Cleveland’s rush to get cash from downtown developers who received UDAGs – essentially free money, nearly 20 years ago – could cost the city $750,000 to $1 million a year on each  of three major gift-loans to wealthy developers.

In all, the city will receive $14.4 million less on $36.7 million worth of loans that would be repaid now rather than in 2010 and 2012. The lesser repayment relates to the discount developers will get for paying sooner than the due dates.

The tragedy lies in the likelihood that the funds will be quickly re-loaned to other downtown developers in much the same manner – no payments for years and no or little interest on the loans. Would that people facing foreclosures on their homes could get such generous terms.

Cleveland Cit Council members believed that they had a deal that each ward would get $100,000 from the payback kitty. Unfortunately, this is a drop in the bucket and there was talk last week that Cleveland Mayor Frank Jackson may renege on those prior commitments.

The UDAGs (Urban Development Action Grants) were given usually as 20-year loans. The money came from federal funds given to cities based on their concentration of blight. Unfortunately, the money was used, not to fight blight in neighborhoods, but mostly for new downtown office developments.

Developers escaped paying any principal or interest on the loans for 20 years by city design. Further, some of the same government-enriched projects also received 100 percent tax abatement for 20 years, all gifts of former Mayor George Voinovich and Council President George Forbes in the late 1980s. The political duo was giving free money away with abandon in the 1980s.

For developers Dick Jacobs and the Forest City Ratners, the city is now offering another bargain. They can save millions of dollars on what they owed without having paid back a penny over the years. Some savings for developers total more than $3 million over three years. Jacobs alone will reduce his payback by $6,191,305. Nice savings if you can get it. But YOU can’t.

Just how disgusting is this deal worked out by Mayor Frank Jackson and his economic czar Chris Warren?

It’s likely Jackson and Warren will take the proceeds of $22.3 million and dump it right back into the hands of developers, likely for the Scott Wolstein’s Flats project and other downtown ventures. If the city waited for the loans to mature Cleveland would collect $36.7 million.

Here are some of the deals worked by the city and developers...

Jacobs’s Key tower on Public Square: The city gave Jacobs $10 million at zero interest with principal not payable for 20 years. The $20 million payback would have been due April 16, 2012. The city wants only $6,674,447 back on the $10 million loan, if paid early.

That means the city is willing to give up $3,325,553 to Jacobs. If this money is paid back in August, likely the very earliest since Council must pass legislation accepting this deal, the payment will be 31 months early.

That suggests that Jacobs will save – and the city will lose – more than $1 million a year. Key Tower is also tax abated for the 20 years, as is its underground garage below city Mall A property, another gift of Voinovich and Forbes.

Similarly, Jacobs borrowed $7,663,000 of UDAG money to build the Marriott Hotel, also fully tax abated for 20 years. It was never so good as when Voinovich and Forbes ruled.

The city is asking Jacobs to pay back $4,797,248, on the Marriott debt due on Dec. 1, 2012, or $2,865,752 less than is due on the UDAG loan of 20 years. That works out to some $750,000 reduction per year until 2012.

The Ratners and Forest City Enterprises have received other reduced UDAG loan repayments at the old Halle’s building. The downtown developers will repay $7,404,828 on a $9,792,325 loan on the old Post Office Building behind Tower City. This loan would be due in March 2, 2010. So the city is willing to forgo $2,387,497 to collect now rather than a little later, maybe only 15 months from when this deal concludes.

Another gift by the city goes to Playhouse Square Foundation, which pays its president Art Falco more than $400,000 a year in salary and benefits. It’s a deal no one would turn down. On a $5.5 million UDAG the payback would be only $1,733,449, or a reduction of $3.7 million. This is an especially generous gift to a non-profit that receives large government subsidies annually.

The reason for these moves by the city suggests political needs of the present mayor.

These deals will enable Mayor Jackson – who is quite slim on achievements – to make some headlines in the next year as he faces re-election in 2009. And who knows what his generosity to developers will bring Jackson in campaign funds next year.

Jackson hasn’t responded to the chaos evident in the city with beatings, rapes and murders rampant and the disgust level is very high. The picture of Cleveland today is that NOBODY is in charge and the mobs are running away with the city as Jackson makes nice with developers and with banana growers in Costa Rica.

It’s also especially galling when thousands in Cleveland and surrounding areas are losing their homes to foreclosures at the same time developers get breaks from the city.

We know “life is unfair” but do our officials have to fix it to be more so?

 

Can We Have Any Truth from Nance and the GCP?

Sunday, The Plain Dealer reported more “delays” on the Medical Mart & Convention Center deal... but it seems more like more obfuscation on what’s going on. Isn’t it time the PD asked for some transparency from Fred Nance and the Greater Cleveland Partnership? They are operating behind closed-doors and in the dark in the usual screw-the-public attitude. They give only sketchy and stalling bull to the PD, which obediently reports it as “news” to us. For a better slant on what could be involved, I reported convention center truth-teller Heywood Sanders’ pitch on how bad the convention business looks with gasoline prices skyrocketing and airlines cutting back on flights not good for the convention business. See those details by clicking here.

The best the Cuyahoga County Commissioners can do after all the stalling is to call the whole thing off and give the tax money back to the taxpayers.

 

Clarification & Correction

Terry Egger, publisher of The Plain Dealer, contacted me about a piece I wrote in RealNEO on potential layoffs and page eliminations at the PD. He indicated that no changes had been finalized, which I also had indicated by writing that the details were “plans” he presented to PD editorial staffers in early June to be finalized later. So there really was no conflict in the reporting. The report got wide distribution via a Poynter Romenesko item and was picked up by Crain’s Cleveland Business and Editor & Publisher.  Egger also contested some parts of a column I wrote here. He questioned the amount of money I reported he made as part of the sale of the Pulitzer papers in the article as too high, though said he was well-paid. The figures used on his various payments in that deal came from the St. Louis Journalism Review, which followed the sale of its city’s paper very closely and examined official documents. Egger also said that the Newhouse chain, which owns the PD and owned a shuttered paper in St. Louis, did not share 50% of the profits of the Pulitzer paper at the time of the sale, as reported, but significantly less at the point of sale. Also, I erroneously named the former president of Pulitzer who helped bring Egger here as Robert Woodward. His name is Robert Woodworth.

Finally, I believe Egger wanted to make contact because the PD will be going through tough times, maybe tougher than anyone expects, in the near future. As he said, the changes will affect the lives of many people in serious ways and he is concerned about the way it is reported here and elsewhere.