Cleveland to Give Rocket Mortgage Another Handout, Economic Development Brain Worm Thrives

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CLEVELAND PLANNING COMMISSION
  • Cleveland Planning Commission

The City of Cleveland will give Rocket Mortgage roughly $1 million over the next five years as part of a so-called job creation incentive package. The grant is now a standard offering, one of the city's go-to tools in its economic development toolbox. It is equal to 0.5 percent of a company's new payroll.

Rocket Mortgage, the Detroit-based mortgage lender formerly known as Quicken Loans, is housed under Dan Gilbert's Rocket family of companies. It plans to expand its Cleveland headcount by roughly 700 employees. The new hires will work on the fourth and fifth floors of the Higbee Building downtown, above the JACK Casino, and will expand the company's fintech (financial technology) division.



According to Rocket's Cleveland-based director of government affairs, Wendell Robinson, these positions will not require a four-year college degree and will pay, on average, $75,000 per year. 

In a city council committee meeting Tuesday morning, which consisted largely of council members prostrating themselves in gratitude before Rocket Mortgage, the city's legislation was revealed to be a formality. Robinson told Councilwoman Phyllis Cleveland that Rocket was already recruiting for these new positions and intended to begin hiring immediately. The company had received a pledge from the city that they'd get the grant, Robinson said, and wanted to hit the ground running.



City council was just the rubber stamp, in other words. Everything had already been ironed out by the Greater Cleveland Partnership (GCP), Ohio Means Jobs and other partners who assembled the picnic basket of subsidies for the mortgage giant. Everyone was confident that city council would raise no objection of any kind.

They didn't. Tuesday morning, the city's elected representatives took turns heaping praise on the mortgage lender. They declared that the deal was "Christmas in February," (Councilman Joe Jones). It was a wow-worthy "big win for Cleveland," one that "the entire city should be celebrating," (Blaine Griffin). Indeed, Griffin said it was one of the best deals he'd ever seen on council. Downtown councilman Kerry McCormack offered his "enthusiastic support," and Phyllis Cleveland said Rocket's expansion represented "an investment in human capital in our community that we haven't seen the likes of in quite some time, if ever." Basheer Jones called the deal "very very exciting" and told the city's economic development director, David Ebersole, that he "continue[d] to hit home runs." (No word on how the deranged 60-year TIF for the Flats East Bank project affected Ebersole's batting average.)

Unlike the Q Deal, which was praised by a majority of city leaders in equally outlandish terms, the current job creation grant is actually contingent upon new jobs being created. It will be disbursed annually, based on Rocket Mortgage's new payroll, and will be capped at $975,000 over five years. The city is not bonding out tens of millions of dollars up front based on wildly optimistic projections, as Cuyahoga County did for Dan Gilbert in the Q Deal, increasing its substantial debt burden and downgrading its bond rating in the process. (Mayor Frank Jackson nevertheless saw fit to call the Q Deal the best deal he'd ever seen as an elected official as he signed the city legislation authorizing nearly $100 million from Cleveland's coffers for the arena renovation. Surreal stuff.)

The current grant for Rocket Mortgage will be defended on these grounds and others, most notably that the company could have expanded its footprint elsewhere. That logic should be familiar. It was applied by more than 200 cities across the country during the Amazon HQ2 sweepstakes, the most profound and embarrassing race-to-the-bottom spectacle an American corporation has yet devised. Rocket might have expanded at the Quicken headquarters in Detroit or grown its operations in Phoenix or Charlotte, Robinson told council Tuesday. He said that as a lifelong Clevelander, he campaigned hard for the expansion in Cleveland and worked with GCP to "put our thumb on the scale" to help the city land these jobs.

The jobs are a juicy prize, make no mistake. Seven hundred new people working downtown, once the pandemic recedes, is a boon for the economy of the central business district. And as Kerry McCormack correctly noted, the increased payroll is only one way that new jobs benefit Cleveland. All these new employees will also use their paychecks on local goods and services, including downtown stores and restaurants that will benefit from the increased foot traffic and may themselves hire new workers to accommodate. At least some of these new Rocket employees will be moving to Cleveland from elsewhere and will presumably be renting apartments or buying homes in the city.

All that is true. It's why cities have taken such stupefying financial risks to attract new jobs, and have created such outrageous incentive packages to lure big companies, and, in general, have espoused such ill-advised policies that aspire, above all else, to something referred to as "business friendliness."

But this is a despicable governance framework — it's a neoliberal framework, if that's helpful — in which impoverished cities like Cleveland dole out precious public dollars to wealthy corporations like Rocket, which happens to be presided over by one of the planet's richest men. All people, certainly the city's own elected representatives and those who purport to be concerned with equity, should be militantly opposed to such ugliness.

And yet, just as during the farcical Q Deal, Rocket Mortgage was exalted Tuesday morning for its commitment to Cleveland. The hearing is worth watching to witness the fanatical scope of this reverence. (The relevant conversation begins at about 30:10). One after another, council members raised their hands to offer their personal commendations. At most, some of them said they hoped arrangements would be made to "create pipelines" so certain constituencies — CMSD students, Tri-C students, African Americans, felons, immigrants, the functionally and financially illiterate — could have access to these new jobs, or at least access to the opportunity to pursue these jobs. (The fact that the new high-paying positions do not require college degrees may have been misconstrued; it's not as if the city's most marginalized will suddenly become mortgage bankers and fintech software developers.) The general vibe was that thanks to the almighty Quicken/Rocket, Cleveland can become the financial services capital of the world.

All of this jubilation was by the way in the context of greenlighting a subsidy for a major corporation. It's a small subsidy relative to something like the Q Deal. And one can argue — as virtually everyone does — that 0.5 percent of a company's new payroll is a small and necessary price to pay for economic growth.

On the other hand, it's a substantial subsidy: $975,000 is, for example, more than half of the total money disbursed as loans to Cleveland small businesses for operating support during the Coronavirus pandemic. Unlike Rocket, which will get its "job creation grant" in the form of a no-strings cashback each year, the 161 struggling Cleveland small businesses get their survival funding in the form of $10,000 loans.  (The city did, for the record, provide roughly $280,000 in grants to 39 small businesses to pay for damage sustained after the civil unrest on May 30.)

Unmentioned and unexplored Tuesday was the question of whether Rocket would have expanded in Cleveland even without these dollars. In economic development circles, this is sometimes referred to as a "but-for" provision. Would Rocket have moved elsewhere but for the job-creation grant?

It's hard to say. Amazon, for one, has mastered the art of securing incentives for locating fulfillment centers precisely where they would have anyway, (near transit arteries in vacant facilities with ample square footage). And while Wendell Robinson said that Rocket is "constantly evaluating" its expansion opportunities in all of its locations, it certainly had available space to expand in the Higbee building and will soon have a brand-new aerial pedestrian bridge to a brand-new parking garage over Ontario, (the planned construction of which has already shuttered one of the last good dives downtown.)

Even if there had been legitimate debate by Rocket execs, and Robinson sauntered over to GCP with his hand out in order to "put [their] thumb on the scale" for Cleveland, every local elected leader should have stared these goons in the face and reminded them the public is right this moment forking over more than $100 million for the renovation of the Q. The Cleveland Cavaliers are also housed under Gilbert's Rocket corporate umbrella. And thanks to Covid, admissions tax revenue will be drastically lower than projections for another consecutive year. The public will be paying off the upgrade until 2034 and will likely have to exhaust all available reserves in the short-term. 

Notwithstanding Gilbert's fortune, the recent stratospheric growth of which makes ongoing public subsidy for his companies a moral abomination in the poorest big city in the USA, Cleveland cannot continue to play this economic development game and expect to get ahead. Watching this same script play out year after year is enough to make a citizen go insane. 

The alternative, of course, is investing in the city itself, creating a healthy place, with healthy people, where companies want to locate and expand. Not because the city is paying them hand over fist to do so in spite of the ghastly quality of life for most residents, but because of successful public schools, robust public transit infrastructure, widespread health and human services, a lively cultural scene and unique small businesses that give any region its flavor and soul. That's what will move Cleveland forward. 

But Cleveland's leaders are unable to dislodge the economic development brain worms living rent-free in their heads. Their views have been so warped by GCP and the business-friendliness cabal that not only do they continue to hand out public money to companies like Rocket, which are only too pleased to pit poor cities against each other to maximize the private take; they thank those companies for the privilege. 

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