm’s strategy is to bring on board more attorneys with books of business featuring clients the firm wants or ones that focus on

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Scott Kadish and Patty Shlonsky are part of the new leadership team at Ulmer & Berne.

(Contributed photo)

practice areas the firm isn’t dabbling in right now — particularly attorneys poised to break out in the way Kadish feels he did when he came to Ulmer years ago. One recent hire exemplifying that added a consumer finance regulatory practice to the firm.

“Demand in the marketplace is flat. That’s just a fact,” Kadish said.

“So people are fighting over the same market share. There’s a set pie, and for the last three or four years at least, that’s where it’s been. You have to grow by adding lawyers or groups.

You get their business, then you bring their share of the pie.”

It’s an approach somewhat novel to the conservatively minded firm.

“We were very cautious before.

And in the cautious approach, we missed a lot of opportunities,” said Shlonsky, 57, who joined the firm in

“We were very cautious before. And in the cautious approach, we missed a lot of opportunities.”

— Patty Shlonsky, partner-in-charge

the mid-1980s. “We don’t want that to happen.”

Besides appealing to potential hires with the usual perks and promoting a positive, inclusive culture, Kadish said the firm already is structuring compensation differently.

Some, even new, young lawyers, may be offered a chance to share profits on top of their base salaries.

While not uncommon in the legal business, it’s new for Ulmer.

With the leadership change, Kadish also moved to eliminate an executive director job formerly held by a non-lawyer. That position is part of a more layered management structure some firms like. Ulmer certainly did, having added that role decades ago.

“My experience is that a non-lawyer has a really difficult time with carrying out, or having the ability to make people do what they want, beVolume 38, Number 10 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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cause they’re not a lawyer,” Kadish said, talking about the preferred method of leaving leadership duties to department heads and practice group leaders.

“How can a non-lawyer tell a litigator how to run their practice? We have those leaders on the front line.

And we hold them accountable,” he said. “I just don’t see the value of that other layer in between. I’ve always questioned that.”

All combined — speeding up hiring, eliminating some mid-level management, offering creative terms for new hires — those efforts underscore a firm that wants to be more efficient and nimble in a tough legal market.

And it should set the tone for future growth. The firm declined to talk revenues and hasn’t set certain targets for revenues or staff, which currently stands at about 160 attorneys, a level comparable to 2009.

But in terms of what growth could include, from acquiring another small firm to opening offices in other markets — the firm’s most recent office opened in 2016 based on a client need with a single attorney in Boca Raton, Fla., and prior to that, a Chicago office opened in 2001 to join the firm’s Ohio offices in Cleveland, Columbus and Cincinnati — Kadish said anything is on the table.

These efforts all come alongside ongoing challenges in the legal business facing all firms: making investments in technology, consulting on better ways to serve clients, providing alternative-fee arrangements and creative billing options.

Other strategies at Ulmer will likely include adding other unique services to diversify income, like in e-discovery work. Kadish said the firm had been doing that for clients previously because of the firm’s work in major litigation cases.

“But now we have started to get hired by other law firms who are managing big cases who just don’t have the ability to do that,” Kadish said. “They’re outsourcing that e-discovery to us.”

Besides being larger and claiming more of the market, Kadish said a main goal for Ulmer under his watch is to make the firm more diverse. The firm has made several diverse hires lately, and it promoted Shlonsky to a leadership position in Cleveland.

“It’s the right thing to do for a number of reasons,” he said. “Why? For one, having diverse people in management is more interesting. If everyone is exactly like me, it’s boring.

Two, we will make better decisions by having different vantage points.”

But a growing firm well-positioned in the market through the Midwest should help Ulmer draw even more women and culturally diverse attorneys and move them into leadership roles.

And that’s all part of a tweaked business strategy to build Ulmer for the future.

“If we can grow, be more diverse and maintain the current chemistry we have now,” Kadish said, “that’ll be a win.”

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Goldsmith & Eggleton expands production at Wadsworth plant

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For the first time in its history, Goldsmith & Eggleton LLC has begun 24-hour operation at its Wadsworth reprocessed rubber manufacturing facility.

G&E, a supplier of reprocessed elastomers to custom rubber compounding firms, also added 16 employees to accommodate the new 24-hour shift, according to Rob Eggleton, business manager, elastomers-processed, of Channel Prime Alliance. Channel Prime is G&E’s sales and customer service partner.

Eggleton said G&E operates two plants in Wadsworth, one for all its reprocessed rubber products and the other for carbon black masterbatches. The 24-hour shift and resulting increase in production capacity affects the reprocessed rubber product lines, which saw a growth in demand in 2016, he said.

“The marketplace has been welcoming our products,” he said.

“We’ve made inroads in Asia, and that includes India and mainland China.”

Eggleton declined to discuss G&E’s sales or capacity figures, but he credited Channel Prime with increasing the sales of G&E’s products in Channel Prime’s existing market segments in Asia.

Channel Prime has been serving as G&E’s distribution partner since the two companies aligned in 2013.

G&E’s product portfolio is being sold to markets new to G&E, thanks to Channel Prime’s network, Eggleton said.

The round-the-clock production

For the first time in its history, Goldsmith & Eggleton began 24-hour operation at its Wadsworth reprocessed rubber manufacturing facility. (Contributed photo)

“The marketplace has been welcoming our products. We’ve made inroads in Asia, and that includes India and mainland China.”

— Rob Eggleton, business manager, elastomers-processed, of Channel Prime Alliance

in Wadsworth is expected to bring quicker turnaround for customers.

“We didn’t have enough shifts to

fill these orders,” Eggleton said.

G&E manufactures a full line of reprocessed elastomers, including blended butyl, halogenated rubber and SBR masterbatch. The firm’s carbon black masterbatch line was not part of the initial plan for production increases, but Eggleton said that G&E’s goal is eventually to add shifts and employees on that line, as well.

In 2014, G&E invested in new machinery and equipment upgrades so that it eventually could expand capacity and product options.

Both G&E and Channel Prime belong to Ravago Holdings America, which chose to align G&E’s manufacturing assets with Channel Prime’s distribution network.

Ravago acquired G&E in 2012, while Channel Prime has been a Ravago company since 2004.

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It’s a ‘very polarizing’ time for the arts

By LYDIA COUTRÉ lcoutre@crain.com @LydiaCoutre

Though nothing has been decided, reports that arts and culture funding could be at risk in the next federal budget have nonprofits keeping a close eye on Washington and gearing up to defend their work.

Over the years, dozens of Northeast Ohio organizations have received grants from the National Endowment for the Arts, usually ranging in the tens of thousands of dollars.

The Ohio Arts Council also receives such grants — $983,200 last year, according to the NEA — that benefit arts in the state. Reports indicate that NEA and the National Endowment for the Humanities both could be on the chopping block in the budget.

Many leaders in the region’s arts community agree that although the individual grants may be relatively small, they are mighty. Without those dollars, some programming would continue with more difficulty, some would be forced to scale back, and others would be eliminated entirely.

Arts and culture organizations say grants have far greater reach into the community, economy, education and quality of life.

“There’s just the question: What kind of society do we want to live in?” said Kevin Moore, managing director for Cleveland Play House.

Nonprofits constantly watch the ebb and flow of funding. It comes with the territory. To an extent, some say, this year is not all that different.

“It’s business as usual,” said Michael Hripko, associate vice president for research for Youngstown State University, which was awarded a $100,000 NEA grant last year.

But others say the conversation feels very different. It’s the language of elimination, rather than reduction, said Jason Weiner, director of development at Beck Center for the Arts.

Greg Peckham, managing director of LAND Studio, said arts often are looked at as a place to make cuts, but this year’s narrative is “very polarizing.” He sees efforts to cast the arts as “elitist ventures,” which is “fundamentally” not true, he said, noting that many of the funds go to underserved areas and support community connections.

The funds enable organizations to expand programming and reach neighborhoods across cities, said Raymond Bobgan, executive artistic director for Cleveland Public Theatre. Eliminating this support would “really end something that was working against isolation of smaller communities.”

If the arts community lost the option of NEA funding, André Gremillet, executive director of the Cleveland Orchestra, said it would send a “very sad, negative signal” to the country that the arts are no longer worth supporting, no longer important. “And to me, that’s a really, really important piece here,” he said.

Because competition for NEA dollars is so tight, the grants provide a stamp of approval, signaling to other funders and donors the quality of the work. For the many arts organizations that operate on a shoestring budget, that validation is crucial.

Gremillet said he’s used to operating in a challenging fundraising environment and isn’t sure he sees a huge difference in the national conversation right now. But when it comes to NEA funds, he’s not just worried about a dollar amount, but

rather losing that leverage.

“If we lost this, we would lose potentially much more than just that amount,” he said.

Christina Vassallo, executive director of arts organization SPACES, said it’s hard to imagine that the NEA would ever be cut. Its appropriation of about $148 million last year is barely a sliver of U.S. spending.

“If you were to cut the NEA, it’s basically like turning over couch cushions to pay your rent,” Vassallo said.

But on the recipient end, those grants are significant, arts leaders argue. Moore, of the Play House, said a relatively small amounts of money “gets catapulted pretty quickly into significant economic impact.” For instance, to see a new show, people buy tickets, visit the neighborhood,

pay to park, eat at the restaurants and more. Others noted that a vibrant arts and culture scene can be a tool in recruitment and retention, and therefore, a big draw for companies considering relocating.

Mark Masuoka, Akron Art Museum executive director and CEO, said he thinks that when people hear support for the arts, they think of a painting or sculpture, but he stresses far beyond that. The most valuable 21st century skill to develop, he said, is a strong imagination, which connects to creativity, innovation and more.

“It’s creating the opportunity to see things beyond what is currently in front of you or imaginable, and I think that is a huge skill,” he said.

Arts funding concerns have also caught the attention of foundations,

said Teleangé Thomas, director for the Foundation Center Midwest.

“It somewhat reminds me of the reality that philanthropy found itself in during the recession,” she said.

“With the difference being that the recession kind of showed up and rightfully or wrongfully; we’re kind of getting earlier warning signs around what may come.”

United Way of Greater Cleveland is also monitoring the NEA conversation. Helen Forbes Fields, general counsel and vice president of community impact, said that it’s key for United Way to remain nimble and anticipate cuts as much as possible.

There have been other presidents who threaten to drastically cut the NEA and NEH, said Tom Schorgl, president and CEO of the Communi-

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In his experience though, these initial broad statements then go through a learning process, including fielding calls from local organizations across the country explaining the local effect of the grants. He thinks the administration likely will take such communications into account as they increase.

Schorgl said it’s important that people who work in and benefit from the arts and culture sector communicate their feelings about its value.

“What does our country value? I think we should be judged by that,” said Bobgan, of Cleveland Public Theatre. “And this president is clearly interested in valuing military, and that’s sad to me. And I think there’s a place for valuing the arts.”

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DDR CONTINUED FROM PAGE 1 Although Lukes, formerly CEO of Equity One Corp. of New York, brings an exceptional background as an experienced public real estate company executive in the retail space, he and the other two executives joining him at DDR were just two days removed from completion of the merger of Equity One with Regency Centers Corp. of Jacksonville, Fla., in a $15.6 billion deal.

The thought among analysts and insiders following the announcement has to be, “What team would know better what kind of pricing and prospective suitors are available as the REIT world journeys through a period of consolidation?”

Haendel St. Juste, managing director and senior REIT analyst at Mizuho Securities, said DDR no longer is in a position where it has to sell.

“They are in much better position to compete now than they were five years ago,” St. Juste said. “They are a sector average at worse, and their portfolio is above average.

With a new management team that’s in the upper quartile, investors may run out of reasons to continue discounting the stock.”

Investors showed a little appetite

CRAIN’S CLEVELAND BUSINESS

for the news as DDR stock closed last Friday at $14.32, a 3% change from an open of $14.28. (A year ago, though, the stock was trading at more than $17 per share.)

What’s more, St. Juste added that no one is pushing publicly for a sale of DDR. At Lukes’ former company, Equity One, the company’s chairman openly sought a buyer.

Some big issues remain, however, for DDR to do to either sail into the sunset or to a better stock price.

One is if DDR sells the 14-property portfolio in Puerto Rico, as prior CEO August discussed, which is seen as a concern because of Puerto Rico’s economic woes and a management distraction. The other is the company unwinding or resolving the direction of its remaining joint ventures with other companies that are seen as hindering transparency.

The other task Lukes and his team face is rebuilding morale of a workforce roiled by management turnover, including the still-unexplained termination of former CEO David Oakes last July and his replacement with August, then a recently appointed board member with an office property background.

“Settling the troops will be a big challenge for Lukes and his team because they have had so much management turmoil the last few

“I would suspect they don’t want to commute to the middle of the country from New York City for a long period of time. Or will they move DDR to New York City?

Others have done that before. We have to see what these next steps are. We have questions now.”

— Vincent Chao, real estate analyst at Deutsche Bank Securities Inc.

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years,” said Vincent Chao, a real estate analyst at Deutsche Bank Securities Inc., who follows DDR and previously followed Equity One. “It’s not that easy for a company to have a new CEO every year or two. It’s disruptive to the company.”

Some big questions remain to be answered in terms of what’s next for DDR. Lukes may have to learn DDR, but he brought his own team to hit the ground running.

Also joining DDR are Michael Makinen, who will serve as executive vice president and chief operating officer, and Matthew Ostrower, who will be executive vice president, chief financial officer and treasurer. They held similar jobs at Equity One. All three are viewed as “New York City guys” unlikely to settle for a Midwest address. During his tenure as Equity CEO, Lukes ran it from a New York headquarters even though most of the firm’s headquarters staff was in Miami.

“I would suspect they don’t want to commute to the middle of the country from New York City for a long period of time,” Chao said.

“Or will they move DDR to New York City? Others have done that before. We have to see what these next steps are. We have questions now.”

Something that is unquestioned is the fitness of Lukes and his team to shepherd DDR. “The board had an opportunity here to bring in a young team that can be in place for a long time,” St. Juste said. “They have hands-on operating experience. People perceive them as having done the right thing at Equity One. They will do the right thing for the shareholders.”

The CEO job at DDR is the third time Lukes has held the title with a public company. He held it almost three years at Equity One, which

followed the CEO job at Seritage, the company containing many properties of Sears Holding Corp.

Among other roles, he served as COO of Kimco Realty Corp., to which DDR is often compared because both are in the open-air shopping center space.

DDR is larger than Equity One, so it could represent another step up on the Lukes résumé. Equity One had 122 properties, 108 of them retail or in development, at the time of its sale to the larger Regency firm. DDR owns and manages 319 value-oriented shopping centers representing 106 million square feet in 35 states and Puerto Rico.

Lukes is not a typical REIT executive.

While most REIT honchos today are finance or accounting types, and Lukes has a masters degree in real estate from Columbia University, he has a design background. He even worked at New York-based Kohn Pedersen Fox, a major national architecture firm.

He holds a master’s in architecture from the University of Pennsylvania, and he has an Ohio connection, having earned a bachelor’s degree in environmental design at Miami University in Oxford.

At Equity One, Lukes led major efforts to redevelop existing properties in its portfolio — a likely direction for DDR with its vast power center holdings around the country.

Lukes’ LinkedIn account also has multiple postings about the future of retail, and he often fielded such questions at Equity One. No matter what’s next, or who is in the executive suite, DDR will continue to face headwinds from changes in the retailing world as retailers deal with the disruption from online retailers.

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Q&A: Kevin Jacques

Boynton D. Murch Chair in Finance, Baldwin Wallace University “It’s not a perfect rule, but generally, the longer the maturity of the asset, the greater the decline in market value for a given increase in interest rates.”

The U.S. Federal Reserve system hiked interest rates for only the second time in the last decade in December. And it’s been a long time coming considering the federal funds rate — the interest rate banks charge one another when lending to other institutions to maintain reserve balances as required by law — has been held near zero since the 2008 recession.

That rate, currently at a range of 0.5% to 0.75%, is significant to banks and financial markets. But the rationale behind moving interest rates, as determined by the Federal Open Market Committee, is, naturally, extremely complicated. Yet, with inflation rebounding, the pulse among experts is that there’s a good chance rates will further grow throughout the year, with the next hike potentially coming as soon as next week when the Fed convenes for its March meeting.

So what does all that mean in the financial services industry?

Crain’s sat down with Kevin Jacques, a former bank regulator whose résumé includes 14 years with the U.S. Department of the Treasury and who now serves as the Boynton D. Murch Chair in Finance at Baldwin Wallace University, for some context. — Jeremy Nobile How are interest rates familiar territory for you?

The U.S. financial system had gone through the savings and loan crisis in the 1980s. Many S&Ls failed. So in the late ’80s and early ’90s, regulators started paying more attention to interest rate risk and what it looks like. I was working with the Federal Reserve and Federal Deposit Insurance Corp. with the comptroller at the time. We worked on a quantitative model for measuring interest rate risk with the idea to make it part of regular standards applied to financial institutions. But at the end of the day, neither the model nor regulation ever came to pass.

Now let’s take a step back. Why did measuring all that risk suddenly matter?

Depending on how interest rates move, it can have a significant impact on the value of bank assets, their liabilities and the degree to which banks make a profit. Part of the reason the S&L crisis came along was because for most, the maturity of their assets was very long because they’re dominated by mortgages. Along comes the early 1980s, and interest rates shoot to record highs. These S&Ls have really, really long-term mortgages, and the value of those mortgages plummets. As a result, they lost enormous amounts of money and became insolvent. I think we lost about 2,500 S&Ls during the crisis.

So for banks, interest rate risk really refers to how the value of their assets are affected?

It changes the value of assets on the bank’s balance sheet, it changes liabilities, and if you change those, you change a bank’s capital. The rate also affects income. The concept of net-interest margin is to take income from interest subtract interest you pay on liabilities, or interest expense, and divide by assets. That gives you some measure of the income you’re making as a percentage of assets.

You mentioned that tends to be around 3% today.

Yes, and it tends to be a little lower for large banks and little higher for small banks. That’s because large banks have more assets and operate on smaller margins.

Rates have been kept down near zero for so long. What’s the effect of that and starting to move those rates now?

Historically, since about 2009,

interest rates are at the lowest points they have ever been. For a bank or S&L or credit union, that lets you take in deposits at really low rates. That’s good for margin. On the flipside, when you make a loan, you have to charge lower rates, and that hurts your interest income (net interest margin or NIM). So when rates start to rise, that all positively affects NIMs. So higher rates make banks more profitable, and that could stimulate lending.

For most banks, hikes have a positive impact on NIM, and that’s because most banks have longer maturity assets than liabilities. Banks are also inclined to pass on interest rate increases to customers on the loan side than they are on the deposit side. Also, if you’re a S&L or credit union, you likely have a significant portion of treasury bills or bonds or corporate bonds on the balance sheet. When interest rates rise, the yield on those bonds goes up. And that makes banks more profitable.

And if NIM is increasing, now I make more profits as a bank, and I may have more incentive to lend money out.

What’s the downside for banks?

In a rising interest rate environment, the market value of those assets we were talking about declines. It’s not a perfect rule, but generally, the longer the maturity of the asset, the greater the decline in market value for a given increase in interest rates.

Coming full circle, it’s that waning value of assets that led to the S&L crisis of the 1980s following rate hikes around that time.

Those hikes caught that sector by surprise, which is why the FOMC is more transparent on its thinking, and why measuring risk matters.

It’s also why the FOMC is very deliberate about saying they’ll raise rates very gradually over time. If you’re an S&L or credit union or bank in Northeast Ohio, when the Fed says it’s doing these things gradually, that makes your job a whole lot easier.

So if I’m a bank, how am I looking at the rate environment today?

We’ve had record low interest rates for the better part of eight years, and now we see rates rising. So, as a financial institution in a rising risk rate environment, are you going to be able to increase NIM as a result?

And what’s going to happen to the value of your assets? There’s a parallel to 1995 and today here. If rates rise too much or too fast, or

banks currently have too much interest rate risk and are not managing it well, then you could see some losses at financial institutions.

The big question now becomes how high are rates going to go, and how fast? And are banks in a position to manage the risk they see?

What do you see happening with the hikes?

If inflation began to rear its head more

rapidly than expected, that would probably accelerate the timetable for raising rates. In scenario two, you have a very uncertain outlook for fiscal policy brought on by a new presidential administration. We’ve heard talk of infrastructure spending, tax cuts and a whole variety of programs related to government spending and taxes. Depending on what happens there, how rapidly it affects the economy, the Fed may

choose to increase the speed with which it raises interest rates.

There certainly are a lot of questions about what fiscal policy could look like under this new administration.

And that’s really the wild card that’s out there. All this creates uncertainty of what makes rates rise. And that is the essence of interest rate risk.

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CRAIN’S CLEVELAND BUSINESS

Opinion From the Government Beat

Arena plan isn’t ideal, but these deals never are

Editorial

Power play There’s no doubt FirstEnergy Corp. finds itself in a serious financial crunch. But Ohio legislators should proceed with caution when it comes to the Akron company’s desire for so-called “zero emission credits” (ZEC) for its nuclear plants in the state.

FirstEnergy reported a loss of $6.2 billion, or $14.49 per share, in 2016, which included a $9.2 billion asset impairment charge.

Bankruptcy is not out of the question for the company’s nuclear plant-operating FirstEnergy Solutions subsidiary, which has about $1.5 billion in book value but carries about $3 billion in debt on its balance sheet.

Nonetheless, FirstEnergy CEO Chuck Jones, in a call with analysts to discuss the financial results, referred to 2016 as “a successful and transformative year” for the company as it seeks to retool itself and exit the competitive generation business by 2018. FirstEnergy intends to focus on its transmission and distribution businesses.

To help accomplish the transformation, FirstEnergy wants the ZEC subsidies for its Davis-Besse and Perry nuclear plants in Ohio to keep them alive/make them attractive to potential buyers.

ZEC subsidies are, essentially, a reward for companies using nuclear plants to generate electricity without producing CO2 and other pollutants, thus acknowledging the role nuclear can play in combating climate change. Jones said the credits “would preserve not only zero-emission assets, but jobs, economic growth, fuel diversity, price stability, and reliability and grid security for the region.”

There’s recent precedent for this strategy. Lawmakers in New York and Illinois, for instance, have agreed to similar plans to subsidize nuclear plants in those states, though there now are court challenges in both states.

The price of a ZEC program in Ohio, naturally, would be borne by ratepayers. The Plain Dealer reported that based on early conversations with lobbyists, the ZEC program “would be designed to allow FirstEnergy to collect an additional $300 million annually, in perpetuity,” and that consumers “would see

monthly power bills rise by about 5 percent ... while commercial and industrial customers could see increases between 5 percent and 9 percent.” (A final draft of the bill has not been completed, so those numbers could change.)

FirstEnergy already got a bailout last fall — albeit not as large as it wanted — related to its coal-fired plants when the Public Utilities Commission of Ohio ordered the company to establish a distribution modernization rider that will provide it with an extra $132.5 million a year for three years, with the possibility of a two-year extension.

The addiction to subsidies is not serving Ohio residents well, as they continue to prop up old power-generation sources at the expense of fully committing to development of renewable energy. The subsidies underscore the broader problem for FirstEnergy, which is that it remains disproportionately reliant on inefficient coal and nuclear plants in an era marked by abundant and cheap natural gas.

Another problem with the ZEC plan is that subsidizing uncompetitive nuclear plants could create complications for existing competitive markets.

Andrew Ott, president and CEO of PJM Interconnection, manages the high-voltage grid in 13 states and the District of Columbia, recently told The PD that while he wouldn’t dismiss the ZEC idea out of hand, “Our position at this point is that we need to protect the integrity of the regional market price.”

Some supporters of the ZEC concept argue that it can be part of a responsible energy strategy promoting zero-emission power generation, in much the same way that tax credits encourage wind and solar power. Those credits, though, have the virtue of promoting technologies that represent the future, and not the past.

We’ll withhold final judgment until there’s a formal proposal in Columbus, but count us as skeptics that big new subsidies for nuclear power — even if they’re designed to bridge the gap between FirstEnergy and the next operators of Davis-Besse and Perry — are in the state’s best interest.

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

CLEVELAND BUSINESS

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216-522-1383

Do you like having professional sports teams in Cleveland?

Of course you do.

Is it worth investing public money to help pay for the places they play?

Supporters and opponents of the plan to use public money to fix up Quicken Loans Arena are in the midst of airing their points of view on the value of spending public money on the project. They packed the Cuyahoga County Council chamber twice in February and likely will do the same before Cleveland City Council this month.

In a perfect world, no city, county or state would give any business, including sports teams, a financial incentive to bring its talents to, or stay in, a particular comJay munity. But until every community signs Miller on and sticks to a no-poaching pledge, incentives will be offered.

The financial incentive game used to be called “smokestack chasing.” It has been going on at least since the Great Depression, when Mississippi started its “Balance Agriculture with Industry” program, and the state’s communities started waving cash in front of northern manufacturers to induce them to build plants in the South.

The giveaways, of course, are greatest to sports teams, even though their owners are among the wealthiest people in the country. Few people noticed, much less raised a ruckus, last week when the state of Ohio and the city of Brooklyn gave tax breaks worth more than $1 million to a medical supply company called Inogen Inc. to open an Eastern sales office and warehouse here instead of Michigan, Pennsylvania or some other state.

But the ties to sports teams are strong; witness the million people who came to a parade after the Cavaliers won the NBA championship last June. And team owners, like Cavs principal owner Dan Gilbert, are just as competitive as the players on the court. Each is vying to have a team that both wins a championship and makes the most money. Getting a subsidy from the hometown is like winning a playoff game on the way to the money championship.

Certainly, the activists who have spoken before county council have a valid point. How can the community come up with money for a sports arena, they ask, without also finding money to help find jobs for the unemployed, rebuild struggling neighborhoods and improving health and social services?

However, the Greater Cleveland Congregations (GCC), one of the activist groups questioning the arena deal, is trying to have it both ways. “We love the team, we hate the deal,” its leaders and members have repeated to county officials. Their answer is to somehow include money for their causes in the deal.

They are unclear how they will make that happen.

On the other side, the argument in favor of the deal that says The Q is an economic engine for the community is built on best-case economics. People are attracted to events at the arena, generating admission taxes and paying salaries, and that visit triggers spending outside the building, which generates more payroll and more taxes. But would that spending disappear if the arena went dark? No, and academics and consultants are split on which side of that analysis does a city come out ahead.

So should the city and county councils come up with the money?

SEE ARENA, PAGE 21

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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Transforming Environmental Liabilities into Thriving Assets

Web Talk Re: FirstEnergy's challenges I don't buy the notion that the nuclear (and coal) plants' costs are rising significantly (and all of a sudden) due to their age. ... We have far older industrial facilities and structures in our country (e.g.., our large hydro dams, oil refineries, bridges and tall buildings), and I don't hear any tales of them having problems.

The main reason for nuclear's high and increasing costs is excessive and relentlessly increasing regulation. That along with unfair treatment in the market, where natural gas fracking enjoys extremely lax regulation ... and renewables enjoy huge subsidies and outright mandates for their use (regardless of cost, practicality, or if new generation is even needed). It's not a fair competition. Through unlevel policy and regulatory playing fields, the market is being handed to renewables and (mostly) gas, by government fiat.

FirstEnergy is merely asking for a level playing field, where all non-emitting sources can compete. — jimhopf There is obviously something wrong with management here.

You have a monopoly, and demand for power is a constant.

A failure of cash flow management is doubtful. Accounting tricks (smoke and mirrors) create the loss. This is a financial engineered crisis. I am not buying it. File the bankruptcy! I call your bluff. The monopoly will be acquired in full by a stalkinghorse bidder probably composed of the same management of the same old company. To this the stockholders and bondholders should object, and the PUCO, the SEC and the attorneys general, federal and state, should prosecute and jail management, disgorging them of their golden parachutes! Drain the swamp here, too, in the fraudulent business community. Regulated monopolies do not need, nor should they get, tax credits as is being advocated for. ... The public is not as ignorant as this management thinks! — 216265

Re: Immigration that works Immigration policies that ensure the migration of immigrants who will uphold our laws and come here legally are what's needed.

This is a golden opportunity for our region and country. The U.S. will bring people of all nationalities here that will enrich our country, and the lives of those who come here will be enriched. We must be ready to welcome them and ensure that they are safe and can achieve the positive goals that attracted them to this country in the first place. — 172684

Personal View

What’s wrong with health care – and how to fix it

By MARK H. NOLAN

The Affordable Care Act as we currently know it is imploding for the following reasons.

Fewer insurance companies are willing to participate in the individual marketplace, on or off the exchange. Case in point, national carriers United Healthcare and Aetna discontinued existing policies and offering new coverage beginning in 2017.

Many regional companies are reducing the states and counties in which they offer products. The reason provided by insurance companies is that premiums collected are exceeded by the claims and expenses incurred, which results in a financial loss.

Among the carriers still offering coverage, a number of measures are being taken in attempt to avoid further financial loss.

Premiums are increasing rapidly (15% to 35% per year). Plan features (deductibles and out-of-pocket maximums) are increasing, which places greater risk on the insured population.

Provider networks are shrinking as carriers only offer HMO or limited PPO networks, which make it more difficult for members to find doctors and hospitals of their choice.

Finally, there is minimal carrier choice and availability in many parts of the country. These include urban as well as rural areas. This results in less competition among the remaining carriers, which further drives premium cost.

As our government considers changes to the current system, a number of areas in health care should be addressed.

Under the ACA, Americans are required to purchase or be part of a health insurance plan. These include employer-sponsored plans, federal and state plans and individual policies.

The reason is that young and healthy persons are needed to balance risk pools in order to offset the cost associated with elderly and unhealthy participants.

This should entice insurers back into the marketplace and will produce a better financial outcome for all involved. The current penalty schedule for those who voluntarily choose not to purchase insurance does not provide sufficient incentive to entice them to enroll. A more punitive arrangement may reverse this trend. An example would be to charge a penalty equal to the average per-person premium in each state plus a 2% administrative fee.

In order to help those who need financial assistance, it would be prudent to retain a subsidy program. Further, state Medicaid programs, such as Ohio’s, should be continued and mandated for all states. This will remove the financial risk associated with those who fall in the gap between Medicaid and premium subsidy and seek treatment without insurance coverage.

Insurance companies that offer individual coverage should be required to offer at least one major hospital system and its doctors for each region in which they offer coverage. Further they should be required to offer coverage in each county of the states in which they conduct business.

Another issue is the prescription drug delivery system. Pharmaceutical companies charge exorbitant prices to health plans that must cover these medications, since there often is no alternative. Drug companies are taking advantage of their unique position by charging prices far in excess of what is needed to recover development costs and make a reasonable profit.

One of the largest drivers of insurance premiums is the cost of litigation. Due to the abundance of legal cases brought against the medical community, doctors and hospitals are forced to provide excessive services and testing simply to cover their risk. This along with malpractice insurance premium increases the cost of care for all Americans.

Reforms to the legal system could reduce rewards to those seeking action for all but the most serious medical errors.

Our society abhors the concept of personal accountability as it applies to health care. Yet millions of dollars are spent on those who do not practice reasonable health habits or delay service until a minor issue becomes serious. Reform in this area will not likely occur in the near future, but could end up being the last avenue for cost reduction.

Nolan is an employee benefits consultant with Arthur J. Gallagher & Co.

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Ohio’s payday problem Critics say the short-term lending industry preys on the poor, but lawmakers aren’t scrambling for a fix erhui79 via Getty Images

By JEREMY NOBILE jnobile@crain.com @JeremyNobile

The short-term loan industry is running virtually unchecked in Ohio, straining local economies like Cleveland’s, where the lenders are particularly active, and drawing ire from opponents of the lenders.

While lawmakers have voiced plans to regulate the industry, though, past efforts have been completely ineffective, and there’s little momentum behind regulating those kinds of lenders today.

With no restraints on their business, payday and auto title lenders are flourishing in Greater Cleveland and across Ohio where shops like Advance America, Cashland and Check into Cash are hard to miss. Business is so strong that it’s common to see several competing shops bunched together on the same city block, usually clustering around a city's poorer neighborhoods. Reports show one in 10 Ohioans has taken out a payday loan at some time, and the typical payday loan borrower is white, female and between 25 and 44 years old.

Lenders say they’re serving a credit need banks won’t touch, providing a significant resource to consumers.

However, the state’s system for regulating these kinds of lenders is flawed, which has helped elevate payday loan costs in Ohio to the most expensive in the country.

According to the Small-Dollar Loan Project of The Pew Charitable Trusts, the typical annual percentage rate on a payday loan in Ohio is 591%. That’s up to four times more than what borrowers pay in other states, like Colorado.

“Since we haven't seen any new legislation, it would be beneficial if (lawmakers) were able to address the interest rates that the payday lenders can charge,” said Douglas Bennett, a spokeman for the Council for Economic Opportunities in Greater Cleveland.

The CEOGC is a member group of the Ohio Association of Community Action Agencies, which advocates for reform of the payday loan industry.

“The current rates make it almost impossible for consumers to afford paying them back," Bennett said. "This should be an issue to Cleveland because if people continue to use them they might not ever get out of their current circumstances.”

Past laws have targeted those APRs directly, capping them in Ohio at 28%. But the industry has exploited loopholes in state law that allow them to charge various layers of fees that hike those rates to nearly 600%.

Pew's report shows that a $300 loan in Ohio paid back over five months draws at least $680 in fees alone.

“There is definitely need for credit in low-income communities. We recognize folks need access to short-term credit that, unfortunately, is often not available through larger banks,” said Katherine Hollingsworth, managing attorney of the consumer practice group for the nonprofit Legal Aid Society of Cleveland, which represents some borrowers when payday and auto title lenders threaten to sue them or repossess their cars.

“But the problem is the credit is so unaffordable, it has devastating effects on the individual and their families,” she said.

Hollingsworth pointed to one local case in 2015 where a single mother with five children took out an auto title loan to “make ends meet.”

She ended up paying rent instead of her loan

How Ohio compares In 2010, Colorado lawmakers reformed payday loan terms, drastically reducing the penalties and interest that consumers have to pay. Here’s how Ohio payday loan terms stack up.

Ohio

Average cost to borrow $300 for five months

$680

$172

34%

4%

591%

117%

Yes

Yes

Avg. share of paycheck due for next loan payment Avg. APR

Colorado

Credit widely available?

By the numbers 836

$184 m 1 in 10

Number of payday and/ or car title loan stores in Ohio in 2016

Millions of dollars per year paid in fees to payday lenders in Ohio

Number of Ohioans who have taken out a payday loan

Sources: Pew Charitable Trust; Center for Responsible Lending

when it was due.

Auto title loans are very similar to payday loans in their terms, except the former uses a borrower’s vehicle as collateral in the deal. According to a study from the nonprofit Center for Responsible Lending, some 60% of all shortterm lending shops in Ohio offered both payday and auto title loans.

“She didn’t understand at the time her car would be repossessed,” Hollingsworth said.

And it was.

Without her car, the woman lost her job. She

became homeless shortly afterward. And without transportation, her kids stopped going to school.

The issue took months to resolve. Legal Aid negotiated a deal with small, extended payments so the mother could get her car back and return to work to pay off the loan that got her in trouble originally.

“This one relatively small loan caused a domino effect where she became homeless and her children weren’t in school because she lost her means for transportation,” Hollingsworth said.

“If anything like this is going to change, it’s going to have to be at the legislative level.”

Invisible ink The trouble with legislation in Ohio is that it has been tried before.

The state passed the Pay Day Loan Act in 1995 requiring lenders to register with the state, but also exempting them from Ohio usury laws.

The number of lenders surged from about 100 at the time to more than 1,500 a decade later.

In 2008, lawmakers passed the Short Term Loan Act (STLA) to rein in the industry. The law effeectively provided for max APRs of 28% and required loan terms to be no less than 31 days while also capping loan amounts to no more than 25% of a person’s monthly income. After a pushback from the lenders, the issue was brought to a statewide referendum, where 64% of voters approved the law.

Shortly afterward, lenders moved to register through the Ohio Mortgage Lending Act (MLA).

Doing so allowed them to tack on fees that amount to the astronomical APRs. This method of operating through the MLA was challenged almost immediately.

SEE PAYDAY, PAGE 16

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FINANCE

Splash hopes to tackle med school debt

By JUDY STRINGER clbfreelancer@crain.com

Each year 18,000 to 19,000 students graduate from medical school — most of them with a disturbing sum of debt. In fact, the average medical school debt balance is now $189,165, according to the Association of American Medical Colleges.

And while most residents and fellows have federal loans and qualify for forbearance programs that limit monthly payments while they are in training, even $300 to $400 payments can be a burden given their $50,000 to $60,000 salaries.

A Cleveland startup plans to ease this burden.

Splash Financial officially rolls out in April with the launch of its digital lending platform, makeasplash.com.

The company will specialize in refinancing medical school loans for residents, often rolling multiple federal and private debt lines into a single, low interest loan. Currently that rate is 5.49%, about one to two points lower than conventional student loans, said founder and CEO Steven Muszynski.

What’s more, residents who qualify for refinancing are only required to pay $1 per month until they finish training programs, which would save Splash Financial customers an average of $3,000 to $5,000 annually at a time when they need it the most.

“Most of them are living paycheck to

“We essentially presold loan volume to banks.

That is how we are able to finance all the loans for the consumers.”

— Steven Muszynski, Splash Financial CEO

Steven Muszynski’s is the founder and CEO of Splash Financial, a local startup aimed at refinancing medical school debt. (Contributed photo)

paycheck,” Muszynski said. “A $3,000, $4,000 savings today is the difference between taking a vacation or not, stepping up to a nicer apartment or just going out to dinner a few times a month.”

Muszynski’s journey to Splash Financial has not always been smooth sailing. Four years ago, he set out to commercialize a college saving account offering that — in addition to helping parents save more and borrow less for their college-bound chil-

dren — was developing a loan product that participating banks could use to compete with higher interest federal student loans.

LendULink, as the company was initially named, went through the Quicken Loans accelerator program Bizdom and “made a lot of connections,” according to Muszynski. However, as a startup, it struggled to gain traction in the market, primarily because of the complexity of the offering.

In late 2015, meanwhile, a friend approached Muszynski with his own loan woes. The friend had $200,000 in medical school debt and, with a typical resident’s salary in the mid$50,000s, was unable to refinance at a local bank. Muszynski went to work, calling on his contacts in the refi world and researching options — or rather lack thereof.

“Nobody could help him,” he said.

LendULink quickly pivoted to fulfill this unmet need with Splash Financial’s predecessor, GradSchoolLoans. While the company was still working with banks, the relationship was an easier sell.

“We essentially presold loan volume to banks,” Muszynski said. “That is how we are able to finance all the loans for the consumers.”

The rebranding to Splash Financial is the final step to bringing a product to market. It is also a better reflection of the impact the company wants to have on the lives of young doctors and medical specialists, according to board member and investor Dr. Ron Flauto. Flauto, who is also founder and chief operating officer of the American Kidney Institute in Cleveland, hires new doctors on a regular basis. Their No. 1 complaint, he said: “I don’t know how I am going to pay these grad school loans.

“Medical school loans can be paralyzing, $200,000 a year, that is literally a mortgage and many of them are newly married or have a child.”

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Muszynski said that while it’s nice to know the company is poised to make life easier for the 90,000 residents and fellows in the United States, what it really aspires to do is give these young professionals the interest rates they should have been offered in the first place.

“If you look at aggregate risk — and that is what interest rates tend to be based on — doctors are the lowest risk borrowers that there are, yet they are getting the same rate as every other grad student,” he said. “A lot of these residents, their salaries will spike in the future. They are going to pay back their debt. They are very low risk. So why burden them today?

“For us, we just want them to stay current. We want them to realize the loan is there, which is why we charge a dollar.”

Splash Financial completed a venture round in January, raising $3.3 million, and Muszynski estimates the market opportunity somewhere around $17 billion, given the country’s 90 million residents and fellows have nearly $190,000 in “mispriced debt” a piece.

“We are pretty happy about the support we have been able to get from our investor base. To raise that amount in Cleveland is exciting and it shows the commitment to early-stage startups that the city has, that the investor base has,” he said, “and it seems that people understand what we are trying to do.”

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FINANCE

Five to watch in finance They are more than just number crunchers and pencil pushers. They’re strategic thinkers and trusted advisers. They have a passion for their work, their clients and the Northeast Ohio community. Here are five of the region’s financial professionals we think are worth watching. Know someone in finance, law, hospitality or any other industry who has a story worth telling in a future section? Let Sections Editor Timothy Magaw know at tmagaw@crain.com.

Julia Dean

Dan Leffler

Marla Petti

Tony Constantine

Jason Bogniard

Assurance Senior Ernst & Young Description: If you had asked Dean a decade ago whether she would have a career in finance, she would have said absolutely not. It took earning a degree in chemistry to realize she wasn’t doing something she loved. After a nudge from one of her contacts, she went back to school to pursue a career in finance and ultimately earned certification as a CPA. Today, she’s in auditing at Ernst & Young, where she works largely with public companies. “I am constantly being challenged,” Dean said. “I absolutely love what I do.” Dean has also served as a mentor with College Now Greater Cleveland — an organization that benefited her when she was younger. She recently got involved with Adoption Network Cleveland and hopes to do mentoring there. “It might be a small thing to do, but it allows you to make an impact in some way on a person’s life,” she said.

Manager Sikich Description: Leffler started his career with Deloitte doing international tax work, but he quickly realized his true passion was working alongside small businesses. “There’s a lot more of a personal connection when you’re working directly with the owner of the company,” said Leffler, who joined BCG & Co. in Akron before it was acquired

by Sikich. In particular, Leffler has carved out a niche in succession planning, mergers and acquisitions and valuations, especially in the manufacturing space. He has taken an interest in helping grow Sikich’s succession planning practice given the looming onslaught of baby boomer retirements. “The most challenging aspect can be getting business owners to talk and think about succession planning,” he said. “They’ve spent their whole lives building a career and don’t always look toward the future.”

Director of Financial Planning Services HW Financial Advisors Description: The reason Petti likes her job is simple: She enjoys helping people.

As a wealth adviser, Petti is passionate about involving women in their family finances. “Men and women have different relationships with money,” Petti said. “It’s best if they both play a role.” For instance, Petti counsels women that if something major happens — like a divorce or death of a spouse — they should be prepared to take control of their financial lives. Petti works with clients on basically “anything you put a dollar sign in front of.” “I love meeting new people and hearing new stories and being part of the solution,” she said. Before joining HW, Petti spent the majority of her career working in an all-female financial firm and has a long involvement with philanthropic commitments that include working with women.

Partner, Tax Ciuni & Panichi Description: Constantine didn’t grow up dreaming of becoming an accountant. It was his dream, after all, to run the metal processing and trucking company started by his grandfather.

But while attending Cleveland State University — studying accounting, figuring it would help with eventually running the business — his family sold the company. He ultimately pivoted his career toward helping family businesses like the one he grew up admiring. “I don’t know whether it’s nostalgia or what, but I see a lot of myself in them — their entrepreneurial spirit,” Constantine said about his clients.

“They all have a unique story.” Today, Constantine is the youngest partner at Ciuni & Panichi and leads its real estate and construction practice. Beyond the office, Constantine is on the Western Reserve Historical Society’s board of directors.

Principal, Business Valuation Apple Growth Partners Description: A trip to New York City when he was 10 or so had planted the idea that Bogniard might one day be trading stocks on the floor of the New York Stock Exchange. That idea didn’t pan out, but Bogniard’s interest in finance never faded.

Today, he helps privately owned companies figure out the value of their businesses. “I never get sick of hearing that American story,” Bogniard said. “A lot of people have sacrificed a lot in their lives to do that, but also reaped the reward of doing it.” Bogniard has performed valuations and other analyses for a number of purposes including litigation support services involving shareholder disputes, asset tracing and domestic relations. His non-litigation work includes estate taxes, acquisitions, stock options and bankruptcy.

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FINANCE Adviser: Azim Nakhooda

Talking politics and portfolios: A look forward Investors, capital markets, economists, nations and many others are attempting to determine what their financial implications may be from the Trump administration and stated policy initiatives.

For months — dating back to the pre-election projections — the markets have been tilting in seemingly direct response to Washington’s daily dramas rather than fundamentals.

Since Nov. 8th, markets have generally risen under the perception of a “friendlier” business environment, less regulation, and a potentially lower tax umbrella. Financials, in particular, have rallied as these factors would appear to be accommodative to their interests.

Looking forward though, we have to wonder, “How sustainable is this rally?”

Consider the following juxtaposition: Barack Obama entered office in January 2009 with the Dow Jones at 7,949 and then almost immediately began policy initiatives that were generally regarded as heavy on financial and consumer regulation, higher taxes and even a philosophically Keynesian approach (which favors bigger government and more oversight).

Trump entered in January 2017 with the Dow Jones at 19,827 and all of the tailwind stimulation as described above.

So, which is the better combination? The Dow at a relative low point and Obama’s point of view or the Dow at historic highs and Trump’s point of view?

Politics aside, I’ll take the cheaper market every time. Over a full cycle, increasing earnings and lower valuations are superior catalysts for growth than political rhetoric.

Even if we allow for the possibility that the Trump administration will successfully legislate all of the platform concepts spoken about thus far, the time, political process, and lagging effect to specific market sectors and earnings is indeterminate. Couple that with known global risk factors such as extreme interest rate conditions, margin compression, diminishing policy tools at central banks, and equity valuations, and the conclusion is cautionary.

More specifically, we really don’t know who the winners and losers may be from a rapidly changing political spectrum. Or, if the market has already voted to that effect, then how much of the “win” is already priced in?

Even the less correlated arenas bear some risk from our political climate. For example, emerging market economies represent cheap relative valuations, strong demographic trends and rising dividend yields. Allowing for perennially higher volatility, there is still a potential risk-adjusted return opportunity from that asset class.

However, highly isolationist or protectionist trade policies may directly curb the financial trajectory

Azim Nakhooda is a principal and partner at Cedar Brook Group. His practice focuses on comprehensive wealth management strategies for high-net-worth families.

of the developing markets. Trump’s policies infer a stronger dollar outcome as he focuses on U.S. infrastructure and corporate growth through tax cuts. A muscular greenback is another significant concern for the developing world, as they already strain under the prospect of higher U.S. interest rates.

So, as the worries start adding up, investors understandably ask what to do.

Perversely, my client portfolios will seek to benefit from potential volatility. If the margin for error is thin, then any perception of error is likely to be met with extreme corrections. Markets in those circumstances tend to overshoot, which is good if you have cash or liquid assets poised to buy.

Similarly, there could be an ironic boost in earnings for European companies, as they’ll enjoy trade premiums versus U.S. competitors with higher export pricing.

Thus, multinationals in Europe with diversified revenues could shed recent valuation hurdles and look attractive again to the longterm equity player. The emerging market theme as described would become even more compelling net of a sell off, as it is by definition a long-term choice.

Domestically, I believe the rising tide advantage to passive strategies may be over. To grind out excess return going forward, we need to be willing to own stocks that have been out of favor, and assume that security selection will be a greater component of total returns.

In the shallower end of the pool, municipals have provided an oasis of calm during recent market upheavals. “Munis” are impacted mostly by fundamental domestic factors and may benefit directly from increasing demand and credit.

We certainly live in interesting times. Navigating the investment climate is made more difficult than usual, when coupled with volatile political arenas and rapid change.

The thoughtful investor and their adviser team will stay steady through the noise, diversify above all else, hold cash patiently at 0% and summon the conviction to buy when others are capitulating.

Lastly, we’re only two years away from the mid-term elections, and the early glimpses of the 2020 election cycle to start this crazy dance all over again.

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CRAIN’S CLEVELAND BUSINESS

FINANCE

PAYDAY CONTINUED FROM PAGE 12 In 2008, a municipal court judge found a Cashland store dodged the STLA in issuing an Elyria man a $500 loan that ultimately carried an APR of 245%. The store sued the man when he couldn’t repay the loan.

However, the business was registered under the MLA, so the lender appealed. An appellate court found that lenders couldn’t make loans under the MLA. The case went all the way to the Ohio Supreme Court, which overturned the lower court by ruling the loophole lenders were exploiting was legitimate.

So, in effect, the state has a law governing payday lenders that might as well be written in invisible ink.

“As I understand it, there isn’t a single payday lender registered in Ohio under the STLA,” said Brian Laliberte, chair of the financial services litigation group for Tucker Ellis LLP. “No one is doing business under the STLA.”

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The total number of short-term lenders can be difficult to track, but Pew’s December report shows Ohio has more than 650 payday loan storefronts in 76 counties. At least 66% are run by out-of-state companies.

Meanwhile, a November 2015 report by the nonprofit Center for Responsible Lending estimated Ohio was home to 836 storefronts that provided either payday loans, auto title loans or both. All combined, the sector earned at least $502 million in just loan fees. That’s more than double the amount from 10 years prior, according to the study.

Nick Bourke, director of Pew’s consumer finance program, said the lenders are “clearly a drag on the local economy” because they drain millions from consumers’ pockets.

Pew suggests Ohio adopt a system like the one in Colorado where conventional two-week payday loans were replaced by six-month-installment loans with lower prices. There, the average $300 loan repaid over five months carried $172 in costs — as compared to the $680 in fees in Ohio. Bourke said research shows an industry claim that regulation would put those lenders out of business simply hasn't come to pass there.

According to the Pew study, Bourke points out, credit access remains widely available there. Average loan payments consume only about 4% of a borrower's next paycheck. And with a clear pathway out of debt, 75% of those loans in Colorado are repaid early.

“Each year, borrowers in that state save more than $40 million, which goes back into the state’s economy,” Bourke said.

The industry takes exception with the notion that those short-term lenders aren't benefitting the economy in their own way, though.

A 2014 study by Kent State University associate professor of economics Shawn Rohlin reported that the short-term consumer loan industry pumped $900 million in direct and indirect spending into the Ohio economy, which caused residents' earnings to rise by $400 million and created an employment impact equal to 10,500 full-time jobs.

It’s worth noting that study was funded by the Ohio Consumer Lend-

ing Association, though Rohlin said the lobbying group had no say on the methodology or results.

Asked about the unflattering reports targeting Ohio’s short-term loan industry, Pat Crowley, spokesman for the Ohio Consumer Lenders Association trade group, deferred questions to a prepared statement: “The Ohio Consumer Lenders Association is committed to making sure hundreds of thousands of underbanked Ohioans, who are overwhelmingly satisfied with our products and services, continue to have access to affordable credit options.

Any new legislation that imposes restrictive caps or onerous regulations will do nothing but harm the very consumers the legislation is designed to assist by eliminating credit options and exposing consumers to more expensive options such as unregulated off-shore internet lenders, overdrafts, utility shut off fees, or worse — illegal lending activities. Proposing public policy that restricts credit access without providing a realistic alternative puts hundreds of thousands of Ohio families at risk. A one-size-fits all approach to products — which is what is being proposed by Pew — does not benefit Ohio consumers, who have many options from OCLA members that offer a variety of products and terms.”

Looking forward The Consumer Financial Protection Bureau last summer proposed a federal rule requiring short-term lenders to verify borrowers’ ability to pay their loan back. Evaluating that credit worthiness is something those lenders have never had to do.

State lawmakers such as Rep. Michael Ashford, D-Toledo, advocate for reformed state laws to bring the lenders in check. But he has since lost support from across the aisle in Rep. Marlene Anielski, R-Walton Hills, who has said she will spend the rest of her two-year term focusing on suicide prevention efforts, as reported by Cleveland.com. Anielski announced she would introduce a bill for payday lending reform in December alongside Ashford.

A bill has yet to be introduced. And Ashford did not reply to several requests for comment about his vision for lender reform.

So what could come next in terms of laws regulating those lenders is unclear.

But opponents don’t seem ready to give up their fight. The bigger issue, they say, is the overall impact on local economies these lenders have — which the industry maintains is wholly a positive one.

“This affects the business community because if consumers are spending their resources on these high interest rates, paying the loans back, they won't have any discretionary income to buy food, clothing, cars, etc.,” Bennett said. “The business community should want consumers to have disposable income to spend in the local community.”

“In a time when Cleveland manufacturers and other employers are looking for a stable workforce, the instability that this type of lender creates in the workforce has a harmful ripple effect long-term on the worker economy in Northeast Ohio,” said Melanie Shakarian, director of development and communications at The Legal Aid Society of Cleveland. “It creates this generational poverty we’re constantly trying to fight.”

CRAIN’S CLEVELAND BUSINESS

ATHLETIC CONTINUED FROM PAGE 1 focus on the user, obsess over their user, create the best content, and users will pay for that content. Subscription is the absolute core of our business.”

On the day it launched a website that will focus on the Browns, Cavs, Indians and Ohio State, The Athletic was asking subscribers to pay a discounted rate of $39.99 a year, or $4.79 per month. (The normal rate is $50 per year.)

The Cleveland site — led by Lloyd and Scott Raab, the former Esquire writer who penned “The Whore of Akron” and “You’re Welcome, Cleveland” — had four full-timers on opening day. Mather expects the total to reach double digits in the near future. The Athletic started without a Browns writer, which Lloyd said is “not ideal, but we’d rather go slow and get this right than just have a Browns writer at the launch.”

It’s all part of a long view that everyone involved said is part of the plan — even in an industry that can be as unforgiving as it is challenging.

Patient approach The Athletic introduced its Chicago site, which was funded by the two founders, in January 2016. With the Cubs going on to win their first World Series since 1908, the startup’s timing was pretty good.

What Mather describes as “a great 2016” also included the debut of The Athletic’s Toronto site, which was funded by a $2.3 million financing round. The largest investment,

The Athletic’s March 1 debut included an in-depth story on the Indians’ approach to scoring runs now that they’ve added Edwin Encarnacion.

$500,000, was made by Courtside Ventures, a $35 million venture investment firm that is led by Cavs owner Dan Gilbert.

Courtside isn’t involved in the dayto-day operations of The Athletic, partner Deepen Parikh said. Instead, the firm is assisting with the startup’s strategic plans, and Parikh said The Athletic’s backers aren’t pushing for immediate windfalls.

“I think patience is of absolute necessity in that we’re trying to build a brand,” the Courtside Ventures partner said. “This isn’t meant to be a quick fix or an extension of a newspaper. It’s a true consumer-facing brand that allows you access to content on

the teams you really care about.”

The $2.3 million funding round allowed The Athletic to launch its Toronto website “with a bigger team from Day 1,” Mather said. The Chicago site, on the other hand, added talent as it padded its subscriber numbers.

Toronto has grown “unbelievably fast,” the co-founder said, and is on track to be profitable by the second quarter of 2017. Mather also expects Chicago to be in the black before the end of the year.

Mather and Hansmann run the operation from San Francisco, with little overhead. They recently hired a designer, who became The Athletic’s third employee on the West Coast,

and the startup has three openings posted on its AngelList profile.

The number of subscriptions needed for each website to be profitable varies, depending on the number of writers each employs, and how much they’re compensated.

In Cleveland, Lloyd said he was given a “pretty strong voice” in the writers who have been hired. His boss, Mather, said The Athletic’s Northeast Ohio operation will probably need “closer to 15,000” subscriptions to be profitable.

That’s a small number for a local newspaper. But for a startup debuting in a city whose sports teams aren’t hurting for coverage, that could be a challenge.

“If there is ever a time that it’s going to work here, this is probably it,” said Kathleen Stansberry, an assistant professor of public relations and social media at Cleveland State University, in reference to the successes of the Cavs and Indians.

And while timing and interest are certainly on The Athletic’s side, convincing consumers to pay for content has proven to be difficult, at best, for online media companies.

“There’s an audience,” Stansberry said. “The problem is they don’t want to spend any money on it. I also think they might struggle a bit because Cleveland has a robust sports blogging community. Many are well-established and have been there a long time, and are producing very good work.”

The Athletic thinks it can differentiate itself in a crowded market because of the strength of its mobile site and its app. The latter has an Every Player feature that allows subscribers to swipe through a report card after each game.

Fans can then submit their own

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grades for each player, and watch highlight reels from that day’s game.

“We’re really focusing on mobile first and doing everything we can to get our first 10,000 subscribers to become obsessed with our app,” Mather said. “That’s how we’re coming out of the gate.”

The Athletic, more than anything, though, believes it has to win over subscribers with its writing. In addition to Lloyd and Raab, T.J. Zuppe, formerly of WKRK-FM, 92.3, will cover the Tribe, and Ken Berger, an ex-CBS Sports NBA insider and Cleveland sports writer for The Associated Press, will be among the national contributors.

“The hires that we’re making, these are not short-term hires,” Lloyd said.

“We’re looking at building a staff and culture that will be around for a while. I believe The Athletic will be around for decades to come.”

The daily newspaper veteran knows he sounds overly optimistic, but Lloyd — who says he grew “very cynical and jaded” about the industry — uses that as a testament to how much faith he has in Mather and Hansmann.

Mather, meanwhile, stresses that by allowing writers to focus on the big picture and not hunt for clicks, The Athletic can attract an audience, and keep them coming back.

“We don’t care about page views,” the co-founder said. “We tend to not have to write about the fluff. We don’t have to be on top of every little roster happening. We can really talk about why it matters.”

With a subscriber base in the thousands, a story might only get 500 page views, Mather said.

“But,” he added, “if those 500 users loved it, that is exactly what we want.”

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CRAIN’S CLEVELAND BUSINESS

AKRON

Q&A: Ilene Shapiro Summit County executive

Ilene Shapiro feels a little bit like an air-traffic controller, and the planes are coming in fast. In January, Shapiro, the first woman elected to lead Summit County, was sworn in.

And she quickly got to work steering a very busy county, working with the leaders of its 31 communities and getting up to speed on their concerns and issues.That’s no small task, but she’s loving every minute of it.

Shapiro took over as interim executive in July, after the unexpected death of executive Russ Pry. In November, voters gave her the job for the next four years, the first woman elected to the office. While Shapiro may be new to the top spot, she’s not new to county government or leadership roles. She served on the Summit County Council for nearly 10 years, three as president. Shapiro also has had a vibrant business career, serving in leadership roles with the Summa Foundation and FirstMerit Corp., plus running her own beauty supply business and consulting firm.

Crain’s recently chatted with Shapiro about her first months in office, her economic development goals and what it feels like to break down gender barriers. — Sue Walton What are some of your economic development goals for Summit County?

Making the county a more proactive partner in retaining and attracting businesses is a priority. I’ve already begun to further focus our efforts on working with existing small- and medium-size businesses, the engines of the economy, to help them grow and prosper. We are developing a more substantive business visitation program to truly learn what local businesses need to stay competitive and grow. I also want to continue the improvement of our workforce development programs, so that our local workforce meets the needs of current and prospective employers, and we are providing our residents with the training, education and skills they need for a lifetime of employment.

What kind of new businesses,

specifically, would you like to attract?

I believe we need to be more strategic in our efforts to attract new businesses. In recent years, the state and our local private and public sector partners have done a lot of good work in identifying the key business sectors in Northeast Ohio: polymer research and development, advanced manufacturing, medical/ biomedical and IT firms. We must now leverage that work to target businesses in those key industries.

We must also train and prepare our workforce in the skills that complement these sectors, so that as we work to grow those industries, we have the labor pool that companies need to succeed.

What are Summit County’s biggest challenges in driving business development?

SEE SHAPIRO, PAGE 19

Firms strike match made in manufacturing heaven

By DAN SHINGLER dshinger@crain.com @DanShingler

As Northeast Ohio seeks to position itself as a hub of 3-D printing technology, Cuyahoga Falls-based Ultra Tech Machinery and Columbus-based Fabrisonic may have just made a major advancement — the ability to combine additive manufactur ing and traditional CNC machining into a single piece of equipment.

“It’s all in one CNC vertical mill,” said Dave Norfolk Bartholomew, a senior machine designer with Ultra Tech who helped develop the new technology.

The concept may sound odd, because machining is traditionally in the realm of metalworking and 3-D printing normally deals with plastics.

But Fabrisonic had already figured out how to 3-D print with metal – even for big pieces of work.

“We can work on stuff up to 6 feet by 6 feet,” said Mark Norfolk, the CEO who co-founded Fabrisonic in 2011.

Fabrisonic takes a different approach to 3-D printing — also known as “additive manufacturing,” which might be a more apt description of how the company’s technology works.

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“BIg Blue” is one of Fabrisonic’s modified CNC cells that incorporates additive manufacturing with traditional machining. (Contributed photo)

While most 3-D printers slowly build up material a few molecules at a time, Fabrisonic does it by using thin metal foils that are stacked on top of each other and then welded together using vibration instead of heat.

It can work with a wide variety of metals, and because the foils themselves can include cutouts and shapes to accommodate internal spaces, they can be configured in such a way that the completed piece has whatever internal features are required, Norfolk said.

That includes everything from small channels through which fluids or gasses might pass, to spaces for sensors, fiber optics or other electronic components.

Because the process is done at low temperatures, those components can be built right into a piece without damaging them, too. And that’s one of the technology’s chief competitive advantages, Bartholomew said. But that’s also something Fabrisonic was doing in house.

What’s new, Norfolk said, is that by working with Ultra Tech, Fabrisonic has figured out a way to incorporate its weld head and additive manufacturing technology with off-the-shelf machine tools operated with modified Siemens controllers.

That means a single machine can be programmed to do additive manufacturing and machinery, and switch back and forth between the two, without having to move a work piece during the process, Bartholomew said.

That capability might transform the very nature of Fabrisonic’s business, too — changing it from a small contract machining company to a vendor of state-of-the art machine tools with technology found nowhere else.

That has been Norfolk’s intention all along.

So far, the company has sold two machines with the new technology, and it’s building its third for a customer, Norfolk and Bartholomew said.

The tech doesn’t come cheap. Fabrisonic is only working with new vertical mills, which can cost $100,000 in

standard trim, because the addition of its technology can double the cost of a new machine.

As to how many machines Fabrisonic and Ultra Tech can sell, that remains to be seen.

Fabrisonic is small and its seven employees, including Norfolk, spend most of their time developing their technology.

Its two machinists use that technology to do work for customers, who typically need very precise work done on metal components for things like aerospace and medical-device applications.

Now those clients want their own equipment.

“Most of our customers come to us first, and we do low-volume production for them for a while. Then, when they get used to the technology, they say, “Hey, can we buy our own machine?” Norfolk said.

Fabrisonic has chosen not to seek alliances with any of the big machine tool companies in part because it doesn’t want to attach itself to a specific platform that not all potential customers may want.

“We would much rather stay independent. There are a lot of great CNC cells on the market today, and our tech works with all of them,” Norfolk said.

“Unless one of those big companies wants to come and buy us,” he added, with a half-joking chuckle.

In the meantime, both companies are in a region that’s rapidly embracing additive manufacturing.

In a July 2016 report, Cleveland-based MAGNET, Team NEO, the Youngstown Business Incubator and Youngstown’s America Makes group issued a report on the potential for 3-D manufacturing and found ample resources and support for the growing technology in Northeast Ohio.

“There is an unusually high concentration of universities training design talent, a historically strong manufacturing base of industry and workforce, world-class materials and biomedical assets, and a growing presence of innovators and innovation service providers,” the report found.

CRAIN'S CLEVELAND BUSINESS μ MARCH 6, 2017 μ PAGE 19 C R A I N ’ S C L E V E L A N D B U S I N E S S | M A R C H 6 - 12 , 2 017 | PA G E 19

AKRON

TinyCircuits keeps on growing

By RICHARD WEINER clbfreelancer@crain.com

Big things are happening at TinyCircuits.

The Akron manufacturer of small, open-source circuit boards is adding floor space and capacity, because the company can’t keep up with the new business it’s getting, company founder Kenneth Burns said.

When Crain’s last visited the company, in November 2015, Tiny Circuits was just coming out with its Tiny Arcade, a hand-sized gaming system shaped like the old arcade machines. A Kickstarter campaign to raise $25,000 at that time, Burns said, eventually brought in $128,000 in preorders for Tiny Arcade, which retails at about $60 and is available through the company website.

Last year, TinyCircuits had so many orders, it couldn’t keep up, Burns said. So, at the end of 2016, the company, which has expanded to eight employees, restructured its finances to expand its design and production capabilities.

That is a far cry from TinyCircuit’s start in Burns’ garage. A graduate of St. Vincent- St. Mary High School, Burns has bachelor’s and master’s degrees in electrical engineering from the University of Akron.

After stints with Telxon Corp. and a failed startup, Burns said, he became interested in industrial controls and with small sensor circuits in particular.

“I wanted to take large industrial sensors and shrink them down,” he said.

In searching for an operating system, Burns discovered the opensource Arduino prototyping platform, and then he “took a left turn into the gaming sector.”

It’s paid off.

“We did roughly $625,000 in revenue in 2016 and plan on over 30% growth in 2017,” said Burns.

“The Tiny Arcade was the growth product toward the end of 2016, after it was released for retail, and accounted for about 40% of our sales

To keep up with orders, TinyCircuits founder Ken Burns had to add more space to the company’s site in Akron. (Shane Wynn for Crain’s)

for the fourth quarter of 2016,” Burns said. “About 15% of revenue came from outside custom jobs, and the remaining would be standard products that we offer.”

Burns declined to talk more specifically about financials, but said, “We did obtain a loan from Growth Opportunity Partners at the end of 2016 that let us hire two new people and get new equipment and build out new space here at Canal Place. We added 2,000 more square feet of floor space, so we’re up to 7,000 total. And we purchased a new pick and place machine (which places all of the electronic components onto the printed circuit boards) and a new laser cutter.”

Canal Place is the old Goodrich Tire factory on the south side of downtown Akron that has been converted into a multiuse business facility. It houses the Akron Global Business Accelerator and several businesses, many of which come from the science departments at the University of Akron. TinyCircuits is listed on the accelerator’s website, but Burns said the company is independent of the organization.

In the meantime, besides selling the Tiny Arcade, TinyCircuits pro-

duces about 55 different products, many of which are inspiring several makers to use them in scientific applications, Burns said.

TinyCircuits manufactures most of its products in-house with a “wide mix of low-volume production machines” and the lessons learned from mistakes made over time, he added.

The company’s products include small games and game kits, tiny video screens, a smartwatch kit, processor boards, an accelerometer, a GPS board, a transceiver, an LED display board, processor kits, an audio board and lots of other small circuit boards.

TinyCircuits’ chips are about the size of a quarter and very inexpensive compared to other circuit boards.

They are compatible with the Arduino operating system, meaning they’re perfect for hackers and makers who want to embed computing power into the electronic devices they create.

Out in Missouri, for instance, J. Scott Christenson built a training stethoscope using a TinyCircuits board. Christenson, an assistant professor at the University of Missouri, was searching for a solution to a problem in training doctors and nurses to use a stethoscope.

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“An actor can play a simulated patient who displays the symptoms of a disease,” said Christenson. “But you can’t simulate what you hear in a stethoscope.”

Christenson’s solution, which is still in development, involves a TinyCircuits board connected to a sound database of medical conditions, created to imitate the look and feel of a stethoscope.

A radio frequency identification chip on the patient tells the TinyCircuits chip what sound to play based on a programmed condition. Voila — the medical student hears what a patient’s medical condition will sound like.

“I found TinyCircuits on the web, looking for Arduino chips,” Christenson said. “It was a small, compact system, and they are good guys — very helpful.”

In Boston, at the Massachusetts Institute of Technology, Columbus native Anna Young is working on a couple of projects using TinyCircuits technology.

One currently in development at Young’s lab is a “smart” pill bottle that can help people with electronically timing their medication intake and tracking data.

Young said that the bottle she is helping to develop could be sold for a fraction of the cost of similar products on the market.

“I love working with the TinyCircuits team because I’m from Ohio (to begin with),” Young said. “It’s fun for us to explore possibilities with them.

They are not just a vendor; we visited their shop and brainstormed with them. They are a great team, and we enjoy working with them.”

TinyCircuits connects with these scientists and others at maker’s fairs and trade shows around the country.

After ideas are brainstormed, TinyCircuits is set up to design and manufacture small batches of products based on a customer’s needs.

Those needs seem to be expanding as fast as Burns and company can get new machines into their space.

“We can do cool things that other companies just can’t do,” he said.

SHAPIRO CONTINUED FROM PAGE 18 What are its biggest assets?

Unfortunately, economic development in our region is still more fractured than I would like. A main focus of my administration will be to work collaboratively with our economic development partners and communities in Summit County to ensure that we are pulling in the right direction and that territorialism and silos become a thing of the past.

Trusted relationships are a thing of the future. We need to improve our process because we are a county rich in natural resources, at the center of America’s infrastructure network, with a long history of hardworking, talented workers.

How does regionalism play into your business/economic development plans?

The county does not operate in a vacuum, so regionalism is very important. ... Businesses are not contained by the imaginary lines drawn by governments. Several years ago, the county introduced a revenue-sharing/anti-poaching agreement to reduce the offering of incentives to induce intracounty relocations and to compensate a community that loses a large employer in the event of an intracounty relocation. I plan to expand that concept and work with our local communities to ensure if one of them is unable to close a deal with a business then other communities in the county can pick up that lead to try to close the deal for itself.

You’ve longed worked with women’s leadership organizations.

What does it feel like to break the glass ceiling as the first elected female county executive?

It has been an amazing journey. I have led with my heart and my head, and been true to my commitment to make a difference. That has taken me to amazing places in my life.

Go to CrainsAkron.com for more of our Q&A with Ilene Shapiro.

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THE LIST Software Developers

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CRAINâ&#x20AC;&#x2122;S CLEVELAND BUSINESS

THE LIST

Local Software Developers

(1)

Ranked by full-time local employees NAME THIS ADDRESS YEAR PHONE/WEB SITE

LOCAL EMPLOYEES LOCAL 1-1-2017 1-1-2016 CODERS INDUSTRY SPECIALIZATION

SOFTWARE PRODUCTS

LANGUAGES

TOP LOCAL EXECUTIVE YEAR FOUNDED TITLE

1

Hyland, creator of OnBase 28500 Clemens Road, Westlake 44145 (440) 788-5000/www.onbase.com

1,603

1,515

270

Health care, higher education, government, finance, insurance, manufacturing

OnBase, enterprise content management software suite

C#, C++, C

1991

Bill Priemer president, CEO

2

MRI Software LLC 28925 Fountain Parkway, Solon 44139 (800) 321-8770/www.mrisoftware.com

407

398

127

Property and investment management solutions for the global real estate industry.

Version X, MRI Commercial Management, MRI Investment Management, MRI Residential Management

VB.net, C#, Java

1971

Patrick Ghilani CEO

3

OEC 4205 Highlander Parkway, Richfield 44286 (330) 523-1800/www.oeconnection.com

228

218

66

OEM distribution networks, serving dealership and repair customers

D2DLink, CollisionLink, RepairLink, ConsumerLink, MyPriceLink, Performance Coaching

.NET Framework

2000

Charles Rotuno chairman, CEO

4

Brandmuscle 1100 Superior Ave., Suite 500, Cleveland 44114 (216) 464-4342/www.brandmuscle.com

220

208

32

Local marketing software and services

BrandBuilder, ChannelBuilder, LocationBuilder

C#, SQL, JavaScript

2000

Kathleen D. Heflin executive vice president, finance

5

Foundation Software 17999 Foltz Industrial Parkway, Strongsville 44149 (800) 246-0800/www.foundationsoft.com

186

129

34

Job cost accounting software for the construction industry

Foundation construction accounting software, Foundation mobile, Foundation Service Dispatch mobile, Foundation SaaS, Foundation eAccess

PowerBuilder

1985

Fred J. Ode CEO, chairman, founder

6

Fleetmatics, a Verizon Company (2) 31500 Bainbridge Road, Solon 44139 (216) 896-7243 /www.fleetmatics.com

163

157

NA

Delivery and service, cable and telecommunications, HVAC and plumbing, construction

Fleetmatics REVEAL, Fleetmatics WORK

C#

2004

Matt Brett vice president, Global Customer Care

7

CardinalCommerce Corp.

8100 Tyler Blvd., Mentor 44060 (877) 352-8444/www.cardinalcommerce.com

155

120

50

Payment industry

Cardinal Consumer Authentication

Java, C#, SQL, JavaScript, Scala, Python

1999

Tim Sherwin CEO

8

Turning Technologies 255 W. Federal St., Youngstown 44503 (330) 746-3015/www.turningtechnologies.com

121

143

30

Learning engagement and assessment services

TurningPoint, ExamView

Windows, Mac, Android, iOS

2002

Ethan Cohen CEO

9

MIM Software Inc. 25800 Science Park Drive, Suite 180, Beachwood 44122 (216) 455-0600/www.mimsoftware.com

89

78

23

Medical imaging

MIM, Mobile MIM, MIMcloud, MIM Symphony, MIM Encore, MIM Maestro

Java, Ruby on Rails, C++, Matlab

1999

Andrew Nelson CEO

10

1EDISource Inc. 31875 Solon Road, Solon 44139 (440) 519-7800/www.1edisource.com

80

82

10

Electronic data interchange software

managedXchange [MX], EDI HeadQuarters [HQ], partnerXchange [PX], intelligentXchange [IX]

C#

1989

John Onysko founder, chairman

11

n2y LLC P.O. Box 550, Huron 44839 (419) 433-9800/n2y.com

70

50

6

Special education online instructional materials

Unique Learning System, News2You, SymbolStix Prime

.NET Framework

1997

Chrissy Wostmann president

12

Software Answers Inc. 6770 W. Snowville Road, Suite 200, Brecksville 44141 (440) 526-0095/www.progressbook.com

63

58

20

Web-based K-12 student, classroom, school and district management software

ProgressBook Suite: GradeBook, ParentAccess, StudentInformation (SIS), SpecialServices, DataMap, VirtualClassroom

C#, MVC, VB.Net, JavaScript, jQuery

1994

Paul Chaffee CEO

13

New Innovations Inc. 3540 Forest Lake Drive, Uniontown 44685 (330) 899-9954/www.new-innov.com

60

49

15

Medical

Residency Management Suite, Undergraduate Management Suite

C#

1995

Steve C. Reed CEO

14

Tribute Inc. 1696-F Georgetown Road, Hudson 44236 (330) 656-3006/www.tribute.com

58

54

20

Industrial distribution, fluid power, fluid handling, hose, conveyor belt, gaskets, seals

Tribute Software, TrulinX Software

.NET Framework

1983

Timothy M. Reynolds president, CEO

15

Dakota Software 1375 Euclid Ave., Suite 500, Cleveland 44115 (216) 765-7100/www.dakotasoft.com

55

50

20

Environment, health and safety

ProActivity Suite, Dakota Profiler, Dakota Auditor, Dakota Tracer, Dakota Scout, Dakota Metrics

.NET Framework

1988

Reg Shiverick president

16

FeneTech Inc. 260 Campus Drive, Aurora 44202 (330) 995-2830/www.fenetech.com

51

48

17

ERP solutions

FeneVision, Q2S

.NET Framework

1996

Ronald W. Crowl president, CEO

17

IBM-UrbanCode 1228 Euclid Ave., Cleveland 44115 (216) 370-6880/https://developer.ibm.com/urbancode/

50

45

35

Software/Technology

IBM UrbanCode Deploy, IBM UrbanCode Release, IBM UrbanCode Build

Java, JavaScript

1911

Brian J. Muskoff program director, IBM UrbanCode

18

Main Sequence Technology Inc. 4420 Sherwin Road, Hamilton Hall, Willoughby 44094 (440) 946-5214/www.pcrecruiter.com

48

47

9

HR applicant tracking, recruiting CRM, staffing software

PCRecruiter, PCRecruiter Resume Inhaler, PCRecruiter Outlook Portal

Microsoft stack

1998

Martin Snyder, president; Gretchen Kubicek, CFO

18

StreamLink Software 812 Huron Road, Suite 550, Cleveland 44115 (216) 377-5500 /www.streamlinksoftware.com

48

43

11

Software for nonprofits and government organizations

AmpliFund

.NET Framework

2008

Adam Roth CEO

20

e2b teknologies Inc. 521 Fifth Ave., Chardon 44024 (440) 352-4700/www.e2btek.com

47

44

8

Accounts receivable credit and collections software, enterprise resource planning

Anytime Collect by e2b teknologies; custom development for Sage 100 ERP, Sage ERP X3, Sage 500 ERP and Epicor ERP

ASP, .NET Framework, Java

2001

Bill Henslee, CEO Lynne Henslee, president

21

BuyerQuest Inc. 343 W. Bagley Road, Suite 300, Cleveland 44017 (866) 937-0670/www.buyerquest.com

45

48

11

Corporate purchasing

BuyerQuest eProcurement, BuyerQuest Marketplace, BuyerQuest Procure-to-Pay

PHP, JavaScript, Java, SQL, CSS/ SASS

2010

Jack Mulloy CEO

21

Pointe Blank Solutions Ltd. 30400 Detroit Road, Suite 400, Westlake 44145 (440) 243-5100/www.pointeblank.net

45

40

20

Health care, government

CasePointe, MatrixPointe Software

C#

2000

Thomas J. Coury chairman, chief software architect

23

Data-Basics Inc. 600 Broadway Ave., Cleveland 44146 (216) 663-5600/www.databasics.com

43

43

28

Service management and accounting

Sam Pro Enterprise, TechAnywhere for Android, DBAnalytics, CRMAnywhere, FMAnywhere

SmallTalk, Android, HTML, DBFrameWork

1974

Arthur K. Divell CEO

24

Banyan Technology 151 Innovation Drive, Suite 310, Elyria 44035 (800) 835-1274/www.banyantechnology.com

42

20

20

Transportation management

Banyan

C#, MVC4/5, SQL, JavaScript, XML

2001

Brian Smith CEO

25

Squirrels 121 Wilbur Drive NE, North Canton 44720 (855) 207-0927/www.airsquirrels.com

35

36

11

Education

AirParrot 2, Reflector 2, ScreenToss, Reflector Director, Reflector Student, ClassHub, Ditto

C, C#, ObjectiveC, JavaScript

2012

David Stanfill president, founder

26

Datatrak International Inc. 5900 Landerbrook Drive, Suite 170, Mayfield Heights 44124 (440) 443-0082/www.datatrak.com

28

23

2

Clinical research, health care

Datatrak EDC, Datatrak eClinical

Java

1995

Jim Bob Ward CEO, president

27

COMS Interactive LLC 9200 South Hills Blvd., Suite 200, Broadview Heights 44147 (330) 650-9900/www.comsinteractive.com

25

25

11

Disease Management System

COMS Assessments, COMS Reporting, COMS Care Review, and COMS Marketing

C#.Net, Sequel, MVC

2008

Bill Stuart president, COO

RESEARCHED BY CHUCK SODER The full list includes 45 companies and is available for purchase at crainscleveland.com. Information is supplied by the companies. (1) Crain's did not receive responses from three companies that typically rank in the Top 10 for

this list: TMW Systems, Snap-on Business Solutions and the Cleveland office of IBM Watson Health (formerly known as Explorys). (2) Verizon acquired Fleetmatics Group PLC of Dublin, Ireland, for $2.4 billion in November 2016.

CRAIN’S CLEVELAND BUSINESS

ARENA CONTINUED FROM PAGE 10 Three times voters in Cuyahoga County have answered that question with the same answer: “yes.” In 1990, voters agreed to a tax on alcohol and tobacco. They agreed to extend it in 1995 and 2014 to pay for the construction and upkeep of FirstEnergy Stadium and the upkeep of Progressive Field and Quicken Loans Arena.

In 2015, that tax generated more than $13 million to pay off bonds issued for work on those three buildings.

Given the high cost of keeping sports teams where they are, and the lack of a clear public benefit, a community’s willingness to financially support its sports teams isn’t apparElizabeth McIntyre Scott Suttell Tim Magaw David Kordalski Damon Sims Sue Walton Kevin Kleps Stan Bullard Real estate/ construction Reporters Jay Miller, Government Dan Shingler Energy/steel/auto Rachel McCafferty Manufacturing/ energy Jeremy Nobile, Finance Lydia Coutré, Health care Data editor Chuck Soder Cartoonist Rich Williams *** Events manager Ashley Ramsey Events coordinator Megan Lemke Integrated marketing manager Michelle Sustar

Publisher/editor Managing editor Sections editor Creative director Web editor Associate editor/Akron Assistant editor Senior reporter

ent on a spreadsheet. Rather, it’s tied into intangibles like civic pride and a kind of kinship that brings joy when a team wins and despair when it loses.

Who hasn’t lorded a local victory over a brother, sister of friend from a city on the losing end? (I have a brother in San Francisco.)

Actually, cigarette smokers are subsidizing local entertainment venues even further, through a tax on every pack approved by voters a decade ago and renewed by voters in 2015.

As a result, since 2007 cigarette smokers contributed $172.8 million to fund hundreds of arts and cultural programs, ranging from the Cleveland Orchestra to a dance performance by elementary school-age kids at the Fatima Family Center on Cleveland’s East Side.

And let’s not forget the $465 million

sunk into the new convention center and adjoining health center. That investment is being paid for by an added sales tax, approved by county commissioners, not voters, in 2009.

But should Gilbert, the Cavs' owner, endow what GCC, which says it represents 100,000 county residents, wants: a $35 million Community Equity Fund? Or should the group try to build support for a tax increase to pay for expanded services?

That seems unlikely.

Asked that question and another about the group’s plans if its proposal is ignored, James Pearlstein, the group’s lead organizer, said they have a plan that he wasn’t prepared to reveal. All he would say is, “There will be hell to pay.”

Let’s hope that’s more rhetoric than threat.

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Account executives

Amy Ann Stoessel Nicole Mastrangelo Dawn Donegan Lindsie Bowman John Banks Laura Kulber Mintz Office coordinator Denise Donaldson Digital strategy/ audience development director Nancy Hanus Production director Craig L. Mackey Billing Peter Iseppi Credit Rod Warmsby

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Get the service you deserve with your business and personal banking needs. Talk to us today or stop by our office at: 24755 Chagrin Blvd., Ste. 100 | Beachwood, OH Contact: Dell Duncan Executive Vice President 216-225-1666 Dduncan@geaugasavings.com

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*** G.D. Crain Jr., Founder (1885-1973) Mrs. G.D. Crain Jr., Chairman (1911-1996) *** Reprints: 212-210-0750 Krista Bora kbora@crain.com Customer service and subscriptions 877-824-9373

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CRAIN’S CLEVELAND BUSINESS

Cleveland Auto Show attendees look at a Chevy Corvette at the IX Center. (Ken Blaze for Crain’s)

Chrome-wheeled eye candy hits CLE

T

Dave Augusta of Newton Falls and Dan Bartels of Salem check out an engine from the car of NASCAR driver Kyle Busch.

he annual Cleveland Auto Show, which wrapped up Sunday, March 5, at the I-X Center, featured concept, pre-production, production and vintage vehicles from auto manufacturers from around the world.

With nearly 1.2 million square feet of exhibits and more than 1,000 vehicles, the scale of this year’s show easily eclipsed its inaugural of 1903, when 15 Cleveland-made automobiles and a handful of cars from around the United States were on display on the floor of Gray’s Armory in downtown.

The show allows thousands of would-be consumers to inspect the vehicles in a pressure-free, non-sales environment. Representatives of the manufacturers were on hand to answer questions.

Final figures weren’t available at press time, but officials expect the attendance to be equal to or better than recent years.

Next year’s show runs from Feb. 23 to March 4.

Vintage cars and memorabilia abound at the show. Clockwise from top left: a 1957 BMW Isetta; a 1974 VW Super Beetle sporting “Herbie the Love Bug” decals; an array of collectible minatures and a detail of a late 1950s-era Pontiac Bonneville.

Auto show attendees check out the undercarriage of a Toyota Tundra.

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CRAIN’S CLEVELAND BUSINESS

Source Lunch Paul Psota

CEO of Altenheim Senior Living With 125 years now under its belt, Altenheim Senior Living is prepared for the future, said Paul Psota, CEO of the nonprofit life plan community. Altenheim is celebrating its 125th anniversary this year — and still growing, with projects totaling about $21 million in capital investments.

Shurmer Place Memory Assisted Living, slated to open in October, is dedicated to seniors dealing with Alzheimer’s and dementia issues and will be staffed with certified dementia practitioners. Altenheim’s Therapy Rehab Center, scheduled to open next January, will be dedicated to individuals who require post-hospital inpatient and/or outpatient therapies or rehabilitative services. — Lydia Coutré

Five things Hobbies Exercising, spending time with his wife and drinking wine

Favorite place in Northeast Ohio Hinckley Lake

Top of the travel bucket list The outdoor Christmas markets in Austria and southern Germany

Favorite book The Bible

Guilty pleasure Using the biggest wine glass he can find and filling it to the top

Lunch spot Square 22 Restaurant and Bar 13485 Pearl Road Strongsville

The meal Avocado Caesar Wrap with kettle chips and an iced tea; Faroe Island Salmon

The vibe Square 22 serves up new American food in an edgy setting. The restaurant and bar balances a casual and chic feel with its cozy fireplace, red-lit bar, dark wood and large windows.

The bill $35.59, plus tip

How do the past 125 years affect the work of Altenheim today?

Altenheim was founded as a not-for-profit organization having the purpose of serving Greater Cleveland’s seniors. It was founded by 60 (or so) German-American women of the West Side German Women’s Club.

With about $260, and a lot of faith, they began construction of a home for the aged (in German, an “Altenheim”) on Detroit Road in or about 1887. It opened in 1892. The Women’s Club continues to be active in carrying out the organization’s mission, strictly as volunteers, to this day. Their passion and altruistic motives permeate Altenheim’s culture today.

How has Altenheim grown in that time, especially in the last decade?

Altenheim operated in its initial facility in Cleveland until 1980, when it moved to Strongsville. At that time, it expanded by purchasing an existing 100-bed nursing facility.

Since then, the number of skilled nursing beds gradually expanded to 160. Beds will increase again, to 170, next January with the addition of Altenheim’s new Therapy Rehab Center. In 2001, Altenheim expanded its services to residential care by opening Shurmer Place at Altenheim (at that time offering 60 independent and assisted living apartments). In fall 2014, Shurmer Place expanded by adding 25 more independent and assisted living apartments. It has 85 in total now. Shurmer Place will add 38 more apartments this fall with the opening of Shurmer Place Memory Assisted Living. It will have 123 in total.

In late 2014, Altenheim expanded its service offerings again by opening Altenheim Home Health Care. The agency offers skilled nursing and therapy services to homebound clients in their own homes.

On Dec. 1, 2016, Altenheim purchased a well-established outpatient therapy clinic, Hands-On Physical Therapy Specialists.

Hands-On provides outpatient physical and occupational therapies to the community, and has a certified hand therapy specialist.

Also, just recently, Altenheim opened Altenheim at Home, offering private duty assistance services to clients in their homes.

Altenheim has also been serving homebound Strongsville seniors with Meals on Wheels for the past three decades.

What are some of the biggest challenges in senior care today?

The number of seniors requiring various services over the next few decades will explode. That’s the good news for our industry. The bad news is, who’s going to pay for needed services? Federal and state governments and private insurance carriers are constantly striving to implement service models that provide less reimbursement to providers and, in some instances, do not serve the best interests of clients. Trends in the industry include tying reimbursement to measurable quality outcomes; penalizing providers for expending too much on care; shifting reimbursement from inpatient services to home and community based services; and, shifting insurance coverages from governmental Medicare and Medicaid programs to private carrier programs.

How will Altenheim address these going forward?

Altenheim’s ongoing priority is to maintain and improve quality outcomes for its clients, families and the community served. Acute care providers and other providers in the care continuum will strive to partner with organizations that can demonstrate quality outcomes over the long haul. Altenheim has also expanded its service offerings to align with changing reimbursement models and client demands, e.g., by providing skilled and private duty services in clients’ own homes; by specializing in its service offerings, e.g., memory care; and, by revamping its in-patient services to accommodate the hospitality environment that Baby Boomers demand.

How do you think the Northeast Ohio community needs to prepare for and respond to an aging population?

Health care providers, employers, insurance carriers and other community organizations should develop, implement and incentivize preventative practices in the way its clients, employees, enrollees and members live their lives. Nutrition, physical activities, positive emotional outlets, support groups and community information resources all have the potential to lessen the economic, physical, social and emotional burdens that will be associated with caring for an unprepared aging population.

in

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MARKETING, ADVERTISING & EVENTS INSIGHTS.

Today’s Tip: A simple question can break the ice.

Most events offer plenty of time for networking. Indeed, a lot of valuable connections can be made just by starting out with a question. Try approaching someone new and ask something simple, such as, “What brings you to this event?”

That’s all it takes sometimes to get the conversation started.

Ashley Ramsey

Events Manager Crain’s Cleveland Business aeramsey@crain.com

How Crain’s can work for you: CRAIN’S CLEVELAND BUSINESS EVENTS Crain’s Cleveland Business events are widely recognized as a great place to make connections. So, why not put your networking skills to the test at one of our upcoming events?

• • •

May 3, Family Business Forum June 21, Crain’s Health Care Forum July 18, Crain’s Women of Note Awards

For more information on upcoming programs, go to www.crainscleveland.com/events.