MANUFACTURING: MVP Plastics looks to grow through diversification. PAGE 4 MVP president and CEO Darrell McNair
SOURCE LUNCH Meet Mike Conley, the Cavs’ chief information officer. PAGE 46
CRAINSCLEVELAND.COM I NOVEMBER 4, 2019
GOVERNMENT
BEER
Gauging tax abatements’ true impact
SOMETHING NEW IS BREWING
With reauthorization looming, program’s effectiveness raises hard questions
Mark King, Great Lakes Brewing’s new CEO, says change is on tap
BY JAY MILLER AND KIM PALMER
KEN BLAZE FOR CRAIN’S
Residential tax abatement, which allows anyone who builds a new home or substantially renovates an older home in the city of Cleveland to avoid a sizable chunk of the home’s property taxes, has since the 1980s helped springboard a residential
BY JEREMY NOBILE
Great Lakes Brewing Co. has never had an identity problem, but it’ll need to reinvent itself for consumers to replicate its successes of the past. That’s where newly installed CEO Mark King comes in. “At the end of the day, beer is a consumer product. So the brand promise has got to be there. Great Lakes is all about quality, and that’s the DNA of the brand,” King said. “But we are not the latest thing or the flashiest. And while you can’t be all things to all people, you can have something for everybody. Our ability to be a bit more progressive in what we’re offering could be a big opportunity, if we do it right.”
NEWSPAPER
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This perspective is steering GLBC to refocus on beers, product innovation and its existing taproom to grow revenue and enhance market share, all of which should come before an expansion of the physical footprint that's sure to come. Times have changed since GLBC founders Pat and Dan Conway planted their flag in a run-down strip of Ohio City in 1988. For American craft brewers back then, quietly playing in the shadow of dominant brands, simply existing was progressive. That’s certainly true for Northeast Ohio’s oldest continuously operating brewery, which designed craft lagers decades before they were tru-
FOCUS | BUSINESS INCENTIVES Do tax breaks and other tools serve as a carrot for businesses, or a stick to the communities that dangle them? PAGE 12
ly in vogue, pioneered the modern brewery/restaurant concept in this market, and introduced Christmas Ale to the Midwest, inspiring a cult following for the holiday brew and spawning countless copycats. “This was all a lot easier before there were this many breweries,” said Bob Sullivan, a craft beer industry consultant and president of Sullivan Sales and Marketing Solutions. “Great Lakes is kind of a victim of its own success because it was so easy, relatively speaking, in the early days when they were the only game in town.” See GREAT LAKES on Page 44
“THERE IS A NEED TO SERIOUSLY START THINKING ABOUT STRUCTURING THE INCENTIVES ... TO GET INVESTMENT DOLLARS INTO THE NEIGHBORHOODS THAT NEED IT MOST.” — Michael Norton, chief policy analyst at Reinvestment Fund
building boom in neighborhoods that, like the city as a whole, were losing residents. But with the expiration of the legislation, last renewed in 2005, and a reauthorization on the horizon, questions are being asked about the program’s long-term impact. The city of Cleveland and City Council members, in partnership with state and local groups, are spearheading an in-depth market study of the city’s housing history, with the ultimate goal of creating a more equitable housing plan citywide. “There is a need to seriously start thinking about structuring the incentives — not just an abatement for abatement's sake, but trying to get investment dollars into the neighborhoods that need it most and that are most poised to respond positively,” said Michael Norton, the chief policy analyst at Reinvestment Fund, a Philadelphia-based firm picked to conduct the historical analysis. See IMPACT on Page 45
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REAL ESTATE
Sherwin-Williams HQ search ignites downtown property derby Owners whose locations could be possibilities for global giant take steps to pave way for deal BY STAN BULLARD
With Sherwin-Williams Co. in search of sites for a new headquarters and research center, two key potential downtown sites are undertaking changes publicly or behind the scenes that may play a role in the outcome of the city-shaping real estate investment. Meantime, the question also arises about what becomes of the global paint and coatings maker’s current headquarters in the Landmark Office Towers, a trio of 22-story office buildings dating from 1930 that are connected to the Tower City Center complex. The Landmark complex includes some space rented to outside tenants, but could become a 600,000-squarefoot challenge for the city’s downtown office market, currently 21% vacant, when Sherwin-Williams potentially exits it in 2023. Meantime, on the other side of the Tower City complex, the owner of the vast 11-acre parking field known as the superblock, west of Public Square, has made changes to the way it holds the property, which could clear the way for a potential sale should Sherwin-Williams anoint that as its future home. Affiliates of Weston Inc., the Warrensville Heights-based real estate owner and developer, on Oct. 23 updated leases covering much of the
This parking lot between Canal Road and the Cuyahoga River was retained by Cavs owner Dan Gilbert’s JACK Entertainment as it agreed to sell other gaming-associated properties to Vici Properties Inc. It’s a potential development site for Sherwin-Williams Co., which occupies the building at right connected to Tower City. | STAN BULLARD
parcel to reflect the absorption of interests in some of the property from a trust of the late Irv Chelm, a Solon-based real estate developer. Chelm planned in the 1980s to con-
struct a skyscraper on the southwest corner of the block at West Sixth Street and Superior Avenue, but the project never proceeded. Kerry Chelm, CEO of Chelm Prop-
erties, said the trust sold its interest to Weston in 2015. However, the transaction between partners was not reflected in the Weston leases until the most recent update. The leases, which cov-
ered 23 separate plots on the superblock, also exempted the parcels from being subject to parking for its nearby, 3-year-old conversion of the Standard Building to apartments. Another parcel on the southeast corner of West Third Street and West St. Clair remained subject to the leases and provides valet parking for the apartments. Weston had consolidated ownership of the superblock over the years so that it now owns all of it except for a tiny parcel on its northeast corner at West Third Street and West St. Clair occupied by a five-story building owned by affiliates of Fairview Parkbased Real Life Cleveland. Yaron Kandelker, Real Life managing partner, did not respond to emails on LinkedIn inquiring about talks for the building, which Real Life has been offering for lease. Rico Pietro, a partner at Cushman & Wakefield Cresco brokerage of Independence, said he expects that every property owner with a site that might become the prospective location of the new Sherwin-Williams complex is making similar moves. “Any property owner would be taking any steps they can to remove any potential impediments to a transaction, or consideration of a transaction,” Pietro said in an Oct. 30 phone interview. See DOWNTOWN on Page 8
NOVEMBER 4, 2019 | CRAIN’S CLEVELAND BUSINESS | 3
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MVP Plastics looks to grow new business through diversification
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This year has been one of transition for MVP Plastics Inc. in Middlefield. The injection molder started 2019 with about 95% of its business in the automotive sector. By August, that share was intentionally down to a little more than 60%, said president and CEO Darrell McNair. As demand for new vehicles declines, he wanted to protect his company against a possible downturn. “Think of it as a tripod,” McNair said. “The more legs you have up underneath you, the more stable the foundation.” McNair has wanted to diversify MVP Plastics — which has plants in Middlefield, Ohio, and Brownsville, Texas — away from automotive for a long time. But 2019 actually presented an opportunity to start that process. The company had an automotive program that was phased out, which opened up capacity for other work. Diversification helps businesses to “spread the risks,” particularly when the economy is sluggish like it is now, said Perc Pineda, chief economist at the Plastics Industry Association in Washington, D.C. He’s heard more interest in business diversification in the plastics industry in the last three to four months as production, while still positive, has declined compared to last year. Companies are looking for potential areas of growth in which they might expand. Automotive in particular is an industry going through a lot of changes that could affect suppliers, Pineda said. The industry's move toward more electric vehicles will change the types of parts vehicles need. Even the ride-sharing trend could lead to
more demand for recycled, easy-toclean materials in vehicles, he added. These changes don’t mean that plastics companies have to abandon the auMcNair tomotive sector altogether, but Pineda said it is a good time for companies to think about how they want to fit into the sector going forward. At MVP Plastics, the company’s decreased automotive work gave it the chance to make some moves in the consumer market. For one, the company had been doing molding for car seats and booster seats for a customer in Canada, McNair said; this year, that work moved beyond molding and into full assembly. MVP also made an acquisition in late 2018 that brought a line of arts and crafts-related storage containers, like pencil cases, to the company. That work began to ramp up in 2019. McNair said that in 2020, MVP intends to put a marketing plan in place for that container line. Currently, MVP is selling those products to retail chains. With plans to further diversify the company, he’s looking at another non-automotive acquisition he hopes to complete by the end of the year. That would take MVP’s automotive business to less than 50% of its overall business. The transition hasn’t been easy, though. The automotive program phased out in February, and the carseat assembly for Canada didn’t begin until August. McNair said the company had to modify shifts and lay
off some employees to match the lessened work. MVP started out 2019 with about 80 to 85 employees, McNair said. Today, it has about 65. He declined to disclose annual revenue for the company. But McNair said he's hopeful the changes MVP made in 2019 will set it on a course for success. “I’m hoping it creates a stable platform for the future for us to grow off of,” he said. He’s optimistic about 2020. The consumer programs that started in 2019 will be ramped up by then, and the company has some new programs launching next year, too. A new relationship with a Chinese company could also lead to new business. In 2019, MVP entered into a strategic alliance with Junchuang Auto Technologies Co. in Suzhou, China. So far, the two companies have a signed commitment, and work is expected to begin in early 2020, McNair said. MVP has previously had a small presence in China through a different partner, but this will significantly grow its status there. McNair said the new partnership was largely driven by tariff pressure, as Junchuang’s products were being exposed to additional costs. MVP will serve as a U.S. manufacturing source for Junchuang, and MVP will be able to manufacture its own products at Junchuang’s plant in China. The Chinese business is primarily automotive, so it doesn’t help with McNair’s business diversification goals. But the alliance will give MVP more of a foothold globally, which is something its automotive customers have been looking for. Rachel Abbey McCafferty: (216) 771-5379; rmccafferty@crain.com
REAL ESTATE
Lender woe hits downtown DoubleTree hotel Occupancy at hotel, which is competing with new properties, falls to 59% BY STAN BULLARD
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The run-up of new hotels in downtown Cleveland has sapped the fortunes of the DoubleTree Hotel Downtown Cleveland, which has entered the first throes of lender woes. Trepp Wire, a New York City-based provider of national mortgage loan information, reported that a $29 million securitized mortgage loan taken out in 2016 by hotel owner Cami Hotels Investments II LLC was placed in special servicing on Oct. 4. It was assigned to C-III Asset Management LLC, a unit of C-III Capital Management of New York City. A Trepp loan document stated that the borrower’s current balance is $27 million on the loan named MSBAM 2016-C29, and it became delinquent in September. The loan does not mature until 2027. Since C-III just received the loan, Trepp said no workout strategy had been developed by Monday, Oct. 21. If special servicers cannot find a way to resolve a problem loan, they often wind up assuming the loan and selling it. No
foreclosure filing had been recorded by last Thursday, Oct. 31, according to Cuyahoga County court records. The 379-room hotel’s occupancy as of the end of September had fallen to 59% from 63% at the end of 2018, according to the Trepp data. The hotel, which opened in 1973, was last renovated in 2016 but competes with much newer properties downtown, including four added in the last five years. Laurel Keller, senior vice president of the Lodging, Hospitality and Gaming Unit of Newmark Knight Frank’s Cleveland office, declined to comment on the downtown DoubleTree specifically, but said room rental rates have been flat so far this year in the Cleveland market and may soften further with an expectation that the market will have fewer conventions next year. Asked about the lender shipping the loan to special servicing after a short period of delinquency, Keller said lenders are more ready to pursue actions against hotel borrowers than other commercial real estate types due to the nature of the hotel business. Where industrial and office properties often
have tenants leasing space for years or months, hotels typically have guests for only a few days or weeks. Cami Hotel Investments II was formed by an affiliate of its management company, The THG Group of Edmonds, Wash. The firm’s general counsel, Bruce Meyer, did no return two phone calls and the company did not respond to an email by 6 p.m. last Thursday. Stan Bullard: (216) 771-5228; sbullard@crain.com
Corrections
` United Way of Greater Cleveland’s Club Connect program is no longer in existence. The program was referenced in the Oct. 28 Giving Guide supplement produced by Crain’s Content Studio. Also in the Oct. 28 Giving Guide, Crain’s significantly overstated the value of an anonymous gift made to the Case Alumni Foundation in a list of philanthropic gifts. The gift was worth $2.3 million.
4 | CRAIN’S CLEVELAND BUSINESS | NOVEMBER 4, 2019
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MY BENESCH “Benesch has been an extremely valuable and vital part of our growth. I wouldn’t have been able to grow our companies without their assistance, their advice, their legal knowledge—I consider them a true business partner.” MATT KAULIG Chairman and Founder Leaf Home Solutions
MY TEAM Featured team (left to right) GREGG EISENBERG COREY CLAY RISTO PRIBISICH MICHAEL MOZES MARK AVSEC MITCHELL GECHT JOHANNA PARKER GREGORY BORAK MICHAEL KLEIN KATHERINE SMITH SAMANTHA STAHLER ERIC BAISDEN JENNY CHOU JORDAN CALL MARGARITA KRNCEVIC MICHAEL MEYER JULIE FENSTERMAKER RICK TRACANNA MATTHEW DELGUYD MICHAEL MARHOFER
As an entrepreneur who grew his LeafFilter business from humble roots (literally in his basement), Matt understands what it takes to be a leader in industry. When it came time to expand the business, he called on Benesch. Now owning several companies in diverse industries, Matt relies on Benesch for all aspects of his legal needs. From private equity to IP protection, and employment law to tax, Benesch provides the wide-ranging insight, experience, and personalized attention that keeps businesses flowing and growing. To learn more about our relationship with Matt and Leaf, visit beneschlaw.com/myteam.
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SPORTS BUSINESS
Some good has come from collapse of Home Team Marketing BY KEVIN KLEPS
A Columbus digital ticketing company recently hired five former Home Team Marketing employees and says it’s bringing on at least a couple more in the coming weeks. HomeTown Ticketing has seven former HTM staffers in all and hopes to open an office in Cleveland by the end of the year, said Lorien Parry Luehrs, the company’s chief operating officer. Home Team Marketing, which once had more than 40 employees in Northeast Ohio, shut down Sept. 25 and, according to a bankruptcy filing in Delaware, owes between $10 million and $50 million to more than
2,000 creditors. Luehrs — who worked for HTM from 2008-14 and was part of an early round of layoffs after a New Yorkbased group of investors took over operations Nale — said she reached out to several former co-workers who were part of TicketRoar, HTM’s digital ticketing platform. HomeTown Ticketing hired five and “several” more are on the way soon, co-founder and CEO Nate Nale said. The tally doesn’t include Luehrs
and Jonathan Hicks, who left HTM in January and has been working in business development for HomeTown Ticketing since August. “We’ve had a lot of growth the past year,” Nale said. “The next 24, 36 months, there is a huge opportunity for us to take over the industry, which we have full intentions to do.” In early October, the Ohio High School Athletic Association announced that HomeTown Ticketing is its official online ticketing provider. The exclusive, multiyear partnership came after a couple of successful test runs in which HomeTown’s digital ticketing platform was used for prominent events, including the 2019 state
high school basketball tournament. HomeTown Ticketing also has exclusive deals with the Pennsylvania Interscholastic Athletic Association, the Nevada Interscholastic Activities Association, VNN Sports (a Michigan-based high school marketing and communications firm) and Dave Campbell’s Texas Football (a prominent sports magazine in the football-mad state). HomeTown Ticketing, which is a division of Columbus-based Easy Peasy Ticketing, is “fully funded,” Nale said, and plans to add 10 to 20 staffers in the next year or so. The recent additions put the current employee count at 18. Two advantages HomeTown Ticket-
ing has for high schools, Nale said, are that the company’s software “doesn’t touch the ticket revenue” (several sources told Crain’s hundreds of schools were owed at least four figures of TicketRoar revenue at the time of HTM’s closing) and it built its platform in-house (HTM’s TicketRoar, on the other hand, was hosted by Eventbrite). The influx of former Home Team Marketing employees saves HomeTown Ticketing “a critical six to eight months,” Nale said, since the new employees already understand the nuances of digital ticketing. “It allows us to continue moving at a rapid speed, which is very important for our business growth,” Nale said.
TravelCenters steps up
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Westlake-based truck-stop operator TravelCenters of America had a partnership with Home Team Marketing that kicked off with the 201617 school year. TravelCenters paid HTM a fee, and the now-defunct company promoted TravelCenters at high schools with which it had relationships. The program was highlighted by a TravelCenters day at the school, usually coinciding with a football game and culminating in the Westlake company presenting a donation to the school. When Home Team Marketing shut its doors, the partnership abruptly ended. TravelCenters realized the schools that were expecting a donation had been “hugely disadvantaged,” said Tom Liutkus, TravelCenters’ senior vice president of marketing and communications. So the company decided to disburse the $1,300 donations anyway — a gesture that went to 45 schools, for a total of $58,500. Granted, that’s a drop in the bucket for the largest operator of truck stops in the U.S., but four figures can mean a lot for a high school athletic department. “It certainly could have been a situation where TravelCenters could have said, ‘Sorry, not my problem,’ ” said Craig Livergood, the business manager for the Bald Eagle Area School District in Wingate, Pa., which was part of the program. At the risk of “sounding like a commercial,” Liutkus said TravelCenters has a “day-making” service platform that calls on employees to attempt to lift the spirits of anyone who appears to be having a difficult time. The $1,300 donations fit that approach. “We want to help these schools,” Liutkus said. “It’s not their fault or our fault (that HTM shut down), but they’re the ones that are going to get hurt.” Plenty of others have also been burned by Home Team Marketing. A meeting of creditors — the Chapter 7 filing on Oct. 15 had a list that was 219 pages long — is scheduled for Nov. 15 in Wilmington, Del. Erin Telisman, a former HTM account manager who said she’s owed about $8,000 in unpaid bonuses, would like to attend, but that probably isn’t feasible for the pregnant mother of three. That’s a long way to go for the majority of the individuals and organizations who are still owed money by Home Team Marketing, which reported that its remaining assets range from nothing to $50,000. “It still blows my mind that they don’t try to make things right with any employees,” Telisman said. Kevin Kleps: kkleps@crain.com, (216) 771-5256, @KevinKleps
6 | CRAIN’S CLEVELAND BUSINESS | NOVEMBER 4, 2019
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Congratulations to Cleveland on Securing the New ELITE Headquarters Congratulations to the city of Cleveland, its residents and economic development partners for your continued efforts to strengthen Ohio’s place on the global business map. The London Stock Exchange Group’s ELITE subsidiary, an international business support and capital-raising platform for ambitious private companies, will now call Cleveland its home in the Americas. As the seventh-largest economy in the country, 21st in the world, and with one of the top financial services sectors in the United States, Ohio is a prime location for ELITE. ELITE will now serve all of North and South America from Cleveland with its innovative programming, giving companies direct access to business education and international capital. Cleveland – with its long-standing institutional investment history, one of the largest concentrations of private small and midmarket companies in the country, as well as a supportive and welcoming business community – was a perfect fit for ELITE. The ELITE Americas headquarters will bring 40 jobs to Cleveland with the goal of helping ambitious small- to medium-businesses here and around the world grow, create jobs and make an impact on their communities.
From all of us at JobsOhio and our partners across the state, congratulations to Cleveland on this exciting accomplishment!
DOWNTOWN
From Page 3
Companies affiliated with Cavaliers owner and Rocket Mortgage founder Dan Gilbert underlined their longterm intentions to develop land on the south side of Huron Road, opposite and below the Tower City complex, originally purchased as the site for a new downtown casino. The vast 18-acre parcel, used as parking, stretches from Tower City to the side of the Cuyahoga River. The property is not included in the $843 million sale/leaseback of the real estate associated with Gilbert’s JACK Cleveland Casino and JACK Thistledown Racino to New York City-based Vici Properties Inc., a Real Estate Investment Trust focus devoted to owning properties used for gaming, announced Oct. 18. Vici even refers to the land as the “Huron Road development parcel” in a list of Gilbert-associated ventures that will continue in Cleveland. Matt Cullen, who serves as CEO of both JACK Entertainment and Bedrock, Gilbert’s real estate arm, said in an Oct. 31 phone interview that Vici as a REIT is interested in the cash flow from gaming operations and it wouldn’t make sense to sell it land. He said the company’s interest in constructing a new casino on the acreage changed after Ohio broadened legalized gaming from the initial four urban casinos to include video slots at seven racetracks in the state. At some point, Cullen said, Bedrock will change the name legally for the land exempted from the sale, which is currently titled to Rock Ohio
“WE ARE ABSOLUTELY INTERESTED IN DEVELOPING THE SITE. ... I REALLY DON’T KNOW WHAT SHERWIN-WILLIAMS IS PLANNING.” — Matt Cullen, CEO of JACK Entertainment and Bedrock
Caesars Cleveland LLC, Gilbert’s initial joint venture with Caesars Entertainment Inc. of Las Vegas to develop Ohio casinos. The name is unchanged since the Gilbert interests acquired the land in 2011 from the former Forest City Enterprises Inc., later Forest City Realty Trust Inc., for $42 million. Cullen said Bedrock considers it a mixed-use development parcel that would complement its nearby holdings, which include the gaming operations it will continue to operate, the just-renovated Rocket Mortgage FieldHouse that houses the Cavaliers, the May Co. building on Public
Square it’s converting to apartments with first-floor retail space, and the May Co. garage. “We are absolutely interested in developing the site,” Cullen said. When asked about potential interest by Sherwin-Williams in the land, he replied, “I really don’t know what Sherwin-Williams is planning.” Parking to service the Bedrockowned Avenue Shops is plentiful, Cullen noted, referring to the one-time train station beneath the Tower City complex. That leaves the land on Huron’s south side for other uses. One source familiar with the Sherwin-Williams search, who spoke on grounds he not be identified, said Cleveland city officials understand that the company is focused on a site in downtown Cleveland as well as a suburban site and is not pursuing an outof-town alternative. He said he’s heard the paint-maker likes both lakefront and riverfront sites out of a half-dozen potential downtown locations. For its part, Sherwin-Williams has not varied from its original statement saying it would look at out-of-state options. John Morikis, Sherwin-Williams’ CEO and chairman, said in a conference call with investors on Oct. 22 that the company hopes to make a selection by the end of this year or early 2020. Its stated goal is to vacate its current headquarters by 2023. The prospect of such a property as its current headquarters hitting the market is rife with challenge, but also opportunity for a deep-pocketed developer. Although 5 million square feet of downtown office space has been converted to office and hotel use, most recently in part of Terminal
Tower, Newmark Knight Frank puts downtown Cleveland vacancy at 21% as of the end of June, its most recent report. Such an empty would add several points to vacancy of the downtown market. The gorgeous art deco carvings on the exterior and brass door and window sashes of the Landmark Office Towers bring to mind the other big vacancy that has dogged the city for more than five years: the now-dark former Huntington Building at 925 Euclid Ave. While Millennia Cos. of Cleveland has been pursuing designs and uses for that structure for two years, it’s also twice the size of the Sherwin-Williams complex and lacks abundant parking. Geoff Coyle, an office leasing and building sales veteran at Hanna Commercial in Cleveland, said continued use of Landmark Office Towers as offices would add empty space to a soft downtown market. “It would need substantial investments and it would not fill up fast,” he said. “It’s well-located near a lot of amenities. It would accent the city’s need to continue to attract out-oftown tenants downtown.” Michael Cantor, managing partner of Allegro Real Estate Brokers and Advisors of Cleveland, said if Allegro were conducting a search for a client such as Sherwin-Williams, it would have started with a study of how the company could reuse the site and the market for other potential uses. “It even has potential as a hotel site given its location near the arena and other downtown attractions and its views of the city and the Cuyahoga River,” Cantor said. One option, he added, might be to
consider separating the corporate management functions in a new property from back-office operations currently at 101 Prospect. That could create an opporCantor tunity for the paint company to create new back-office operations there. But the challenge should not be understated. Another vacant downtown corporate HQ, the former Ohio Bell Telephone Co. headquarters at 45 Erieview Plaza, was recently listed for sale as well as lease with Cleveland’s CBRE Group Inc. office. Somera Road, a New York real estate investment company, has owned the nearly 500,000-square-foot building since 2016 but has not landed adequate leasing to convert it to multitenant use or a home for a new company. Somera also undertook another, smaller, downtown Cleveland office venture earlier this year, by buying the office building and parking garages at 1020 Huron Road. Tom Yablonsky, executive vice president of Downtown Cleveland Alliance, said he doesn’t see the Landmark Office Towers as an outsized undertaking. “It’s consistent with other tax-credit restoration projects undertaken in the city over many years,” Yablonsky said. “It could be several hundred units of apartments or even reutilized as office. It is very doable.” Stan Bullard: (216) 771-5228, sbullard@crain.com
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Focus
I
f you spent any time on social media last week, it was hard to miss friends, colleagues and concerned citizens you’ve never met talking about the CLE Rising Summit, a two-and-ahalf-day gathering at Cleveland Public Auditorium that was very much aligned with the spirit of Daniel Burnham: “Make no little plans; they have no magic to stir men’s blood.” That’s the encouraging part. About 600 people met to discuss serious things: education, the lakefront, poverty, affordable housing, racial equity, accelerating economic development, and more. In a city that too often operates with a top-down mentality, it’s refreshing to see people gather with the shared purpose of making things better in our beloved, but troubled, community. This effort, using the Weatherhead School of Management-developed Appreciative Inquiry approach to creating change, was a recognition that doing nothing is not an option. Now comes the hard part of turning talk into meaningful action. How many times have you sat in a corporate planning session that had you nodding your head in agreement in the moment, only to realize months later that few or none of the changes had been made? Too many, CLE RISING ORGANIZERS probably. And your company is considerably less complicatPROMISE THERE WILL ed than a metro area of a couBE A PUBLIC REPORT TO ple million people. CLE Rising organizers THE COMMUNITY IN promise there will be a public report to the community MARCH, AND THAT in March, and that teams inTEAMS INVOLVED IN volved in the process will be empowered to turn their THE PROCESS WILL BE ideas into reality. But there EMPOWERED TO TURN have been previous initiatives along similar lines, such THEIR IDEAS INTO as the mid-2000s Voices & REALITY. Choices project, that raised awareness of worthwhile goals and then fell short of achieving them because of a lack of financial resources, or focus, or institutional support, or many other factors. There was a fair amount of skepticism heading into this
summit because of those past disappointments, and if this one is all talk and no action, it will fan greater skepticism about Cleveland’s ability to become a more vibrant place. We hope the March report is targeted and focused on follow-through. As we’ve pointed out in this space during the past couple of weeks, the Census Bureau’s poverty numbers for Cleveland and Cuyahoga County are frightening, and we simply must do more to bolster the education, skills and talent of the workforce to create greater economic opportunity. CLE Rising on its website promised to set “big, exciting and attainable economic goals that raise the community’s hopes and help to create a strong economic future by 2030.” The group of 600 people last week accomplished the first part. It’s on CLE Rising leaders to set a blueprint to engage all of us to help achieve the second part.
Past and future O
ne of the anchors of Cleveland’s economy — its health care sector — is about to get a change at the top of one of its most important players. Big transitions aren’t easy, but the structure of this important one at University Hospitals gives us confidence that the health care system will continue to be a vital regional asset. UH announced last week that Thomas F. Zenty III, its CEO since 2003, will retire at the end of January 2021. Under his leadership, UH grew significantly, going from three hospitals to 18, with the addition of key regional hospitals and the construction of properties such as the UH Seidman Cancer Center and the UH Ahuja Medical Center in Beachwood. Zenty, 64, has worked in health care for 40 years; his nearly two decades at the helm of UH leave a lasting mark on Northeast Ohio. This is a well-planned exit. UH’s board expects to announce the selection of the next CEO before the end of this year, culminating what it characterized as “an extensive and deliberate succession planning process” for the past year. Assuming that timetable is met, the new CEO will be able to work with Zenty for a year to make the transition as smooth as possible. Northeast Ohio needs a strong UH, and this bridge from the past to the future is built to keep it that way.
Publisher and Editor: Elizabeth McIntyre (emcintyre@crain.com) Managing Editor: Scott Suttell (ssuttell@crain.com) Contact Crain’s: 216-522-1383 Read Crain’s online: crainscleveland.com
You may have noticed that your print edition of Crain’s Cleveland Business looks a little different today. There’s a reason for that: We decided the publication could use a design refresh on the eve of our 40th anniversary year in 2020. The refresh, though, also is part of a broader strategy by our parent company, Crain Communications, to Elizabeth create a more unified look across its four McINTYRE regional business brands in Chicago, Cleveland, Detroit and New York. Earlier this year, David Kordalski, the creative director for Cleveland and Detroit, and Tom Linden, his counterpart at Crain’s Chicago, began the redesign process, with the goal of shaping a better sense of community among the four regional brands. If you have ever come across a Crain’s Chicago or Crain’s New York during your travels, you may have noticed those brands looked somewhat similar to Crain’s Cleveland, but still had major differences. You might say they looked like cousins. The refresh makes it clear that we’re siblings. Linden put it best when he said, “Since their inception, the Crain city books have shared a family name, but like most siblings growing up, they’ve developed their own personalities and styles. Now it’s time for a family reunion, to take stock, learn from each other, share best practices and use the strength of our family name to continue to grow.” So, what’s new? THE NEW PRINT Effective Nov. 11, when Crain’s Detroit Business goes DESIGN INCLUDES live with its redesign, all four re- FRESH TYPEFACES gional business brands will have the same logo online and FOR HEADLINES, in print for the first time. The new print design in- BYLINES, PROMOS cludes fresh typefaces for head- AND LABELS, WHICH lines, bylines, promos and labels, which shows a clear SHOWS A CLEAR emphasis on navigation. Things EMPHASIS ON that worked well — specifically, the body copy for stories — will NAVIGATION. remain the same. Folios with the page number and dates have been moved to the bottom of the page to create a less cluttered and more contemporary look and feel for the publication. There’s also a stronger commitment to visual storytelling with an emphasis on creating clearer hierarchy on each page. Headlines, images, captions and quotes are all weighted to help you more easily navigate key stories and elements. The idea is to make it easier and more pleasurable to read. But none of that matters if what your reading isn’t compelling. We promise to continue to bring you the same high-quality content you have always gotten from Crain’s Cleveland and our three sibling brands in Chicago, Detroit and New York. You’ll be better informed about the business environment in your region. You learn about industry trends and who, and what, is on the cutting-edge. “The purpose of the redesign is show readers our ongoing commitment to creating content that reflects what is most meaningful today,” Linden said. Kordalski echoed that, saying, “As a news designer, it’s always gratifying to build on a solid foundation of smart reporting.” Going into our 40th anniversary year in 2020, you can continue to count on Crain’s Cleveland for its in-depth and unique coverage of Northeast Ohio’s business community, now with a fresher look.
Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing ClevEdit@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.
Sound off: Send a Personal View for the opinion page to emcintyre@crain.com. Please include a telephone number for verification purposes.
10 | CRAIN’S CLEVELAND BUSINESS | NOVEMBER 4, 2019
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Construction diversity and inclusion: A strategy at the intersection of race, gender and economics in region BY CONSTANCE HAQQ AND ERIC GORDON
on construction projects. Despite these collaborative efforts, an Ohio Supreme Court decision in September struck down the local hirSector partnerships in manufacing law that has produced so much turing, health care and information success. Nevertheless, in response to technology, each projected to be the court decision, many of those “in-demand” areas of the Northeast same public, private and labor interOhio economy, are receiving wellests that established the MOU/CBA deserved attention and support pledged to continue their voluntary from industry leaders, philanthropic Haqq, director of administration efforts to ensure equitable minority funders and workforce partners. and external affairs for the participation in construction. In the We believe the construction sec- Northeast Ohio Regional Sewer same Crain’s article cited earlier, a tor, which began a similar effort in District, and Gordon, CEO of the survey of industry leaders under2013, deserves the same level of fi- Cleveland Metropolitan School scored a growing concern that connancial support, as evidenced in an District, are co-chairs of the struction demand will be constrained Oct. 21 Crain’s article, “Demand for Construction Diversity and by the lack of supply of trained proworkers is a growing construction Inclusion Committee. 11-4-SVN Ad-.indd fessionals and tradespeople. contractor concern.” As construction demand has Nearly a decade ago, four Afrievolved, so has CDI and its collabocan-American contractors — in con- WE BELIEVE THAT rators. In 2018, volunteer leaders sultation with former U.S. Rep. Louis and staff completed a comprehenStokes — engaged public, private, la- CONSTRUCTION sive assessment of CDI and deterbor and community leaders in a con- DIVERSITY AND mined a need to expand CDI’s work versation which, in 2013, established to include promoting job and busithe Construction Diversity and Inclu- INCLUSION IS STRONGLY ness opportunities for minorities sion (CDI) Committee of the Com- POSITIONED TO PLAY AN across the construction sector. Submission of Economic Inclusion, a sequently, the Work & Jobs Strategy program of the Greater Cleveland EVEN MORE IMPORTANT Group (formerly the Owners OutPartnership — as a sector partner- ROLE IN CLOSING THE reach Group), led by construction ship — to advance equitable minority DEMAND AND SUPPLY GAP leaders from MetroHealth and the participation in construction. Cleveland Clinic, has been convenAs we move toward our seventh IN CONSTRUCTION. ing a growing number of new collabyear of operation, the goal of changing the culture and inclusion around major construc- orators including financing and development entities, tion projects has seen progress. Trade unions, major construction managers, professional services represencontractors and their associations, school systems and tatives and commercial real estate interests. Relative to community organizations can point to several programs construction supply, CDI is actively working with eduand initiatives where inclusion of women and minori- cation and workforce partners to expand outreach to ties are at the forefront. The CDI committee is poised to high school and college students, individuals looking for new career opportunities and seasoned professionhelp these efforts move to the next level of impact. The Memorandum of Understanding Regarding Com- als looking for their next client. The leadership of CDI munity Benefits and Inclusion (MOU) was signed in Feb- celebrates all of the voices and efforts supporting and ruary 2013 by a group of business, labor, political, educa- advancing diversity and inclusion in construction. We believe that CDI, like other sector partnership tional and civic leaders establishing the operational framework for Community Benefit Agreements (CBA) in convenings, is strongly positioned to play an even more construction. Subsequently, major employers voluntarily important role in closing the demand and supply gap in endorsed the agreement and used it to guide more than construction. We are grateful to our founding MOU $600 million in minority contracting. Further, the MOU/ group and steadfast supporters. In order to broaden our CBA was inspired and augmented by the existence of a impact and sustainability, we invite new partners and, local hiring law — also known as the “Fannie Lewis law” most importantly, additional funding partners to imple— under which, according to the city of Cleveland, more ment this key strategy that lives at the intersection of than $232 million was earned by local residents working race, gender and economics.
LETTER TO THE EDITOR
Check out this checklist for job success TO THE EDITOR: As I started to get older, my daughter asked me if I’m going to become a grumpy old man, and now I understand how we become grumpy as we age. You keep seeing the same problems time and time again, with the same goofy excuses as to why they are happening. I looked at your editorial page on Oct. 21 and on one side, in the editorial “All in,” I read how Cleveland Mayor Frank Jackson has come up with one odd excuse after another on why the city he leads has fallen deeper into poverty, even given the fact that we are in the longest economic expansion in modern times. Then, on the other side of the page, in a Personal View headlined, “Manufacturing the next generation of Cleveland talent,” I see someone talking about how desperate we are for workers in manufacturing. I don’t have a single job in the shop that wouldn’t lift someone out of poverty. I didn’t come up with this list,
but I can tell you most manufacturers can work with someone who can nail just seven out of 10 of these qualities that require zero talent: 1. Being on time 2. Work ethic 3. Effort 4. Energy 5. Body language 6. Passion 7. Doing extra 8. Being prepared 9. Being coachable 10. Attitude I have seen people from all walks of life employ the qualities listed above and become very successful. Mike Gordon Sr. President and CEO Tendon Manufacturing Inc., Warrensville Heights
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BUSINESS INCENTIVES
CARROT? OR STUCK?
RETROROCKET VIA ISTOCK
Tax breaks designed to attract or retain businesses may not actually pay off for the communities offering them
| BY JAY MILLER
When the Sherwin-Williams Co. announced earlier this year that it needed to find a place to gather its scattered administrative and research operations, the paint-maker said its search for a location for its new corporate headquarters would “consider multiple sites, including locations in Cleveland, Northeast Ohio and several other states.” That kind of announcement from a major corporation is expected to bring out of the woodwork communities that will offer the company tax breaks and other financial incentives to woo the business. Communities believe that attracting or keeping jobs is vital to their economic health, so they offer financial incentives to keep employment robust. At the same time, for large corporations, anything that helps defray the cost of doing business may chip away at any hometown allegiance.
But it’s not clear that the tax breaks, low-interest loans or lowcost worker training programs — or such incentives as tax credits for movie companies that bring shortterm productions to town — actually pay off for communities. In his new book, “Making Sense of Incentives,” Timothy Bartik, a leading expert on wooing businesses, estimates that to attract jobs, state and local governments are forgoing $50 billion a year from the various subsidies they offer businesses that are considering job-creating business expansions to their communities.
Also in Focus ` With reauthorization looming, Cleveland reviews the impact tax abatements have on residents. PAGE 1 ` Financial incentives are a blunt but effective tool for Cleveland's suburbs. PAGE 14 ` Microloans open up lending to startups and small businessess. PAGE 16
See ABATEMENT on Page 15
12 | CRAIN’S CLEVELAND BUSINESS | NOVEMBER 4, 2019
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FOCUS | BUSINESS INCENTIVES
ABATEMENTS IN THE ’BURBS
Cleveland suburbs prove financial incentives work for smaller communities, too BY LEE CHILCOTE
County abatement leaders
In 2014, the city of Independence began offering business incentives after a strategic plan revealed the need to redevelop older office buildings on Rockside Road, which were suffering from high vacancy rates and declining rents in the wake of the Great Recession. To help spur redevelopment, the city implemented a targeted Tax Increment Financing (TIF) program and began providing job-creation and -retention grants to landlords for redevelopment of specific properties in the commercial corridor. “There was a gap between what the landlord could get in terms of rents and the actual cost of construction improvements,” said Jeremy Rowan, economic development director for Independence. “We asked ourselves, ‘How can the city put dollars into the deal to reduce the gap between market rents and construction costs?’ ” As a result of the city’s incentives, as well as its investment in new infrastructure such as the widening of Rockside Road and the addition of new sidewalks and walking paths in the area, developers have invested more than $15 million into 20 projects totaling 500,000 square feet of office space in the past five years. Rowan said those projects have raised the assessed value of these properties and the city’s income tax revenues. “Yes, the economy is growing, but not at the pace it needs to and there’s a lot of competition,” he said. “Other communities are being aggressive with their retention and attraction efforts, and we found that we needed to
Here are the tax abatements/forgone tax dollars by authority for the tax year 2018 for the city of Cleveland and the 10 highest Cuyahoga County suburbs. Cleveland Westlake Strongsville Garfield Heights Lakewood North Olmsted Village of Mayfield Independence Beachwood Parma Village of Orange
$7,986,135.14 $613,114.65 $539,925.20 $345,981.24 $317,439.65 $209,873.56 $179,225.53 $171,917.25 $170,913.15 $138,040.13 $127,016.52
SOURCE: GOVERNMENTAL ACCOUNTING STANDARDS BOARD
CRAIN’S CLEVELAND BUSINESS GRAPHIC
“A LOT OF PROPERTIES HAVE TO OVERCOME BROWNFIELD CHALLENGES, AND THIS HELPS TO OVERCOME ADDITIONAL COSTS WITH OLD BUILDINGS AND OUTDATED INFRASTRUCTURE.” — Jonathan Holody, director of planning and development for the city of Euclid
be smart, but to be aggressive, too.” Northeast Ohio suburbs are increasingly using incentives such as tax abatement, grants and TIFs to attract and retain commercial development. Such tools are needed, leaders say, to help close financing gaps on deals, stay competitive with greenfield sites in farther-out communities and attract commercial development in a relatively slow-growth economy. Yet economic development officials in these suburbs vary widely in the types of incentives they use and how
they apply them, with approaches ranging from 100%, 15-year tax abatement in Community Reinvestment Act (CRA) areas, to targeted job-creation grants based on the specific number of positions created. They argue that to be most effective, cities should remain flexible and target their approaches to the unique needs of their communities and area businesses. Keith Benjamin, community services director with the city of South Euclid, said his city has attracted more than $100 million in new com-
15-year, 100% tax abatement. “A lot of properties have to overcome brownfield challenges, and this helps to overcome additional costs with old buildings and outdated infrastructure,” said Jonathan Holody, director of planning and development for the city of Euclid. “In our case, it gives those sites an advantage over greenfield sites farther out.” He added that Euclid has seen positive results from its approach, with construction of the new Amazon fulfillment center on the site of the former Euclid Square Mall as one example. “We had a record amount of investment last year according to commercial permit data,” Holody noted. “It seems that Amazon is having a good impact and drawing attention to the city of Euclid.” Cleveland Heights also recently expanded its use of commercial development incentives, following a 2017 citywide strategic plan. The city now offers a commercial loan program to bridge financing gaps, small loan programs and even TIF and tax abatement for larger projects where the investment and job-creation numbers make sense. Tim Boland, director of economic development, cited new projects such as Top of the Hill (Cedar-Fairmount) and Cedar-Lee-Meadowbrook (Lee Road) as signs of progress. Once again, customization is key, especially in Cleveland Heights, where many businesses are smaller and locally owned. “With walkable commercial districts, our businesses, both current and new, often have different needs than large corporate franchises,” Boland noted.
mercial development in the past decade. Yet only one recent project, Senders Pediatrics and Research Center, was provided with any kind of incentive at all (a five-year, 50% real estate tax abatement for bringing 38 new jobs to the city in 2014). “Our philosophy is that tax abatements and other financial incentives should be conservative, short-term and collaborative,” said Benjamin. “We believe they should be the exception, not the rule, and they should provide a long-term community benefit in the form of the creation of jobs and adding to the tax base.” Before committing to any kind of incentive, he added, South Euclid would have to complete a needs assessment and examine the city’s return on investment. The city has been able to remain competitive by working with partners to help businesses take advantage of programs like Cuyahoga County’s low-interest Economic Development Loan Fund. Although Benjamin said he would like to see South Euclid offer more business incentives, he knows taxpayer dollars are limited in his mostly residential community. For better or worse, commercial incentives have become more common, especially in communities farther from Cleveland. “With expansion dollars and tax incentives going to those outer cities, it means that the inner-ring suburbs and the city of Cleveland need to continue to provide opportunities for investment,” he said. Some suburbs have adopted more aggressive approaches. In Euclid, all new commercial development within designated CRA areas is eligible for
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FOCUS | BUSINESS INCENTIVES
ABATEMENT
From Page 12
“Sometimes, you see people claiming these things, you know, pay for themselves,” said Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich., in a telephone interview. “I don’t think that’s usually the case.” In his book, Bartik lays out the positives and negatives. On the plus side, a company move can indeed create jobs in any new facility and can spur business, and possibly create more jobs at ancillary businesses in the new community, such as grocery stores, hardware stores, restaurants and other service businesses. Job growth can also boost wages as workers become harder to keep. New jobs may also increase housing demand. All of these increases can boost tax collections. At the same time, the current hometown would lose that business and those jobs and taxes if the company gets a better offer elsewhere. So cities compete on the theory that if they don’t offer incentives, the company will go elsewhere. On the negative side, Bartik’s research suggests that incentives play a role in location decisions no more than 25% of the time. The rest of the time, the firm would have made the same decision regarding an expansion or relocation even if no incentive had been offered. Look at what happened when Seattle-based Amazon.com Inc. announced in 2017 that it would create a “second headquarters” that could eventually employ 50,000 people. It received 238 proposals from cities across North America, including Cleveland. Amazon entertained some lavish offers. The state of California proposed tax breaks worth as much as $1 billion. New Jersey officials put together a package of tax breaks that would have been worth over $7 billion to Amazon. Cleveland’s bid included $3.5 billion in financial incentives. So, who won? In November 2018 Amazon announced it would create two large regional offices that would employ 25,000 people each, one in Arlington, Va., the other in New York’s Long Island City. The state of Virginia and the city of Arlington offered $573 million dollars — far less than the 10-year, $8.5 billion subsidy offered by the state of Maryland. Both target areas are adjacent to Washington, D.C. “An additional $7.5 billion (sic) in subsidies wasn’t enough to get Amazon to move across the river,” Michael Farren, an economist at the Mercatus Center, a George Mason University think tank, told The New York Times after the winners were announced. “That just says that subsidies were never what mattered in the first place.” Amazon ended up canceling its New York headquarters plans after local residents and some politicians expressed shrill opposition to the estimated $3 billion in tax breaks offered to the e-tail giant. Still, incentives continue to be a key tool used by Ohio’s state and local economic development organizations. Crain’s reported in April that tax exemptions and tax credits will cost the state of Ohio an estimated $19.2 billion over the next two years, according to a document that is part of the state biennial operating budget. That doesn’t include the $186.5 million spent by JobsOhio, the nonprofit
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“SOMETIMES, YOU SEE PEOPLE CLAIMING THESE THINGS, YOU KNOW, PAY FOR THEMSELVES. I DON’T THINK THAT’S USUALLY THE CASE.” — Timothy Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research
“THERE IS NO QUESTION THAT INCENTIVES ARE A VERY SMALL PIECE OF THE ECONOMIC PACKAGE OF A DEAL.” — Mark Barbash, economic development consultant and former director of the former Ohio Department of Development
“WHAT MAKES IT INEFFECTUAL IS THAT EVERYBODY’S GOING TO DO IT — YOU JUST GET A RACE TO THE BOTTOM.” — Zach Schiller, research director of Policy Matters Ohio
that uses the state’s liquor profits to support economic development. JobsOhio considered the incentives critical to attracting 27,071 new jobs and retaining 69,905 existing Ohio jobs in 2018. “These results reflect our culture of collaboration and client focus that makes Ohio more attractive for companies,” said John Minor, at the time JobsOhio’s chief investment officer. “Along with our partners (the state of Ohio and the local economic development organizations), JobsOhio has a strong foundation to address important business issues, and we are well-positioned for the future.” Others, including Mark Barbash, an economic development consultant and former director of the former Ohio Department of Development, are skeptical about giving incentives too much credit. “Do incentives have an impact on
a decision by a company in terms of a location?” asked Barbash. “I think there is no question that incentives are a very small piece of the economic package of a deal.” Locally, Zach Schiller, research director of Policy Matters Ohio, said he believes the state and its communities should be more selective about which companies or which projects get public financial incentives. “I would like to see some better targeting than we have now,” he said. “I think what makes it ineffectual is that everybody’s going to do it — you just get a race to the bottom. A good example of this is the motion picture tax credit. I mean, you’re not going to have a movie industry in every state. And so the first few who did it seemed to benefit and everybody else piles in.” Jay Miller: jmiller@crain.com, (216) 771-5362
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FOCUS | BUSINESS INCENTIVES
Microloans bridge gaps in traditional lending
Starting as low as $500, these loans can be crucial to small businesses and startups Much attention is lavished on the big business deals, the ones that require millions of dollars in capital and tax credits, but with nearly 950,000 small businesses in Ohio employing up to 46% of the state’s workforce, those are hardly the only stories to tell. In 2016, 146,308 loans under $100,000 (a total value of $2.4 billion) were issued by Ohio lending institutions reporting under the Community Reinvestment Act, according to the Federal Financial Institutions Examination Council. Those loans ranged from as little as $500 up to $350,000 and included what are referred to as microloans, lower dollar amounts often originating at and serviced by non-banks, community organizations or in some cases municipalities. Rates and terms vary and are usually higher than a traditional bank due to risk mitigation. Jasmine Dixon, capital adviser at the Cleveland office of the Economic and Community Development Institute (ECDI), a Small Business Administration lender, said she deals with small loans for customers that have “credit challenges.” She cited three main reasons for customers to apply for a microloan from ECDI: “Either they have a credit
CONTRIBUTED
BY KIM PALMER
“WE KNOW OUR CLIENTS DO NOT HAVE CERTAIN KINDS OF ASSETS. WE NEVER SAY NO. WE WILL JUST SAY, ‘NOT NOW.’ ” — Jasmine Dixon, capital adviser at the Cleveland office of the Economic and Community Development Institute
challenge, do not want to work with startups — unless that individual has a lot of capital — or is in an industry that they do not want to lend to, like restaurants and construction companies, where there is a lot of risk involved.” The ECDI uses funds from multiple sources, including the SBA’s Community Advantage program, to provide loans up to $350,000 with a five-year term at rates between 8.5%12%. Her average loan is around $25,000. As a community development organization, the goal is to build up the economic state of the community, which requires a lenient approach to credit and a lot of financial education along the way. “We know our clients do not have certain kinds of assets,” Dixon said. “We never say no. We will just say, ‘Not now.’ ” Brian Anderson, business development manager for the city of Cleveland Heights, said microloans can play an important role in helping to grow small businesses in a distinct neighborhood. Cleveland Heights is funding a citywide microloan program in which applicants work with its Small Business Development Center to craft a business and financial plan. “As a microloan fund, typically we
are talking about very small businesses and startups that a lot of times are not bankable,” Anderson said. “We are doing the due diligence, like reviewing financials, but primarily with these types of loans you are relying on personal credit history.” The loans are for $10,000 or less, with a “target” APR a little above prime up to what an SBA microloan allows, which is now in the 5.25%-7.5% range with a maximum five-year term. With the city home to a good stock of small retail space, storefronts of 600 to 900 square feet, Anderson said he hopes to expand the program over time. “We absolutely want to see more deals on the microloan side,” he said. “They don’t need a lot of build-out, but they need some of those basic startup costs.” Nontraditional borrowers are not all small startups. There are also more seasoned, financially educated business owners who aren’t big enough to warrant bank-backed lending. “Our average customer is a small business owner who has been around a couple of years, who has a track record of doing between $500,000 to $2 million in revenue, that has just grown a little beyond their ability to secure funds from their bank,” said John Kropf, presi-
dent of Growth Capital Corp. Kropf uses funds associated with a pilot SBA program that provides small 7(a) loans to mission-based, non-bank organizations. All those loans, whether the amount is $25,000 or $250,000, have a 10-year term to spread out payments and encourage possible refinancing. Growth Capital began participating in the program in 2012 and is now one of the largest provider of small 7(a) loans in the country. “We are one step above that microlending but not quite at banking lending (levels),” Kropf said. The program is more about access to credit than financial education or incentives. Business owners are encouraged to seek traditional bank loans if they qualify. “We have very limited financial resources,” Kropf noted, “so we want to deploy them with the biggest impact.” Recently, he added, he’s seen a lot of customers use Growth Capital’s program to refinance high-rate predatory loans. Kropf acknowledged that such loans can be helpful if a business finds itself in a bind, but pointed out that once it starts paying the loan back, the high interest can really hurt cash flow and, in turn, hurt the business. Kim Palmer: kpalmer@crain.com, (216) 771-5384
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Estate Planning Council offers breadth of expertise to guide you on a path toward financial security BY PETER BALUNEK
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he Estate Planning Council of Cleveland is pleased to once again partner with Crain’s Cleveland Business in presenting our annual estate planning special section. The purpose of this section is to provide the community with timely information and valuable resources reflecting our multi-disciplinary approach to planning, including financial, insurance, business succession, and estate and charitable planning matters. The articles
and commentary on the pages that follow have been provided by some of the region’s most experienced professionals in these fields. They may help you to address your financial and estate planning concerns, or spur further discussion with your team of advisors. Estate planning is an Balunek often overlooked aspect of personal financial management. Millions of Americans do not have a current estate plan
and medical directives in place, leaving them vulnerable in the event of unexpected illness, accident or untimely death. Committing a modest amount of time to executing these important documents can save time, expense and hardship for families, loved ones and businesses. Life can change at any time, and we must prepare ourselves and our families for that possibility. The 2019 exemption from gift, estate and generation-skipping transfer taxes is now $11.4 million, and interest rates are low. There is no better time than now to
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implement estate planning strategies to take advantage of these favorable laws and conditions. It is wise to seek and rely upon the advice of experienced professionals who are familiar with income, gift and transfer tax laws and have expertise in making prudent financial and investment recommendations. Whether you have a plan in place or need to create one, it makes good financial sense to meet with your trusted advisors prior to year-end to find out what you can be doing to take advantage of new and existing planning opportunities. Perhaps you have family members with special needs. You may have a family business that you wish to transfer to a future generation or prepare for sale. Maybe you have charitable legacies that you wish to fulfill. Plenty of such experienced professionals comprise the membership of the Estate Planning Council of Cleveland. They are prepared to help you evaluate how your personal financial goals could be affected by the changing tax, economic and legislative environment,
as well as geopolitical risks. Founded in the 1930s, the Estate Planning Council of Cleveland is composed of more than 400 members working in the Greater Cleveland area, including attorneys, accountants, bankers and trust officers, financial planners, insurance agents, appraisers and representatives from charitable organizations. Our website, www.epccleveland.org, is a valuable resource that can help you to identify the professionals you will need to assist you with your unique situation. We are pleased to present you with this special section in Crain’s Cleveland Business, which contains important insights and commentary on a variety of estate planning issues. We hope that you will find it to be an indispensable resource as you work with your advisors to plan a sound financial future. Peter Balunek, CFP, CLU, ChFC, is a life insurance professional at Falls Advisory Group. Contact him at 440-247-5858 or peter@ fallsadvisorygroup.com
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The nuts and bolts of basic estate planning BY MARGARET M. METZINGER
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know, I know, you’ve been meaning to get to it. N ow is the time to start thinking about your family’s needs in the event you suffer catastrophic inj ury, terminal illness, or even death. These are not easy subj ects to contemplate, but without even the most basic estate plan in place, your family could experience unnecessary financial burdens and time-consuming stress at a time already wrought with emotional turmoil, sadness and potential family disputes. B y planning ahead, you can make decisions now so your family won’t have to in the future. The type of estate planning documents you need is driven by a number of factors, including marital status; the size of your family, and any family members with special needs; household income; the extent of your assets; life insurance, disability insurance or long-term care insurance; your standard of living; general health considerations; potential inheritances from others; and how long you plan on working before retirement. There is no one-si e-fits-all estate plan each is tailored to the specific needs
of the client based on these factors and others, the existence of which come to light during your first meeting with your estate planner. It is important to provide your attorney with as much information as possible. A well thought out estate plan will provide a solid foundation that can grow with you and can be modified to meet your changing needs. The following discussion outlines some of the estate planning tools available to you when you start thinking about your estate plan. Metzinger First, you need a will, frequently referred to as a last will and testament. This document allows you to identify the beneficiaries of your estate and designate what each beneficiary will receive upon your death. You have many options available to you in making these designations. or instance, you can make specific bequests ( gifts) of real property, cash, stock, j ewelry, cars, artwork, or other items of personal property to one or more individuals or charities. You can also divide your assets equally among a group of beneficiaries or identify specific amounts
ESTATE
PLANNING or percentages of your net estate ( what remains after taxes, expenses and costs) to pass onto your beneficiaries. Your will can be modified or revoked at any time as long as you retain the mental capacity to take such actions. Second, there may be circumstances where a trust should be considered. Trusts can be used to manage your property during your life and administer the use of such property by your beneficiaries after your death. ou can allocate some or all of your property to a trust; you can limit the use of trust income and/ or principal; you can give the trustee complete discretion over the management and distribution of the trust assets for the benefit of your beneficiaries and the power to direct when, and under what circumstances, trust assets should be distributed to your beneficiaries free of trust. There are many types of trusts that can be utilized based on your situation. ome trusts are modifiable and revocable, and others are irrevocable and cannot be changed.
Next, advance directives — sometimes known as health care directives — provide notice to your family and physicians about what happens to you from a medical perspective at the end of your life. A living will is a declaration of your wishes and spells out what types of medical treatment you want at the end of your life, in the event you are unable to speak for yourself. A health care power of attorney enables you to appoint someone to make medical decisions on your behalf, in the event you are unable to make such decisions for yourself. Your “ agent,” sometimes referred to as an “ attorney in fact,” will interact with your medical care team on your behalf as both your advocate and spokesperson. This person likely will be called upon to make immediate medical decisions for you during a time of great emotional turmoil, so you should choose someone who can handle this responsibility. Once your advance directives are executed, you should provide your physician with copies that can be scanned into your electronic medical record. As another consideration, a general durable power of attorney is used to assist in the management of your
financial affairs. This document allows you to designate another person, your “ attorney in fact” or your “ agent,” to oversee your financial matters in the event you become incapacitated. A power of attorney may be revoked by you in writing at any time, provided you retain the legal capacity to do so. Also, any authority given to your attorney in fact pursuant to a power of attorney is extinguished upon your death. Finally, in addition to the powers given to your attorney in fact in your advance directives and power of attorney, you have the ability to nominate a person to become your legal guardian should the need arise. A legal guardian is appointed by the probate court, upon proper application and proof of your incapacity, in the county in which you reside. A legal guardian can be appointed to handle your financial affairs, your personal care, or both. You should consult with your lawyer to ensure that you designate an appropriate person to become your legal guardian if the need arises. Margaret M. Metzinger is a partner at Frantz Ward. Contact her at 216-5151075 or MMetzinger@frantzward.com.
Dedicated to Helping Clients Protect Their Legacy. Trust is essential when choosing an advisor to help you protect your assets and preserve your legacy. Ulmer’s estate planning attorneys have decades of experience and will work with you to maximize opportunities, minimize risk, and create a customized strategy that provides peace of mind. • Estate Planning • Wills and Trusts • Succession Planning
• Probate and Trust Litigation • Tax Planning, Probate & Trust Administration
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The intricacies of selling a business: planning ahead and after G lenm ede w o rk s w it h m any c lient s and t h eir adviso rs in p lanning f o r liq uidit y event s. T h e f o llo w ing c ase st udy sh o w s h o w G lenm ede c o llab o rat ed w it h a mergers and acquisitions firm to meet o ne c lient ’s needs b ef o re and af t er t h e sale o f a b usiness.
T
hrough hard work and perseverance, many owners have the opportunity to sell thriving businesses for a significant profit. owever, this positive outcome introduces its own set of challenges. aintaining and growing the proceeds of a sale require very different skills than building a company.
any owners meet the challenges by engaging a range of trusted advisors. irst, an owner may need a firm to identify a buyer and consider post-sale goals. t is ust as important, however, for sellers to work with a relationship-driven wealth management advisor who can help define the seller s ob ectives and create Olejko a long-term plan. holistic wealth plan should incorporate the seller s lifestyle ob ectives and simultaneously address philanthropic and legacy goals. n addition, a wealth manage-
ESTATE
PLANNING ment advisor should be equipped to help educate and orient children and grandchildren about prudent stewardship of newfound wealth.
A recent case study: selling a family’s manufacturing business The co-owner of a manufacturing company ointly owned with his siblings — decided to sell the business. The primary ob ective
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was to identify a buyer who would continue the family s mission with respect and understanding. The transaction was complex, involving many family members and a variety of property holdings. The family hired a mergers and acquisitions advisor to determine a valuation, find a suitable buyer, structure the deal and remain involved after the sale to ensure a seamless transition. S elling the business, however, was only the beginning. The former owner realized he needed an experienced and trusted partner to help organize and invest his assets and provide financial guidance as he embarked on the next phase of his life. roceeds of the sale included $25 million outright to the former co-owner, $15 million in trust for the benefit of his children ranging from elementary school age to the late 20s — and an equity stake in the business providing financial benefits if the company were sold again. The Glenmede team worked with the client s investment banker to understand nuances of the transaction. e t, the team reviewed all financial documents in the process of organizing the client s many financial accounts. They reviewed estate planning documents to guarantee that fiduciaries and successor fiduciaries were current, and that retirement plan and life insurance beneficiary forms were complete and reflected the client s desires. ith the review completed, Glenmede created a holistic balance sheet accounting for all the family wealth, including liquid and non-li uid assets. B ased on a clear understanding of the client s goals, the team began the process of creating a long-term wealth plan. key element involved establishing a comfortable level of expenditure that preserved enough income for continuing growth in wealth. The plan also incorporated ta -efficient philanthropic activities and wealth transfer to the next generation. t allowed enough fle ibility to accommodate changes in family circumstances and priorities, as determined by periodic reviews. lenmede s e perience providing financial education to the ne t generation was important because the client wanted to prepare inheritors for managing assets responsibly and upholding the family s values. s a first step, the lenmede team recommended involving the children in family philanthropic discussions and age-appropriate activities. rom these conversations, the children gradually would learn general financial knowledge and sound financial practices, and eventually participate in discussions about the underlying investment strategy of
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A holistic wealth plan should incorporate the seller’s lifestyle objectives and simultaneously address philanthropic and legacy goals.
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BY LINDA M. OLEJKO
their own portfolios. t that point, more advanced concepts, such as ta -efficient charitable giving, would be introduced. Typically, we engage in a goals-based wealth review for each family member. The goal is forging a path toward long-term financial security, a meaningful legacy and developing a strategy for philanthropic gifting.
Conclusion n many cases, closely held business owners should seek professional advice before a transaction takes place, so they can take advantage of strategies only available pre-sale. atters such as valuation discounts, gifting and maximizing the ta efficiency of pre-sale transfers must be planned long in advance. ● hether sellers choose to work with advisors before or after a sale, it is crucial to find a partner with a comprehensive, long-term approach and experience building lasting relationships. mplementing a wealth strategy can take years — selling a business is ust one step in the process. ●
Linda M. Olejko, CFP, CEPA, is a managing director in Glenmede’s Greater Cleveland office. Contact her at Linda.Olejko@glenmede. com. T h is m at erial is int ended t o
b e a review o f issues o r t o p ic s o f p o ssib le int erest t o G lenm ede T rust Co m p any c lient s and f riends and it is no t p erso naliz ed invest m ent , est at e p lanning , t ax o r leg al advic e. A dvic e is p ro vided in lig h t o f a c lient ’s ap p lic ab le c irc um st anc es and m ay dif f er sub st ant ially f ro m t h is p resent at io n. T h is m at erial m ay c o nt ain G lenm ede’s o p inio ns, w h ic h m ay c h ang e w it h o ut no t ic e af t er dat e o f p ub lic at io n. I nf o rm at io n g at h ered f ro m t h ird- p art y so urc es is assum ed reliab le b ut is no t g uarant eed. T h is p ub lic at io n m ay no t b e used as leg al o r t ax advic e.
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I am the trustee of a trust. Now what? Engaging a team of trusted advisors can help ensure obligations are executed effectively
BY STEPHANIE M. GLAVINOS
U
pon becoming trustee of a trust, the trustee will frequently engage an attorney and seek advice from other advisors to assist them throughout the trust administration process. Many trustees accepting the position do not understand the responsibilities involved in a trust administration. A trustee client should rely upon their advisors to explain not only the fiduciary duties imposed by state law, but also the obligations charged under the specific terms of the trust. For advisors, counseling trustees on the administration of the trust often becomes a continuing representation that lasts throughout the duration of the trust administration. Assuming the role of trustee is a commitment that comes with duties to the beneficiaries. trust creates a fiduciary relationship between a trustee and the trust beneficiaries. It is essential from the outset of a
trust administration that the trustee is educated on the legal duties of a fiduciary and the conse uences of failing to discharge the trustee’s duties. The trustee is required to administer the trust in strict accordance with its terms. If the trustee fails to do so, this can be a breach of its fiduciary duty, and the beneficiaries have the right to take legal action against the trustee personally. Many trustees, once apprised of the Glavinos personal risks involved with the j ob of trustee, may choose to carry insurance coverage available to trustees to insulate against this potential liability. dentification of the trust beneficiaries should be done at the beginning of the trust administration. The specific terms of the trust, including timing and guidelines, will govern the parameters for making distributions to the beneficiaries. The
ESTATE
PLANNING trustee must adhere to these standards, as they are duty bound to carry out the specific terms of the trust. One of the trustee’s primary duties is to safeguard the trust property in a reasonable manner. Initially, this process can be time-consuming as the trustee’s j ob requires locating and inventorying all of the assets that are either already in the trust or that will be subsequently transferred to the trust. A trustee must prudently manage the trust assets. Many trustees require guidance with regard to their investment duties. They should be advised to employ all necessary agents and financial advisors to assist with the development of an investment strategy that takes into account the needs of the current beneficiaries as well as the potential future remainder beneficiaries.
The trustee has a continuing obligation to keep the current beneficiaries reasonably informed regarding the assets of the trust and information relating to the administration. At least annually, the trustee should prepare a trust report identifying the trust property, liabilities, receipts and disbursements. This report should also disclose the source and amount of any compensation paid to the trustee. A trustee is entitled to compensation for services rendered in the administration of a trust, but it is vital that the trustee follow the terms of the trust that govern trustee compensation or, in its absence, adhere to applicable state law. A trustee also should take care to recogni e potential conflicts of interest and avoid entering into transactions that might benefit a trustee personally. U nless the terms of the trust provide otherwise, a trustee must treat the beneficiaries with impartiality and
cannot favor one beneficiary s needs or desires above another beneficiary. The trustee must ensure that a trust complies with all federal and state income tax laws. A trustee has a duty to timely file all re uisite ta returns and pay any trust income or estate tax obligations owed by the trust. Where applicable, the trustee must also send a schedule - to the beneficiary detailing the beneficiary s share of the trust income and deductions. It is prudent for a trustee to engage an experienced income tax preparer to assist with this j ob. A trustee should be educated and advised as to the duties and responsibilities highlighted in this article, and rely upon advisors to counsel them through this process. Stephanie M. Glavinos is an attorney at Ulmer & Berne LLP. Contact her at 216-583-7230 or sglavinos@ulmer.com.
HELPING CLIENTS PROTECT THEIR LEGACY Protecting what you have built for the next generation takes careful planning and an experienced partner who understands your goals and objectives and can tailor a plan to help you achieve them. At Hahn Loeser, we work with our clients to navigate the evolving tax laws, minimize tax exposure and create a strategy that will help you preserve your legacy.
Let us know how our Estate Planning Team can help. Stephen H. Gairepy | National Trusts & Estates Team Chair | 216.274.2224 | sgariepy@hahnlaw.com Christina D. Evans | Cleveland Trusts & Estates Team Chair | 216.274.2442 | cdevans@hahnlaw.com
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Planning for a trust beneficiary who falls within the ‘diminished capacity’ gray area BY DANA MARIE DECAPITE
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hen faced with decisionmaking during the estate planning process, there are numerous factors to consider. Each family situation and wealth structure is uni ue, as are the beneficiaries inheriting under each estate plan. One particularly complicated planning consideration arises when planning for a beneficiary with diminished capacity. U nlike a typical special needs planning scenario involving a beneficiary with a permanent mental or physical disability, many individuals and families are faced with the issue of planning for a beneficiary with potentially temporary diminished capacity.
Temporary diminished capacity is likely subj ective to the party implementing the estate plan, and for that reason, it is not easily diagnosed in the estate planning setting. beneficiary with temporary diminished capacity may include a financially unsophisticated beneficiary a minor beneficiary or a beneficiary with a substance abuse or addiction-related illness, untreated mental DeCapite illness, long-term j ob loss, or any other life situation creating a circumstantial and temporary need for heightened planning. These types of beneficiaries may never require needs-based assistance and may not have a permanent
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PLANNING disability, but their life situation is volatile, and inherited wealth may have a universally negative impact on the beneficiary. To ensure estate planning goals are met and to avoid devastating conse uences for the beneficiary, it is important to plan properly for a beneficiary who falls within this diminished capacity gray area. An estate planning practitioner can help navigate this planning scenario, where traditional planning may result in an overly accessible inheritance, and commonly used special needs planning
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techniques may be a bit too restrictive. This article discusses important elements to consider when planning for a beneficiary with temporary diminished capacity and drafting techniques that can be used to plan effectively for that beneficiary.
Evaluating beneficiary capacity It is critical to diagnose temporary diminished capacity appropriately through the estate planning process. The family must consider the beneficiary s ability to reside alone the beneficiary s ability to maintain employment and/ or a source of income; the amount of medical care necessary for the beneficiary and whether the need will increase exponentially and atypically over time; the age and life expectancy of the beneficiary the anticipated costs associated with maintaining the beneficiary s current uality of life and standard of living; the potential for capacity to decline further or to be restored; whether needs-based assistance will be necessary for the beneficiary after the death of a caretaker family member; and the other assets of the beneficiary, if any. These considerations are useful in building the structure of an estate plan to guarantee the outcome of the estate plan and to protect the beneficiary.
Planning techniques for beneficiaries with temporary diminished capacity The plan for the beneficiary s inheritance should accomplish the appropriate balance of rigidity and fle ibility and should also maintain uality of life for the beneficiary from an educational, medical, social and support standpoint. Many of the estate planning techniques appropriate for planning for beneficiaries with temporary diminished capacity are standard — however, it is the appropriate layering of these techniques that is critical. A widely accepted planning technique for wealth transfer is the likely starting point for planning for a beneficiary
with temporary diminished capacity — dynastic trust planning. U sing a dynastic trust as the baseline, and then drafting in the necessary fle ibility to tweak the document to the beneficiary s specific level of incapacity, can create the appropriate checks and balances for the lifetime of the beneficiary. The following planning techniques, layered on top of dynastic trust planning, are opportunities to grant or restrict the control of the beneficiary as it relates to the eventual administration of the trust: ● N aming of appropriate trustee/ co-trustees, trust protector, trust advisor and other independent advisors; ● llowing the beneficiary to serve as co-trustee or sole trustee of his/ her trust at a certain age, upon the occurrence of a certain event, or in the sole discretion of a third party; or, conversely, explicitly prohibiting the beneficiary from serving in any fiduciary or uasi-fiduciary capacity D rafting of dispositive provisions conditioned upon certain timing, the occurrence of an event, or the easily ascertainable behavior of the beneficiary ● U sing a limited power of appointment allowing the beneficiary the ability to appoint trust property to other individuals/ charitable organizations, either during their lifetime or in a testamentary capacity upon death; ● sing an n Terrorem provision to deter a beneficiary from challenging the plan, for a situation where beneficiaries are treated differently as to amount or method of inheritance. Addressing and planning for the temporary diminished capacity of a beneficiary is a difficult, but critical, conversation to have with your estate planning practitioner. There are numerous effective planning strategies that can help achieve estate planning goals while also protecting a beneficiary who does not fit neatly into a pre-e isting estate planning mold. ●
Dana Marie DeCapite is a partner at Hahn Loeser & Parks LLP. Contact her at 216-274-2465 or ddecapite@ hahnlaw.com.
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Organ donations can save lives Estate planning an ideal time to address wishes
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BY GORDON BOWEN
here are 1,73 1 people in N ortheast Ohio anxiously waiting for one phone call that will save their life. That’s right. There are 1,7 31 people in N ortheast Ohio waiting for a life-saving organ transplant — 3,125 wait in Ohio and 112,8 8 6 wait across the U nited S tates. U nfortunately, only some of them will be lucky enough to answer the phone call informing them they have a new chance at life. In 2018 , 18 6 people in N ortheast Ohio died waiting or became too sick to transplant. The national number? 11,5 45 . Our nation’s organ shortage is one of the few medical crises where the scientific and clinical solution is available. Today’s organ transplant surgeries overwhelmingly are successful, and transplant survivors go on to live fulfilled lives, contribute to the workforce and create and enj oy loving families. The primary reason so many still die waiting is painfully simple: N ot enough Americans are registered organ, eye and tissue donors.
This is a problem with a solution. And there is no better time to learn about the need for organ, eye and tissue donation than when planning your estate. It’s no secret that most people will avoid conversations about their mortality. Well, guess what? If you’re planning your estate, then you have already overcome that hurdle. H ere are the key things to know about organ, eye and tissue donation: ● Y ou are never too old to be an organ, eye and tissue donor. Gifts from donors of Bowen all ages can be viable for transplant. D on’t rule yourself out. ● A n organ donor can save up to eight lives, and a tissue donor can help heal and save more than 5 0 . ● I n almost all situations, you can still a s cific f n ral arran ments you desire. D onation professionals will do everything to respect and honor your wishes. ● T he donation process is anonymous.
ideas ideals impact
ESTATE
PLANNING Identifying info is only shared if recipients and donor families both agree
then evaluates the health of the donor’s organs and matches viable organs with potential recipients across the country. The team provides care for the donor and family throughout the process.
The Ohio Donor Registry Organ, eye and tissue donation starts
How does organ, eye and with the Ohio D onor R egistry, which is managed by the Ohio D epartment tissue donation work? Lifebanc manages the organ, eye and tissue donation process in N ortheast Ohio. Lifebanc is one of 5 8 organ procurement organizations in the U nited tates, each designated to serve a specific geographic area. Lifebanc is independent of the hospitals in its region. H ospitals are required to refer imminent deaths meeting certain criteria conducive to organ donation to Lifebanc. For organ donation to occur, a patient is almost always on a ventilator and progressing to brain death. Once brain death has been determined or a family elects to withdraw care, Lifebanc’s team of social workers and clinicians work with the family to inform them of the opportunity of donation, their loved one’s registered donor status or obtain consent for the donation process to proceed. The team
of Public S afety. It operates on the legal principle of first-person consent. That means when an adult in the state of Ohio registers on the Ohio D onor R egistry, they are declaring their wishes to be an organ, eye and tissue donor. That declaration is legally binding, and no one can overturn it. Most people know they can register to be an organ, eye and tissue donor when conducting business at a B ureau of otor ehicle office. ost people also want to spend as little time in the B MV as possible. There is an easier and quicker way. Anyone with a stateissued ID can register online at lifebanc. org/ estate. The process takes about three minutes. There often is confusion in the estate planning world regarding organ, eye and tissue donation and living wills. While
any declaration of intent to save lives through donation is positive, it is most effective for estate planning professionals to have clients register online at lifebanc. org/ estate. R egistering online eliminates potential clerical errors and the need for living wills to be available when donation conversations are occurring. There is one last step. Talk to your family. Tell them about your decision to be a registered organ, eye and tissue donor. Planning for your estate relieves your loved ones from having to make stressful decisions during a difficult time. Make sure your decision about registering to be an organ, eye and tissue donor is also one less worry for them.
Let’s end this crisis Together, we can drastically reduce the number of people who die waiting for an organ transplant. The medicine and technology are here. N ow it’s up to us as a society. About 90% of adults in Ohio have favorable views of organ, eye and tissue donation. Only 5 8 % are registered on the Ohio D onor R egistry. Let’s bridge that gap and give hope to all those waiting. Gordon Bowen is CEO at Lifebanc.
For results that resonate, change the equation. Partner with Glenmede, an independent, privately owned trust company offering investment and wealth management services. Founded in 1956 by the Pew family to manage their charitable assets, we provide customized solutions for individuals, families, endowments and foundations. To learn how our culture of innovation and experienced thinking can help you make your unique imprint on the future, contact Linda M. Olejko at 216-514-7876 or linda.olejko@glenmede.com.
Glenmede’s services are best suited to those with $5 million or more to invest. @glenmede /company/glenmede glenmede.com
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ESTATE PLANNING PLANNING ESTATE
S8 November 4, 2019
How to incorporate your pets into your estate plan BY MARY EILEEN VITALE
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any pets end up in shelters when their owners become incapacitated or pass away. id you know you can plan for the care of your pet in your estate planning? All 50 states have enacted laws authorizing the establishment of pet trusts, which allow an owner to designate an individual to care for a pet and provide funding for the pet’s ongoing care. pet trust creates a legally enforceable obligation for your trustee to use funds to care for your pet as you wish. dvantages include: ● alidity during your lifetime, if you are incapacitated and after your death; ● Trust assets escape probate; ● Trust provisions set forth your pet’s caretaker and the provision of care; and ● unds can be overseen by a separate trustee if needed. Consider the following when creating a pet trust: ● The trustee can be the same person as the pet guardian, or a differ-
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PLANNING ent person named to help invest the assets and provide oversight on disbursements. ● t s important to have a serious conversation with your pet guardian to assure there is mutual understanding of expectations involved and the ability to make the Vitale commitment. ● N ame a successor guardian in case the originally named individual is unwilling or unable to comply. ● onsider a beneficiary for the remaining trust assets if your pet does not outlive the assets. Choose from family members, the guardian or a charitable pet organization. ● The amount of money or other assets reasonably necessary to fund the trust depends on the number of pets supported and their anticipated life expectancies. Consider the pets’
health concerns, special dietary needs veterinary e penses, etc. ● onsider any special circumstances, such as if you have more than one pet and whether the wish is to keep them together. etailed instructions and contact information help with transition, but don’t restrict your trustee s discretion too much, as unexpected or new circumstances may occur. Although a pet trust provides an enforceable obligation, you may not be able to set aside assets to establish one. lternatively, you can name someone in your will who will care for your pets as you wish. imilar to using a trust, you should discuss this responsibility with the individual( s) to assure willingness and ability to provide the care. hether establishing a pet trust or another estate planning solution, don t leave your pets out of your long-term planning. R emember, they are also members of the family. Mary Eileen Vitale, CPA, CFP, AEP, is principal at HW & Co. Contact her at 216-378-7210 or vitale@hwco.com.
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SPONSORED CONTENT
Selecting the perfect fiduciary BY JOSEPH M. MENTREK
I
t cannot be stressed enough j ust how important the selection of an appropriate fiduciary is to the overall success of an estate plan. The best of plans easily may be foiled by an inexperienced, uninformed or disengaged fiduciary. hether considering the actions of an agent or attorney-infact under the durable general power of attorney or health care directive, the executor of an estate or the trustee of a trust, it is paramount that careful consideration is given to both the skills of the person ( or institution) tapped to act and the unique circumstances surrounding their service. ast year highlighted some general considerations in selecting a fiduciary, including a discussion of fiduciary duties. The responsibilities involving service as a fiduciary are significant and should not be taken lightly. This year offers a good opportunity to Mentrek dig deeper into some other important aspects of fiduciary selection. All too often, the principal client’s fiduciary selection process is accomplished without much thought, starting with their spouse and ending with their children named in descending order as to age. n some cases, that is a perfectly logical and workable answer. n other cases, not so much. nly after the principal thoroughly understands the nature and extent of a fiduciary s duty under the law, as well as the specific re uirements defined in the operative documents, he or she should begin to identify possible persons to serve in the important role. Likewise, the intended fiduciary should be made aware of the principal’s intention to name them to serve, understand and accept the nature and scope of what such service might re uire. ervice as a fiduciary should never come as a surprise. The right fiduciary will possess the re uisite skillset to fulfill their fiduciary obligations, take necessary actions and make decisions based on the expressed provisions of the documents and relevant state statutes. They should also have the time and willingness to make themselves available and should not only be responsive to the needs of the beneficiaries but should also know the beneficiaries well enough to anticipate their needs. An appropriate work ethic and attitude toward the task at hand also are crucial. The fiduciary should be reliable, organi ed and scrupulously honest. Above all, the candidate should possess emotional intelligence and should have the ability to communicate in a manner by which they can assess the needs of the beneficiaries and act with resolve and empathy toward those
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PLANNING needs while respecting the wishes and direction of the principal. f the fiduciary is not otherwise aware, they need to be prepared to ask probing questions in order to understand the family dynamic and the value system of the principal and the family. They must understand the financial situations of the beneficiaries and manage income and assets based on each individual’s unique circumstances. The fiduciary must understand that they are acting at the direction of the principal, and where that direction is lacking, they should understand that their duty is to e ercise udgment in a manner that reflects what they believe to be the principal’s intent. hen considering variables, the family dynamic may pose the fiduciary s greatest challenge. The principal must honestly assess the impact of bestowing the proverbial keys to the kingdom to one child over another and the extent of the inherent conflict that may result among siblings when it comes to one making financial decisions that affect the others. n many instances, an immediate family member may not be the best choice as a fiduciary. n those cases, serious consideration should be given to e tended family members, friends, business associates or others who may be well suited for the task when an individual fiduciary is preferred. nd if there is no individual ready, willing and able to serve, an institutional fiduciary may be the best choice. n institutional fiduciary offers independence to mitigate family conflict. ther obvious advantages include specific e pertise and continuity of existence. And while an institutional fiduciary may lack the heart of an individual when it comes to decision making on behalf of beneficiaries, this deficiency may be overcome by appointment of an individual trust advisor to provide special insight into the unique needs and circumstances of the beneficiaries. To conclude, the most well-thoughtout plan in the world will fail if it is not properly e ecuted. The best way to ensure success is to carefully and thoughtfully consider the role and selection of the fiduciaries who will be in place to carry out your specific wishes when you are no longer able to provide such direction. Joseph M. Mentrek is a partner and chair of estate and succession planning and administration at Calfee, Halter & Griswold. Contact him at 216-622-8866 or jmentrek@ calfee.com.
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ESTATE PLANNING
SPONSORED CONTENT
November 4, 2019
S9
Changing environment may necessitate trust revisions
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lthough death and taxes are certain, the timing of death and the tax environment in effect at one’s death are not certain at all. For example, simply within the past 20 years, the federal estate tax exemption has shifted from $650,000 in 1999 to $11.4 million in 2019, and will undoubtedly continue to change. The backdrop to this ever-changing estate tax environment has been the stock market rise to record highs and the omnipresent capital gains tax. Accordingly, trustees and beneficiaries of irrevocable trusts are increasingly seeing trusts with significant appreciation and capital gains tax Stark liability, while over 99% of estates do not pay estate tax. When estate tax exemptions were lower, avoiding estate tax by using irrevocable trusts was a valuable strategy; however, the current status of many old trusts re uires trustees and beneficiaries to balance paying capital gains tax with diversifying trust investments and raising cash for distributions. ven after a beneficiary s death, heirs receive assets with the same capital gains tax liabilities because the current beneficiary s estate ta e emption is often “ wasted.” Many families may save taxes by seeking estate tax inclusion, and the corresponding basis adj ustment, rather than continuing to exclude property from estate tax. Fortunately, the current high estate ta e emption and fle ibility of hio law regarding modifying irrevocable trusts permit families to strategically reduce the capital gains tax burden of managing the trust property. U nder current law, an irrevocable trust may be modified to give the current beneficiary certain powers over the trust property that will cause appreciated assets to be included in the beneficiary s estate. ncluding property in an individual’s estate causes the income tax basis of such property to be “ stepped-up,” or adj usted to its fair market value at the individual’s date of death, whether or not estate tax is actually paid. U pon an asset’s basis step-up, the capital gains tax that would otherwise be due upon sale is effectively eliminated, and trustees and remainder beneficiaries then may diversify or raise cash with reduced or eliminated capital gains tax exposure. hio law provides multiple methods to modify irrevocable trusts to insert such powers, including decanting, re uesting a udicial modification and agreeing privately to trust modifications. ach method has distinct advantages and disadvantages, but all may ultimately provide families with ability to leverage the current estate planning environment to
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PLANNING optimize the basis of assets inherited or retained in trust. Modifying irrevocable trusts to cause estate tax inclusion is j ust one of the tax-savings opportunities that
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the current estate tax and trust law environment provide, but it can be an invaluable techni ue for beneficiaries of estate tax-exempt irrevocable trusts created and funded in prior years. J ustin L. Stark, Esq., is an associate at Schneider Smeltz Spieth Bell. Contact him at 216-696-4200 or JStark@sssb-law.com.
‘‘
The backdrop to this everchanging estate tax environment has been the stock market rise to record highs and the omnipresent capital gains tax.
‘‘
BY JUSTIN L. STARK
Jewish values teach us to care for future generations. The Jewish Federation of Cleveland can help you leave a precious inheritance and lasting legacy for your children, grandchildren, and our community. Find out how you can become a member of the Jewish Federation of Cleveland’s Legacy Society by contacting Carol F. Wolf for a confidential conversation at 216-593-2805 or cwolf@jcfcleve.org.
L’dor V’dor. From Generation to Generation. Create Your Jewish Legacy
www.jewishclevelandgifts.org
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S10 November 4, 2019
ESTATE PLANNING PLANNING ESTATE
SPONSORED CONTENT
Maintaining a legacy Expert advice, education key to successful transfer of wealth or a business BY GREG ALTHANS AND GREG LONCZAK
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e frequently are asked by our family clients how best to transition wealth or a business to the next generation. This may require complex technical estate, tax and investment factors be carefully studied and weighed. Equally important are the qualitative, relational aspects of wealth transfer among family members. Early education and ongoing communication are critical. Family members should gain an understanding of the values and principles that are at the center of the family’s wealth creation. These discussions can begin at a young age and are often best if they are brief, informal, and occur around “ teachable moments” in a child’s life. For younger adults, it is important to talk in greater detail about what goes into financial decisions. S trong communication must be matched with proper planning tools for effective wealth transfers. One such effective tool often utilized is a family entity such as a family limited liability company ( “ FLLC” ) . If used successfully, FLLCs can facilitate family education, transfer of business or financial assets and
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PLANNING
Althans
Lonczak
asset protection. Once formed, family assets can be transferred into the FLLC by family members or other family entities such as trusts. The FLLC is led by a manager who retains control over key decisions such as business interests, investments, distributions, voting rights and new member admission. The FLLC should hold regular meetings to discuss investments or management decisions, distributions, and ta filings, and any other relevant issues. Allowing younger family members to participate in FLLC meetings and perhaps, over time, j oin the management group will allow opportunities to learn and grow in financial responsibility. LEGACY CONTINUED ON NEXT PAGE
Passing family values on for generations BY JULIE TAFT
A
dynasty trust is a long-term, irrevocable trust designed to hold assets for the benefit of multiple family generations. Gift, estate and generation-skipping transfer ( “ GS T” ) tax laws apply at the time assets are transferred to trust. S o long as assets remain in a properly managed trust, no estate or GS T taxes are imposed when trust benefits shift from one generation to the next. The 2019 gift, estate and GS T tax exemption is $11.4 million per person. Many states, including Ohio, now allow a trust to Taft continue in perpetuity. A married couple could therefore gift up to $22.8 million to a perpetual dynasty trust in 2019 and, as long as those assets remain in the trust, those assets and all future growth would be exempt from gift, estate and GS T transfer taxes in perpetuity. Allowing assets to transfer from one generation to the next without transfer tax reductions can provide significant benefits over time in addition to many other benefits.
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ESTATE
PLANNING K eeping assets in trusts for your children can create added value and can: ● Provide a level of protection from a child’s creditors or a divorcing spouse; ● Provide asset management, encouraging or discouraging certain behaviors; ● Avoid dispositions to individuals outside of your bloodline; ● Avoid passing assets through a probate process for a child that does not plan for his or her own estate; and ● Avoid the transfer tax laws in effect at the time of your child’s death when transfer tax exemptions may not be as generous as allowed under current law. These same benefits will likely be equally important when planning for grandchildren and each succeeding generation. It is important to state your intent in creating any long-term trust. Is education of paramount importance to you? Or making sure that a beneficiary is a productive member of society? VALUES CONTINUED ON NEXT PAGE
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ESTATE PLANNING
SPONSORED CONTENT
LEGACY CONTINUED FROM PREVIOUS PAGE
Care must be taken to ensure the has legitimate and significant non-tax reasons to remain valid in the eyes of the state and IR S . S ome specific purposes may include maintaining a single pool of assets for investment opportunities, management succession and protecting family assets from depletion in the event of a divorce. dditional tips include keeping good records, observing all legal formalities, hiring independent appraisers for transfer valuations and not commingling assets and personal assets. learstead recently held a multigenerational wealth transfer roundtable panel discussion with some of leveVALUES CONTINUED FROM PREVIOUS PAGE
long-term trust re uires careful planning to allow enough fle ibility for the trust to adapt to future events while continuing to carry out the purposes for which you created the trust. t is often best to provide a trustee with a wide degree of discretion in allowable distributions, but to make your intentions known in the document so that the trustee can consider your intentions
land s leading e perts. iscussed were the creation of a family transfer blueprint, family mission statements, family philanthropic plans and effective use of trusts. What resonated with all was that passing wealth from one generation to the ne t can be accomplished relatively easily if the family is surrounded by the right team of seasoned experts utilizing the right forward-thinking toolkit. Greg Althans, CPA/PFS, CFP, is senior managing director and chief wealth strategist at Clearstead. Contact him at 216-621-5684 or galthans@ clearstead.com. Greg Lonczak, CFP, is managing director at Clearstead. Contact him at 216-658-2857 or glonczak@clearstead.com.
when e ercising that discretion. n e perienced estate planning attorney can guide you through the process of determining whether a dynasty trust makes sense for you and will help you create a plan to achieve your individual goals and ob ectives. Julie Taft is a partner at Taft Stettinius & Hollister LLP. Contact her at 216-706-3879 or jtaft@ taftlaw.com.
November 4, 2019
S11
Planning for clients with minor children
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BY ABBIE R. PAPPAS
hile older clients might have estate planning on their radars, younger clients often believe that they don t need to engage in estate planning because their assets are not significant enough to warrant it. H owever, estate planning is imperative for clients with young children, even if those clients Pappas do not otherwise have substantial wealth or estate ta concerns. arents of minor children should have an estate plan in place for the following essential reasons: Appointing guardians: When a minor child is in need of a guardian, a probate court will appoint one. This may include appointing a guardian of the minor child s estate to manage the child s property, if that child has received more than , in assets. The probate court generally will appoint the guardian named by the
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PLANNING child s parents in their wills or their durable powers of attorney. In the absence of these documents, fights may arise between different family members vying for custody of the child and his or her assets. Managing transfer of wealth: Even when parents plan to leave their children only a modest inheritance, those parents might worry about the immaturity of a teenaged child handling newfound wealth. n the absence of a will, a minor beneficiary receiving inherited assets would receive those assets outright upon reaching age . owever, under the hio Transfer to inors ct, an hio testator can provide in his or her will that inherited assets be held for a minor beneficiary until age . lients who desire more structured management of their children s inherited assets and wish to avoid the pub-
licity, ongoing oversight and probate court costs should consider setting up a trust. The trust instrument may direct the trustee to pay out assets to the child at certain pre-determined ages or circumstances, or to retain assets in trust for the entirety of the child s lifetime. ealthier clients may choose to set up different types of trusts to make gifts to their children, grandchildren and future descendants in a ta -efficient manner. f course, after the arrival a new baby, it is understandably quite difficult to get an estate plan in place amidst all the chaos. Therefore, it is often a good idea for e pectant parents to add estate planning to their pre-baby to-do list. good estate plan, when prepared correctly, will serve a growing family well for years to come. Abbie R. Pappas, Esq., is an associate at Singerman, Mills, Desberg & Kauntz Co., L.P.A. Contact her at 216-292-5807 or apappas@smdklaw.com.
The Power of Every
Legacy
Because of donors’ generosity, we are putting big ideas to work on discoveries and innovations, so the smallest, most treasured moments in life are possible. That’s the legacy that donors leave here. We look forward to working with you so that your clients can make the most of their giving and leave their own legacy for our patients and community. Learn more at powerofeveryone.org, call 216.444.1245 or email giftplanning@ccf.org
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CREATIVE DEPARTMENT Client: Cleveland Clinic Division: Development Project: 2019 Planned Giving Flat Size: 0” x 0” Trim Size: 10.25” x 7” Live Area: 0” x 0”
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ESTATE PLANNING PLANNING ESTATE
S12 November 4, 2019
SPONSORED CONTENT
What to do when a prenuptial agreement is not part of ‘I do’ There are other ways to protect the family business BY BILL BESETH AND SUSAN RACEY
ESTATE
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common question we hear from our business owner and high-net-worth clients is “ what can I do to protect my family’s business and wealth when my child is planning to marry without signing a prenuptial agreement? ” Clients recognize that the divorce rate hovers around 5 0% and that a new person entering into the family may acquire certain legal rights in the family’s property upon a child’s death. U nder current Ohio law, a couple must enter into a marital agreement before marriage ( “ prenuptial” ) for those rights to be validly waived — marital
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Beseth
Racey
agreements signed after the marriage are unenforceable in Ohio. Frequently, the client’s child wants to avoid upsetting the fianc , or the client is reluctant to broach the subj ect of a prenuptial agreement with the child despite the potential risks to their family’s business interests and wealth. In these situations, is there planning that the client can do to protect the family business and wealth The simple
answer is yes. While not an exhaustive list, the following planning techniques are available to protect business interests and wealth for future generations when a child marries without entering into a prenuptial agreement. Of course, before implementing any of them, ualified counsel should be consulted. Update the business’s governing documents to keep the business “in the family.” Consider adding restrictive transfer provisions that ensure interests
Making Every Connection Possible With nearly 100 years of mission-focused, non-profit service to the community, CHSC strives to make every connection possible for those with communication disorders regardless of their ability to pay. Community support makes this possible. Programs for hearing, speech, and deaf services continue to grow to meet the ever-increasing need.
www.chsc.org
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may be transferred only to lineal descendants in: ● Operating agreements; ●
S hareholder agreements; or
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Partnership agreements.
Establish a trust. Consider establishing a trust to hold business interests and other assets for a child in order to limit: D istribution of assets to persons other than lineal descendants;
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ho may benefit from assets upon a child’s death; and
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Who may serve as trustee and thereby have the power to control the business interests or assets.
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Create a family entity to manage family assets. Consider establishing an entity to hold and manage family assets, such as: ●
Family limited liability company;
Family limited partnership; Family dynastic trust; or ● Corporation. ● ●
Implementing one or more of these planning techniques may help accomplish a client’s goal of protecting family business interests and wealth when a child marries without signing a prenuptial agreement. Further, control over the family business and wealth may be kept exclusively “ in the family” according to the client’s wishes. Certainly, these techniques must be considered in conj unction with transfer tax implications. Bill Beseth is counsel at Tucker Ellis. Contact him at 216-6965479 or bill.beseth@tuckerellis. com. Susan Racey is a partner at Tucker Ellis. Contact her at 216-696-3651 or susan.racey@ tuckerellis.com
The non-tax advantages of trusts BY DEANNA ALGER
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state planners have been using trusts as a tool to help their clients pay less in estate tax for years. B ecause the current $11.4 million estate tax exemption is so high, there may be a misconception that including a trust as part of an estate plan is not necessary. Obviously, trusts can be useful at providing tax savings, but they can also provide significant non-ta benefits for all parties involved. B elow is a list of four important non-tax benefits to consider when determining whether to Alger include a trust as part of your estate plan. 1. Probate avoidance. Probate is a state j udicial process by which a decedent’s estate is properly distributed to creditors, beneficiaries and heirs. There are many steps involved, and the process can be time-consuming and expensive. Another disadvantage is that probate court records are open to the public. Anyone can see how much your estate was worth and how it was divided. S etting up a revocable living trust and transferring title of your assets into the trust will remove those assets from probate and allow you to bypass that burdensome process. 2. Asset protection. A properly designed trust can protect the trust’s assets from the claims of the beneficiary s creditors, including an ex-spouse in the event of a divorce. In such situations in which a trust beneficiary does not own
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PLANNING the assets, creditors are not able to gain access to the trust funds. 3. Young beneficiaries. Without a trust in place, beneficiaries ages and older potentially can have immediate access to an outright inheritance. When large sums of money are involved, this could be dangerous. H aving a trust structured so that beneficiaries receive their inheritance at a specified age can provide protection until they are mature enough to manage the inheritance on their own. 4. Control. H aving a trust allows you to have complete control of all aspects regarding how the assets within the trust are managed, used and distributed. You can spell out exactly who gets ownership of what, what the trust assets are used for, etc. H aving this control may help to avoid unwanted family conflicts and to ensure that your wishes are carried out in the way you intended. Trusts can be used in many ways other than j ust as an instrument to save taxes. They are an important part of an estate plan that should be taken advantage of when appropriate. B e sure to include the topic in you estate plan discussion with your advisors. DeAnna Alger, CPA, MBA, is a tax and accounting services supervisor for Zinner & Co. Contact her at 216831-0733.
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Tanzie D. Adams Charles F. Adler, III Richard A. Ahrens DeAnna Alger Jennifer M. Allen Ronald S. Ambrogio William Ambrogio Graham T. Andrews Gary S. Archdeacon Heather A. Archdeacon Kemper D. Arnold James S. Aussem P. Thomas Austin Charles J. Avarello Andrew G. Bacharach, Jr. Michael Ryan Baker Peter Balunek Molly Balunek Mary Lynne Baranek Kimberly J. Baranovich Lawrence C. Barrett Ronald E. Bates Stephen Baumgarten Alexandra G. Beach Edward J. Bell Steven Berman William H. Beseth, III Michelle M. Bizily Alane Boffa Tami M. Bolder Daniel L. Bonder David J. Bosak Jill A. Branthoover Herbert L. Braverman Christopher Paul Bray James R. Bright Kenneth B. Brown Don P. Brown Richard C. Brubaker Robert M. Brucken Bethany J. Bryant Jeannine Brzezinski Martin J. Burke, Jr. Eileen M. Burkhart Samuel V. Butcher Donald J. Cairns Carl Camillo Leigh H. Carter Raymond J. Casey William G. Caster Jennifer Chess James R. Chriszt Trevor R. Chuna Gina M. Ciani Mark A. Ciulla Michael R. Cole Jeffrey P. Consolo James I. W. Corcoran Calla Hoyt Cornett Barbara J. Cottrell Greg S. Cowan Steve Cox Thomas H. Craft Deborah P. Cugel Patricia M. Culler Kenneth D. Cunningham Tia Marie M. D’Aveta Elizabeth F.M. De Nitto Dana Marie DeCapite Thomas A. DeWerth Carina S. Diamond David S. Dickenson, II Sarah M. Dimling Nicholas P. DiSanto Mary Ann Doherty Lynda Doland Terry Ann Donner Timothy Doyle Emily A. Drake Therese Sweeney Drake Jill Dugovics William A. Duncan Carl J. Dyczek Howard B. Edelstein Elaine B. Eisner Michael E. Ernewein Christina D. Evans Susan M. Evans Todd M. Everson Frank Fantozzi Charles E. Federanich
Joseph M. Ferraro William C. Ferry J. Paul Fidler Julie E. Firestone Linda Fousek Susan L. Friedman Amy K. Friedmann Patricia L. Fries Frank F. Gagliardi Melissa Sue Gallop Robert R. Galloway Naomi D. Ganoe Stephen H. Gariepy Rao K. Garuda James E. Gaydosh Kyle B. Gee Christopher J. Geiss Thomas M. Genco Arthur E. Gibbs, III
Lindsay J. Keith Marta L. Kelleher Lisa M. Kerr Jonathan M. Kesselman Todd W. Kiick Paul S. Klug Victor G. Kmetich Daniel R. Kohler James R. Komos Beth M. Korth Roy A. Krall Frank C. Krasovec, Jr. Thomas W. Krause James B. Krost Craig A. Kukla Anthony C. Kure Kristen Kuzma Ann-Marie K. La Porta Louis D. LaJoe
Richard S. Milligan William M. Mills Wayne D. Minich Ginger F. Mlakar Elizabeth M. Monihan Katherine Collin Moore Kenneth R. Morgan Philip G. Moshier Michael J. Moss Joseph L. Motta Susan C. Murphy Hoyt C. Murray Christine A. Myers Raymond C. Nash Jodi Marie Nead Robert Nemeth Michael H. Novak Michael T. Novak Anthony J. Nuccio
THE ESTATE PLANNING COUNCIL OF C LEVE LAND PRESIDENT
SECRETARY
PROGRAM CHAIR
Peter Balunek
Elaine B. Eisner
Kimberly Stein
VICE PRESIDENT
TREASURER
IMMEDIATE PAST PRESIDENT
Dana Marie DeCapite
Laura B. Springer
Julie A. Taft
Thomas C. Gilchrist Caroline Gluek Ronald J. Gogul Scott A. Gohn Daniel M. Goldfarb James A. Goldsmith Susan S. Goldstein Laura Joyce Gorretta Lawrence I. Gould David A. Grano Karen L. Greco Christopher M. Greene Sally Gries Nancy Hancock Griffith Elizabeth C. Griffiths James P. Gruber Marie L. Gustavsson-Monago Amy M. Gyetko Ellen E. Halfon Patrick A. Hammer Sarah Hannibal Brian R. Hassett Lawrence H. Hatch Janet W. Havener Jean M. Hillman Joanne Hindel Mark L. Hoffman Harold L. Hom Brent R. Horvath Michael J. Horvitz Scott Huff Douglas Ingold Lauren Iwema Lynnette Jackson Paula Jagelewski Barbara Bellin Janovitz Theodore T. Jones James O. Judd Stephen L. Kadish Matthew F. Kadish Matthew A. Kaliff Joseph W. Kampman Karen J. Kannenberg Lori L. Kaplan Toby Kaye
Gary E. Lanzen Donald Laubacher Daniel J. Lauletta Paul J. Lehman Maureen Leneghan David M. Lenz Wendy S. Lewis Keith M. Lichtcsien David C. Ligan Dennis A. Linden Amanda Lisachenko Jennifer R. Loan Ted S. Lorenzen Amy R. Lorius Janet L. Lowder Lisa K. Lowy Sandra C. Lucas Robert M. Lustig Kathryn E. Madzsar David S. Maher Stanley J. Majkrzak Chad Makuch Timothy Patrick Malloy Laura J. Malone Michelle Mancini Karen T. Manning Monique W. Marinakos Wentworth J. Marshall, Jr. Adam L. Martinson Michael W. Matile Nancy McCann Karen M. McCarthy Daniel A. McGowan Erica E. McGregor Daniel J. McGuire Jamie E. McHenry Sarah E. McIntosh Ryan P. McKean Kevin R. McKinnis James C. McSherry Ervis Mellani Joseph M. Mentrek Margaret M. Metzinger Lisa H. Michel Christine Millen
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Eric A. Nye Michael J. O’Brien Lacie L. O’Daire Linda M. Olejko Matthew S. Olver Leslie A. O’Malley Robert J. O’Neil Richard M. Packer Abbie R. Pappas Sebastian C. Pascu William A. Payne James B. Perrine Dominic V. Perry Ivan Petrovic Marla K.Petti Jennifer N. Pinkerton Douglas A. Piper Douglas Price Rebecca Yingst Price Maria E. Quinn Susan L. Racey Joseph Radigan Uma M. Rajeshwar Chrisstina Ramnytz Timothy L. Ramsier Melissa Anne Register Linda M. Rich R. Andrew Richner Radd L. Riebe Elton H. Riemer Kathleen K. Riley Michael G. Riley Theodore J. Robbins Lisa Roberts-Mamone Julie K. Robie Kenneth L. Rogat Carrie A. Rosko Lisa J. Roth Debbie Rothschild Larry Rothstein David Rubis Alexander I. Rupert Patrick J. Saccogna Stephanie Sandle Jennifer A. Savage
Ronald S. Schickler Bradley Schlang Michele Schrock Dennis F. Schwartz Jennifer B. Schwarz June A. Seech John S. Seich Doris A. Seifert-Day Kyra Shank Stanley E. Shearer Douglas E. Shostek Jeffrey Shoykhet Roger L. Shumaker Michael A. Simmons Mary Jean Skutt Mark A. Skvoretz John M. Slivka Sondra L. Sofranko Laura F. Sonderman James Spallino, Jr. Richard T. Spotz, Jr. William L. Spring Laura B. Springer Justin L. Stark Stacey Staub Kimberly Stein Laurie G. Steiner Matthew Stepanek Saul Stephens Roger E. Stewart Beverly A. Stiegele Karin Maloney Stifler David J. Stokley Diane M. Strachan Thomas B. Strauchon Thomas E. Stuckart John E. Sullivan, III Linda Dela Court Summers Joseph T. Svete Scott E. Swartz David A. Szabo Julie A. Taft Yeshwant K. Tamaskar Richard Tanner Jessica Tepus Zachary J. Tharp Barbara Theofilos Kurt M. Thomas James K. Thompson Donna L. Thrane Floyd A. Trouten, III Mark A. Trubiano Stephenie Truong Thomas M. Turner Diann Vajskop Robert A. Valente Jaclyn L. M. Vary Amy Vegh Catherine Veres Carmen M. Verhosek Mary Eileen Vitale Robert W. Wasacz Neil R. Waxman Ronald F. Wayne Julie A. Weagraff Michael L. Wear Stephen D. Webster David G. Weibel Jeffry L. Weiler Richard Weinberg Miles P. Welo Heather L. Welsh Katherine E. Wensink Aileen P. Werklund Elizabeth Wettach-Ganocy Terrence B. Whalen Frederick N. Widen Geoffrey B.C. Williams Erica K. Williams Scott A. Williams Teresa M. Wisniewski Nelson J. Wittenmyer Matthew D. Wojtowicz Carol F. Wolf Brenda L. Wolff James D. Yurman Michael J. Zeleznik David M. Zolt Gary A. Zwick Donald F. Zwilling
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The benefits of privately financed life insurance BY RICHARD T. HEFFERN
TOGETHER, WE CAN HELP YOU LEAVE YOUR MARK ON CLEVELAND. MetroHealth is changing how health care is delivered in Northeast Ohio. We are making an investment in a vision for a healthy community. We are a catalyst for change – for our health, for our neighborhood, for our economy and for our future. Join us.
To learn more, contact Beth Darmstadter, director of individual giving, at 440-592-1389 or bdarmstadter@metrohealth.org. The MetroHealth Foundation 2500 MetroHealth Drive Cleveland, OH 44109
L
ife insurance is a unique asset in that it provides cash liquidity at an unknown point in the future when it may be needed the most. This liquidity can be very useful in paying estate taxes, moving assets between family members or securing interests between business partners. Privately financed life insurance is the funding of life insurance premiums through personal loans between an insured or a family member and Heffern an irrevocable trust. The many advantages of privately funded life insurance often are overshadowed by perceived challenges. One such challenge is the decision of how to pay the hefty premiums that often are associated with funding life insurance. Funding may be accomplished by utilizing business interests, third-party lending, personal assets or split-dollar arrangements. Private split-dollar arrangements can help a family move significant assets or value from one generation to another, with ta and gifting efficiencies, while providing asset protection to both generations. As an example, a parent contributes cash, once or over a period of years, to an irrevocable trust established for a child. The trust buys
INSURANCE PLANNING
life insurance on the child and uses that cash to pay premiums, typically over a short period of time. The trust then establishes an interest-only 20-year loan agreement with the parent and makes non-taxable interest payments back to the parent with continuous renewals, ultimately to be repaid at the death of the child. The loan interest rate is tied to the applicable federal rate established by the IR S . Currently, the long-term rate is 2.21% , which remains historically low. The note created by this loan is an asset included in the parent’s estate with the potential for a discount due to the longterm nature of the repayment terms ( the life expectancy of the child) . The result is that the loan will free e or potentially reduce the value of the contributions made in the parent’s estate. All growth of the assets in the trust and the life insurance remain outside of both the parent’s and the child s estate. They are held in trust for asset protection and for the benefit of future generations. Richard T. Heffern is director of insurance services at Ancora. Contact him at 216-825-4000 or rheffern@ ancora.net.
3 ways business owners can leverage life insurance BY CHRISTINE MILLEN AND RAYMOND NASH
Join the Girl Scout Network! It may have been years since you earned your first badge, but the skills you learn through Girl Scouts stay with you forever. Follow us on LinkedIn to connect with other Girl Scout alums. For more information visit gsneo.org or call 330-983-0399. Connect with us on LinkedIn: @GirlScoutsofNorthEastOhio and @GirlScoutNetwork
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ife insurance can be a powerful tool for business owners, especially when it comes to a growing, closely held business. Life insurance often can play an invaluable role in long-term planning. H owever, many business owners can get bogged down in near-term demands, making it difficult to find time to plan. To cut through the noise, here are three impactful ways business owners can leverage the benefits of life insurance. 1. Succession planning. One way business owners can tap into the benefits of life insurance is to use it as a tool to fund a buy-sell agreement. There are several ways business owners can structure a buy-sell agreement. H owever, the document itself means nothing without the financial funding to make it happen. There are multiple ways to fund a buy-sell that don’t involve life insurance, such as creating a cash sinking fund, borrowing adequate funds
INSURANCE PLANNING
Millen
Nash
and making installment payments. Life insurance is the only option that can provide immediate funding, for pennies on the dollar, precisely when needed. B ecause of the leverage life insurance can provide, it is often the most costeffective method to funding a buy-sell. 2. Key person insurance. In the event of an unexpected death, life insurance also can provide the necessary funds to overcome revenue loss or hiring expenses needed to replace a key team member vital to the success of the company. 3 WAYS CONTINUED ON PAGE S16
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November 4, 2019
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Life insurance a viable option for significant charitable gifts BY CAROL F. WOLF
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uch thought and consideration goes into charitable planning. B y far, the most common legacy gift is a simple bequest, but this is far from the only choice, and it may not even be the best choice for many donors. Individuals most frequently purchase life insurance when they become parents. They continue to pay premiums, and may never think about the policy again, even after their children are grown and independent. It is not unusual to work with a donor who has never considered how they might use their paid-up life insurance policy for a different and maybe even more satisfying purpose as part of their charitable legacy. Often, they are surprised they have an asset they did not realize could be used as a charitable gift. Life insurance can be an effective and simple option for charitable giving, especially for those who wish to make significant gifts without
depleting current assets. It often is used as a portion of a blended gift ( current and deferred assets, often testamentary) to increase the total amount donated. N ot only does the charity receive a much more substantial commitment, but the donor benefits from a higher level of recognition. It is a delicate balance and sometimes a complicated decision between what is immediately needed and the increased value of a deferred commitment. Although there are many ways to use insurance as a Wolf vehicle for a charitable gift, the two most common are donating a policy that is no longer needed or purchasing a new policy and donating it to the charitable organization. B oth are easy and may be cost effective for the donor by creating a current tax deduction as well as decreasing the size of an estate, if that is an issue. The charity is the owner of the policy,
INSURANCE PLANNING
which creates an irrevocable bequest. A third option, one which provides the donor with more fle ibility but does not provide a tax deduction, is to simply name a charity as a beneficiary of a policy you own. This enables the donor to change the beneficiary at any time, but makes it a less desirable gift for a charity that may or may not realize the gift in the end. In one situation, an individual may have a $1 million life insurance policy with his or her children as beneficiaries. The children are independent adults who also may be inheriting other assets. The paid-up life insurance policy may be cashed in, but the cash is not really needed by the individual. If the owner has philanthropic interests, this is a simple and efficient way for him or her to be recognized for a maj or gift
and also decrease the value of his estate by $1 million. In another scenario, the donor wishes to make a maj or gift to a charity, but has limited assets currently. They purchase a new life insurance policy and donate it to the charity, designating the charity as the owner and beneficiary. f a donor can gift the amount of the premiums over a period of time to purchase life insurance, they may be able to double or triple the size of the cash gift they would have donated. Many donors can use appreciated securities to pay premiums. If the securities were owned for more than one year, they can deduct the full market value of the gift as well as avoid the capital gains tax they would owe if the securities were sold. The charitable organization’s leadership must decide ( with a gift acceptance policy) if gifts of insurance are a good option, considering that they will not receive the gift until the donor passes away, which may be several decades in the
future. In the case of donors in their 40s, when premiums are low, gifts may not be realized for 5 0 years. Larger charities with endowment funds are more likely to accept life insurance gifts than small ones that struggle to meet the bottom line. In addition, monitoring payments and reminding individuals to donate the funds to cover the premiums may be too cumbersome for a small organization. They may, however, decide to accept only paid-up policies. There are many options based on the donor’s and the charity’s shortand long-term needs and goals. As with most substantial gifts, the donor, financial advisor and development professionals must work together for the best outcome. Carol F. Wolf, MSW, CFRE, is assistant vice president of planned giving and endowments at the Jewish Federation of Cleveland. Contact her at 216593-2805 or cwolf@jcfcleve.org.
Your music. Your legacy. Many thoughtful music lovers have created an enduring legacy by remembering The Cleveland Orchestra in their will. Together, we can ensure a vibrant future for the arts in our community. We invite you to learn more about how you can leave a meaningful legacy through estate planning by contacting us or visiting our website.
Rachel Lappen 216-231-8011 rlappen@clevelandorchestra.com clevelandorchestra.com/legacy
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Planning opportunities for women BY CHRISTINE MILLEN
W
omen are controlling more wealth than ever before, yet most of their hard-earned capital remains unprotected. Women are the primary breadwinners in more than 40% of households, and nearly half of estates worth more than $5 million dollars are controlled by women. Yet, women with life insurance typically trail behind men who have life insurance by about 25 % . Women face different financial risks and challenges than their male counter- Millen parts, which can significantly impact their ability to achieve long-term financial goals. n many sectors, women still earn less than men. Plus, women may have less saved for retirement, since they are the likely partner in a marriage to take time out of the workforce to raise children or care for aging parents. Amplifying these two challenges is longevity, because women statistically live longer than men. S o, a woman’s nest egg may be smaller, yet it needs to last longer. n the face of these challenges, it is important to plan early to ensure longterm financial success. great foundation to mitigate risk is to start with family income protection. As a rule of thumb, the amount of life insurance for family income protection should be about 10 times income. Term insurance can be a low-cost method for funding this protection. H owever, a properly designed permanent insurance policy can enhance a nest egg through policy cash values and minimize the effects of longevity through an added long-term care benefit.
Get more with Ancora. With proprietary investment strategies, wealth planning and retirement plan solutions - we help you get more out of life. 216-825-4000 / www.ancora.net
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3 WAYS BUSINESS OWNERS CAN LEVERAGE LIFE INSURANCE CONTINUED FROM PAGE S14
Generally, the simplest way to determine the amount to insure is a multiple of the key person s salary, such as times salary. Additionally, term insurance can be a low-cost solution to cover this risk. 3. Executive benefits funding. n today s tight labor market, many employers are looking for different ways to incent and retain key team members. Through proper planning, businesses can reward key personnel and recruit top talent, without breaking the corporate bank account. An executive bonus plan is a simple employer-provided program designed to enhance benefits for key e ecutives utili ing life insurance. n an e ecutive bonus plan, the life insurance policy is owned by an employee, who designates the policy beneficiary, and the company pays premiums via bonuses to the employee. The company generally can take
INSURANCE PLANNING
hen thinking about income protection, disability insurance should be a part of the conversation as well. en and women alike often assume their employer group disability coverage is enough. This usually isn’t the case for successful professionals and business owners. To start, a group disability plan should be evaluated to determine benefit limits, and to identify coverage gaps that may be filled with individually underwritten disability insurance, or a supplemental disability plan that may be designed for a group of key employees, paid by the employer. B ecause women typically live longer than men, life insurance costs less for women. This makes life insurance a particularly compelling tool for women to use when it comes to legacy planning. Life insurance can help transfer wealth down to future generations and equalize an estate for a female business owner when some children may be involved in the business and others are not. Plus, life insurance can enhance a gift to charity, since the death benefit the charity receives is usually much greater than premium gifts. omen should look for an insurance advisor to collaborate with who understands how to leverage insurance tools to help overcome challenges and capitalize on opportunities that are unique to women. Christine Millen is vice president at Heirmark. Contact her at 440-6309400 or cmillen@heirmark.com.
a tax deduction for bonused premiums, while the employee pays taxes on bonuses received. To further enhance the plan for the employee, the company may “ double bonus” premiums and taxes, removing out-of-pocket costs for the employee. The life insurance policy can be designed to check-off multiple bo es for the e ecutive, including death benefit protection, ( 2) potential income tax-free access to policy cash values for supplemental retirement income and ( 3) long-term care protection to preserve assets. usiness owners can break through the noise of the day-to-day and implement any of these tactics by engaging an insurance advisor with expertise in mitigating risk and retaining talent for businesses. Christine Millen is vice president at Heirmark. Contact her at 440-6309400 or cmillen@heirmark.com. Raymond Nash is principal and CEO at Heirmark. Contact him at 440630-9400 or nash@heirmark.com.
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November 4, 2019
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Gifting retirement assets offers income tax savings BY TARA MITCHELL
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or philanthropically minded individuals, assets that can be among the most tax-advantaged items to contribute to charity are those that will be heavily taxed upon distribution. Today, more people participate in tax-favored retirement plans than ever before. While individuals are committed to accumulating and growing these assets, few have planned for the harsh tax consequences associated with retirement plan Mitchell distributions — with tax rates of as much as 37% . D id you know that a direct contribution of retirement assets as part of an estate planning strategy can mean more funds for charities and heirs alike? or many people, a ualified retirement plan or an may be the most significant source of assets accumulated in their lifetime and one that receives favorable income tax treatment. Participants are
RETIREMENT PLANNING
not taxed on the contributions they make to the plan and any tax on the income or growth of the assets within the plan is deferred. Income tax is due when funds are withdrawn or eventually distributed to heirs. If the assets within a retirement plan are given directly to a ualified charitable organization, they are received in full, with no tax due, resulting in a more significant gift to charity A planned gift of retirement assets to a ualified charitable organi ation can reduce or eliminate taxes, while providing more for family members by allowing other assets, such as real estate and stock that receive a step up in basis, to transfer free of tax. Consider: A planned gift of retirement assets to a ualified charitable organization can result in a larger gift than leaving a donation through a will or trust. Let’s say, for example, that an estate is worth $1 million. It holds two
accounts: an IR A worth $500,000 and a taxable account ( trust or other) worth $500,000. The decedent would like to donate $100,000 to a charity upon her death, with the remaining assets to go to a single beneficiary at a tax rate. Allocating the donation from the IR A results in $800,000 going to the beneficiary , plus of $400,000) after income taxes. Giving the donation from the taxable account results in $775,000 ( $400,000 plus 75% of $500,0 00) going to the
beneficiary after income ta es. iving from the IR A enables the charity to receive the intended amount, while the beneficiary receives , more. Another option is to gift retirement assets during lifetime. Consider the tax savings of an IR A charitable rollover. Taxpayers age 70½ or older who transfer directly to charity up to $100,000 annually from their IR A accounts will not have to recognize the distribution as income. If you are thinking about making
such gifts, be sure to check with your tax professional. Your tax professional should help you determine the most ta -efficient way to gift your assets to a charity. Tara Mitchell is a specialist in gift planning and strategic collaborations, institutional relations and development, at University Hospitals. Contact her at 216-844-5913 or Tara. Mitchell3@UHhospitals.org.
Forever. Legacy Donors to the Cleveland Museum of Art promise a future that will give people opportunities to imagine and learn for generations to come. Consider adding the Cleveland Museum of Art to your estate plan either by bequest, trust, or other planned gift. Contact Diane M. Strachan, CFRE, at 216-707-2585 or dstrachan@clevelandart.org, to create your lasting legacy for our community.
cma.org
#1 Attraction in Cleveland
Photo by Julie Hahn, Sugarbush Design
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Charitable gift annuities: 5 reasons why they rock BY AMANDA M. STEYER
M
uch like the glorious city in which we live, work and play, charitable gift annuities often are underappreciated and overlooked. To right this wrong, let’s take a look at why charitable gift annuities do indeed rock. A charitable gift annuity is a creative planned giving vehicle. In exchange for a transfer of cash, appreciated securities or, in some circumstances, real estate, the charity contractually guarantees to provide an annual income stream to one or two named beneficiaries, or “ annuitants,” for life. At the end of the annuity, any remaining amount is used by the charity to provide support for the areas or programs chosen by the donors.
ere are five reasons to remind you of why charitable gift annuities are so effective:
1. They are simple and secure. The gift annuity is among the oldest, simplest and most popular of the charitable life income gift options. A gift annuity agreement often is a one-page contract that outlines the terms of the arrangement, such as the amount and timing Steyer of the payments. These payments are fi ed at that time and will not fluctuate or ad ust for inflation. More important, a gift annuity is considered a general obligation of the issuing charitable organization.
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Meaning, the income stream is backed by the charity’s entire assets, not j ust the gift itself, and will continue for the lives of the donors no matter how the overall market is performing.
2. They are new and improved. The payment amount generated by the charitable gift annuity is determined at the time the gift is established. Payment amounts will depend on a number of factors, including the amount of the gift, as well as the donor’s age at the time of the gift. Most charities will use the payout rates suggested by the American Council
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216.232.EYES (3937) cleyebankfoundation.org
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on Gift Annuities. On May 15, 2018, the ACGA announced new suggested maximum gift annuity rates to replace the rates that became effective on J anuary 1, 2012. The new rates apply to gift annuities established on or after J uly 1, 2018. In many scenarios, the new rates will be .4% to .5% percent higher than the rates they replace. These increases in annuity rates should make gift annuities a more attractive option for those who wish to support an organization’s mission and also are interested in receiving fi ed payments for life.
3. They leave a legacy. In addition to making a gift that can, in turn, fulfill financial ob ectives, we mustn’t forget that a charitable gift annuity supports a charity in a meaningful and impactful way. When establishing a charitable gift annuity, donors have the ability to choose an organi ation that reflects their charitable wishes and values. S ince the proceeds of the gift annuity won’t be available for use by the charity until after the annuitants’ lifetime, a unique legacy is created, ensuring that what matters most to an individual continues well into the future.
4. They can be attractive for younger donors. The gift annuity is not j ust for the individual looking for safe and stable income right now to supplement retirement years; it also can provide the younger donor with fle ibility and long-term planning. As an alternative to having annuity payments begin immediately, gift annuities can be deferred to begin at a future date — a younger donor
planning for retirement, for example. The longer the payment is deferred, the higher the payment will be when it begins. fle ible annuity planning option is available if the annuitant wants fle ibility in planning for the future. Payments are deferred for at least one year and then can be “ turned on” at some point. Although deferring the beginning date of payments will not generate any additional tax savings, it will increase the amount of the payments once they do begin.
5. They provide peace of mind. A charitable gift annuity also can be established to provide a fi ed payment stream to a loved one after the donor’s lifetime. A testamentary gift annuity may be funded through a will or trust, and can provide immediate or deferred payments. Those payments can be used to provide additional resources for an individual such as a surviving spouse, by offering a life income structure rather than a large outright bequest. Either way, donors can take comfort in knowing that their loved ones always will be supported financially. With a charitable gift annuity, individuals do not have to choose between personal financial security and providing for others. A gift annuity enables them to make a substantial gift to support an organization they are passionate about and to fulfill financial obj ectives. It is truly the gift that gives back. And that rocks. Amanda M. Steyer, Esq., is senior director of gift planning at Cleveland Clinic. Contact her at 216-444-5021 or steyera@ccf.org
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Are your donor-named gifts properly funded? Increasing endowed gifts through planned giving BY JANE HARGRAFT
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s B ob D ylan famously wrote and sang in 196 4, “ The Times They Are A-Changing.” While D ylan was writing about the social, economic and political upheaval that was gripping our country at that time, it’s a universally true statement. We are in a constant state of flu in almost every arena. Ignoring change is often short-sighted and can damage your institution. This situation is true in the case of donornamed gifts to your endowment that, say in 1990, were considered large enough to fund a program, professorship or scholarship in perpetuity. B ut, times, changes and different factors beyond your control, such as market fluctuations, the recession and increased costs – particularly labor, pension and health insurance – can diminish a gift’s impact. S uddenly, costs have outstripped returns, and the annual draw the originally invested funds were meant to cover is insufficient.
This leaves both parties feeling aggrieved. To the fundraising professional, the named funds are frustratingly underfunded, and new gifts to the endowment to name similar positions or programs can be as much as 10 times an investment made in 1990. To the donor, what was at the time a maj or investment, in a structure set by you, the institution, appears diminished and “ lesser than” when presented with the menu of options for naming Hargraft funds in your latest maj or campaign. What to do? H onesty and transparency is always the best policy. H ave an open discussion with your donor to e plain that through no one’s fault – their investment ( or their family’s) in 1990 cannot do what it was intended to do today. And, rather than go down the easy road of subsuming the gift into the general endowment ( assuming
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you ve written that fle ibility into your gift agreement) , a move guaranteed to offend many and please very few, it may be best to try a different approach. Instead, offer the donor an opportunity to add to the named fund with an additional cash gift to the endowment, and if that’s not possible, an irrevocable planned gift to the endowment. This approach will solve both of your potential problems, providing sufficient funds without alienating your donor. A gift of life insurance is one type of irrevocable planned gift to consider, especially if you have sufficient annual operating fundraising and do not immediately need cash for your endowment. This planned gift may also be attractive to a donor who has already committed their e tant estate to other causes or programs.
There are two distinct options for this type of gift. The first option is for your donor to make your institution the beneficiary of a new or pre-e isting life insurance policy that will bring the named program into compliance with current naming level policies. The other option is that your donor may consider a new life insurance policy that is owned by the institution. U nder this second option, the donor makes annual gifts to the institution, which then uses the funds to pay the insurance premium. The donor receives a ta deduction during the payment period. Occasionally, other circumstances intervene and can prevent the donor from making the premium payments. B e sure that when you are planning to accept this gift of insurance, your endowment can take over the payments in this case. Often, your endowment will treat this investment as part of their asset mi . Make sure you weigh and understand these issues before accepting such a gift, and both institutions and donors should receive professional counsel before entering such an agreement. Fundraisers
should especially discuss this with their chief financial officer and leadership before initiating a conversation about such a gift — nothing poisons a relationship faster than soliciting a gift that the institution then decides is it does not want to accept. And what do you do with these reinvested chairs or programs? I would recommend a small but meaningful event for the donor. Like renewing one’s marriage vows, this reinvestment in your institution is an occasion for special recognition for the donor and the beneficiary who had likely evolved from when they made the gift) . Instead, it is an opportunity to bring your donor closer to your institution and to truly thank them for the impact their past gift made and their future gift will make. This approach allow you to turn a potentially negative situation into a positive for both you and the donor. Jane Hargraft is chief development officer at The Cleveland Orchestra. Contact her at 216-231-7520 or jhargraft@clevelandorchestra.com.
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WILLIAM M. MILLS
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JEAN M. CULLEN
ABBIE R. PAPPAS
Singerman, Mills, Desberg & Kauntz Co., L.P.A. prides itself on bringing a wide range of experience to structuring and executing estate planning documentation for our clients. Our goal is to provide our clients with the peace of mind that comes with knowing that their counsel is single-mindedly looking out for their best interests.
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Pairing a charitable remainder trust with a donor-advised fund has multiple benefits BY SANDRA C. LUCAS
D
onor-advised funds are increasingly popular charitable giving vehicles. When appropriate, the marriage of a charitable remainder trust to a D AF can allow a donor to receive income, minimize taxes and diversify assets, while ultimately making a significant charitable impact. A donor funds a CR T by making an irrevocable gift of assets. The donor receives a charitable deduction, equal to the trust’s remainder value, for the year in which this gift is made. The donor, or other individual( s) , receives income from Lucas the CR T for a term of years ( no more than 20) or life, subj ect to tax. The income payout is based on the value of trust assets when the CR T is funded ( an annuity trust, or CR AT) or as revalued annually ( a unitrust, or CR U T) . hen the T ends, a ualified charity, such as a D AF, receives remaining trust assets. There are limits to a donor’s ability to change charitable beneficiaries after the T is created. fa is the remainder beneficiary, the D AF advisors ( such as the donor, if living, or the donor’s children) can, however, recommend distributions to a variety of charities. This may appeal to a donor who desires his or her children to be involved in philanthropy after the donor is gone. This also builds in fle ibility regarding charitable distributions from the CR T. Who might consider this approach? A
CHARITABLE PLANNING
good candidate is a charitably-inclined person who owns highly appreciated stock and wants to diversify that portfolio in a tax-wise manner, while receiving an income stream. H ere’s an example: The donor transfers low-basis stock to a CR T. he is the income beneficiary and designates a D AF as the charitable beneficiary. ecause Ts are ta exempt, the trust pays no capital gains tax when the trustee sells the stock to diversify the trust portfolio. The donor receives income for a term of years or life, subj ect to tax on the distributions. If the CR T is a unitrust ( CR U T) , the income payout is a fi ed percentage of the trust assets, revalued annually. In that case, if the trust investments perform well, the payout to the donor may increase over time. When the trust ends, the D AF advisors ( here, the donor’s children) may recommend charitable distributions that honor the donor’s philosophy of giving or perhaps meet charitable needs the donor could not foresee. Is this strategy right for you? Consult your professional advisors and a D AF sponsor, such as a community foundation. Sandra C. Lucas, Esq., is the director of planned giving at the Catholic Community Foundation. Contact her at 216696-6525, ext. 1640 or slucas@ catholiccommunity.org.
10/30/2019 10/29/19 9:11:02 3:36 PM AM
ESTATE PLANNING
SPONSORED CONTENT
Tips on BY BRIAN M. O’NEILL
I
t is no secret that donor-advised funds have exploded in popularity. Charitably motivated individuals and families have discovered the many benefits of donor-advised funds, which allow them to meet their philanthropic and financial goals. A donor-advised fund acts as “ charitable investment account” administered by a sponsor organi ation ( typically a community foundation or charitable arm of a financial institution , which handles the administrative and regulatory burdens. donor can receive an income tax deduction when assets are contributed to a fund, and then make recommendations for distributions called grants over time to charitable organi ations. ollowing are five ways a donor can ma imi e the benefits of a donor-advised fund.
Contributing appreciated assets: In addition to the potential income tax deduction for property contributed to a donor-advised fund, a donor can contribute appreciated as-
November 4, 2019
S21
a i i in benefits of a donor advised fund sets, such as low basis stock, to avoid incurring capital gains ta . Controlling the timing of tax deductions and grants: With the increase in the standard deduction, fewer ta payers are itemi ing deductions ( which includes the charitable deduction . nstead of making multiple year-end gifts directly to one or more charities, a donor can make one contribution to a donor-advised fund and still receive a tax deduction for the year of the contribution. This one contribution to O’Neill a donor-advised fund will typically be larger the amount of two years of gifts while allowing the donor to stagger distributions to charities with periodic grant recommendations. y bunching two years of charitable gifts into a single year, a donor is able to itemi e deductions in alternating years and benefit from the charitable deduction. aking bunched gifts to a donor-advised fund allows donors to
CHARITABLE PLANNING
ma imi e their charitable income ta deductions while spreading out over time the distributions to charities of their choice. Designating a donor-advised fund as a beneficiary: A donor can include a donor-advised fund in the donor’s estate plan and benefit from an estate ta charitable deduction upon the donor’s death. This can be done by designating a donor-advised fund as a beneficiary in a will or trust, or as the beneficiary of an IR A or life insurance policy. Involving family and creating a legacy of giving: A donor is able to name “ co-advisors” or “ successor advisors to make grant recommendations, enabling a donor to involve others in philanthropy and create a family legacy of giving. Using sponsor organization resources: ponsor organi ations, es-
pecially community foundations, offer many resources to assist donors, such as educating donors on different organi ations and initiatives in the community and helping create a charitable mission statement. ith so many benefits and fle ible strategies offered by donor-advised funds, e pect this charitable planning
vehicle to continue to rise in popularity. Brian M. O’Neill is a partner at Tucker Ellis LLP and chair of The MetroHealth Foundation board of directors. Contact him at the foundation at 216-778-5665. Joseph Ferraro, an associate at Tucker Ellis LLP, contributed to the article.
Usually, 1+1=2 . In this case, it equals 817. That’s the combined years of legal experience in real estate, business law, and estate planning of Frantz Ward now that Kadish, Hinkel & Weibel has joined us. FrantzWard.com
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10/30/2019 10/29/19 9:11:15 3:36 PM AM
ESTATE PLANNING PLANNING ESTATE
S22 November 4, 2019
SPONSORED CONTENT
Donor stewardship requires authentic gratitude BY SARA THOMAS
encouraging faithful philanthropy WE ENRICH DONORS’ LIVES BY CONNECTING THEIR SUPPORT WITH THE MINISTRIES AND SERVICES OF THE DIOCESE OF CLEVELAND TO CONTINUE JESUS’ MISSION ON EARTH.
Catholic Legacy Planning • Donor Advised Funds • Charitable Gift Annuities • Philanthropic Funds Since its inception in 2000, the Catholic Community Foundation has raised more than $465 million to provide for the spiritual, educational and charitable needs of people throughout Northeast Ohio.
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To create your Catholic legacy, contact Sandy Lucas, Esq., Director of Planned Giving, 216-696-6525 x1640, slucas@catholiccommunity.org. Please join us at our Continuing Education Seminar for Estate Planning Professionals 11/20/19: www.catholiccommunity.org/2019Seminar
o l ic
t io - e duc a
www.catholiccommunity.org/create-your-legacy
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T
he word “ gratitude” means more than a simple “ thank you.” At the heart of strong donor stewardship is authentic gratitude for every donation no matter the gift amount. In order to express heartfelt gratitude to donors, organizations must prioritize the donor experience, which can be akin to the customer experience. Customers buy goods and services from a Thomas company, while donors are purchasing the power to do good for a cause about which they are passionate. timely response is the first essential way to steward donors. J ust as a business would offer a receipt of payment, our organization strives to acknowledge gifts of support within the week in which they are received. S econd, a personalized response supports the connection a donor has to the organization’s mission. While volume may be a challenge for some larger organizations, personally signing letters, writing thank-you notes or making phone calls makes a big difference. With the rise of online giving and overly cluttered inboxes, it is also important to diversify the way in which you thank donors. For example, for peer-to-peer campaigns, an email may suffice for ta purposes. B ut sending a post card announcing the final goal raised to donors reminds
CHARITABLE PLANNING
them of the bigger picture and makes them feel a part of the effort. Or consider a video thank-you on your nonprofit s social media channels as another friendly touchpoint. D on’t forget to incorporate the unexpected. J ust as in a good customer relationship in which a company strives to offer exciting new products or services, a nonprofit can reach out to donors with human stories that are the fruits of their financial support. These stories can be told in third person, or can come from grateful clients, program staff or volunteers when appropriate. S tory-driven stewardship might simply thank the donor without asking for the next gift. Good donor stewardship doesn’t have to cost much, but it does require time and attention to detail. Leverage staff, board members or your organization’s ambassadors to help. Any stakeholder can be a part of thanking donors in a meaningful way. The most important thing is letting the donor know they have made an impact through giving – and hopefully through donor stewardship you can retain them. Sara Thomas is director of development at Cleveland Hearing & Speech Center. Contact her at 216-325-7578 or sara@chsc.org.
10/30/2019 10/29/19 9:11:27 3:37 PM AM
ESTATE PLANNING
SPONSORED CONTENT
November 4, 2019
S23
STEADFAST CLARITY FOR YOUR COMPLEX WORLD Clearstead is an institutional and private client advisory firm that is relentless in providing financial solutions so our clients can exceed their aspirations and build stronger legacies for their families, their communities, and themselves.
Creating and implementing charitable giving plans BY JULIE WEAGRAFF
C
haritable giving is a meaningful way to give back to organizations that have special significance in your life. urposeful giving must start with a plan. Think about what you want your legacy to be. ou can start planning at any age, and as your life circumstances change, you can adapt your charitable giving to reflect those changes. This could take place at any time during your life or at the onset of maj or life events such as marriage, the birth or adoption of a child, or Weagraff when you retire. orking with a professional advisor or group of advisors will help you establish and execute your future charitable plans. To create and implement the charitable giving plan that’s right for you, you first need to choose the right advisor. ake sure the person is someone you trust and who understands your philanthropic goals. ver the course of your lifetime, you may work with only one advisor or several advisors, but the key is to make sure your intentions for charitable giving clearly are outlined in your estate plans. s your life circumstances change, you can adapt your plans to meet your goals at that particular point in your life.
PRIVATE WEALTH MANAGEMENT MULTIGENERATIONAL PLANNING & INVESTMENTS INTEGRATED TAX PLANNING INSTITUTIONAL INVESTMENT CONSULTING
VISIT CLEARSTEAD.COM TO LEARN MORE
CHARITABLE PLANNING
s you grow older, you may want to consider expanding your circle of giving or focusing on a smaller number of organizations with larger commitments. rgani ations that were significant to you as a young person may not have as much meaning for you as you age. That is why it is important to continually re-evaluate and update your charitable giving priorities. ou can make it an annual review or you can review your plans every few years, but doing so will help you to stay current with your charitable intentions. nnual or periodic reviews also present an opportunity to involve your family members in your charitable planning. our spouse, partner, children, and other key family members can give you important feedback that can help you determine how you want to make an impact with your charitable giving. Investing time and resources into your charitable giving plan will give you peace of mind in ensuring your legacy will be fulfilled in a way that reflects what you treasured most. Julie Weagraff, MNO, CFRE, is vice president of fund development at Girl Scouts of North East Ohio. Contact her at 330-983-0399 or jweagraff@gsneo.org.
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S24 November 4, 2019
ESTATE PLANNING PLANNING ESTATE
SPONSORED CONTENT
The art of giving: tips for making a bequest BY LEIGH CARTER
F
or many people, a meaningful part of their legacy is the art they’ve collected during their lifetime. When considering what becomes of their collection after they’re gone, there is a natural desire to place it where it will be most appreciated, and often that means donating it to an institution such as an art museum. A charitable bequest of art written into one’s will or trust may provide a valuable tax deduction and allow future generations to enj oy the artworks in a public space. H owever, these purposes can be frustrated if this intention is not discussed in Carter advance with the recipient organization. ll too often, the first notice an institution receives of an estate gift is a call from a benefactor’s family, attorney or financial advisor with news that the deceased donor has provided a bequest of all or a part of his or her collection. While appreciative of the donor s beneficence, the institution may be unable to accept the gift because the works are outside the institution’s mission or curatorial departments, or the works could be too duplicative of obj ects they already have. D onations of large collections may simply involve a greater number of works than the
CHARITABLE PLANNING
institution can display or effectively store. When the designated recipient organization cannot accept such a gift, the natural consequences can include disappointment for the decedent’s family and heirs, regret for the institution and complications in settling the estate. To avoid these problems, a donor should let the organization know of the intention to include it in the estate plan. Any organization would be ready and willing to consult confidentially in advance on the proposed gift and to assist with the arrangements and documents to best achieve the donor’s desires. f the art or collectibles are not a good fit with that particular organization, they can help guide the donor toward other solutions and possibly another recipient better suited to the gift. As is true with so many endeavors, communication and collaboration yield the best results for all involved. Leigh Carter is relationship manager, wealth advisory vice president at Glenmede, and a trustee at the Cleveland Museum of Art. Contact him at 216-514-7873.
Helping Clients Solve Complex Estate and Succession Planning Needs The attorneys in Calfee, Halter & Griswold LLP’s Estate and Succession Planning group can help you make some of the most important decisions of your life. With deep knowledge and experience in finance and the law, our professionals provide exceptional value to clients seeking: • • • • •
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Calfee’s Estate and Succession Planning Attorneys Joseph M. Mentrek, Practice Group Chair Nicole K. Coumou | Amy K. Friedmann | Jean M. Hillman | Maureen T. Pavicic | Fran Mitchell Schaul | Jaclyn M. Vary CALFEE.COM | 888-CALFEE1 | INFO@CALFEE.COM ©2019 Calfee, Halter & Griswold LLP. All Rights Reserved. 1405 East Sixth Street, Cleveland, OH 44114
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THE LIST
Colleges and Universities
Ranked by full-time equivalent enrollment on Northeast Ohio campuses LOCAL FTE ENROLLMENT % CHANGE
STUDENT: TEACHER RATIO
1
Kent State University P.O. Box 5190, Kent 44242 330-672-3000/kent.edu
28,329 29,118
-3%
20:1
$11,131 $11,706
84% 16%
4 year public
$659.5
$141.4
Todd Diacon president
2
University of Akron 302 Buchtel Common, Akron 44325 330-972-7111/uakron.edu
15,629 16,735
-7%
20:1
$9,400 $12,600
86% 14%
4 year public
$358
$228.2
Gary L. Miller president
3
Cuyahoga Community College 700 Carnegie Ave., Cleveland 44115 216-987-6000/tri-c.edu
12,169 12,824
-5%
15:1
$3,436 NA
100% 0%
2 year public
$229.3
$77.8
Alex Johnson president
4
Cleveland State University 2121 Euclid Ave., Cleveland 44115 216-687-2000/csuohio.edu
12,310 12,759
-4%
17:1
$10,745 $12,882
82% 18%
4 year public
$276.8
$88.4
Harlan M. Sands president
5
Case Western Reserve University 10900 Euclid Ave., Cleveland 44106 216-368-2000/case.edu
11,076 11,072
0%
11:1
$50,450 $15,614
45% 55%
4 year private
$1204
$1866.5
Barbara R. Snyder president
6
Youngstown State University One University Plaza, Youngstown 44555 330-941-3000/ysu.edu
10,185 10,566
-4%
14:1
$8,249 $9,400
90.5% 9.5%
4 year public
$184
$279.8
James Tressel president
7
Stark State College 6200 Frank Ave. N.W., Canton 44720 330-494-6170/starkstate.edu
5,942 5,915
0%
21:1
$4,190 $5,252
100% 0%
2 year public
$64.3
$7.7
Para M. Jones president
8
Lorain County Community College 1005 N. Abbe Road, Elyria 44035 800-995-5222/lorainccc.edu
5,648 5,752
-2%
16:1
$3,550 NA
100% 0%
2 year public
$70.2
$51.1
Marcia J. Ballinger president
9
Lakeland Community College 7700 Clocktower Drive, Kirtland 44094 440-525-7000/lakelandcc.edu
3,497 3,653
-4%
13:1
$2,883 NA
100% 0%
2 year public
NA
NA
Morris W. Beverage Jr. president
10
Ashland University 401 College Ave., Ashland 44805 419-289-4142/ashland.edu
3,302 3,520
-6%
13:1
$20,950 $10,340
75% 25%
4 year private
$108.2
$45.3
Carlos Campo president
11
John Carroll University 1 John Carroll Blvd., University Heights 44118 216-397-1886/jcu.edu
3,394 3,488
-3%
13:1
$42,910 $12,232
86% 14%
4 year private
$86
$223.5
Michael D. Johnson president
12
Baldwin Wallace University 275 Eastland Road, Berea 44017 440-826-2900/bw.edu
3,233 3,383
-4%
11:1
$33,530 $10,110
85% 15%
4 year private
$130.9
$179.5
Robert C. Helmer president
RANK
COLLEGE/UNIVERSITY
FALL 2019/ 2018
TUITION/ ROOM AND BOARD
% ENROLLMENT UNDERGRAD/ GRADUATE
TYPE OF INSTITUTION/ AFFILIATION
OPERATING BUDGET (MILLIONS)
ENDOWMENT (MILLIONS) 6-30-2019
TOP LOCAL EXECUTIVE
HIGHER EDUCATION SOLUTIONS maloneynovotny.com + 216.363.0100 13
Oberlin College 38 E. College St., Oberlin 44074 440-775-8460/oberlin.edu
2,833 2,775
2%
9:1
$55,976 $16,826
99% 1%
4 year private
$162.1
$925
Carmen Ambar president
14
Walsh University 2020 E. Maple St. N.W., North Canton 44720 330-490-7090/walsh.edu
1,895 2,180
-13%
13:1
$29,330 $5,450
71.7% 28.3%
4 year private
$80.5
$28.4
Timothy J. Collins president
15
University of Mount Union 1972 Clark Ave., Alliance 44601 800-992-6682/mountunion.edu
2,008 2,088
-4%
12:1
$31,300 $10,500
90.7% 9.3%
4 year private
$56.9
$145
Richard Merriman president
16
The College of Wooster 1189 Beall Ave., Wooster 44691 330-263-2000/wooster.edu
1,937 1,996
-3%
11:1
$52,000 $12,250
100% 0%
4 year private
$85
$328.9
Sarah Bolton president
17
Malone University 2600 Cleveland Ave. N.W., Canton 44709 330-471-8100/malone.edu
1,330 1,441
-8%
11.3:1
$30,800 $9,800
75% 25%
4 year private
$28.9
$20.7
David A. King president
18
Notre Dame College 4545 College Road, South Euclid 44121 216-381-1680/notredamecollege.edu
1,396 1,420
-2%
14:1
$29,460 $10,130
93% 7%
4 year private
$28
$10.6
Thomas G. Kruczek president
19
Bowling Green State University - Firelands One University Drive, Huron 44839 419-433-5560/firelands.bgsu.edu
1,362 1,303
5%
20:1
$4,706 NA
100% 0%
2 year public
NA
NA
Andrew Kurtz dean, BGSU Firelands
20
Lake Erie College 391 W. Washington St., Painesville 44077 440-296-1856/lec.edu
1,138 1,172
-3%
14:1
$30,886 $9,908
82.7% 17.3%
4 year private
$19.4
$33.1
Brian D. Posler president
21
Hiram College 11715 Garfield Road, Hiram 44234 330-569-3211/hiram.edu
967 974
-1%
12:1
$35,360 $10,290
98.7% 1.3%
4 year private
$29.7
$75.8
Lori E. Varlotta president
22
Northeast Ohio Medical University 4209 State Route 44, Rootstown 44272 330-325-2511/neomed.edu
856 853
0%
NA
$38,101 NA
0% 100%
4 year public
$64.2
$24.4
John T. Langell president
23
Ursuline College 2550 Lander Road, Pepper Pike 44124 440-449-4200/ursuline.edu
712 734
-3%
7:1
$33,120 $11,126
62% 38%
4 year private
$30
$46
Christine De Vinne president
24
Cleveland Institute of Art 11610 Euclid Ave., Cleveland 44106 216-421-7000/cia.edu
645 655
-2%
10:1
$40,480 NA
100% 0%
4 year private
$21.1
$27.5
Grafton J. Nunes president, CEO
RESEARCHED BY CHUCK SODER: CSODER@CRAIN.COM
Get 28 schools, 152 executives and historical data in Excel. Become a Data Member: CrainsCleveland.com/data Information is supplied by the schools. Send feedback to Chuck Soder: csoder@crain.com
P041_CL_20191104.indd 41
NOVEMBER 4, 2019 | CRAIN’S CLEVELAND BUSINESS | 41
11/1/2019 1:28:26 PM
AKRON MEDIA
ENV
Devil Strip aims for greener grass with co-op model
New business model allows community members, supporters to buy shares of the magazine BY JUDY STRINGER
In 2014, when Chris Horne launched The Devil Strip, an Akron arts and culture magazine, he knew it would be an uphill battle. Print publications were — and are now — downsizing and, in some cases, folding amid decades-long declines in readership and advertising. Still, the Rubber City newcomer felt there was a place for his “nakedly pro-Akron” approach to community coverage. Horne, a Georgia native and digital news veteran, was able to convince enough advertisers of that to support the free monthly for its first five years. In the face of sustained revenue pressure and a desire to “create more social currency,” however, Horne is shifting The Devil Strip to a multi-stakeholder cooperative. “It is clear we can’t grow if we are based on ads alone,” he said. “We’d do OK, but we would never be able to do the kind of work that we really want to do.” Since Nov. 1, community members, businesses and other supporters have been able to purchase shares of the magazine. Investors become both members and owners of the magazine. Horne claims The Devil Strip — which gets its name from what some people call the grassy area between the sidewalk and the street — is the
first co-op of its kind in the U.S. Member-owners can buy in for as little as $1 per month, but pricier tiers come with perks like discounts for Akron-area restaurants, shops and cultural venues, or admission to member-only events. The perks, Horne said, are meant to incentivize patronage of local businesses and resources. Membership also comes with some decision-making power: the ability to vote for board members and have a say in the content or direction of the magazine. “We might sample our membership, for example, to see if they would like The Devil Strip home-delivered or, on the other hand, want us to take that same investment and put it into expanded coverage, like more on public education,” he said. Giving readers a voice is meant to deepen the connection between the paper and its audience, while also producing content that is more meaningful to locals and, thereby, fostering a better-educated, more civically engaged community. “We are not doing this just so The
“IT IS CLEAR WE CAN’T GROW IF WE ARE BASED ON ADS ALONE. WE’D DO OK, BUT WE WOULD NEVER BE ABLE TO DO THE KIND OF WORK THAT WE REALLY WANT TO DO.” — Chris Horne, The Devil Strip
Devil Strip can survive,” Horne explained. “Our fundamental question is, ‘What can we do to help make Akron a better place to live?’ ” Horne hopes to sell between 500 to 600 memberships before Jan. 1. He anticipates the average member will come in at a $144 per year but hopes to sell enough of the higher membership tiers — it will offer plans at $330 and $1,000-plus per year — to raise as close to $100,000 as possible to get the maximum benefit of matching-gift opportunities from NewsMatch and other philanthropists. “If we can get $200,000 with the launch, that will put us on the right path for not just sustainability but a little bit of growth, too,” he said. Just last week, the company also announced that the John S. and James L. Knight Foundation will invest $200,000 over two years to help support the transition. The magazine will use the funding to focus on im-
proved distribution, marketing and events, pay for the business and legal fees associated with creating a co-op and provide a salary for Horne, according to a news release. It will be the first time he’s drawn a paycheck from The Devil Strip since he started the publication, the release said. Launching a co-op isn’t something Horne cooked up overnight. He had considered making The Devil Strip an employee co-op almost from the beginning. Separately, Horne entertained discussions about how the magazine might connect better with readers and mitigate any direct or indirect advertiser influence by being membership-supported rather than relying on ads. A multi-stakeholder co-op was ultimately a marriage of those two ideas. Beginning in August 2018, Horne got the chance to research and blueprint his vision during a 10-month fellowship at Stanford University, courtesy of the John S. Knight Journalism Fellowship program. Meanwhile, back at home, The Devil Strip landed a $30,000 grant from the Membership Puzzle Project, a program out of New York University, to fund audience research and exploration into co-op structures. During the research phase, Horne and his team connected with a number of active co-ops, but ultimately embraced Black Star Brewery in Aus-
JOIN US FOR ONE OF THE LARGEST GATHERINGS OF CLEVELAND’S RISING LEADERS! A celebration of Crain’s 40 under 40 and 20 in their 20s will be a one-stop destination to rub elbows with the community’s best and brightest professionals who are scaling businesses to new heights, making decisions that put their organizations on the map and producing a seemingly infinite stream of impactful work.
tin, Texas, as a member cooperative that most closely aligned with their goals. “You have this audience that has this refined taste for craft beer and this atmosphere where people want to come in and enjoy themselves,” he explained, adding that by the same token, he believes there are “people who want to consume the best local news and who want to have a quality experience in their community. … It just seems like the model could lend itself to local news.” If and/or how quickly Akronites will buy into the craft news concept remains to be seen, but Rick Edmonds, media business analyst at the Poynter Institute, is optimistic. He’s watched media outlets turn to a number of business models — most adopting a nonprofit-like status — to reduce or eliminate their reliance on flagging advertisers. “Even if it’s not terribly widely used, my own opinion is that the co-op model would be pretty good match to the times,” he said. “We have been saying for years now that for papers of any type to succeed, they have to have a close tie, in one way or another, to their community, and that’s kind of the whole deal with co-ops.” Contact Judy Stringer: clbfreelancer@crain.com
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AKRON ENVIRONMENT
Davey to nearly double size of Kent headquarters
Construction will begin next year on long-planned third wing that will add 40,000 square feet BY DAN SHINGLER
The Davey Tree Expert Co. is giving the city of Kent a birthday present — a big expansion that will nearly double the size of the company’s headquarters in town, plus plans for a training facility across the street. And it’s not even the city’s birthday, it’s Davey’s — the residential and commercial tree service business is celebrating its 40th year as an employee-owned company this year. Davey Tree has been growing rapidly since then, both through organic growth and acquisitions, said president and CEO Patrick Covey, who took the reins of Davey in 2016 after 26 years with the company. Since its employees bought the business from the Davey family in 1979, the company has seen its sales climb from about $60 million to more than $1.1 billion annually today, Covey said. And it’s still growing at a pretty good clip. “We’re tracking for the last two years to do about 11% to 12% yearover-year growth,” he said. “We grew by about $100 million last year and we’re targeting more than $100 million (in growth) this year.” Along the way, Davey’s payroll has grown from about 2,800 employees to more than 11,000 and its shareholder
ranks have swelled from about 500 to more than 6,000, Covey said. That means it’s time for Davey to build the third wing of its headquarters, which it has long planned at its campus on the city’s north side. “It was always designed to have a third wing coming out, and we’re announcing we’re going to build the third wing next year,” Covey said. “That will add about 40,000 square feet to our existing space and should give us room to grow for about the next 10 years.” The existing headquarters has about 42,000 square feet and was completed in 1985, according to Davey spokeswoman Jennifer Lennox. The expansion project will begin in 2020, and Covey said it will take about 18 months and between $14 million and $16 million to build the additional space. It will be used to draw back some employees Davey now houses in offsite offices around Kent and to better organize existing employees and make space for new ones. Meanwhile, Davey also has big plans for 175 acres of mostly empty land across the street from its main
“WE GREW BY ABOUT $100 MILLION LAST YEAR AND WE’RE TARGETING MORE THAN $100 MILLION (IN GROWTH) THIS YEAR.” — Patrick Covey, Davey Tree Expert Co. president and CEO
campus. It purchased that property, which was formerly Oak Knolls golf course, in 2017, largely so the company could control the site and use it later, Covey said. Later is just around the corner now, and Covey said the company is moving forward with plans to use the property for a new training and education center, he said. The site has about 75 buildable acres, plus bogs, riverside land and other natural settings. Davey has begun talking to local government officials about its plans for the area. Covey said Davey hopes to build some classrooms, indoor climbing and other training facilities, and possibly even some sort of event space over the next five to seven years. The company will spend much of the next two years working on infrastructure for the site, according to Covey. Both projects are making local officials happy, said Kent economic
development director Tom Wilke, who added that Davey has been a significant employer in the city since long before it became employee owned. Today, the company is a top-five employer in Kent in terms of the number of people who work there. In terms of payroll taxes, Davey is No. 2 behind Kent State University, because the company has its well-paid executives in town, Wilke said. So, officials are excited that Davey is going to expand in place. “It’s an excellent thing for the city of Kent,” Wilke said. “Davey Tree is almost synonymous with the city of Kent. They’ve been a significant part of the economy since they were founded, so we’re proud to have their headquarters here and thrilled that they’re going to expand their headquarters here.” Davey intends to continue growing, Covey said, both through acquisitions and by increasing sales in existing and new territories. The company will continue to look for reputable tree-service businesses that can expand its footprint. Davey has done more than 40 acquisitions to date, Covey estimated, with almost all of them small, family-owned enterprises. “This year, I think we’ll end up doing eight acquisitions, and they generally have revenue of between $2
million and $8 million,” Covey said. Davey also is benefiting from some larger trends, including a strong economy, increased awareness and appreciation of trees, and the advent of more pests and diseases that need to be managed in order to save trees. “There’s a lot more concern about the positive impact that trees have today … and that plays out well for companies like ours that take care of trees,” Covey said. Davey also is getting more business from utilities that need to trim trees near power lines — including in California, where the threat of fires has caused planned blackouts. The California-based utility Pacific Gas and Electric is Davey’s largest client, according to Covey. But in the tree business, things can turn as quickly as leaves’ colors in the fall, so the company is always cautious, Covey said. “The economy has been good. We have a lot of our client base where we’re a heavy discretionary spend for them, and it’s pretty easy to carve us out if they’re having economic anxiety,” he said. “So, it’s been a good period from that perspective in terms of people having the confidence to spend.” Dan Shingler: dshingler@crain.com, (216) 771-5290, @DanShingler
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Today, however, competition has never been greater for a piece of the $120 billion U.S. beer market in which Big Beer remains king by a wide margin despite slowly losing ground to craft brands. In Ohio alone, where there are at least 313 craft breweries, the number of craft businesses has at least septupled in the past eight years. “When we incorporated in 1986, there were maybe eight dozen breweries. Now, it’s over 8,000. The competition has never been more intense than it is right now,” Pat Conway said. “What we need to do now is circle the wagons, get everybody together and ask, ‘What can we do to continue improving our game by going from good to great?’ ”
Who is Mark King? King, who’s about to turn 57, is just the second CEO at GLBC. He replaces Bill Boor, who joined the company in September 2015 and departed in the spring for a job with Cavco Industries in Arizona. Where Boor came from the manufacturing sector and brought a strong background in finance, King arrives from the realms of beer and cider, where he’s worked for more than 35 years. He brings experience in sales and marketing, which are elevated priorities right now. A Detroit native, King said he has
Great Lakes Brewing Co. co-owner Pat Conway with new CEO Mark King. | KEN BLAZE FOR CRAIN’S
long been familiar with GLBC, which he officially joined in October. His brother kept the fridge stocked with Edmund Fitzgerald Porter. King studied business at Marquette University in Milwaukee (where the drinking age was 18) and played rugby. One of his close friends and teammates was Chris Farley of “Saturday Night Live.” During that time, he took a job loading beer
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SOLICITATION OF APPLICANTS INTERESTED IN SERVING AS SUBCHAPTER V TRUSTEES The United States Department of Justice, Office of the United States Trustee, seeks resumes from persons wishing to be considered for inclusion in a pool of trustees who may be appointed on a case-by-case basis to administer cases filed under the Small Business Reorganization Act of 2019 (Subchapter V), which amended chapter 11 of title 11 of the United States Code (Bankruptcy Code). Those with business, managerial, consulting, mediation and operational experience are encouraged to apply. The appointment is for cases filed in the United States Bankruptcy Court for the Northern District of Ohio, as well as in nearby Districts or Divisions, as appropriate. Subchapter V trustees may receive compensation and reimbursement for expenses, in each case in which they serve, pursuant to court order under section 330 of the Bankruptcy Code. Trustees are not federal government employees. All resumes must be received on or before November 15, 2019. For additional information, qualification requirements, and application procedures go to http://www.justice. gov/ust/eo/private_trustee/vacancies/11ad.htm.
trucks for the local Budweiser distributor. A self-described “rudderless ship” post-college, King drove his Camaro to San Diego a few years later in search of a job. He found one driving a beer truck for another Bud distributor and started to foster a love for the business of beer. After that, he took a corporate-level marketing job with Anheuser-Busch, where he pushed new products like Bud Dry. He moved to Labatt Breweries of Canada a few years later, eventually settling into its import business. He stayed with that company for 17 years through ownership changes. The original Labatt company was acquired by Belgian brewer Interbrew in 1995. It merged with Brazil’s AmBev in in 2004 to create InBev, which joined with Anheuser-Busch in 2008 to form AB In-Bev. Before that mega-merger, King shifted to other endeavors, holding positions with distributors like Beam Suntory and The Gambrinus Co. In 2012, sensing an opportunity in the market for local, dry, European-style ciders versus the sweeter American versions gaining popularity on the coasts with larger companies, King launched Austin Eastciders out of Texas — a state not exactly known for its apple orchards, which led to some ribbing at the time. “Well, they don’t grow a lot of hops in St. Louis, and they make great beer there,” he’d say. Today, that company distributes in Texas, its top market, Oklahoma and New York City. It has about 100 employees and is on pace to make about 60,000 barrels this year. King credits its growth to a good product and branding. He is still on the board at Eastciders, which is now backed by a private equity company, but said he feels ready to try something new. So when Sullivan, the craft consultant, encouraged King to reach out to GLBC as it sought a new CEO, he jumped at the chance. King quickly connected with the Conways, who saw him as a proper cultural fit, Pat said. King’s take on the cider business says volumes about his approach to GLBC. “The whole thought was, if we could become the cool craft cider brand versus the big guys on the shelf, then we win,” he said. The same could be applied to craft beer. “(King’s) sales and marketing
At a glance: Mark King Hometown: Detroit Age: 56 Past work: ` Labatt Breweries of Canada, which merged with Interbrew, which merged with AmBev, creating InBev (which merged with Anheuser-Busch, creating AB-Inbev; King left before that deal). 1987-2007 ` Beam Suntory, 2007-2010 ` The Gambrinus Co., 2010-2011 ` Austin EastCiders, 2012-present (current board member) ` BeatBox Beverages, 2018-2019 Random fact: Played rugby in college with Chris Farley of “Saturday Night Live” fame.
background in the industry will be invaluable given the situation, which in my view is unhealthy from an industry perspective,” Boor said. “It’s a marketing business now with overcrowded shelves and taps. Making good beer isn’t enough, and some who make pretty mediocre beer seem to rise to the top based on newness and attention-grabbing.”
Low-hanging fruit What GLBC has going for it today is a strong brand and history that resonates with a loyal fan base. But winning new customers will be key for future viability. GLBC has a reputation for being rather conservative with its offerings, and King could see turning that around to draw in new fans. Many brewers have walked back past vows to never make a hazy IPA
“IT’S A MARKETING BUSINESS NOW WITH OVERCROWDED SHELVES AND TAPS. MAKING GOOD BEER ISN’T ENOUGH, AND SOME WHO MAKE PRETTY MEDIOCRE BEER SEEM TO RISE TO THE TOP BASED ON NEWNESS AND ATTENTION-GRABBING.” — Bill Boor, former GLBC CEO
or craft seltzer. King said he will never write off anything as at least a possibility. It’s too early to say what new beers could be in store for 2020, but product innovation is top of mind. That doesn’t mean displacing core offerings. GLBC may move some seasonals to year-rounds; King acknowledged there’s a clamor to do that with Conway’s Irish Ale. Another option is playing up old beers that have become popular, like craft lagers: a perfect opportunity to draw attention back to the flagship Dortmunder Gold. Like most GLBC beers, though, Dortmunder is not in aluminum, reflecting what is arguably the greatest misstep for the company. “They’ve missed the can thing by at least five or six years,” Sullivan said. “But it’s not too late.” Unfortunately, GLBC — the 20thlargest craft brewer in the U.S., with production maxing out at about 150,000 barrels annually and some 250 employees — has no room for a canning operation in its current facilities. Yet, bottle sales are losing ground to cans. According to Nielsen, glass still makes up most of the craft market (comprising about 67% of retail sales in 2018), but sales in cans spiked 40% in 2017 and 33% in 2018. The trend is fueled by the transportability of cans, which fit more occasions than bottles, like golfing or going to the beach. They’re also easier to recycle. King said GLBC will put out more beers in standard cans in 2020, which it will do by contracting with another company. That should immediately spur sales for those occasions for which GLBC is not considered because of its bottle-centric portfolio. The taproom-restaurant is in store for a refreshed design as well, said Bridget Barrett, GLBC’s director of customer experience. “What we will be doing next year is a slightly more elevated dining experience in a few parts of the brewpub,” she said. “Then, we’re looking at how to take that beer garden, that green space with the retractable roof, and make that more of a casual, beer hall experience.” Barrett said they will move the gate on the sidewalk closer to the street to add more space, allowing for longer, communal tables, which have been lacking. Those areas may have pareddown menus and focus more on beer, while other spaces inside the original restaurant will retain a more dining-centric experience. But what of the Scranton Peninsula property GLBC bought for an undisclosed sum in spring 2018? Pat said what could become of that property is a work in progress. It could have a brewery, a taproom, space for warehousing, a canning line. The possibilities are myriad. A consideration is how the area could be developed in stages over time. But growing revenue and market share in the home market is the first priority. That’s where King’s efforts will come into play to grab the low-hanging fruit. Even expanding into more markets — GLBC currently distributes in 13 states and Washington, D.C. — isn’t a top priority right now, though Pat indicated Boston and Texas could be of interest if “done right.” Winning more business in the backyard is the near-term objective, he added, noting “we never want to be a mile wide and an inch deep.” Jeremy Nobile: (216) 771-5362 jnobile@crain.com
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From Page 1
For decades, Cleveland has offered the maximum 15-year, 100% tax abatement across the city, but development has been uneven, creating profound disparities in housing value. According to Norton’s research, there were 3,216 single-family and nearly 250 multifamily properties given tax abatements in the city of Cleveland from 2004 to 2018. In 2018, the city of Cleveland and the Cleveland Metropolitan School District lost out on nearly $43 million in uncollected taxes due to abatements. In total, Cuyahoga County and all Cuyahoga County schools relinquished nearly $81 million. If you combine all cities, schools, libraries and other county entities, abatements account for more than $107 million in forgone tax revenue. Abatements were located all across the city, with heavier concentrations west of downtown and in the far southeast. Norton pointed out that median sales prices fall in the $150,000 to $270,000 range in the neighborhoods in and around downtown, south, southwest and around Case Western Reserve University, where pockets of the city have experienced rapid development. That’s in stark contrast to areas on the city’s East Side, where median prices are in the $8,000-$25,000 range and sales transactions tend to be cash-based. Using median home sale prices and median household income changes over 15 years, Norton was able to show that about a third (35%) of the city has experienced a precipitous increase in appraised house value in relation to income, exerting pressure on people who live in those communities. Those increases in value have produced a property tax issue, which Councilman Anthony Brancatelli, chairman of council’s Development, Planning and Sustainability Committee, wants to address in any renewal legislation. Brancatelli, who represents Slavic Village and parts of the West Side, said he’s increasingly hearing complaints from longtime homeowners in his ward, usually older and retired, who are seeing budget-busting increases in their property taxes. According to the real estate website Zillow, the median list price per square foot in the fast-growing Detroit Shoreway neighborhood is now $160, compared to the Cleveland average of $73. Brancatelli warned, however, that a push to completely eliminate tax abatements in places like Ohio City and Tremont might seem like an easy fix but would not build the robust market the city needs right now. “I think there are components of this that are going to come out that are probably less directed at the city and more directed at (Cuyahoga) County,” he said. “That’s where the biggest pushback has been: where the county has been aggressive in reassessing (taxes), especially in hot markets.” Brancatelli pointed to several metropolitan taxing districts that have adopted policies to insulate existing property owners from sharp increases in valuation. The city has absolute discretion over what tax incentives to offer, as long as abatements fall within the state statute. Other cities in Ohio and elsewhere are already customizing plans to protect homeowners who purchased homes without abatements and now feel pressure from recent development. In Philadelphia, for example, under its Longtime Owner Occupants Program, or LOOP, property owners
who experience an increase in value of more than 50% between one valuation and the next would see their tax payment “locked in” at that level. The tax payment for that homeowner could then rise again only if property tax rates are raised, not if the property valuation increases. “This is a topic that is being dealt with across the country,” said Mark McDermott, vice president and Ohio market leader for Enterprise Community Partners Inc., a national nonprofit that works to boost the impact of local affordable housing development. “Columbus has established some additional requirements around the use of their tax abatement system.” McDermott noted that tax abatements are not a silver bullet to increase development, adding that a combination of tax or funding subsidies, regulations and targeted investments by organizations is the best path to more equitable development. Tax abatements aside, he added that some neighborhoods have a problem of home value that’s beyond
any tax relief. “Banks shy away from smaller loans under whatever the magic number is — say, $50,000 — because the cost of doing that business is the same as a cost of doing a larger loan,” he explained.
Encouraging risk Getting the data on the total investments provided by abatements, the tax revenues that have been generated, changes in assessed home values and any additional economic activity will dictate any recommendations for tax incentive changes. The analysis of Cleveland’s tax abatements is not without some obstacles, though. Detailed county data go back just 15 years, meaning researchers can only hypothesize about what the city experienced before tax incentives. “What would have been the effect if we hadn’t done this, if we don’t continue to do this?” said Tania Menesse, Cleveland’s director of community development. “What would be the effect
broadly on development in Cleveland?” The study will also attempt to determine whether homeowners and developers are driven to renovate or build solely because of the tax abatements or if those tax savings are just a bonus for a decision they would have made regardless. “The whole idea of an incentive is that it gets people to take a risk, to do a little bit more in an area or with a product that they would have not otherwise used,” Menesse noted. Whatever the study’s conclusions, Andrew Brickman, principal of real estate developer Brickhaus Partners, said he’s concerned that any curtailing of tax abatements will grind development to a halt. “With construction prices where they are, you need tax abatement,” Brickman said. “If the city wants to continue to attract development, it’s an important policy that needs to stay in place. I don’t think they can get complacent and say, ‘Oh, we’re some success in Tremont and Ohio City and University Circle and De-
troit-Shoreway. We can do away with tax abatement or shorten the period of tax abatement in those areas.’ ” The next stage of the study, which was scheduled to be complete at the end of October, will look at foreclosure activity and whether it corresponds with the end of the abatement period. If a relationship is found, one change under consideration for the program would be a step-down model in which a 100% abatement decreases over the course of 15 years. “We believe that the economy is stronger and that with the right tools and the right incentive we can have development in more than just a few neighborhoods,” Menesse said. “We want to make sure that the recommendations that we make are responsible and do not shut down development but support development in other parts of the city.” Kim Palmer: kpalmer@crain.com, (216) 771-5384 Jay Miller: jmiller@crain.com, (216) 771-5362
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CLA is pleased to announce a career milestone for a professional in our Canton office: Dan Schrader is advancing from manager to principal. “Dan has been a great asset to our team since joining in 2010. His dedication to his clients, community, and his colleagues are just a few of the reasons why he is deserving of this advancement in his career,” adds Managing Principal, Steve Pittman. Dan provides tax planning and financial statement compliance for construction and real estate clients.
Donley’s is excited to announce that Martin Pangrace has joined our company in the position of General Counsel/Risk Manager. Before joining our team, Martin was the litigation partner at Brennan Manna Diamond’s Cleveland office. He brings nearly 20 years of experience in construction, insurance coverage, and other civil litigation. Martin received his J.D. at Case Western Reserve University and a B.A. with honors from Carnegie Mellon University.
NOMS promotes Victoria Bearer to director of operations, Cleveland-West Region and the Eye Care Division systemwide. With a Bachelor of Arts in applied science from Youngstown State University, she brings over 20 years’ management experience in a variety of clinical and surgical settings to her new role. Her position will focus on expanding NOMS’ footprint in Greater Cleveland and ophthalmology, optometry and other visionrelated services across Northern Ohio and beyond. Visit NomsHealthCare.com
BDO USA, LLP has announced that Sean Kilbane has been admitted to the firm’s partnership. Mr. Kilbane has extensive knowledge in providing assurance services to manufacturers and distributors, real estate entities, tax-exempt organizations and employee benefit plans. Sean has more than 14 years of public accounting experience, with an emphasis on private equity sponsored, multinational organizations; commercial and residential real estate developers and owners.
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NOMS Healthcare welcomes Kathryn Mominee as director of ASC operations, where she has overall responsibility for leading strategy, operations and optimization of the revenue cycle for NOMS’ newest venture in ambulatory surgery centers. She has extensive experience overseeing mergers and acquisitions of practices. Prior to joining NOMS, she served for more than 20 years in various leadership positions. Visit NomsHealthcare.com
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Ulmer & Berne LLP Matthew I. Pollack joins Ulmer as Counsel in the firm’s Business Law Practice Group, where he concentrates on representing businesses in all types of financing transactions. He advises corporate clients with respect to a comprehensive range of commercial business matters. Matthew received his undergraduate degree from The Ohio State University, his MBA from Case Western Reserve University (CWRU) Weatherhead School of Management, and his law degree from CWRU School of Law.
BDO USA BDO USA, LLP has announced that Donna Sakony has been admitted to the firm’s partnership. As a tax partner, Ms. Sakony will continue to provide tax services and business solutions to various industry groups including real estate and construction, professional services, private equity, and manufacturing and distribution. She also specializes in partnership taxation including compliance, exit strategies, and partnership transactions.
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SOURCE LUNCH
Mike Conley
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Mike Conley, the Cavs’ chief information officer, spent a few years at Ohio State University, studying to be a dentist, before deciding “I didn’t like looking in people’s mouths anymore.” He then enrolled at Cleveland State and was running the student newspaper within months, which led to a job as a sports producer at Cleveland.com. Conley’s tech skills — he said he “studied up” and figured out how to code and build a website during his time at CSU — have been serving him well ever since. He’s involved in almost every aspect of the business for the Cavs, who hired Conley as vice president of digital in 2013 and promoted him to CIO four years later. He played an integral role in the renovation of Rocket Mortgage FieldHouse, which debuted in time for the Cavs’ 50th season. And for Conley, the studying hasn’t stopped. “I’m an avid reader,” he said. “I’m constantly educating myself. If I don’t understand something, I force myself to learn it — the what and the how.” — Kevin Kleps ` What’s your favorite aspect of the renovations that were done at Rocket Mortgage FieldHouse? The power portal. That project went through several iterations and visions. It was something that hadn’t been done before. ... When we engaged (technology service provider) ANC with the concept, they had to engineer something that really hadn’t been done at that scale before. That was both exciting and had a little bit of trepidation at the same time because you’re going into uncharted waters. But once we were able to get the design solidified and confirmation from the engineering side that we could make it happen, it was really exciting seeing it come to life. We worked through a solution where we knew when we did reopen the doors, the fans and the guests that came through the venue were really going to enjoy it. It was great seeing it go from a concept to real architecture to coming to life for fans when we first opened up the doors. And we’re really just scratching the surface of what we can do with it.
name is going to be featured boldly inside the portal and then slowly dissolve into the background of names that have already checked into the facility for that event. That’s a way for us to really take what we’ve done at the power portal to a level that truly engages every fan who comes through.
` And one of those things is the portal can “greet” fans once they enter the area, right? We’re working on a proof of concept that leverages the gate-scan data. So when you come in to check into the venue and you scan your mobile ticket, the ticket reader gives you your seat locator. But at that same time, we’re looking to inject that information from the gate scanners into the visualizations at the power portal. So once you get scanned and you get your seat locator, by the time you get to the portal, your
Hobbies Conley doesn’t have time for much, but he enjoys playing basketball with his kids and loves to golf.
` How much more technologically advanced is everything now at the arena? We made significant strides in modernizing the building. We still have more to go this upcoming offseason as we look at WiFi and 5G and modernizing that. That was just a matter of timing on the project and timing of the technology getting to the point where we could make a sound
investment and feel confident in the future of that investment being more than just a couple of years before we needed to change it out again. ... Down the road, we can look at fantasy gaming and other things inside the venue. Those moments, that ability to be able to have real-time bandwidth available for people to be able to use the infrastructure and, more importantly, the connectivity in the building, allows you to do a lot. We focused on that a lot with the project, and we got that right. That’s the important piece, and now we’ve got a bunch of canvases around the building with our digital signage and our direct-view LED and our wayfinding signs to truly evolve with technology that’s 4K, AK or HDR — whatever wins out in that space.
THE CONLEY FILE
LUNCH SPOT
Starting five Conley and his wife, Carrie, have five kids who range in age from 18 months to 13 years.
Restaurant name Red, the Steakhouse; Cleveland
Father-son bond Conley also enjoys the peaceful reflection that can come from a day spent fishing — something he said he got from his father, Bill, who passed away in July.
The meal One had steak frites with a soft drink. The other had a Caesar salad with chicken and a water. The vibe Red’s dinner menu is more extensive and the lunch crowd isn’t as vibrant, but the food remains top-notch. The bill $47.52, plus tip
REPORTERS
` What’s one of the next things you’re looking at when it comes to technology and the fan experience? I think the holy grail is trying to figure out how do you limit or mitigate lines so people that want to get in and out of concession areas can do it quickly. I love the concept of the terminal-less payment, kind of similar to what machine vision is doing at Amazon Go stores. You think about walking into a grab-and-go stand inside the venue. You have your app open and it identifies you as you walk in. You grab whatever items you want and you walk out, and you’re charged whatever the amount is that’s tied to the items that you took, and you’re back to your seat. But it’s really just trying to figure out ways to engineer the utilities of the facility to meet the needs of the fans. So you can be as aggressive as you want on the technology side or you can still come in and enjoy the game the way you want to, the old-fashioned way. ` You studied to be a dentist, then worked for Cleveland.com and now you’re the CIO of an NBA team. That can’t be a common path. I think the CIO role in general has a unique blend of experience as you look across the board. It’s such a changing role compared to what it was before, where it was really technically driven. Now, you need soft skills and hard skills mixed together. I always kid that with my career, I’ve been drawing straight with crooked lines. … It’s about looking at technology through the lens that it’s going to be constantly changing and you’ve got to change with it.
THE WEEK FAREWELL: John G. “Jack” Breen, the chairman and CEO of The Sherwin-Williams Co. from 1979 to 1999 and a major philanthropic figure in the Cleveland community, died Oct. 28 at age 85. Under his leadership, Sherwin-Williams achieved 21 consecutive years of earnings improvement while growing revenues and store count significantly. He retired as CEO in October 1999 and as chairman in April 2000. Two months after his retirement as chairman, Sherwin-Williams dedicated the John G. Breen Technology Center in Cleveland to honor his service. Breen was a member of the Sherwin-Williams board until his retirement in April 2005. He also served on the boards of several corporations and nonprofits throughout Northeast Ohio.
business support and capital-raising company aimed at helping small and midsize enterprises. The exact location for the new headquarters, which initially will employ 40 people and generate $5.5 million in annual payroll, has not yet been finalized.
The JACK Cleveland Casino in the former Higbee building is one of two properties involved in a buy-leaseback deal between VICI Properties Inc. and JACK Entertainment LLC. The transaction is expected to close in early 2020. | JACK CLEVELAND CASINO
WELCOME: The city of Cleveland will be the Americas headquarters for an international business training company. The London Stock Exchange Group’s Elite, formed in
2012 and currently working with 1,200 businesses in 43 countries, will locate in downtown Cleveland in 2020. The subsidiary of the London Stock Exchange is an international
DEAL: New York City-based real estate investment trust VICI Properties Inc. will pay $843.3 million to buy and then lease back to JACK Entertainment LLC the JACK Cleveland Casino in downtown Cleveland and the JACK Thistledown Racino in North Randall. Both properties will continue to operate under the JACK name. The transaction is expected to close in early 2020. The two Cleveland-area casino properties will have an initial total annual rent of $65.9 million.
Stan Bullard, senior reporter, Real estate/ construction. (216) 771-5228 or sbullard@crain.com Jay Miller, Government. (216) 771-5362 or jmiller@crain.com Rachel Abbey McCafferty, Manufacturing/energy/ education. (216) 771-5379 or rmccafferty@crain.com Jeremy Nobile, Finance. (216) 771-5255 or jnobile@crain.com Kim Palmer, Government. (216) 771-5384 or kpalmer@crain.com Dan Shingler, Energy/steel/auto/Akron. (216) 771-5290 or dshingler@crain.com Lydia Coutré, Health care/nonprofits. (216) 771-5479 or lcoutre@crain.com ADVERTISING
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Crain’s Cleveland Business is published by Crain Communications Inc. Chairman Keith E. Crain Vice chairman Mary Kay Crain President KC Crain Senior executive VP Chris Crain Secretary Lexie Crain Armstrong Chief Financial Officer Robert Recchia G.D. Crain Jr., Founder (1885-1973) Mrs. G.D. Crain Jr., Chairman (1911-1996) Editorial & Business Offices 700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1230 (216) 522-1383 Volume 40, Number 44 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for the last week of December, at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2019 by Crain Communications Inc. Periodicals postage paid at Cleveland, OH, and at additional mailing offices. Price per copy: $2.00. Postmaster: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, MI 48207-2912. 1 (877) 824-9373. Subscriptions: In Ohio: 1 year - $64, 2 year - $110. Outside Ohio: 1 year - $110, 2 year - $195. Single copy, $2.00. Allow 4 weeks for change of address. For subscription information and delivery concerns send correspondence to Audience Development Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, MI, 48207-9911, or email to customerservice@crainscleveland.com, or call (877) 824-9373 (in the U.S. and Canada) or (313) 446-0450 (all other locations), or fax (313) 446-6777.
46 | CRAIN’S CLEVELAND BUSINESS | NOVEMBER 4, 2019
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