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You're Not In Camelot Anymore, Mr. Kennedy

Medical Mart Purveyor Steers Clear Of Cleveland's Slow-in-coming Due Diligence



Like so many other big decisions in Cleveland, something major happened behind closed doors.

For months on end, the general consensus was trending toward putting the proposed convention center/medical mart complex on Forest City Enterprises' cramped plot behind Tower City. A study from the Greater Cleveland Partnership, housed conveniently at Tower City, came out in August with the site at the top of the heap, claiming it would be too costly to remedy foundation problems at the existing convention center site.

But on January 22, the county commissioners became emboldened by a new study from Merchandise Mart Properties Inc., and suddenly Tower City was out. Plan B on Mall B, the site of the current convention center, was a go. They claim the site change, with a special new foundation as well, would cost around $50 million less.

The sudden about-face creased many brows. On Thursday, February 12, Cleveland City Council held a hearing to put many of those questions to MMPI president Chris Kennedy, who claimed he was "agnostic" about site selection. Kennedy also made it clear that his company was in charge here, damn it.

"We'd be the manager of this facility, and as manager of this facility, we'd operate it, we'd take the risks and we'd take the rewards," Kennedy told council members.

What risks? An early memorandum of understanding shows MMPI receiving between $5 million and $8 million a year to operate the facility, even though the deal between MMPI and the county gives MMPI ownership - an arrangement that conveniently allows the county to avoid competitive bidding.

The Mall B site is largely owned by the city, which undoubtedly will be called upon to unload it cheaply for the greater good. The company, through the county, also plans to ask for property taxes to be waived on the $425 million development - a $2 million-a-year present. And don't forget: Taxpayers are footing the entire bill, as well as interest on the bonds that is expected to make the project cost nearly a billion dollars when all is said and done. MMPI's cost: maybe $20 million. Some risk.

Kennedy was evasive when confronted with specific questions from council members, which were limited to less than a third of the three-hour hearing. Nearly two hours were consumed by a self-aggrandizing, 300-slide PowerPoint presentation, much of which merely restated the company's prominence in the field. The second half dealt with the chronology of events and the various engineering permutations (appropriately dubbed "schemes") that brought the company to its current Mall B selection.

Kennedy predicted the creation of about 5,000 jobs, with an estimated 50 trade shows (10 percent of the market share) and 100 new conferences (6 percent), generating close to a billion dollars in new economic activity(!).

Council President Martin Sweeney openly gushed about the prospects Kennedy presented. Then he actually tried to get details about land-acquisition costs. Kennedy, who'd begun his spiel with the assertion that he's "more than open to any insight or suggestion you might have," soon motioned to the news cameras in the room and added, "Whether we want negotiations on television is something else."

Sweeney, effectively scolded, called upon his loyal majority on council. Most of the questions were softballs, but some had bite, appearing to catch Kennedy off-guard, evasive and more than a tad dickish.

When Ward 4 Councilman Ken Johnson, chairman of the parks committee, pushed Kennedy on where he got a $17 million figure for land acquisition at the current Mall B site, Kennedy ultimately became flustered: "What I'm saying, for the fourth time, is that we went with the Greater Cleveland Partnership input. Please do not attribute those numbers to us."

Johnson also asked him about reports that MMPI's profitability was suffering. Kennedy's pink face turned red, deflecting the question with generalities.

Ward 8 Councilwoman Sabra Pierce Scott asked about rumors that MMPI could back out as late as August. Kennedy said, "If there was an indication that nobody wanted to come to Cleveland, I don't know why we'd want to continue." In courtroom dramas, lawyers call answers like that "unresponsive."

Kennedy was surprisingly stymied by questions from downtown Councilman Joe Cimperman, who in no way could be called an opponent of the project. When he asked Kennedy whether MMPI had a nonprofit wing, or whether the project had to be a for-profit venture, Kennedy claimed he didn't know. When Cimperman asked whether the project would pay property taxes, Kennedy said, "If there were property taxes, what we can afford to build will change." Then Cimperman let it all come out: "Is there any other market where public financing is where it is here?" Kennedy responded irrelevantly and evasively: "There's no trade-show operation in the United States without public subsidy."

Cimperman did get a promise from Kennedy that the county or city wouldn't be responsible for any project cost overruns, but Kennedy made it clear he wasn't ready to negotiate in public. And when Ward 16 Councilman Kevin Kelley asked Kennedy, point-blank, to confirm reports in The Plain Dealer that MMPI would own the facility, Kennedy only acknowledged that the company would be "the beneficiary."

As Sweeney tried to wrap up, several council members outside Sweeney's majority and known for more rigorous due diligence couldn't contain their disgust. North Collinwood's Mike Polensek, who urged Sweeney a year ago to bring council into the negotiations, butted in. The taxpayers got the short end of the stick on the Gateway and Browns Stadium projects, said Polensek, and now council is "trying to get on the caboose after the train has left the station."

Ward 17 Councilman Matt Zone, Sweeney's most outspoken foe, added, "I have a whole list of questions here, but I didn't have an opportunity to ask them because of the way this committee meeting unfolded." Later, Zone called Sweeney "intellectually challenged."

Polensek says this could be an opportunity to create a true "civic center," similar to Chicago's Millenium Park, that's tied to the lakefront and becomes a destination of its own. It's in the city's best interest to hold a lease over MMPI's heads, he says, and become a planning partner.

"This was Kennedy trotting out his show wagon again," he says. "And we've heard it. We know you're an outstanding company. How many times are we going to see this again? What about the issue of governance? Is this going to be lease or a sale? That's what people want to know now. This town is at a crossroads, so we can't afford to continue to make bad decisions. If we give them this property without any strings attached, that's a serious mistake. Do I want to see the existing convention center renovated? Of course. Do I find the Kennedy proposal intriguing? Finally after all these years, we have an opportunity to resurrect the convention center. So yes.

But let's not get caught up in the euphoria. MMPI is getting all the profits and they're obviously putting very little of their own money into it."

It all sounds so familiar.


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