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And wow, it was announced on December 31, 2008, published in the Plain Dealer (online) at 6pm – New Years Eve. Big traffic time no doubt. Maybe it was in the print edition today.
According to the latest article, MMPI asked for the extension – they’re doing their own site selection review, despite the appointed selection committee reportedly demonstrating a preference for Forest City-owned Tower City and appear to need more time:
MMPI is doing its own site analysis despite a similar site-selection study that the Greater Cleveland Partnership, the region’s chamber of commerce, completed in August. That study recommended the mart and convention center be built at Tower City for $583 million.
MMPI, which will be responsible for construction cost overruns, wants to keep construction costs to about $400 million. A representative for MMPI could not be reached on Wednesday.
But here’s the part I don’t get (among others):
County taxpayers are financing construction of the project through a quarter-cent sales tax hike that commissioners approved in 2007. The tax, which will be in place for 20 years, generated $42 million in its first full year.
Over the 20 years, the tax could raise $1 billion. The county intends to borrow money for the project, and use the tax to pay off the debt.
Cleveland has got to be a cheaper place to build than almost anywhere else. In construction terms, why is MMPI quibbling over less than $183 million when the tax being collected sounds as though it could easily manage to pay the higher amount for Tower City? (I also think MMPI’s number of $400 million is a ridiculous underestimation.)
And, if it’s true that “we” want to beat out NYC for this med mart concept, shouldn’t the expense of building in NYC be a barrier that Cleveland easily defeats?
Something just (still) doesn’t sound right. I don’t know Fred Nance – I know he’s done a lot in this town. But what exactly is he doing on this deal? Thoughts? What would you be doing if you really wanted it to happen?
Additional reading: Roldo covers the situation as well, here, and puts into context with the rest of the money collected from us for…we’re not exactly sure what.
By Jill Miller Zimon at 6:38 pm January 1st, 2009 in Business, Cleveland+, Economy, Government, leadership, med mart, Ohio, Politics
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3 Responses to “Med Mart shocker: commissioners extend deadline”
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Jill wrote: In construction terms, why is MMPI quibbling over less than $183 million when the tax being collected sounds as though it could easily manage to pay the higher amount for Tower City?
My GUESS …
You’ll have to remember how the deal is structured:
- the county is lending MMPI a fixed amount of money;
- MMPI is promising to bring in construction under that amount or eat cost overruns;
- the county will lease-to-buy the convention center from MMPI based on the fixed amount using sales tax revenues;
- MMPI will pay back its original loan from the county using the lease payments from the county.
If I were managing this for MMPI, I’d want to make sure that:
1) estimated construction costs are well under the amount being lent by the county to ensure that MMPI doesn’t eat any of the inevitable overruns;
2) estimated county sales tax revenues are well in excess of the amount the county needs to make its lease payments to MMPI so that MMPI can easily service its loan from the county (would you necessarily believe projections of sales tax revenues 20 years hence?);
3) MMPI is on the hook for repaying as little as is possible (a less expensive convention center reduces financial exposure), particularly because MMPI plans to make its money by managing (not building) the convention center.
That’s off the top of my head. Someone else can probably provide other reasons.
Par for the course …
[T]he [county commissioners'] postponement [of convention center site selection] irked [Cleveland Mayor Frank] Jackson because he learned of it by reading a story in Thursday’s Plain Dealer. (link)
Thanks for both comments – the Jackson Fumes item came up in a google alert – I just posted about it.