The Future of Cleveland: Economic Growth without Equity

by Letters 4 the Damned

The Future of Cleveland: Economic Growth without Equity

Introduction

It could be argued that Cleveland has a relatively bright future when considering what the past 20 years have been like for the city. The foreclosure crisis and predatory lending practices destroyed neighborhoods and left vacant parcels all throughout the city. The lack of employment for people with high school diplomas caused unskilled workers to leave the city for places like the Sun-Belt region, where many of Cleveland’s manufacturing jobs also moved. The high poverty rates and decreasing tax base contributed to the decline of the Cleveland Metropolitan School District. Yet, despite all these obstacles Cleveland has not given up and now, there may be light at the end of the tunnel. Fred Nance of Squire Sanders and the Cleveland Browns explained “for anyone who doesn’t realize it, Cleveland is definitely on a roll” (O’Hare, 2012). Don Micheff of Ernst & Young goes into more detail noting “I can’t think of another place in the country that has the activity taking place here today whether it’s the convention center, whether it’s the medical mart, whether it’s the casino’s, whether it’s our east bank of the flats, [or] what [is] taking place around Browns stadium” (O’Hare, 2012).

Population Trends

Although population will continue to decline, human capital will rise, as educated people migrate to the city from outside the region, outside the state, and outside the country. “The number of educated 25- to 34-year-olds residing in the city [has] increased by 68 percent, with many landing in Ohio City, Tremont, downtown, and [the] Detroit Shoreway [areas]” (Piiparinen, 2014). Piiparinen also notes “every high-tech job creates an additional five jobs in the local market” (Piiparinen, 2014). This is promising because as more skilled workers enter the city, more employment opportunities will be made for those without college degrees. This will serve as a pull factor for those who have left as well as those who are considering leaving.

As aforementioned one of Cleveland’s brightest population trends is the migration of young adults. According to Piiparinen’s mapping human capital study “growth largely occurs in three geographic areas: (1) Cleveland’s inner core, specifically Downtown, Ohio City, and Tremont; (2) certain second-tier neighborhoods in Cleveland (e.g., Kamms Corner and Old Brooklyn); and (3) select inner-ring suburbs (e.g., Lakewood and Cleveland Hts)” (Piiparinen, 2013). The millennial generation may be the force of growth Cleveland needs and the growth of this 25-34 year old population is not slowing down. Over the past 14 years “downtown’s millennial population has increased by 68 percent” (Marinucci, 2014). However, areas that are losing their young adult population include East Cleveland, the outer suburbs of Cuyahoga County and it’s surrounding counties. Piiparinen explains this is largely due to two main factors. One of these is the psychological appeal of the urban core to young adults. “Downtown is leveraging national trends. Millennials, those between the ages of 25 and 34, are choosing where to live first – then finding work” (Marinucci, 2014). The other factor has to do with the racial demographic shift of minority populations to the outer suburbs. This may be due to reduced housing expenses and other costs of living. Either way a demographic shift of race and class is occurring. While revitalization continues downtown the cost of living will rise and displacement will become a concern for residents in these once affordable areas of Cleveland. Memories of past gentrification could prove politically troublesome as residents in inner city areas are forced out due to lack of affordability. This will be a push factor and contribute further to the out-migration of unskilled or working class residents, resulting in further population loss.

Public Schools

Resident population trends show continued growth to 18,000 by 2018, 23,000 by 2021, and 25,000 by 2023 (Downtown Cleveland Alliance, 3). This increased residential growth may mean an increase in tax revenue and thus funding for the Cleveland Municipal School District. However, the net benefits from the property taxes of new residents minus the loss of property taxes of unskilled workers may mean that tax revenue will stay the same. When you factor in that a significant amount of the new housing are apartments and rental properties the economic outcome would likely be a loss. Although property owners may factor property taxes into the monthly rent, renters are still not required to pay these taxes directly and this creates uncertainty.

Cleveland’s plan for the transformation of the school district is built upon an “emerging national model that profoundly changes the role of the school district. This approach, or portfolio strategy, is showing promising results in cities such as Baltimore, Denver, Hartford, New York and others” (Jackson, 5). The Cleveland Municipal School districts plan involves transforming the system from a single-source school district to one composed of several district and charter schools. This plan would hold such schools to the highest standards of performance while also giving the school’s control over financial resources. The idea is to trade accountability for control. The plan will close or replace failing schools, transfer authority to individual schools, create an alliance to monitor these schools, and begin long-term system reforms. The plan’s goal is to make the transformation by 2017. However, of concern is the fact that “the school district failed to meet its improvement goals in the first year” of its plan (O’Donnell, 2013). With more than 30,000 students leaving CMSD over the past decade and a 63 percent graduation rate the schools have several obstacles to overcome. Frankly speaking, the future of the school system in Cleveland is bleak. Although, combined with population migration trends, these schools may actually improve along with the median income of the area, such a positive relationship is not necessarily a guarantee and the school system’s future is an uncertainty at this point.

Downtown and Neighborhood Development

Fred Nance explains, “we have this tremendous underutilized waterfront [and] we are going to figure out how to attract investment and make things happen” (O’Hare, 2012). The lakefront plans currently are composed of mixed-use and commercial infill development as well as development around Burke Lakefront Airport. The lakefront plans most prominent feature will be the development of a walkway connecting the Science Center, Browns Stadium, Rock and Roll Hall of Fame, downtown Medical Mart and Convention Center and the Erie Street Festival Pier. The North Coast Harbor section of the lakefront will feature “more than 1,000 apartments, stores and restaurants, an office building, a public boardwalk and a downtown school” (McFee, 2014). These plans sound promising and are certainly of more benefit than an otherwise empty lakefront space. When considering the rising demand for housing, the plan appears feasible and of benefit to Cleveland’s future.

The nuCLEus project will also prove beneficial to Cleveland’s future. This $350 million project located in the core of Cleveland will replace parking space in the Gateway District with a much more profitable use. The plan which was recently approved the City Planning Commission will include around 120,000 square feet of retail space, a 200 room hotel, 200,000 square feet of office space and an additional 500 housing units with vertical space above commercial businesses for parking. Another core-oriented project in Cleveland’s feature is the redesign of Public Square. The Group Planning Commission and landscape architect James Corner intend to transform the area into one connected park featuring green space, a café, a splash pool for children and space for performances. The park will certainly act as a complement to the nearby shopping malls and most likely will function in our near future as “a world class public space” (Allard, 2014). The redevelopment is certainly needed. Project for Public Spaces listed Public Square seventh on its list of “15 squares most in need of improvement”. Project for Public Spaces wrote “Cleveland’s famed Public Square is surrounded and divided by wide roads full of fast moving traffic. So, there’s little going on there” (Project for Public Spaces, n.d., para. 8). However, the Group Planning Commission and James Corners plan does address most of the criticisms brought forth by the Project for Public Spaces.

Other downtown projects include the Towpath Trail. The four stage $57 million project is not without problems. “The Towpath is now largely complete south of Cleveland, but building the final six miles north of Harvard Road on the south side of the city has proven extremely difficult” (Litt, 2014). There have been frequent problems resulting in the need for more funding but the project is now focused on the last two stages and looks promising. This connected walkway throughout the city will add to the walkability and aesthetic appeal of Cleveland. Still Cleveland’s most encouraging factor is the increasing demand for housing downtown.

The rise in residential housing demand is a major positive for the city. The Downtown Cleveland Alliance noted that “the Opening of The 9 and the Residences at 1717 sent the downtown residential population over 13,000” (Downtown Cleveland Alliance, 3). Joseph Marinucci writes “In the past 18 months, downtown Cleveland has added 800 residential units to meet demand and expects 1,000 more units to come online in the next 24 months. Today’s residential population…is the densest it’s been in more than 60 years.” Downtown’s current rate of occupancy is at 98 percent (Marinucci, 2014). As Doug Price of the K & D group explains, “There’s a huge demand for more housing and we got these jobs coming in, almost 3,000 of them…. We’re going to take housing to a new level in the city of Cleveland” (O’Hare, 2012).

Elimination of Blight

However, blighted and vacant housing still remains to be an issue for Cleveland. Cleveland has 16,000 vacant homes to repair or demolish. Demolition of such housing is costly at approximately $10,000 a home and suspected vacant buildings are all over the city. Banks such as J.P. Morgan Chase and Deutshce Bank Trust Co. in Germany owned much of the housing that is now abandoned. The availability of low-cost homes in Cleveland was taken advantage of by these banks that would purchase and re-sell the homes without visiting or maintaining them. The result was widespread blight. Collectively Deutshce Bank Trust Co., Wells Fargo, Ameriquest Mortgage Company, Countrywide Financial Corp and J.P. Morgan Chase were responsible for 12,650 foreclosures in Cleveland. Cuyahoga County was recently awarded a $50 million demolition bond to aid in this process.

Re-use of vacant land

Once demolished these lots add to the supply of vacant land in the city. The re-use of this land can be limited by the existence of brownfields or other toxins but main strategies typically involve urban agriculture, the sale of side lots to nearby homes, or the creation of green spaces in urban areas. Urban Agriculture, though popular, offers little hope for the re-use of land in Cleveland. The city’s extreme weather shifts can damage crops and would demand an indoor greenhouse approach (Keating, 2010). This would make such an investment cost prohibitive. As witnessed with previous attempts at community gardens the neighborhood often doesn’t maintain the land making the strategy risky at best.

The Economy

Eric Wobser of Ohio City Inc. explained in 2012 that there had already been “a huge explosion in small businesses. We want to take that momentum of new businesses and new residents and continue the residential and economic development that’s taking place” (O’Hare, 2012). The rising demand for housing will provide an economic boost to the city. Also of great benefit to Cleveland’s economy is the upcoming RNC convention. However, the benefit the convention brings is not totally quantifiable.

The Republican National Convention in 2016 will bring an estimated impact of $400 million dollars to the local economy (Farkas, 2014). The convention “will close the Q arena for six weeks, attract more than 5,000 protesters and 50,000 attendees” (Farkas, 2014). Treasurer of the Cleveland 2016 RNC Host Committee explains, “the goal is not to get rich, but to reintroduce the city to the world” (Farkas, 2014). The amount of media attention the RNC convention receives is three times that of the Superbowl and provides a great opportunity to rebrand Cleveland to the world. The RNC will bring with it 1,200 booked events, 50,000 attendees, and approximately 250 contract negotiations. This is going to be a critical event for Cleveland and with media coverage second only to the Olympics it presents a rare opportunity to promote the city.

The departure of corporate headquarters and the United transportation hub have left the city with even more economic problems. The unexpected departure of BP in 1998 left the BP building vacant and took with it a significant amount of employment. The Eaton Corporation was another major loss to the city. Their departure from the city to the suburb of Beachwood meant the loss of 700 jobs in a zero-sum game for the county. Many other relocations of corporate headquarters have also occurred resulting in numerous blows to the city economy. The recent loss of Cleveland-Hopkins as a United Airlines hub left a significant negative impact on the city’s economy. The situation resulted in the loss of 500 jobs but other airlines have begun utilizing the airport as a hub, which will fortunately save the airport.

Poverty

Poverty will continue to be a problem for the city. Presently one-third of Cleveland residents live in poverty and more than 50 percent of all children in the city live below the poverty line. The city has the second highest poverty rate in the country, which leads to crime, poor schools, blight and other major issues that the city is currently facing. The city was recently named the 5th most dangerous city in America with a majority of crimes being robberies. Poverty continues to be an underlying issue for many other problems in the city and should be the top priority addressed if we wish to improve the city on a permanent basis. This means implementing new strategies if we wish to expect better results. The spreading of wealth and avoidance of displacement is of the utmost performance.

One of the major concerns of the revitalization of downtown is this displacement of lower or working class residents to the suburbs. An excellent example of such concerns have been expressed by the residents and business owners along the opportunity corridor. The $331 million project will create an urban boulevard connecting Slavic Village and Interstate 490 among other areas to University Circle (Grant, 2013). The project is said to increase job availability for residents and offer economic rejuvenation to high poverty neighborhoods in the area known as The Forgotten Triangle. However, Cleveland’s 2020 Citywide Plan notes that there needs to be a focus on spreading wealth. This spreading of wealth is vital to the outer suburbs of Cleveland and the avoidance of another two-city, poor and wealthy, scenario. Richey Piiparinen notes that “by strategically targeting reinvestment into areas experiencing population growth in an otherwise shrinking region, decision makers can shift their focus from managing decline to fostering growth” (Piiparinen, 2013). However, this targeting of reinvestment could create problems if there is not significant spillover into the surrounding neighborhoods. There also needs to be a focus on creating job opportunities not just for college graduates but for those with high school diplomas or less. Job mismatch and lack of opportunity for unskilled workers continues to be a concern. If a path to escaping poverty is not provided for these individuals then we cannot effectively reduce poverty in the city and if we do not address poverty we can expect history to repeat itself.

Assets and Obstacles

The ongoing campaign to rebrand Cleveland is a major asset. Efforts by organizations such as Positively Cleveland and Global Cleveland have not gone unnoticed. Researcher Ari Maron notes about Cleveland, “It’s even written up in the New York Times. I mean just the level of attention we’re getting is really exciting and I think what it comes back to is that this is all part of our collective history. There is something about the urban core that conjures up those feelings of we have been here before” (O’Hare, 2012).

The recent return of Lebron James to Cleveland is estimated to bring an additional $500 million annually. Although this amount has been debated due to its inclusion of leisure spending and reliance on playoff games Lebron James will undoubtedly bring national attention to the city. This attention was “witnessed” during the opening game of the 2014 season.

The successful investment in renovating playhouse square is visible not only by the world’s largest chandelier but by the one million plus people who come to Cleveland to attend shows every year. Art Falco of the Playhouse Square Foundation explains, “Playhouse Square has almost ten performance spaces and almost 10,000 seats. It’s the largest performing arts center, second only to Lincoln Center in New York. We have over 800 curtains a year drawing over a million people coming to Playhouse Square on an annual basis” (O’Hare, 2012). The 100 year old Westside Market alone…attracts a million people to the neighborhood” (O’Hare, 2012).

Another major asset to the city’s future is to be found in its medical institutions. Wes Finch of The Finch Group discusses the cities medical facilities observing that with “Cleveland Clinic, University Hospitals, the new Veteran’s Administration hospital, all of Case Western medical and…the Medical Mart in downtown Cleveland you can realize, [Cleveland] will become, rapidly, the medical capital of the world” (O’Hare, 2012).

The inclusion of the new Heinen’s Grocery Store in The 9 Building will act as a complement to the rise in residential population. The 33,000 square foot grocery store will be located inside of the Cleveland Trust Rotunda with a goal of opening in 2015. Cleveland’s historic works of architecture like the Rotunda give the city more than a history but rather an identity not easily duplicated. The recent award from the Ohio Development Service Agency for $33 million in tax credits will go to fund the rehabilitation of “31 historic buildings in ten communities across the state” (Maties, 2014). The May Co. and George Worthington buildings downtown recently received $10 million in tax credits from the state towards their preservation (McFee, 2013). Another asset of the city is found in it’s community organizations whether it’s The Cleveland Foundation or the Cleveland Restoration Society. “The World’s First Community Organization”, The Cleveland Foundation, is a proud legacy of Cleveland and has worked to better the community for almost 100 years. There is no doubt that their grants, awards, and assistance will continue in the coming years.

Another asset in the oncoming decade will be Cleveland’s park systems. The Metroparks, also known as the states “emerald necklace” has proposed plans to renovate the piers at Euclid Beach Park and construct a “pedestrian bridge…linking Villa Angela and Wildwood parks” (Freshwater, 2014). All these new attractions from the Metroparks to the $500 million development of the Flats East Bank will prove beneficial to the economy but poverty is going to still be an issue in the coming decade.

The rising class and racial tensions will not be addressed by targeted reinvestment. As inequality worsens in the city these problems are going to become real obstacles for Cleveland. Evidenced recently by the protest against the Cleveland police’s excessive use of force on 12 year-old Tamir Rice, these tensions will worsen if there is not more justice and equality created in the city. Another tale of two cities scenario will prove detrimental to the city’s economy and national appeal. Imagine, if you will, what it would mean for the city if the recent protests in Public Square were happening during the 2016 RNC convention. Such attention would backpedal rebranding efforts by the city for some time. It is vital that these issues be addressed. Presently, the national media is covering Cleveland because the Department of Justice’s investigation into the police force “found reasonable cause to believe the Cleveland police department has routinely used excessive force” (Richinick, 2014). This is certainly not the kind of coverage that will help Cleveland especially with the nations eyes on the city in the coming decade. It will take wise leadership to steer Cleveland during these sensitive times.

People and Organizations

Current and future leadership in Cleveland will be composed of; political figures such as Mayor Frank Jackson, philanthropists like Ronald B. Richard and David Abbott, community leaders such as Joseph Roman and Joe Marinucci, scholars such as Ronald Berkman, Alex Johnson and Barbara Snyder and leaders of medical institutions like David Cosgrove and Thomas Zenty III. The city’s sports figures like Lebron James are likely to emerge as the city’s future leaders and as the millennial generation continues to compose a larger portion of the city we can expect to see more progressive leaders in the future.

This will aid greatly in the reduction of class and racial tensions in the city and will complement innovative and high tech efforts by organizations such as Case Western Reserve University. Future leadership is likely to make Cleveland the 21st century city it is capable of being. With future developments like fiber optic systems along the Health-Tech Corridor, Cleveland is on track to catch up with other progressive cities like Santa Monica. These future leaders of Cleveland, the region’s millennial generation, will bring with it what Cleveland needs to transform from an industrial city into a 21st century health and technology center of the nation and the world. Leadership in the coming decade will prove to be exciting if nothing else.

Conclusion

Cleveland’s future will be decided by numerous factors including redevelopment and the creation of equity. However, the “tale of two cities” scenario is bound to repeat itself if Cleveland continues to apply the same methodologies and concepts that have failed before. Targeted reinvestment efforts and development will better certain neighborhoods without the guarantee that it will benefit those around it. As the next decade emerges in Cleveland we can expect to see growth downtown despite population loss. This is growth that is promising for the city but not everyone in it. Cleveland does have a chance at a bright future in the next decade. It is undeniable that investments downtown will create a better city, but for who? If the investments result in a more expensive downtown that will displace poor and minority populations to the suburbs than such an investment would create a zero-sum game for the county and region. Cleveland must improve for everyone if it wishes to avoid a repeat of past decline because just like wealth, poverty is also contagious.

– Christopher Kolezynski

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