Crain's Cleveland Business

$1.50/FEBRUARY 28 - MARCH 6, 2011

Entire contents © 2011 by Crain Communications Inc.

Vol. 32, No. 9

07148601032

609 INSIDE

How do downtown Cleveland restaurateurs view the new casino? We asked ■■ Page 3PLUS:FAIRVIEW HOSPITAL’S NEXT MOVE ■■ PAGE 3ST. VINCENT CHARITY FORMS FOUNDATION ■■ PAGE 4

NEW

SPAP

ER

PLUS: INTRODUCING TWO AIRPORT DIRECTORS ■■ PITTSBURGH, POST-US AIRWAYS ■■ WHAT IS A HUB? ■■ & MORE

Mistrust fuels Kasich’s bargaining bill Muni officials: Relationships already built allow constructive talksBy JAY [email protected]

Reno Contipelli sees both sides of the public employee collective bargaining squabble that is roilingthe Midwest.

Indeed, he has been on bothsides of the negotiating table. Aunion firefighter in Cuyahoga Heights,

Mr. Contipelli also is president ofthe Cuyahoga Heights School Board,where he negotiates contracts withunion teachers.

Mr. Contipelli, who as a firefighteraccepts that he cannot strike, believes, as a school board member,that teachers also should not beable to strike. But he doesn’t seeSenate Bill 5 — the proposal that

would take away many of the bar-gaining rights of public employeesacross Ohio — as solving what hesees as the real problem: longstandingsuspicions harbored on both sidesof the table.

“Most negotiations come downto relationships,” said Mr. Contipelli,who noted that his first years on the school board were marred by

mistrust on both sides ofthe table that led to con-tentious negotiations. “Butthe school board built trustwith the union and sincethen we’ve had nothing butpositive (negotiations).”

While some public offi-cials are solidly behind theRepublican proposal thatwould increase their negotiatingposition with their union employees,others, including Mr. Contipelli, are

not sold on much of thepackage of changes Gov.John Kasich and the Re-publican majorities in thestate Legislature are tryingto enact. They say theyhave built relationshipsacross the table that haveallowed for reasonablecontract settlements.

This legislative foray is coupled in the minds of several municipal

EnigmaticOptima eyesnext NEOpropertyMiami concern quietlybuilds local portfolioBy STAN [email protected]

Less than three years after Optima Management Group of Miamiopened its wallet to buy properties indowntown Cleveland, it holds a collection of four skyscrapers, nearly2.9 million square feet of commercialspace and more than 2,000 parkingspaces.

By a nose, Cleveland-based realestate giant Forest City EnterprisesInc. remains downtown’s largestowner of office and retail buildings,with six skyscrapers and nearly 3million square feet of properties. Butpublicly traded Forest City has beenbuying and developing buildingsdowntown since the 1970s.

On the other hand, family-ownedOptima began acquiring propertieshere in May 2008, when it shelled out$82 million in cash for the OneCleveland Center office building at1375 E. Ninth St. Nearly $188 millionin Cleveland acquisitions later, Optimahas said little about why it’s buyingso much property here.

Industry insiders say the tippingpoint in determining Optima’s strategyin Cleveland may be coming soonshould it buy another property —

See OPTIMA Page 27

See BILL Page 27

SPECIALREPORT

UP IN THE AIRA look at the future of air service in Northeast Ohio and what it might mean for the region

The aviation industry is in the midst of change — from Continental’s merger with United Airlines to Southwest’s deal with AirTran Airways — and no one knows for sure what itmight mean for Northeast Ohio.

We examine the latest in this special six-page report. PAGES 21-26

Kasich

NEWSCOM

20110228-NEWS--1-NAT-CCI-CL_-- 2/25/2011 2:41 PM

Employment Median weekly Women’s earnings as (in millions) earnings percentage of men’sIndustry

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Big Issue ..........11Classified ..........30Editorial ............10Going Places ....19Letter................11

List: NE Ohio-basednational professionalassociations ..28

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HOW DO YOU FEEL ABOUT FOUR-FIFTHS?Women who worked full time in wage and salary jobs had median weekly earnings of $657 in 2009,or 80% of men’s median weekly earnings ($819) that year, according to new data from the U.S. Bureau of Labor Statistics. Of the 45 million women who worked full time in wage and salary jobs,the largest segment — 17 million — worked in education and health services. Here’s a breakdownof employment and median weekly earnings of women, by selected industry, for 2009:

Education/health services 17.13 $717 77.0%

Wholesale/retail trade 5.27 523 76.0

Financial 4.13 732 70.5

Professional services 4.08 744 76.6

Manufacturing 3.47 618 73.8

Leisure/hospitality 3.03 421 83.5

Public admin. 2.83 783 78.5

Other services 1.70 503 72.2

Total 44.71 657 80.2

■ A Feb. 21, Page 3story on the hiring ofMichael Deemer as directorof the new business devel-opment center for the Down-town Cleveland Allianceincorrectly identified thechef/restaurateurs who arefaces of the alliance’s newmarketing campaign. ZackBruell of Chinato andJonathon Sawyer of

Greenhouse Tavern are featured in the campaign.

■ A Feb. 21, Page 3story on Penske Automo-tive Group buying a formerChrysler dealership inBeachwood incorrectly identified the location of thedealership. It sits near theChagrin Boulevard inter-change of Interstate 271.

20110228-NEWS--2-NAT-CCI-CL_-- 2/25/2011 10:50 AM Page 1

another 25,000 square feetof space are expected to becompleted by early 2013.

Fairview officials said2010 was a good year finan-cially for the hospital as ithit its revenue targets,though John Mills, the hospital’s senior vice presi-dent of operations, wouldn’tshare exact figures. Still, patientrooms are full, and the expansionplans are a welcome change for thehospital’s employees.

Plans for the new structure

feature large, private patient rooms — a far cryfrom much of the hospital’scurrent emergency depart-ment and intensive careunit. Some of the currentrooms are so small andpacked with equipmentthat the feet of a patient on one bed nearly peak

through the curtains into the adja-cent hallway.

The current emergency depart-ment was built for 35,000 annualpatient visits. In 2009 — the most

recent numbers available — theemergency department saw 69,000visits.

“If we had bunk beds, we’d be using them,” said Janice Murphy,president of Fairview and Lakewoodhospitals, which are part of theCleveland Clinic.

Fairview had a slight hiccup withthe construction project when thecity’s Board of Zoning Appeals inJanuary denied the Clinic’s applica-tion for a variance to add a rooftophelicopter landing pod atop the

FEBRUARY 28 - MARCH 6, 2011 WWW.CRAINSCLEVELAND.COM CRAIN’S CLEVELAND BUSINESS 3

INSIGHT

THE WEEK IN QUOTES“Whatever changesmay come out of theprocess (in the Legis-lature), this is not ashort-term fix for usand this may not beimplemented forsome municipalitiesfor three years.”— Bay Village Mayor DebbieSutherland. Page One

“Cash flow is tight.Fees are squeezed. Itwas gut-wrenching tolet people go. We muscled our waythrough, but we don’twant to go throughthat again.”— Mike Crislip, president, Herschman Architects. Page 9

“It’s safe to say a reduction in the status of the hub …has a little bit of achilling effect on yourbusiness attraction efforts.”— Douglas Moormann, vice president of economic develop-ment, Cincinnati USA RegionalChamber. Page 26

More room, rooms featured in Fairview Hospital’s $76M upgrade

Medical supplyfirms chafe atbidding processNE Ohio companies consider staff cuts,mergers to adjust to new Medicare system By TIMOTHY [email protected]

Medical equipment suppliers inNortheast Ohio are in an uproarover a new competitive biddingprogram imposed by Medicare that,for some, is cutting off access tolarge chunks of their customers andis forcing them to trim their opera-tions or to diversify themselves toride out the storm.

Under the program rolled out this year in nine regions, includingCleveland and Cincinnati, onlydurable medical equipment suppliersthat won competitively bid contractswith the federal government can bereimbursed by Medicare. Proponents

of the program, which will expandto other regions later this year, say itcould save Medicare and its benefi-ciaries about $28 billion over thenext 10 years.

But a number of suppliers, includingthose that have won contracts,aren’t fans of the program.

Joe Petrolla, president of SeeleyMedical in Andover in AshtabulaCounty, said the program is, at best,“suicide bidding.” Companies thatwon the contracts, such as SeeleyMedical, were forced to bid so lowit’s tough to supply the latest equip-ment and offer the level of servicethey had in the past, Mr. Petrollasaid.

“It’s extremely impor-tant, because rightnow we enjoy a com-petitive advantage(over nearby citiesthat are not hubs). …It’s an attraction leverthat we want to use.”— Tom Waltermire, CEO, TeamNEO. Page 21

See BIDDING Page 14

See FAIRVIEW Page 29

Patient visits far outstripping current capacity;officials keep watchful eye on West Side rivals

By TIMOTHY [email protected]

Business is booming at FairviewHospital on Cleveland’s West Side,and it soon will embark on a $76million renovation and construc-tion initiative that officials say willtransform the nearly 120-year-oldhospital into a sleek and modern

medical center. At the end of March, Fairview will

begin work on a roughly 125,000-square-foot addition that will includea 52-bed emergency departmentand a 26-bed intensive care unit.The addition will be wedged along-side the hospital’s existing structureoff Lorain Road. Construction of theaddition and work on renovation of

BETS AREON THETABLE

Downtown restaurateurs take stock of casino’s eventual

effect on bottom line

Story by KATHY AMES CARR ■■ Illustration by STEVE BENNETT

Will the planned Horse-

shoe Casino Cleveland

and its 400-seat, buffet-

style restaurant dull the

appetite of casino patrons for the offerings

of neighboring downtown restaurants?

Zack Bruell thinks not. Mike Moyer

isn’t so sure.

Several local restaurateurs bet the casino,

slated to open in early 2012 in the former

Higbee Building, will bring more business

to their tables by drawing to the center city

hordes of people who otherwise wouldn’t

come downtown.

“The sooner this opens, the better,” said

Mr. Bruell, chef and owner of Chinato, a 140-

seat restaurant on East Fourth Street.

But some restaurant operators fear the

big eatery inside the casino will allow patrons

to satisfy their hunger without venturing

far from the slots and gaming tables.

“It’ll hurt some businesses like mine,

which already has been struggling due to the

weather and tough economy,” said Mr.

Moyer, owner of Alvies Gateway Grille &

See BETS Page 18

Murphy



Volume 32, Number 9 Crain’s Cleveland Business(ISSN 0197-2375) is published weekly, except forcombined issues on the fourth week of May and fifthweek of May, the fourth week of June and first weekof July, the third week of December and fourth weekof December at 700 West St. Clair Ave., Suite 310,Cleveland, OH 44113-1230. Copyright © 2011 byCrain Communications Inc. Periodicals postage paidat Cleveland, Ohio, and at additional mailing offices.Price per copy: $1.50. POSTMASTER: Send ad-dress changes to Crain’s Cleveland Business, Cir-culation Department, 1155 Gratiot Avenue, Detroit,Michigan 48207-2912. 1-877-824-9373.

REPRINT INFORMATION: 800-290-5460 Ext. 136

Ride Along Included in Edition 1.

Fundraising arm next onSt. Vincent Charity’s listFoundation will be hospital’s first formal effort

the Sisters of Charity and UniversityHospitals each are providing $15million — $5 million a year, for threeyears — to seed the St. Vincent Char-ity Development Foundation, whichlaunched at the start of the year.

Similar foundations are starting atthe Sisters of Charity’s other hospitals— Mercy Medical and ProvidenceHospital in Columbia, S.C. UniversityHospitals and the Sisters of Charitystill jointly own St. John MedicalCenter in Westlake, and the bulk of itsfundraising activities will be filteredthrough University Hospitals.

In search of angelsJoanne Clark, St. Vincent’s vice

president of corporate affairs andthe foundation’s president, said herbiggest task for the next year isputting together a board of directorsfor the foundation. She plans to announce the first class of 10 or 15board members by April and hopesto have 30 on board by the year’send. The board will consist of activefundraisers, Ms. Clark said, to sup-port St. Vincent’s small developmentstaff of three people.

No fundraising goals are in place,but Ms. Clark noted that every dollarcounts. Ms. Clark said officials at St.Vincent are exploring ways to raisemoney, such as tapping grateful patients, putting together annualfund drives and seeking donationsfrom corporations and grantmakingfoundations.

The hospital holds a fundraisinggala every other year, and last year’sbrought it about $450,000. St. Vincent officials hope the founda-tion can build on that success.

“We’re going to be looking for ourangels,” Ms. Clark said. “We’re goingto get out and talk to those people.”

At the moment, St. Vincent isstudying the possibility of a capitalcampaign to support the medicalcenter’s expansion plans, which couldunfold over the next several years.

The first phase of constructionwould include a two-story, 80,000-square-foot surgery center, accordingto Wendy Hoke, St. Vincent’s directorof marketing and communications.Ms. Hoke said the size and scope ofthe building could change, but St.Vincent plans to make room for thestructure when it demolishes its administration building and old phar-macy and research building in July.

St. Vincent is tapping into an extremely competitive market forphilanthropic gifts. The ClevelandClinic and University Hospitals arethe two major fundraising jugger-nauts in the area and often attractmultimillion-dollar donations, butMs. Clark doesn’t believe their pres-ence will hinder St. Vincent’s fund-raising abilities.

Being a Catholic hospital thatcares for the community’s poor andunderserved provides the medicalcenter the opportunity to tell donorsa distinctive story, Ms. Clark said.

“We want all of the community toknow about us and understand whatwe’re doing,” she said. “We don’tjust care for Catholics. The door is always open.” ■


St. Vincent Charity Medical Centeris building a fundraising infrastruc-ture to support the Catholic hospitalas it prepares to invest in itself andto weather a potential storm thatcould be produced by possible cutsin Medicaid reimbursements.

St. Vincent, which is owned by theSisters of Charity of St. Augustine,until this year hasn’t had a formalfundraising arm. Rather, UniversityHospitals handled fundraising for

St. Vincent when the big health system jointly owned with the Sis-ters of Charity the medical center onEast 22nd Street in downtown Cleve-land and Mercy Medical Center inCanton.

The Sisters of Charity and Uni-versity Hospitals parted ways at thestart of 2010 due to differing missionsas University Hospitals pursued its$1.2 billion Vision 2010 strategicplan and the Sisters of Charity lookedto expand St. Vincent’s revenuebase and invest in its operations. Aspart of the transition in ownership,

20110228-NEWS--4-NAT-CCI-CL_-- 2/25/2011 1:09 PM Page 1

“When you don’t (makemoney), you have nochoice but to raise money or go out of busi-ness.” – Mike Burkons, founder, Charitee Golf LLC, which he saysis profitable after 18 months


Golf tech company hits rough patchDrop in charity tournament bookings hurts VerishotBy CHUCK [email protected]

Verishot has hit a sand trap.Golf technology company Nine

Iron Innovations Inc., which gotmoney from state-funded investors,has shut down almost all its opera-tions. The Independence companyon Jan. 1 sold its core line of business,Verishot, a video monitoring servicefor golf courses that run contests, tothe company’s former customerservice manager, Paul Westdyk, saidCEO Dan Quigg.

Verishot had no employees at the time, said Mr. Quigg, who wouldnot disclose terms of the deal.

Nine Iron Innovations, which atits peak employed five people aswell as several seasonal part-timeemployees, retains the rights toShareGolf, a prototype-stage socialmedia platform for golfers. That lineof business is on hiatus until thecompany finds more money, Mr.Quigg said.

Mr. Quigg cited the economicdownturn as the main reason thecompany sold Verishot. Verishot expanded to provide video moni-toring services to about 70 coursesin 2009, up from 13 in mid-2008. Allthe while, though, golf courses werebooking fewer charity tournamentsfor 2010, he said, which reduced the need for Verishot’s verificationservices.

By contrast, another area company

providing similar services hasachieved profitability, according toits owner.

Nine Iron Innovations founderMike Burkons 18 months ago startedCharitee Golf LLC after agreeing togive up his equity in the originalcompany to have his noncompeteagreement dissolved. Mr. Burkonssaid the Shaker Heights company’ssmall staff, which consists of himand two part-time employees, hashelped it reach profitability on aninvestment of less than $100,000.

Shrinking the size of Nine IronInnovations’ staff to Charitee’s sizewas not an option, Mr. Quigg said.Some of the investors that financedNine Iron Innovations — includingJumpStart Inc. and North Coast Angel Fund, both of which receivedmoney from Ohio’s Third Frontiereconomic development program —were looking for higher returns thancould be delivered by a companywith one or two employees, he said.

“When you go to raise money,people expect you to grow a busi-ness,” Mr. Quigg said.

Mr. Burkons wouldn’t commentabout Nine Iron Innovations, but hedid say JumpStart and North CoastAngel Fund need to focus more ongetting companies to profitabilitythan on getting the companies theyfinance to raise more money so theycan grow quickly. He said his com-pany eventually might raise moremoney, but being profitable gives it

options.“When you don’t (make money),

you have no choice but to raise moneyor go out of business,” Mr. Burkonssaid.

JumpStart would support a port-folio company’s decision to scaleback growth plans to focus on quicklyachieving profitability if it appearedthat was the company’s only option,said Lynn-Ann Gries, president andchief investment officer with Jump-Start Ventures, the investment armof the nonprofit economic develop-ment group. JumpStart’s main goal,though, is to turn startups into high-growth companies.

“The money we give them is toprove something,” she said.

Investors typically only back acompany if they are excited about itsgrowth potential, said Clay Rankin,managing member of North CoastAngel Fund. Realizing that potentialoften requires spending money,which means delaying profitability,Mr. Rankin said.

“You can’t get to that level of revenue generation unless you invest a certain amount of money,”he said. ■

Packaging specialist expandsin Streetsboro after growthBy STAN [email protected]

Expansion needs at AutomatedPackaging Systems Inc. of Streets-boro have taken off the market thelargest empty industrial building inthe Portage County town.

A maker of packaging machineryand provider of packaging materials,Automated Packaging bought thehulking, 173,000-square-foot buildingat 600 Mondial Parkway from PlaytexManufacturing Inc. of Westport, Conn.,for $5.23 million Feb. 16, accordingto Portage County land records.

Daryl Manzetti, Automated Pack-aging’s chief financial officer, said thecompany has experienced “a signif-icant amount of growth the past threeyears” and needs the added space.

“We’ve expanded globally andare up against it in terms of capacity,”Mr. Manzetti said.

Mr. Manzetti said air pouchesand mailbags are growing productlines for Automated Packaging, andthe new plant would make thoseproducts as well as others the com-pany is developing.

“This is a big deal for us,” Mr.Manzetti said of buying the building.“We committed to the state that wewould create 85 jobs in the firstthree years. But we see it as a 10-yearproject. By the end of that time, wewill have invested $47 million in theplant and have 200 to 250 jobs there.”

The state of Ohio last December

approved a 45% Job Creation TaxCredit for seven years for the project, which includes buying thebuilding and equipment to operateit. The state estimates the incentivewill save the company a total of$224,000, but it requires AutomatedPackaging to operate in the buildingat least 10 years.

Jeffrey Pritchard, Streetsboro cityplanning, zoning and economic development director, said he waspleased the company acquired thebuilding from Playtex, which hadmarketed it for more than three years.

“I feel we’re blessed,” Mr.Pritchard said.

The former Playtex buildingwould serve as Automated Packaging’sthird plant in Streetsboro. Mr.Manzetti said when the new plantgoes into production, it will be Automated Packaging’s largest factoryunder a single roof. The companyoperates five plants, including onein the United Kingdom.

Online real estate ads say theproperty at 600 Mondial originallyhit the market in 2008 with an askingprice of $8.15 million. However, TerryCoyne, a Grubb & Ellis Co. seniorvice president who representedPlaytex in the sale, said the originalprice reflected the hot industrialmarket before the recession struck.

“We got the price we wanted,”Mr. Coyne said.

The building dates from 1995 andsits on 32 acres, Mr. Coyne said. ■



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Electric firm seekinginput from contractorsBy DAN [email protected]

Madison Electric is turning to itshistory for its future growth.

The company got its start in 1929with an innovative product that revolutionized a small part of theelectricians’ trade. That product, knownas the “Madison Strap,” allowedelectricians to install outlet boxes inthe middle of a wall, where there wasno stud. It was the company’s main-stay for decades, even after it wascopied by competitors, and it’s still abig seller.

But Madison Electric thinks it’stime for new innovations, and it saysit has found a rich source of ideasand inventions by tapping into elec-tricians and other contractors whospend their days on job sites, oftenenvisioning better ways to do things.

“We’re getting some really goodideas that are what we call ‘contractortested,’” said Madison Electric pres-ident Brad Wiandt during an inter-view that took place in a room full ofprototypes and inventions the com-pany hopes to bring to market.

The company found its first newproduct at a trade show in 2008,when Madison Electric executivesmet Greg Herth, an electrician fromLong Island, N.Y. Mr. Herth alreadyhad patented an electrical outlet boxthat had special attachment points,allowing it to be used in existing con-struction without tearing out walls.

Mr. Herth said he spent 15 yearstinkering with his idea before he finally got his first patent. Today, hehas 13 of them, as he has continuedto expand his line of products. ButMr. Herth said he gave up on sellingthose products himself after talkingwith Mr. Wiandt and Madison Electric’sdirector of marketing, Rob Fisher.

“Now, Madison handles the distri-bution of our product,” Mr. Herthsaid. “I had 23 sales reps across theU.S. before.”

Mr. Herth’s company, Smart BoxInc., doesn’t reveal its revenues, butMr. Herth said he now makes farmore as an inventor with his ownproducts than he ever made as anelectrician.

Mining for gold

Madison Electric did not want torely solely on Mr. Herth for newproducts, no matter how many goodideas or patents he might generate.So, in 2009, it set up something calledthe Sparks Innovation Center, an Internet-based entity that solicits ideasfrom other contractors, vets themthrough monthly meetings of tradeprofessionals and then brings prod-ucts to market and distributes them.

One of the first contractors to walkthrough that new door was DougHill, a Brook Park electrician whospecializes in building offices fordentists.

Mr. Hill’s 18-person shop constantlywas wiring commercial buildings,which use metal clad cable, knownas MC cable, as conduit to carry elec-trical wiring. The cables were alwaysa mess inside the walls and requireda lot of labor to straighten out and attach to the internal studs, so Mr.Hill designed a clip that grips boththe cable and a standard-size, 2x4stud. An electrician quickly can snapthe clip onto the stud, snap the wireinto place and be done, Mr. Hill said.

“I had the opportunity to go withsome larger companies — muchlarger than Madison — but I wentwith them,” Mr. Hill said.

Like Mr. Herth, Mr. Hill said hewas working too hard as a one-manshow trying to market his own product.He’d gotten his product into morethan 100 stores, but said he decidedhe could make faster progress usingthe network of sales reps that MadisonElectric already worked with, andwhich it was using to market otherproducts such as those from Mr. Herth.

The arrangement worked so well,Mr. Hill said, that he has signed a 10-year agreement with Madison Elec-tric. Mr. Hill said he also makes moremoney now than he did as a contrac-tor, and plans work full time for hisproduct development company,Time Saver Products Inc.

“I’ll probably retire from this(electrical contracting) business nextyear and I’ll just run Time Saver fulltime,” he said. “It’s more profitable,and to be honest, it’s a passion I have.”

Charged and readyFor Madison Electric, the new

products represent an opportunityto increase sales with higher-margin,proprietary products, Mr. Wiandt said.

The company does not manufac-ture the items itself. That work iscontracted out, often to China, butMr. Wiandt said Madison Electric al-ways has been principally a marketingand distribution company, which iswhat many inventors need the most.

There are plenty more products inthe pipeline, too. Mr. Wiandt saidthere are products to market spots inwalls where wires are supposed to berouted and devices to hold cabling inplace or to help a worker retract itthrough a wall when there is noroom to move.

All the products are construction-based, which means few if any ofthem are selling up to their potentialbecause of the ongoing slump in theconstruction business, Mr. Wiandt said.

But Madison Electric can afford tobe patient. Its sales last year wereabout $20 million, down about 20%from 2007 but still enough to keepthe company profitable. ■

2011 NORTECH INNOVATION AWARDS

The winners of the 2011 NorTechInnovation Awards were announcedduring an awards reception lastThursday, Feb. 24, at LaCentre Conference and Banquet Facility inWestlake.

Of 20 finalists, nine were selectedas winners of this year’s awards,which are intended to highlightsome of the technological advance-ments taking place in the region, especially those that have the abilityto impact industries and markets ina positive way.

The winners for 2011 are:

■ VasoStar Inc.: Vibrational guide-wire system for crossing chronic lesions

■ Kent Displays Inc.: BoogieBoard LCD Writing Tablet

■ Echogen Power Systems Inc.:Advanced energy recycling using aCO2-based power cycle

■Ashlawn Energy LLC: VanadiumRedox Flow Batteries for energystorage solutions

■ RTI International Metals Inc.:Continuous casting method formaking titanium ingots

■ The University of Akron: Ultra-

Dr. Hiroyuki Fujita, the CEO

of Mayfield Village-based

QED, was givenNorTech’s

new Regional Impact Award.

In deliveringthe evening’s

keynote address, Dr.

Fujita said, “together, we

can make apositive differ-

ence in theworld.”

JASON MILLER

sonic rubber devulcanization extruderand technology

■ AeroClay Inc.: AeroClay, a clay-based aerogel, a lightweight porousmaterial that can have a variety ofmechanical properties

■ MAR Systems Inc.: Sorbster,which extracts heavy metals fromwater

■AllTech Medical Systems AmericaInc.: High-performance, low-cost total MRI system

Also honored was keynote speakerHiroyuki Fujita, president and CEOof Quality Electrodynamics LLC ofMayfield Village, who received thefirst ever Regional Impact Awardfrom NorTech, a regional technologyadvocacy organization.

In 2009, Dr. Fujita and QED werethe recipients of a NorTech Innova-tion Award, and QED was designatedby Forbes magazine as the 11th “MostPromising Company in America.”The company makes state-of-the-artMRI coils for customers worldwide,including Siemens Healthcare inGermany and Toshiba Medical Sys-tems Corp. in Japan.

To view a photo slideshow from thereception, visit CrainsCleveland.com;to listen to some of the winners, fi-nalists and tech advocates talk aboutthe importance of these innovations,visit http://tinyurl.com/4l7goj9.

Job experience can lead to ideas, company says


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Grant for low-income students at riskColleges try to reducereliance on aid program

cations to our families in the summer.”The fate of the Ohio College

Opportunity Grant, which is an $888award for students at public institu-tions, is one of many fiscal issuesfaced by Northeast Ohio’s publiccolleges as the state works to elimi-nate an estimated $8 billion hole inits next two-year budget period,which begins July 1.

The schools potentially will needto deal with deep cuts in their statesubsidies, which could have impli-cations across their campuses. Bar-ring another tuition freeze, schoolscould hike their tuition rates, causingmore of a financial crunch for poten-tial students.

Kent State University recentlylaunched a scholarship-matching

program to encourage incomingfreshman from Ohio to find othersources of money to help financetheir education. Under the program,Kent State will match any outsidescholarship up to $1,000 for low-income students. Outside scholar-ships could include those by localclubs, churches, businesses or other organization.

T. David Garcia, the university’sassociate vice president for enrollmentmanagement, said Kent State expectsto spend $300,000 to $500,000 onthe program. If it’s successful, itcould be expanded next year to in-clude students from outside Ohio.

“Students need to step up and beengaged with the process,” Mr. Garciasaid. ■


The state budget crisis mightcause the elimination of a populargrant program for Ohio’s needieststudents, and Northeast Ohio’s publicand private colleges are trying to figureout how to manage the uncertaintyat a time when many are telling incoming freshmen how much finan-cial aid they’ve received.

The Ohio College OpportunityGrant two years ago unexpectedlywas slashed by about 50%, and lastyear was sliced even further. TheOhio Board of Regents last Novemberproposed eliminating the programaltogether for students at public colleges and universities but keepingit in place for the state’s private colleges. However, the program’s fateultimately will be determined by the Republican-controlled Legislatureand Gov. John Kasich. The governorwill present his budget to lawmakersMarch 15 and must sign one into lawby June 30.

“Our colleges are concerned — andI think legitimately — that the programcould be wiped out,” said C. ToddJones, president and general councilof the Association of IndependentColleges and Universities of Ohio.

As the belt-tightening continues atcolleges statewide, many are findingit tough to make up their budgetshortfalls themselves and have hadto steer students toward student loansand other aid resources, accordingto George Rolleston, director of financial aid at Baldwin-WallaceCollege in Berea.

Last fall, about 775 B-W studentsreceived the $1,848 grants, whichwere reduced from $2,256 the yearbefore for full-time students at private schools. Baldwin-Wallacemade up the difference, Mr. Rollestonsaid, costing the college a total ofabout $316,200. What will happen inMarch when Gov. Kasich presentshis budget is anyone’s guess, he noted,but deep cuts to the grant programwould be “dramatic” or “severe” forlow-income college students.

“With the economy having been whatit has been, we are not seeing growthin the fiscal capacity for families toafford college,” Mr. Rolleston said.

Mr. Jones, of the independent colleges association, suspects theabsence of the grant program couldbe particularly harmful for Ohio’sprivate institutions. Students gener-ally choose those types of institu-tions because of their missions ortheir size, he noted.

“In absence of (the program), theyeither attend a college not suited forthem or they don’t attend college atall,” Mr. Jones said.

Blunt warningAt John Carroll University, financial

aid award letters are going out to incoming freshmen bluntly tellingthem not to rely on state aid to helpfinance their education, said DoraPruce, the college’s director for com-munity and government relations.Last fall, 647 students at the privateschool in University Heights receivedthe grant.

“We have worked internally to relyless and less on that aid,” Ms. Prucesaid. “We don’t want to be in the position of sending out award letterswith an amount in it, then have to recalculate it and send out communi-


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By STAN [email protected]

More work and something evenmore scarce the past few years —optimism — are flickering in the shopsof some Northeast Ohio architectsthat serve commercial clients,though firms with more institution-ally oriented practices increasinglyare wary about the future.

Mike Crislip, president of Her-schman Architects in Beachwood,said, “The consensus for people inthe retail architecture industry isthat last year they could not see aroad ahead. This year, they can seea road ahead, but it’s flat andbumpy.”

Balanced against the sense thatbusiness is improving for hard-hitarchitectural firms is concern thatinstitutional and health care work— sectors that sustained the profes-sion through the recent lean times— are slowing.

Robert Bostwick, president ofCleveland-based Bostwick Archi-tects, said he and others worry that looming state budget cuts willreduce the flow of work at Ohio’spublic universities.

That work “means a lot to ourprofession,” Mr. Bostwick said,though he remains in the camp ofarchitects who believe business inthe design field this year will be better than last.

In a shift, Paul Westlake, managingprincipal of Cleveland-based West-lake Reed Leskosky, said he has become “pathologically optimistic”— which he defined as upbeat withoutgood cause — as state and localgovernment work “has tanked” withgovernment budgets now runningin the red.

Westlake Reed is a diversifiedpractice that specializes in historicpreservation work, and its assign-ments for federal agencies, museumsand theaters kept its revenue andstaff growing despite the recession.

However, with government cof-fers tight, institutional work likelywill become harder to come by forthe firm. Mr. Westlake noted that aWestlake Reed assignment to designa $40 million museum at the York-town Victory Center in Yorktown,Va., was deferred last August due toVirginia’s money woes.

A job here, a job there

The murky outlook for the pro-fession is reflected in staffing levels,which many Northeast Ohio archi-tectural firms chopped once the recession hit. Examples of some hiringover the last 12 months of registeredarchitects and other staffers arecommon, but at best constitute ahandful at various firms.

“We’ve hired back five people inthe last year” to bring Herschman’sstaff to 60, Mr. Crislip said. However,the additions came after the firmshed a total of 20 employees in 2008and 2009 as the downturn decimateddesign and development work asso-ciated with retailing.

Business still isn’t robust, whichholds down hiring.

“Cash flow is tight,” Mr. Crislipsaid. “Fees are squeezed. It was gut-wrenching to let people go. Wemuscled our way through, but wedon’t want to go through that again.”

AIA Cleveland, a chapter of theAmerican Institute of Architects national professional group, lastmonth held a day-long seminar focused on job-hunting, résumétips and interview skills that drew 40people — two years after the downturn moved the focus of many designers from drawing boards torésumés.

Even though a billion-dollarbuilding boom is afoot in downtownCleveland due to the new medicalmerchandise mart and conventioncenter and other projects, insiderssay the broader market is sluggish.

Gary Hribar, managing principalof the Cleveland office of architec-tural and engineering firm URSCorp., runs an office benefitingfrom roles with the Flats East BankNeighborhood project’s office tower and the medical mart. None-theless, he sees those assignmentsas anomalies.

“I think the market has been softand is still soft,” Mr. Hribar said.“We’re seeing a lot fewer (requestsfor proposals) in our business today.”

Pursuing new avenuesTo adjust, firms are exploring

new geographic markets and newniches.

GPD Associates, an Akron-basedarchitecture and engineering firm,

“I’m seeing more unconventional forms of financingemerging that will help the private sector. ... For now,we’re being called more often.” – Jonathan Sandvick, president, Sandvick Architects


HEALTH CAREHEROES

Crain’s Cleveland Business onMay 2 will publish its Health CareHeroes section, and we’re seekingnominations to help identify honorees among the dedicated professionals who work in North-east Ohio’s world-class medical andwellness communities.

The nomination period runsthrough March 25. In the Advance-ments in Health Care segment ofthe section, Crain’s will honor peopleand institutions in the following categories:

■ Allied Health■ Health Care Advocate■ Nurse■ Physician■ VolunteerNew this year to Health Care

Heroes is a segment called Well-ness that will honor the region’sHealthiest Employer.

To tell Crain’s how your hero hastouched the lives of people theyserve and made a positive differ-ence in the community, go towww.crainscleveland.com/marketing/hcheroes.html.

The 2011 Health Care Heroesluncheon is scheduled for the weekof May 16. Tickets will be availablebeginning April 1.

COMING UPCrain’s introduces new small business e-mail

Crain’s Cleveland Business thisThursday, March 3, is launching afree weekly e-newsletter aimed atproviding readers with informationabout small business and entrepre-neurship in Northeast Ohio and beyond.

Every Thursday by noon, theCrain’s Small Business Report, sponsored by COSE, will bring youthe latest news and trends that affectsmall companies and the entrepre-neurial economy.

Regular features include news stories related to important smallbusiness issues, events and develop-

ments in Northeast Ohio; a blog focused specifically on small busi-nesses; links to small business-relateddata; Bright Spots, a column high-lighting positive developments in theregion; and COSE Voice, offeringweekly updates from the Council ofSmaller Enterprises.

If you already receive Crain’s dailyand weekly e-mail news alerts, you’llautomatically receive the new Crain’sSmall Business Report.

But if you aren’t already receivingour e-mails — and come on, they’refree — you can do so by visitingwww.CrainsCleveland.com/signup.

Commercially focused architects optimisticBut government, health care work may dry up last month acquired the

four-architect Jester JonesSchifer Architects firm inMarion, Ohio, to boost itspresence in central Ohio.

William Dorsky, managingprincipal of Dorsky + YueInternational of Beach-wood, said his commerciallyfocused firm is designing itsfirst non-U.S. project, a 2-million-square foot mall in Winnipeg, Canada,and hopes to learn soon if a projectin Asia secures financing. However,no deliberate strategy gets credit forthe projects.

“They found us,” Mr. Dorsky said.“It’s a problem I hope to be cursedwith for the next five years.”

Cornelia Hodgson, president ofC.C. Hodgson Architectural Groupof Beachwood, said the decision sheand Mr. Dorsky, her husband, madelast year to divide the former DorskyHodgson Yue firm into Dorsky +Yue and her own namesake firm isworking out well. Going on her ownallowed her to qualify as a women-owned business and to compete forgovernment work.

Ms. Hodgson’s firm has won acommission from the U.S. Depart-ment of Veterans Affairs to design afreestanding dementia center in

Martinsville, W. Va., and torenovate the floor the current dementia ward willvacate in the VA hospital.She sees the job as a door-opener for more VA work.Her firm’s practice designingsenior residences is also up.

“I’ve been pleased to callback six people,” Ms.

Hodgson said. Likewise, Mr. Dorskyhas added four the past year. How-ever, their prior combined firm shed45 people before they parceled outthe 40 survivors between their firms.

Those firms that are able to hirehold out the hope of landing a raretalent released by a competitor.However, not all firms are so blessed.

Jonathan Sandvick, president ofSandvick Architects in Cleveland,said his firm has not been able tocall back any of 10 staffers on layoff.Current staffers continue to work atreduced pay — two years into thedownturn.

Even so, Mr. Sandvick said he believes the market is improving.

“I’m seeing unconventional formsof financing emerging that will helpthe private sector. I hope in a fewmonths we’ll have more work,” Mr. Sandvick said. “For now, we’re being called more often.” ■

Hodgson


By DAVID McCLOUGH

Backed into a corner, governorsacross the country are talkingabout making cuts to public services and raising taxes. Jerry

Brown, the recently elected (and former)governor of California, has announcedmassive cuts to the state budget andseeks extension of a voter-approved taxincrease set to expire.

If voter-approved taxation bails outCalifornia, you can bet that higher taxesare imminent everywhere. Voters needto seriously consider the implications ofvoting to hand over their income.

Where I live, voters approved two leviesto fund the library and fire protection. Atfirst glance fire protection and librariesare valuable public services. So whywould anyone vote against funding these

services? In the case of fire protection, the city

argued that failure to support the levywould result in the loss of one fireman.In a small community like mine, onefireman seems like, well, one fireman toomany to lose. But is it?

Consider that the probability of needingan additional fireman prior to the levywas close to, if not at, zero, just as it is after passage of the levy. My house has survived 82 years, with nearly allyears characterized by (at least!) one less fireman. We are paying for no addedbenefit.

When asked why I was against the tax,I replied that the city is entrusted withthe public safety of the community, so

the additional fireman must not be neededfor the safety of the community or the gov-ernment would not risk the loss. Wouldn’tthe fireman be among the last cuts?

The situation for the library was some-what different due to a reduction of statesupport for libraries. Without passage ofthe levy, hours would be reduced andworkers would be let go.

The community let the state governmentoff the hook by reaching into its collec-tive pocket to fund whatever project the state chose to fund rather than our library. It is unlikely that individuals voting for the library levy will use the service any more than if the levy failed.Again, we are paying for no added bene-fit. I suspect the state felt confident thattaxpayers would pick up the tab for locallibraries.

Mr. McClough is an assistant professor ofeconomics at Ohio Northern University.

Ihope — as I watch all this demon-strating and protesting by unionizedpublic employees in Columbus andother state capitals — that it repre-

sents a start of negotiations that eventu-ally involve compromise on both sides.

Our country has become far too polarized, far too black-or-white, in theway we look at everything, andthis is just one more example.

Some (not all) Republicansand business owners and exec-utives loathe everything aboutunions, viewing them as nothingmore than obstructions to success,saddling them with unneces-sary work rules and protectingunder-performers.

Some (not all) Democrats andliberal supporters view unionsas the only way to ensure that workersaren’t overworked, underpaid and mis-treated by profit-hungry business owners.

The realities, as always, are some-where in between. No one should arguethat it’s a good thing that the biggestunions in America now represent public-sector workers. As we stated on this page

last week, the huge amount of public-sector employment — and the costs ofbenefits packages (primarily pensions)— are straining the economic health ofOhio and other states.

By the same token, unions have existedfor decades in America, and have playeda necessary and proper role in things such

as worker safety, fair wage scalesand reasonable work rules.

The fact is that America’smanufacturing unions, mostvisibly the United Auto Workers,have learned that it’s in the bestlong-term interests of theirmembers to work with, ratherthan against, management inorder to build the kinds of products best suited to generateprofits. They have had to shoul-

der more of the hard costs of benefits, especially in the arena of health care.America’s domestic carmakers havefought their way back to competitive-ness, and they’ve done it in tandem withtheir union.

That’s what’s necessary in the publicemployees’ unions, whether they’re

teachers or clerks or road crews. Theyneed to realize that the future is now,and it’s decidedly different than it wasjust a few years ago. America is tax-weary,and state governments are in budget crises.

Something could break, and it’s notlikely going to be the governments. Publicemployees and their unions should resistthe “us-or-them” strategy and help shapetheir future by accepting that change isunstoppable and should work to find amiddle ground with government.

* * * *UNITED WAY OF GREATER CLEVE-

LAND has been stretched as never before, answering calls for help fromthousands of our family members andco-workers. The sad fact is that the needsof those seeking help from United Way-funded agencies are always the greatestwhen there are fewer of us to give.

Calls to United Way’s 211 referralnumber increased by 11% to a record230,000. The local campaign is $1 millionshort of its goal, so please do whateveryou can to help by going to unitedway-cleveland.org/live. And let’s hope thatnext year, those calls go down, not up. ■


Oh so snugT

he brouhaha going on in Ohio, Wisconsinand a handful of other states over legislationto reduce the contract bargaining leverageof unionized public employees is exposing

the snug relationship between those workers andDemocratic lawmakers in those states. And thetightness of that relationship raises the question ofwhether the Democrats are working for the good ofall the people of their states or for the employeeunions that contribute to their election campaigns.

Let’s start with a simple premise that defies debate: Many state and local governments andschool districts nationwide face big budget deficitsor barely can make ends meet, with no end in sightto their money woes. If these governments andschool districts were companies, many would befiling for Chapter 11 bankruptcy so that they couldvoid contracts with their unionized workers. In thatway, these employers could be freed of the wage,benefit and pension obligations and seniority rulesthey no longer can afford to operate under becauseof their financial predicaments.

However, governments aren’t companies. A citycan file for Chapter 9 — the municipal version ofChapter 11 — but it would cut itself off from thecredit markets by reneging on its debt obligations. Acity that wore the scarlet letter “B” of bankruptcyalso would scare away prospective employers andresidents and would struggle to retain those alreadywithin its borders.

Public workers know their employers can’t foldup their tents like a business could if that businesskept flirting with bankruptcy. So, they hide behindtheir contracts and resist efforts to make them paymore of the cost of their health care and pensionbenefits. They also fight allowing employers to layoff senior workers first, which would let employerssave more money when job cuts are a must.

The extent to which collective bargaining shouldbe part of the process of setting the wage and employment terms of public workers is an issueworthy of debate. However, it appears Democraticlegislators are more concerned with protecting theinterests of public employees than they are aboutdiscussing the impact on government bodies andschool districts of maintaining the status quo.

In Wisconsin, Democratic lawmakers have boycotted their legislature in a show of unity withriled-up public workers. And in Ohio, key Democraticfigures have acted like cheerleaders for public workers during recent rallies in Columbus.

Among those cheerleaders was former Gov. TedStrickland, who was the writer of an e-mail sent lastWednesday by the Ohio Democratic Party. In that e-mail, Mr. Strickland commends public workersfor their resolve. He then makes this pitch: “Pleasesend a message to (Gov.) John Kasich and the Republicans in the Statehouse that we will not bemuzzled in this fight. Make a contribution of just$10 to the Ohio Democratic Party today.” The underlined plea provides a link to a web site whererecipients can make their contributions.

The ex-governor’s message to public employees isclear: You cover our back, we’ll cover yours. Andother taxpayers? They’re on their own.

FROM THE PUBLISHER

PERSONAL VIEW

BRIANTUCKER

Union foes must find middle ground

Vote to raise taxes sends wrong message

PUBLISHER/EDITORIAL DIRECTOR:Brian D.Tucker ([email protected])

EDITOR:Mark Dodosh ([email protected])

MANAGING EDITOR:Scott Suttell ([email protected])

OPINION

See VIEW Page 11



KEITH WOLFEClevelandI think there’s good andbad things about it. I thinkthe unions should have theright to be able to fight fortheir rights regardingthings like pensions andpension cuts. On the otherhand, there are a lot ofproblems, certainly ... inWisconsin and Ohio, as faras the state budgets.

➤➤➤➤ Watch more people weigh in by visiting the Multimedia section at www.CrainsCleveland.com.

THE BIG ISSUEWhat do you think about the protests at the Ohio and Wisconsin capitals regarding the collective bargaining laws?

MARY BANKSClevelandI’m definitely against (taking away collective bargaining rights). I thinkanyone who joins a unionshould be able to negotiatetheir payment and theirbenefits, because that’sgoing to make them happier and that’s going to make them producebetter.

DOUG UTTEREast ClevelandI’m a supporter of theunions, personally, and Ithink it’s a disgrace whatthe Tea Party is trying todo. I’m a little disappointedour governor has jumpedon the bandwagon thisquickly and in this way inOhio, which is historically aunion stronghold.

SHARON KOVACH Brooklyn (nonunionstate employee)They have to keep bothsides in mind. What’s goodfor the state and what’sgood for their employees— keep both in mind. Youdon’t want to hold anybody’sthroat, as far as the cities,to make them pay benefitslike for police and fire thatthey can’t afford.

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The problem with voting to increasetaxes when times are tough is thatgovernment doesn’t reduce taxes whentimes are good. This is an example ofan unhealthy relationship in whichtaxpayers enable government tocontinue its irresponsible behavior.

The very same people who takecar keys away from an intoxicatedspouse or friend are in essencehanding the keys to the drunk andasking him or her to drive. We wouldnot hand car keys to a drunk, but wevote to tax ourselves. The analogy isnot so far-fetched.

Voting for taxes during difficulttimes is not the reasoned solution.When businesses are failing, we don’thand over our income. We don’tchoose to bail out failure becausewe expect the firm will fail some-time in the future.

The difference between businessand government is that governmentdoesn’t have to make the toughchoices necessary to survive. Eventhe worst state and local govern-ments survive without consequenceto the decision-makers (much likecorporate CEOs and mortgage lenders).

However poorly the governmentfunctions, the cost is borne by tax-payers.

Whereas it is headline news whentaxpayers bail out GM, Chrysler,AIG, Fannie Mae, Freddie Mac andgigantic banks, barely a peep isheard when government fails to deliver adequate services within abudget. An unintended consequenceis that taxpayers have a choice tostay or to go and often choose toleave, thereby voting with their feet.In their wake are the residents oftentimes least able to pick up thetab (see Detroit).

During the most recent recession,business firms were forced to maketough decisions to survive. Thefirms that made wise choices arepoised to thrive during the next expansion of the business cycle.Can we say the same for state andlocal government? Are state and local governments any better pre-pared for the next crisis?

These are, of course, rhetoricalquestions. However, if we vote ourselves more taxes, we can besure that the state will not make thetough choices. ■

continued from PAGE 10

View: Higher taxes duringtough times wrong answer

LETTER

WRITE TO USSend your letters to: Mark Dodosh, editor, Crain’s Cleveland Business, 700 W.St. Clair Ave., Suite 310, Cleveland, OH 44113-1230e-mail: [email protected]

Lower taxes critical to private sector■ I just finished reading your Feb.21 open letter to President Obamaon your editorial page, and I mustsay — well said, Crain’s. Well said.

For the past 25 years, I’ve been asmall business owner who workswith hundreds of other small busi-ness owners. The points made inthe editorial about the impact that

taxes can have on a business andjobs in the public sector that don’tpay for themselves are things I’veseen and discussed time and timeagain.

What I haven’t seen — until readingyour editorial — is a description ofthe problem expressed so clearlyand concisely. It’s going up on our

firm’s bulletin board and likely willbe quoted to clients for some time to come. Thanks for expressing it sowell.

Michael D. McManus CPAManaging partnerMcManus, Dosen & Co.Middleburg Heights



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TAX LIENSThe Internal Revenue Service filed taxliens against the following businessesin the Cuyahoga County Recorder’s Office. The IRS files a tax lien to protect the interests of the federalgovernment. The lien is a public noticeto creditors that the government has aclaim against a company’s property.Liens reported here are $5,000 andhigher. Dates listed are the dates thedocuments were filed in the Recorder’sOffice.

LIENS FILEDA Caring Alternative Inc.1220 Huron Road, ClevelandID: 34-1801887Date filed: Feb. 8, 2011Type: Employer’s withholdingAmount: $240,933

CRS Co. Inc. Faith ChristianSchool & Day Care11089 W. Sprague Road, North RoyaltonID: 34-1741604Date filed: Feb. 4, 2011Type: Employer’s withholding, unemployment, corporate incomeAmount: $198,968

TVK Floors LLC5124 Wallings Road, North RoyaltonID: 20-2839050Date filed: Feb. 8, 2011Type: Employer’s withholding, unemploymentAmount: $163,221

Olmsted Manor Ltd.27500 Mill Road, North OlmstedID: 31-1550564Date filed: Feb. 1, 2011Type: Employer’s withholding, partnership incomeAmount: $154,052

Catered Elegance Inc.1160 Broadway Ave., BedfordID: 34-1835482Date filed: Feb. 4, 2011

Type: Employer’s withholdingAmount: $94,023

USA Parking Systems Inc.1325 Carnegie Ave., ClevelandID: 34-1695245Date filed: Feb. 4, 2011Type: Employer’s withholding, unemploymentAmount: $90,902

Title Access LLC27887 Clemens Road, Suite 1, WestlakeID: 34-1926916Date filed: Feb. 1, 2011Type: Employer’s withholdingAmount: $82,274

Price Builders and Developers Inc.5055 Corbin Drive, Suite A, ClevelandID: 34-1897294Date filed: Feb. 1, 2011Type: Employer’s withholding, unemploymentAmount: $80,133

Leasway Purchasing Corp.3700 Park E. Drive, ClevelandID: 34-6500296Date filed: Feb. 16, 2011Type: Federal excise taxAmount: $71,395

Manju Govind LLC Knights Inn22115 Brookpark Road, Fairview ParkID: 34-1831580Date filed: Feb. 1, 2011Type: Employer’s withholding, unemploymentAmount: $66,532

Cuyahoga Dairy Inc.3740 W. 13th St., ClevelandID: 31-1519059Date filed: Feb. 1, 2011Type: Employer’s withholding, unemploymentAmount: $66,613

Quality Oil Change Inc.547 Broadway Ave., BedfordID: 34-1621969Date filed: Feb. 16, 2011Type: Employer’s withholding, unemploymentAmount: $60,843

Post Painting Inc.24816 Aurora Road, Suite F, Bedford HeightsID: 34-1700614Date filed: Feb. 4, 2011Type: Employer’s withholdingAmount: $54,277

Supportive Solutions Training5333 Northfield Road, BedfordID: 16-1637165Date filed: Feb. 1, 2011Type: Failure to file complete returnAmount: $49,079

Forum Architectural Services LLC1138 W. Ninth St., ClevelandID: 26-3647659Date filed: Feb. 1, 2011 Type: Employer’s withholdingAmount: $46,588

Gray Container LLC2800 E. 90th St., ClevelandID: 20-3598415Date filed: Feb. 1, 2011Type: Employer’s withholdingAmount: $39,459

Nicoles Child Care Center Inc.4035 E. 141st St., ClevelandID: 34-1700440Date filed: Feb. 16, 2011Type: Employer’s withholdingAmount: $29,202

EC Financial LLC6155 Rockside Road, Suite 201, IndependenceID: 26-3324371Date filed: Feb. 4, 2011

Type: Employer’s annual federal taxreturnAmount: $28,784

Entertainment Arts Research Inc.4500 Rockside Road, Suite 400, IndependenceID: 26-3760396Date filed: Feb, 4, 2011Type: Employer’s withholdingAmount: $27,848

Pramuky Inc.11837 Edgewater Drive, LakewoodID: 34-1852948Date filed: Feb. 1, 2011Type: Employer’s withholdingAmount: $26,378

Action Calibration Services Inc.17820 Englewood Drive, Suite 13,Middleburg HeightsID: 34-1879978Date filed: Feb. 1, 2011Type: Employer’s withholdingAmount: $23,995

Abel Counseling & Associates Inc.14100 Cedar Road, Suite 300, University HeightsID: 34-1805036Date filed: Jan. 11, 2011Type: Employer’s withholding, unemploymentAmount: $5,581

PMA Marketing Inc.P.O. Box 39119, SolonID: 20-8176287Date filed: Jan. 4, 2011Type: Employer’s withholdingAmount: $5,562

Hayat Inc.4608 Great Northern Blvd., North OlmstedID: 43-2041188Date filed: Jan. 4, 2011Type: Employer’s withholdingAmount: $5,017

LIENS RELEASEDB & C Tavern Co.1 Berea Commons, BereaID: 34-1514084Date filed: Feb. 9, 2009Date released: Jan. 11, 2011Type: Employer’s withholdingAmount: $5,748

Bidder Transport Inc.18401 Maple Heights Blvd., Maple HeightsID: 34-1554376Date filed: Nov. 5, 2007Date released: Jan. 4, 2011Type: Employer’s withholdingAmount: $11,043

Bidder Transport Inc.18401 Maple Heights Blvd., Maple HeightsID: 34-1554376Date filed: May 27, 2008Date released: Jan. 4, 2011Type: Employer’s withholdingAmount: $5,009

Canvas Specialty Manufacturing Co.4045 Saint Clair Ave., ClevelandID: 34-0890218Date filed: Nov. 30, 2010Date released: Jan. 4, 2011Type: Employer’s withholdingAmount: $10,050

Canvas Specialty Manufacturing Co.4045 Saint Clair Ave., ClevelandID: 34-0890218Date filed: Jan. 15, 2010Date released: Jan. 4, 2011Type: Employer’s withholdingAmount: $8,540

Cleveland Mica Co.1360 Hird Ave., LakewoodID: 34-0677613Date filed: Dec. 21, 2009Date released: Jan. 11, 2011Type: Employer’s withholdingAmount: $10,346


CHALLENGE: Eric was enjoying astronomicalgrowth. Orders for the Bella Bowl™, the company’stop seller, were going through the roof. But demand was putting a strain on Eric’s relationship with his supplier, not to mention his cash flow.

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Bidding: Firms seekmore certain revenues

DIABETIC CARE SERVICES & PHARMACY

Marc Wolf, CEO of Diabetic Care Services & Pharmacy, said the Eastlake company lost 10% of its total Medicare busi-ness due to a new Medicare competitive bidding process.

Also, Mr. Petrolla said the family-owned company reduced its workforce by about 25% over the last twoyears through attrition and layoffsin anticipation of the program.

“We can’t run like the federalgovernment,” Mr. Petrolla said. “Wehave to have cash flow, and we haveto have profit.”

Despite complaints from suppliers,Dr. Donald Berwick, administratorof the Centers for Medicare & Med-icaid Services, said implementationof the program was going “verysmoothly” and the agency had received only a handful of complaintsfrom beneficiaries who found it difficult to line up suppliers. CMSestimated that Medicare and itsbeneficiaries will pay 32% less onequipment and supplies throughsupplier competition.

This isn’t the first time the Centers for Medicare & MedicaidServices pushed a competitive bidding program. In 2008, Congressdelayed the implementation of theprogram because of problems withthe bidding process. Some of thekinks, particularly on the technical

side, have been worked out, butthere still are concerns about theprogram as a whole, said Amy Leopard,a partner with Cleveland law firmWalter & Haverfield LLP.

Ms. Leopard said many medicalequipment suppliers are looking atmergers and affiliations to diversifytheir customer bases because it’sbecoming increasingly difficult tooperate their businesses indepen-dently. Many also are consideringways to diversify their product offerings in order to make up forbusiness they might lose because ofthe program.

Diabetic Care Services & Pharmacy,a national provider of diabetic supplies that is based in Eastlake,lost bids in all the regions involvedin the project, effectively cutting offabout 10% of its total Medicarebusiness, according to the company’sCEO, Marc Wolf.

“What’s happened is all theseMedicare beneficiaries in Clevelandand other areas are really restrictedin the supplies they’re going to get,”Mr. Wolf said. “They’re not gettingproduct they’re used to. Also, thatperson is going to have to find some-


one new to service them.”

Period of adjustmentTo skirt that problem, at least in

the Cleveland region, Diabetic CareServices & Pharmacy delivers suppliesin its own vehicles rather than through

mail services, which allows thecompany to continue to be paidthrough Medicare because the bidprocess only applied to mail-orderdiabetes supplies. That’s not neces-sarily an option in the other competitive bidding regions, Mr.Wolfe said, so the company is lookingto boost its business volume else-where around the country and diversify its product lines.

Seeley Medical has gone beyondthe health care arena in hopes of diversifying its product lines. Thecompany recently invested in Azork Technologies, a company inYoungstown that developed a cloudcomputing platform that allowsusers to access documents and applications through a web platformrather than a computer or server.

“We have to keep diversifying sowe don’t have to deal with an industrywhere economically it doesn’t makesense to operate,” Mr. Petrolla said.

Integrated Medical Inc. in Cleve-land has thinned its operations inthe face of competitive bidding, according to president Gary Bajusz.To cut costs, the company in Decem-ber laid off two respiratory therapistsand in February closed its Mt. Vernon site and let go of the threeemployees at that location.

Integrated Medical is exploringnew service lines — among them,retrofitting homes for medicalequipment such as wheelchairs orchairlifts — to open new revenuestreams.

“Cash flow is an important part ofany business,” Mr. Bajusz said.“With a loss of revenue, we have tolook at our expenses and things ofthat nature.”

Though Seeley Medical could beconsidered a winner because it wonbids in every category in which itcompeted, its leaders say that’s notthe case. Seeley and others will needto re-bid in three years, leading to

even more uncertainty.

Thinner ranks possibleInvacare Corp. in Elyria has a big

stake in the fight as many of its customers are heavily reliant onMedicare reimbursements. So, thesupplier of wheelchairs, portableoxygen and other home care equip-ment is helping the distributors ofits products eliminate some of theiroverhead costs, according to Invacarespokeswoman Lara Mahoney. Thecompany, for example, helps its distributors collect co-pays fromtheir customers and keep track oftheir inventory.

“Invacare is the largest creditor inthe (home medical equipment) industry,” Ms. Mahoney said. “Wewant to ensure our providers are ashealthy as possible.”

Ms. Mahoney said the competitivebidding program isn’t expected toaffect Invacare’s earnings this year,but she couldn’t speculate beyondthen.

Suppliers have clamored for therepeal of the program. Though theyaren’t offering specifics to addressthe cost issue, they say they would liketo see more dialogue with the Centersfor Medicare & Medicaid Services todevelop a fairer payment system.

Legislation to repeal the programgarnered support in the last Con-gress — including the backing ofmuch of the Ohio delegation — butorganizers simply ran out of time,said Kamela Yuricich, executive director of the Ohio Association ofMedical Equipment Services.

If that support doesn’t translateto the new Congress and the programmoves forward, Mr. Wolf of DiabeticCare Services said it could signal theend of several small home medicalequipment suppliers.

“They’re going to close theirdoors,” he said. “There’s no ques-tion about it.” ■

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Catering, a longtime dining spot justa half-block from the planned casino.

“Initially, everyone is going towant to go eat at the casino becauseit’s new,” Mr. Moyer said. “That willhurt some of us. How long that lasts,I’m not sure.”

Mr. Bruell doesn’t share that view.“I don’t think people choosing to

eat at a buffet will affect my business,and if I can get 2% of what comesthrough (the door of the casino) overa year, that’s a lot of money,” Mr.Bruell said.

The $350 million casino is expectedto draw 5 million visitors annually,according to Rock Ohio CaesarsCleveland LLC, a joint venture between Dan Gilbert’s Rock GamingLLC and casino giant Caesars Enter-tainment Corp. Not unexpectedly,Rock Ohio Caesars rebuffs the notion that a restaurant inside thebuilding will hurt surrounding barsand eateries.

“The restaurant won’t cannibalizeexisting businesses,” said MarcusGlover, the Horseshoe Casino Cleve-land’s general manager. “Four-hun-dred seats can’t satisfy our customerbase at the casino. That’s why we’llbe partnering with local businesses.”

When Ohio voters in November2009 approved a constitutionalamendment clearing the way for thedevelopment of four casinos, manylocally owned and independentlyoperated restaurants throughout thestate — including in Cleveland —were skittish about the prospect oflosing some business to a gamingmecca and its resident casinorestaurants.

Mr. Glover dismissed that concernand said bolstering traffic at peripheral downtown businesses isimperative to the casino’s long-term viability, as developers seek to createa loyal customer base that will be drawn to both the casino and surrounding attractions.

“We see downtown Cleveland as a core, and that’s why we want to establish these partnerships witharea businesses,” he said.

Let’s make a dealMr. Glover met with a number of

local establishments Feb. 16 to talkabout forming partnerships as thecasino’s developers prepare for moretourism in downtown Cleveland after Horseshoe opens. He declinedto identify the businesses that attended the meeting.

Mr. Glover said he is looking to solicit restaurants, hotels and other


Bets: Casino aims to partner with downtown restaurants continued from PAGE 3

RUGGERO FATICA

ABOVE: Mike Moyer, the owner of Alvies Gateway Grille & Catering, is somewhat fearful of the effect the new casino willhave on his restaurant, located on Ontario Street in downtown Cleveland. BELOW: Meanwhile, Zack Bruell — the chef andowner of Chinato on East Fourth Street, among other establishments — is eager for the casino to open.

hospitality-related operations to participate in Caesar Entertainment’sTotal Rewards casino loyalty program, which allows gamblers toearn credits each time they play atthe casino. They then can redeemthose credits toward the purchase ofa nearby restaurant meal or hotelstay.

“It’s not a discount program,” Mr.Glover said. “For example, we do thiswith about 30 different restaurantand beverage partners in New Orleans with our downtown casinothere. We contribute about $5 millionto $6 million each year toward thesebusinesses, and we have similar expectations for Cleveland.”

Douglas Katz, former president ofCleveland Independents, a group ofabout 90 locally owned and inde-pendently operated restaurants, saidsome members have expressed anxiety about the planned casinoand its restaurant, particularly because of the “convenience option”a casino restaurant offers. However,Mr. Katz said he thinks partnershipsbetween the casino and local restau-rants would be a boon for both

of Fire, Food & Drink in ShakerHeights.

Mr. Glover said the casino’s oper-ators are looking into a shuttle service that would transport visitorsthroughout the downtown area toenhance that carousel of commerce.

‘You adapt or you suffer’Restaurateur Alan Glazen said

Cleveland’s top-tier restaurants onlystand to benefit from the casino project, even if more eateries pop upwithin the Horseshoe.

Mr. Glazen, who owns Erie IslandCoffee Co. on East Fourth Streetdowntown and in Rocky River and isa restaurant investor, said he only ishearing enthusiasm for the casinofrom other owners and operators.

“Who’s going to worry? The sub-average restaurants that arecompeting against a buffet are prob-ably concerned,” he said. “I don’t seeanybody who’s good who is shakingin their boots.”

His East Fourth Street neighborsconcur.

“I think the casino/restaurant willbe great for business,” said Michael

Symon, chef and owner of Lola, in ane-mail. “The more people that cometo downtown, the better. It createsgreat energy at our urban core,which will be nothing but good forthe city. … Our city can only be asstrong as our downtown long term.”

Likewise, Jonathon Sawyer, thechef and owner of The GreenhouseTavern, said in an e-mail: “I do believe some (restaurants) will losebusiness, but just like any otherchange in the culture of downtown,you adapt or you suffer. We are excitedat the opportunity to expose evenmore people to what downtownCleveland is all about.”

Mr. Glazen, who also owns ABCTavern in Ohio City and XYZ Tavernin the nearby Detroit-Shorewayneighborhood, said he believes theseand other Cleveland neighborhooddestinations also will see an uptick inbusiness.

“It’s a win-win-win-win,” Mr.Glazen said. “It’s going to draw newpeople who will walk one block, thenthe next time two blocks away andbeyond to try new places.” ■

BRIGHT SPOTSIt’s not all bad out there. Here’s

the latest installment of a weeklyweb feature that highlights positivedevelopments in the Northeast Ohio

business community.

■■ JD Mason & Associ-ates Inc. of Cleveland, aconsulting firm serving

the nonprofit community,is wrapping up an assign-

ment with a high-profileglobal client.

The client is the American Foun-dation for AIDS Research (amfAR),which has offices in New York,Washington D.C., and Bangkok. It’san international nonprofit dedicatedto the support of AIDS research,HIV prevention, treatment educationand the advocacy of public policyissues related to AIDS.

JD Mason said it’s assisting amfAR in “the implementation anddeployment of a comprehensive replacement accounting solutionthat includes business processstrategy and staff training.” The 10-month project concludes this spring.

Among JD Mason’s other health-related clients are the CatholicMedical Mission Board and theGlobal Alliance for TB Drug Devel-opment.

■■ Two new retailers are comingto Legacy Village, the big lifestylecenter in Lyndhurst.

Yogurt Vi, which will be next toCalifornia Pizza Kitchen, opens inMay and will offer 10 flavors of certified-probiotic yogurt. Customerscan choose from candy toppings,sprinkles and fresh cut fruits, or

make a combination of their own.Be careful with those toppings,though; you pay by the weight ofthe dessert.

Opening in June is Crazy 8,which offers apparel and acces-sories for boys and girls in sizesnewborn to 14. The retailer, openingon Main Street near Gymboree (itsparent company), got its start in2007 and now has more than 80 locations nationwide.

Legacy Village has more than 55restaurants and retailers in total.

■■ ViewRay Inc., a privately heldmedical device company in Cleve-land, said it has received U.S. Foodand Drug Administration marketingclearance for its radiotherapy treatment planning and deliverysoftware.

The software “is a critical com-ponent of the company’s new radiation therapy system, whichcombines simultaneous magneticresonance imaging and radiotherapydelivery,” ViewRay said in a newsrelease.

Now in the late stages of develop-ment, the integrated ViewRay systemcurrently is available only as a non-human-use research system. Thecompany is working to secure FDAclearance for commercial distribu-tion of the system for clinical use.

“FDA clearance of our softwarerepresents a significant milestonein the development of the ViewRaysystem,” said ViewRay president andCEO Gregory M. Ayers in a statement.

“In the past year ViewRay hasachieved a string of notable suc-cesses, in funding and partnerships

as well as product development,”Dr. Ayers said. “It’s exciting to seesuch progress with a product webelieve will offer an advancementin radiation therapy.”

The ViewRay system is designedto provide continuous soft-tissueMRI during cancer treatment sothat clinicians can see preciselywhere the radiation is delivered,the company said.

The company recently secured$20 million in financing “intendedto move the ViewRay system throughthe final development and regula-tory processes and toward the goalof commercialization and place-ment in major medical centers.”

Send information for Bright Spotsto managing editor Scott Suttell [email protected].

A CASINO PRIMERThe Horseshoe Casino Cleveland

is the first phase of a larger, $600million Phase II casino, to be builtnearby on 16 acres between HuronRoad and the Cuyahoga River. Thatcasino is scheduled to open in2013.

■■ Horseshoe developer: RockOhio Caesars LLC, a joint venturebetween Dan Gilbert’s Rock GamingLLC and Caesars EntertainmentCorp. that also is developing theCincinnati casino. Penn NationalGaming Inc. will develop the Columbus and Toledo properties.

■■ The operation: About 2,000slot machines, 50 to 60 gaming tables, a poker room with 25 to 30tables, two bars and a 400-seat buffet-style restaurant. The casino isexpected to draw 5 million people ayear and employ 1,500 to 1,600people — about 95% of them fromGreater Cleveland.

■■ Revenue allocation: Oncethe $600 million Phase II casino isfully operational, operators expect itwill generate $100 million annuallyin gaming tax revenue. Local distrib-ution of gaming taxes will providean estimated $29.7 million to thecity of Cleveland, $18.7 million toCuyahoga County and $22.5 millionto Cuyahoga County school districtsbeginning in 2013.

patrons and businesses, thoughnonparticipants could be placed at adisadvantage.

“Based on what we’ve seen, I thinkthis is a quality situation that will improve the downtown region,” saidMr. Katz, who also is chef and owner



After 25 years of dedicated and loyal service... THIS WAS THE COMPANY’S WAY TO THANK YOU.

The Law Firm of David A. Young, LLC represents long-term, highly compensated executives during the termination process. We represent individuals, not corporations.

WillmottLudwigOsadczuk

LeonardObengHanley

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GOING PLACESJOB CHANGES

FINANCEOHIO COMMERCE BANK: EricHetrick to network administrator.

FINANCIAL SERVICEPEASE & ASSOCIATES: Joe Rokasto senior auditor; Lindsay Welch toaudit staff accountant; Patricia Garven to tax manager; Brian Earlyto tax staff accountant; Jim Emondand Laura Pelissier to CFO servicesstaff accountants.SKODA MINOTTI: Victor Hernandezand Ritchie Wilson to help desk technicians; Sandy Jiberno to administrative assistant; BridgetMullaly to paraprofessional. SS&G: Rebecca Frisina to seniorassociate; Jeannine A. Souders toassociate; Christine Klaiber to manager, assurance services.

GOVERNMENTCUYAHOGA COUNTY: Gregory F.Clifford to law director.

INSURANCEMEDICAL MUTUAL OF OHIO: KimOsadczuk to manager, ProposalUnit.WELLS FARGO INSURANCE SERVICES USA INC.: MargaretLudwig to senior vice president.

LEGALTAROLLI, SUNDHEIM, COVELL &TUMMINO LLP: Brian W. Bolingerto partner. WELTMAN, WEINBERG & REISCO. LPA: Theodore J. Bush to director of title operations.

MANUFACTURINGCARLISLE BRAKE AND FRICTION:D. Christian Koch to president.

MARKETINGFELBER & FELBER MARKETING:Michelle Willmott to public relationsassociate. LIGGETT STASHOWER: CherylHanley to senior account director.

NONPROFITBURTON D. MORGAN FOUNDATION:Dianne Ketler to grants managerand social media coordinator.THE GREATER CLEVELAND PARTNERSHIP: Martin R. McGannto vice president, state and local government advocacy.LIFEBANC: Michael K. Obeng tomedical director of tissue services.

LONG TERM CARE OMBUDSMAN:Tyrone Robinson and MargaretMiller to ombudsman specialists.

REAL ESTATELMI MANAGEMENT INC.: RhondaLeonard to division manager.RUSSELL REAL ESTATE SER-VICES: Jana Devers, William Hendricks Jr., Kevin McGuire,Lauren Nutter, Edward Roffey,David Streeter and Cindy Wisniewski to sales associates.

SERVICEEQUITY CORPORATE HOUSING:Kim Lucas to account executive. GABLES SEARCH GROUP INC.:Tiffany Lengyel to recruiter; Megan Angus to account executive. DORMAN FARRELL: Ryan Roseto director of new business develop-ment; Cindy Nappi to director of human resources consulting; Nancy Vice to senior benefits consultant. RESOURCE TITLE NATIONALAGENCY INC.: Donna Betley to account executive. SERVICEMASTER BY AMERISTEAM:Craig Crissinger to operations manager.

TECHNOLOGYATNETPLUS INC.: Damian Huisingand Chris Horning to IT specialists;Rochelle Schenk and Susan Hudikto account managers; David Kaiserto service manager; Ellen Kurr tobusiness process/communicationsmanager. WRIS WEB SERVICES: JohnStrathern to director of client services; Cassie Flanigan to marketing coordinator; TiaMarshaeSanford to social media specialist;Sandy Cronin to ColdFusion programmer.

BOARDSHIRAM HOUSE: Kevin D. Barnes(Taft Stettinius & Hollister LLP) topresident-elect; John D. Barrett topresident; David B. Moore to vicepresident, finance; Susan W.Cargile to vice president, develop-ment; Russell R. Grundke to secretary and executive director. NORTECH: Timothy M. Reynolds(Tribute Inc.) to chairman.

AWARDSSAINT JOSEPH ACADEMY: Dr.Michael Gallagher (West Park Dental)and Cathy Gallagher received the

2011 Medaille Shield Award.STARK COUNTY ASSOCIATION OFREALTORS: Jim Bray (Cutler RealEstate) received a Lifetime Achieve-ment Award.

Send information for Going Places [email protected].

Average 401(k) balanceup 11% over prior yearContributors leery of investing in stock, thoughBY JERRY GEISELBusiness Insurance

Employees’ 401(k) account balancesin 2010 continued to climb and arehigher than they were before the fallin the equities markets, accordingto an analysis released last week.

The average 401(k) account balance was $71,500 last year, up11.4% from $64,200 at year-end2009, according to Fidelity Invest-ments, a Boston-based mutual fundprovider and 401(k) plan adminis-trator. At year-end 2008, the averageaccount balance, battered by thatyear’s plunge in the equities markets,fell to $50,200, a huge drop from2007 when the average accountbalance was $69,200.

“You can’t underestimate the factthat the markets were very favor-able last year,” said Beth McHugh,Fidelity’s vice president of marketinsights.

Even with the resurgence of the equities markets, 401(k) plan participants are more cautious

about fully investing their accountbalances in stock. Thirteen percentof active participants held all oftheir 401(k) account balances in equities last year, down from 14% in2009 and 20% in 2007.

Loan activity increased slightly;just over 11% of participants took outa loan from their 401(k) plan lastyear, compared with 10.6% in 2009.

Fidelity also found that 21% ofplan sponsors offer a Roth 401(k)feature, up from just 10% in 2007. Ina Roth 401(k) plan, participantsmake after-tax contributions, butthose contributions and investmentincome can be withdrawn tax-free ifcertain requirements are met.

The study analyzed the accountbalances of about 11 million partic-ipants in nearly 17,000 corporateplans serviced by Fidelity.

A summary is available athttp://tinyurl.com/4dh7qyx.

Jerry Geisel is an editor-at-large forBusiness Insurance, a sister publi-cation of Crain’s Cleveland Business.


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ON THE WEB: Listen to portions ofCrain’s reporter Jay Miller’s interviewwith the leaders of Akron-Canton and Cleveland Hopkins International airports. www.CrainsCleveland.com/section/audio

SPECIALREPORT

UP IN THE AIRAn examination of the future of air service inNortheast Ohio andwhat it might meanfor the region

I N S I D E■ TALE OF THE TAPE: Are Hopkinsand Akron-Canton actually competitors,or do they serve drastically differentcustomers? Plus, the implications of theSouthwest Airlines-AirTran merger.PAGE 22

■ LOOKING BACK ...: Cleveland wentfrom being Continental’s smallest hub(of three) to being United’s smallest hub(of eight). Plus, United Continental’stake on Cleveland. PAGE 24

■ IN OUR (RELATIVE) BACKYARD:Pittsburgh lost its US Airways hub in2004 after the airline struggled throughbankruptcy; the other steel city foundit’s not a death sentence, but it isn’tgood, either. PAGE 25

■ VARIED PERSPECTIVES: What is a hub, and what benefit does onebring to cities? Plus, a list of hub citiesacross the country. PAGE 26

THEINTERVIEWRICKY D. SMITHDirector of port controlCity of Cleveland

RICHARD MCQUEENPresident, CEOAkron-Canton Airport

See INTERVIEW Page 26

MARC GOLUB

Richard McQueen (left) and Ricky Smith, on Feb. 18 at Hopkins

By JAY [email protected]

Television ads for Akron-Canton Airport still suggesta competitive rivalry between the small-but-

growing airport in North Cantonand the more sprawling ClevelandHopkins International Airport.

But the leaders of both airportsstill agreed to sit down together —it was the first time they’d met — totalk with Crain’s Cleveland Business

about their airports and their rolesin the region’s air service.

Ricky D. Smith became Cleveland’sdirector of port control, which operates Cleveland Hopkins andBurke Lakefront Airport, in June

2006. Before that, he spent 14 yearswith the Maryland Aviation Administration, rising to seniordeputy executive director andchief operating officer. The MAAoperates the Baltimore/Washington

International Thurgood MarshallAirport.

Richard McQueen has been atAkron-Canton since he joined asairport accountant in 1982. He became president and CEO in 2008,replacing the late Fred Krum, wholaunched the aggressive marketingcampaign that rattled ClevelandHopkins’ cage.

An early ad said bluntly, “Akron-Canton Airport: A better way to go.”A more recent ad claimed, “At ourairport you’ll get to your gate 40%faster.”

Meanwhile, Cleveland Hopkins

Can we stick the landing?Northeast Ohio travelers, officials wait to see how mergers will be felt as industry transforms

By JAY [email protected]

Transportation con-sultant and bloggerMark Zannoni fliesinto Cleveland

Hopkins International Air-port twice a month from LosAngeles — and he makes apoint of flying on ContinentalAirlines.

So Mr. Zannoni, an aviationindustry observer who blogsat airlinecity.com, is worriedthat the merger of Continentalwith United Airlines will costhim the direct-flight optionshe now has between the twocities.

He is concerned the new,

merged airline might routehim through hubs in Denveror Chicago if it prunes itsflight schedule here and “de-hubs” Cleveland Hopkins.

Mr. Zannoni believes sostrongly in the importance ofmaintaining the Cleveland hubpost-merger that he evenavoids using Akron’s airport,where several airlines — no-tably AirTran — attempt to luretravelers with low-cost flights.

In fact, he and other industryexperts even suggest thatsuch efforts in Akron havecome at the expense of Cleve-land Hopkins, where the pas-senger count has declined.

See LANDING Page 24

United Continental Holdings Inc.Last May, United and Continental air-

lines announced a $3.2 billion all-stockmerger that would create the world’slargest airline. In September, share-holders of the two companies createdUnited Continental Holdings Inc. andsaid the airline’s nearly 700 aircraftwould carry the United name.

The merger joins two so-called legacycarriers. These airlines have highercost structures and extensive hub-and-spoke systems, which route trafficthrough a particular airport. They profit

when demand for air service is high,especially among business travelers,who generally are willing to pay higherfares for the better service the legacycarriers offer.

The merger’s full impact won’t befelt for several years; final approval tooperate as a single airline is not expecteduntil 2012. The 200-plus daily flights ofthe merged airlines and their regionalpartners account for about 70% of thepassenger traffic at Cleveland Hopkins,according to an analysis done last year.

Southwest Airlines Inc.

Dallas-based Southwest solidified itsposition as the fourth-largest U.S. passenger carrier last September whenit purchased Orlando’s AirTran Airwaysfor $1.4 billion in stock and cash. Withthe merger, expected to get govern-ment approval by the middle of thisyear, the new airline becomes thedominant U.S. low-cost air carrier.

Low-cost carriers like Southwest

don’t operate formal hub systems. Instead, they offer fewer frills and flyonly on high-volume direct routes,though as Southwest has grown it hasbegun to route traffic through airportswhere they have a larger presence.

Southwest has 24 flights fromCleveland. AirTran dominates serviceat Akron-Canton, accounting for sevenof 16 daily departures at the airport.


2222 CRAIN’S CLEVELAND BUSINESS FEBRUARY 28 - MARCH 6, 2011

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SPECIAL REPORT: UP IN THE AIR

TALE OF TWO AIRPORTSThe tale of the tape between

Akron-Canton Airport and Cleveland Hopkins InternationalAirport:

■ Runways: Akron-Canton 2, Hopkins 3

(Akron-Canton’s two runways bothare 7,600 feet, but one is being extended to 8,200. Hopkins hastwo parallel runways at 10,000 and9,000 feet, as well as one 6,000-foot crosswind runway.)

■ Airlines: Akron-Canton 5, Hopkins 11

(Akron-Canton: AirTran Airways,Delta Connection, Frontier, UnitedExpress, US Airways Express; Hopkins: Air Canada Jazz; Americanand American Eagle; Delta andDelta Connection; Frontier Airlines;Southwest Airlines; UnitedContinen-tal; USA 3000; US Airways and USAirways Express)

■ Number of flights per day:Akron-Canton 40, Hopkins 250

■ Number of passengers:Akron-Canton — 1.56 million in2010; Hopkins — 9.49 million in2010

■ Primary destinations: Akron-Canton — Atlanta, Boston, Charlotte,Chicago, Detroit, Milwaukee, NewYork, Philadelphia and Orlando; Hopkins — All major U.S. cities,plus six international cities: Cancun,Montreal, Nassau, Punta Cana, Quebec City and Toronto (a total of74 destinations)

SOURCES:WWW.AKRONCANTONAIRPORT.COM;

WWW.CLEVELANDAIRPORT.COMWWW.BTS.GOV

Economy, slow demandcause traffic changesVolume up at Akron-Canton, while new era forbusiness travel plays role in Hopkins decline By SCOTT [email protected]

Drive up to the Akron-Canton Airport and youmight be struck by howsimilar it is to approaching

a suburban office park.A Clevelander who drives about

50 miles south on I-77 gets off atExit 113, crosses Lauby Road andfinds the terminal straight ahead,less than a minute after leaving thehighway. There’s a huge, open-airparking lot, and if you’re picking upor dropping off, the approach to theterminal is on par with collectingthe kids at the mall.

“We’ve made comfort and ease ofuse a big area of emphasis,” saidKristie Van Auken, senior vice pres-ident and chief marketing officer ofAkron-Canton Airport. “From thetime people enter the airport to thetime they leave … it should be anexcellent experience.”

Cleveland Hopkins InternationalAirport values service, too, but likeall big airports — Hopkins is the 36th-largest airport in America, by passenger volume — it can makeno particular claims to coziness.Hopkins’ strength is the breadth ofits service, with about 250 flightsper day to a total of 74 destinations,so the business or leisure traveler using Hopkins can get just aboutanywhere, at any time he or sheneeds. (Akron-Canton, by contrast,travels to only nine destinations.)

The airports’ long-term passengertrends are going in opposite direc-tions, though Hopkins and Akron-Canton operate on considerablydifferent scales.

Hopkins reports it served 9.49million passengers in 2010, downabout 2% from 9.71 million in 2009.As recently as 2000, Hopkins served13.3 million passengers. The airport’spassenger data over the pastdecade show marked drops in twoyears that make sense in the contextof big declines nationwide in business travel.

In 2001, for instance, the year ofthe Sept. 11 terrorist attacks, passenger traffic at Hopkins fell to11.86 million from 13.28 million in2000, the year that produced thehighest figure for the airport duringthe decade. And in 2009, when thecurrent recession began to bitehard on the economy, Hopkins

carried 9.72 million passengers,down from 11.1 million in 2008.

Meanwhile, Akron-Canton’s passenger numbers have risensteadily, from 789,607 in 2000 tonearly double that — 1.56 million— in 2010. Even so, most of Akron-Canton’s growth came in the firstpart of the decade; since 2005, passenger traffic at the airport is upa relatively modest 9%.

Ups and downsGeorge Hobica, who runs AirFare

Watchdog.com, said Akron-Can-ton’s growth is fueled by addingmore flights to more attractive

See CHANGES Page 23

Southwest’s post-deal plan not knownMerger with AirTrancould have an effect on CAK, Hopkins flights

By SCOTT [email protected]

Two formerly small-timeplayers in the U.S. aviationworld — Southwest Airlinesand AirTran Airways —

could have a huge impact onNortheast Ohio’s airports whentheir merger is completed some-time in the first half of this year.

To the extent the Akron-CantonAirport has been able to grab a largershare of the flying customer inNortheast Ohio, it’s largely due toAirTran. Orlando, Fla.-based AirTran,one of the nation’s largest low-fareairlines, carried about half of the 1.5million passengers who flew intoand out of Akron-Canton in 2010.

“Our customers have really rallied around the type of service(AirTran has) brought to the airport,”said Richard B. McQueen, presidentand CEO of Akron-Canton. “We knowthat we’ve got a successful businesshere because AirTran has developeda successful business here.”

But the planned $3.4 billionmerger of AirTran and Southwest —the Dallas-based airline that virtu-ally charted the path for growth inthe low-fare end of the U.S. air service market — raises some anxiety because no one, obviously,knows precisely what will happento fares and service in NortheastOhio after the deal is complete.

The stakes are high because AirTran is the dominant carrier atAkron-Canton and Southwest is the

second-largest carrier at ClevelandHopkins International Airport,only about 50 miles away fromAkron-Canton; about 11% of pas-sengers at Hopkins fly on Southwest.

An optimist might say that themerged AirTran/Southwest will bea stronger airline with the capabilityof adding flights — direct and otherwise — throughout its system. Under such a scenario, themerged airline continues both thedramatic gains AirTran has experi-enced at Akron-Canton and theslow, steady growth it has seen atHopkins.

Mike Boyd of Boyd Group Inter-national, an aviation consultingand research firm in Evergreen,Colo., noted in a report about themerger that “no single market represents even 1%” of Southwest’srevenue, which means the airlineis a long way from hitting a satura-tion point in the cities it serves. Mr. Boyd added that Southwest inthe past rarely has cut service following an acquisition and thatin markets including southern andnorthern California, it flies fromthree airports.

Those points aside, the big concern is that the merged AirTran/Southwest could cut service at oneof the airports in Northeast Ohio,where population growth is minimaland overall demand for air servicerises slowly. In such a market withboth airlines having a presenceclose together, it’s possible thatservice at one or both airportscould be reduced, said Tom Parsons, CEO of BestFares.com.

Nonetheless, Mr. Parsons saidSouthwest’s decision to take overAirTran was driven by a need to“expand quickly to keep up withthe other merged airlines” and that

service cuts don’t appear to be partof the strategy. He also said South-west’s owners didn’t want a legacycarrier to buy the well-regardedAirTran and that AirTran was agood cultural fit with Southwest.

Combining with AirTran “makesgood business sense for Southwest,”Mr. Parsons said, because it canadd 38 cities quickly, and many ofthose markets are on the EastCoast, where Southwest is weakerthan in other parts of the country.

Mr. Parsons said he was “happynot to see” AirTran acquired by alegacy carrier, which he said typically buys out other airlinesand then scales back service in thenewly acquired hubs.

Akron-Canton’s Mr. McQueen isan optimist.

“I don’t think they’re buying AirTran to reduce their scope,” hesaid. “They’re buying it to grow.”

Indeed, an AirTran filing withthe Securities and Exchange Commission indicated that at anAirTran board meeting in Atlantalast Sept. 21, AirTran financial adviser Morgan Stanley presentedbackground on the airline’s effortsto grow, “and discussed its viewsregarding the lack of any other potential merger partners or finan-cial buyers for AirTran.”

The filing stated that among thereasons AirTran agreed to the dealwere the risks of standing alone “ina consolidating, competitive industry” and management’s viewthat “there were no realistic otherpotential candidates for an alter-native business combinationtransaction.”

Shareholder and regulatory approvals are pending. An AirTranshareholder meeting is set forMarch 23. ■

PHOTO PROVIDED

Akron-Canton Airport officials have made the airport’s lack of congestion andease of use a major selling point.


destinations, and offering generallylower fares. But he cautionedagainst drawing a straight line between passenger gains at Akron-Canton and declines at Hopkins.Indeed, as a matter of mathematics,the 700,000-odd passenger gain atAkron-Canton since 2000 doesn’tcome close to accounting for Hopkins’ drop of nearly 4 millionpassengers in the same timeframe.

Hopkins’ drop in passengers is“overwhelmingly a matter of theeconomy and the changing natureof business travel,” he said. Whilethere certainly are cases in which aperson who might previously haveflown from Hopkins now is choosingAkron-Canton due to price or increased flight availability fromthe smaller airport, he said, the region’s bigger challenge is a sloweconomy and a corresponding stagnation in demand for air travel.

One set of numbers neither airport can provide is a precisebreakdown of exactly who is choosingto fly from each airport, and why.

Richard McQueen, president andCEO of Akron-Canton, estimatesthat traffic at the airport is 60%leisure and 40% business, but hesaid there are no hard data to support those figures.

Meanwhile, Ricky Smith, directorof the Cleveland airport system,said, “We think our traffic is morethan 40% business and that fluctu-ates with the time of the year.”(Hopkins’ web site states that the9.49 million passengers who usedthe airport last year were “dividedalmost evenly between businessand leisure travelers.”)

Mr. Smith added that coming attractions in Cleveland — primarilya new convention center, medicalmart and casino downtown — standto boost the airport’s traffic bymaking the city more of a destina-tion for business and leisure travel.

Tom Spradlin, an Independenceresident who has flown from bothairports, said he values the choicesthat come with two easily reachableairports in the region.

“If I can save a couple hundreddollars (on tickets) by going toAkron-Canton, that’s worth it,” hesaid recently during an interview inthe short-term waiting lot at the airport, where he was picking uphis wife from a trip to Florida. Buthe more often flies from Hopkins,which offers more options at moretimes.

Mr. Hobica said that’s a commondistinction for passengers in thesepressed economic times. Averagefares at Akron-Canton run about$100 less than at Hopkins, accordingto federal government data, thoughhe noted that “averages don’t always mean much — specific faresto specific destinations at specifictimes do.”

Akron-Canton can take you tosome popular destinations, including

“From the time peopleenter the airport to thetime they leave ... itshould be an excellentexperience.” – Kristie Van Auken, senior vicepresident and chief marketing officer, Akron-Canton Airport

COMPARING FARES

% change % change’00-’10 ’09-’10

Hopkins $341.49 $337.32 $398.02 $336.00 $389.56 14.1 15.9

Akron-Canton 275.68 277.17 289.80 241.40 283.51 2.8 17.4

The Bureau of Transportation Statistics’ most recent data on average fares are from the third quarter of 2010. Average faresare based on domestic itinerary fares, round-trip or one-way for which no return is purchased. Fares are based on the totalticket value, which consists of the price charged by the airlines plus any additional taxes and fees levied by an outside entity atthe time of purchase. Fares include only the price paid at the time of the ticket purchase and do not include other fees, suchas baggage fees, paid at the airport or on board the aircraft. Averages do not include frequent-flyer or “zero fares” or a fewabnormally high reported fares.

Airport 3Q ’00 3Q ’07 3Q ’08 3Q ’09 3Q ’10

FEBRUARY 28 - MARCH 6, 2011 CRAIN’S CLEVELAND BUSINESS 23

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Atlanta, Chicago, New York and Orlando. But there are, obviously,holes in its lineup; Mr. McQueensaid he’d love to see Akron-Cantonadd flights to cities such as Balti-more, Dallas and Las Vegas. To dothat, he said, the airport must continue to work with its five air-lines to establish “strong relation-ships based on trust and good data”that would enable Akron-Canton tomake the case for expanded service.

Fan favoritesOne thing both airports have in

common is a mastery of social media.Robert Cook, co-founder and

managing director of aviation consulting firm AirGate Solutions,tracks Facebook usage by about130 airports worldwide and findsthat Hopkins, with more than31,500 fans, and Akron-Canton,with more than 20,000 fans, areamong the top five U.S. airports by

that quirky measurement.Akron-Canton passengers even

can take part in a live web chatwith Mr. McQueen on the thirdWednesday of every month from 1p.m. to 2 p.m. (Mark your calendars:The next one is March 16.)

Mr. McQueen says he’s up for

anything during the chats. Most ofthe questions are pretty straight-forward, but one chatter recentlyasked why an airport is called an“airport” rather than a“planeport.”

“I had to wing it on that one,” hesaid. ■

Changes: Airports seevalue in social mediacontinued from PAGE 22


Since 1987, Cleveland Hopkinshas been a Continental hub.That means local passengerscan find more direct flights to

cities such as New York and Chicagothan Pittsburghers, and they can flydirect to cities such as Indianapolisand Rochester, N.Y.

Pittsburgh passengers wouldhave to change planes to get tothose midsize cities because Pitts-burgh International Airport is noairline’s hub.

Cleveland was the smallest of theold Continental’s three domestichubs, the only one in the Midwest.Now after the merger, it is the smallestof eight domestic United hubs.

The talk in the industry is that theairline will choose to route flightsthrough United’s hubs at Chicago’sO’Hare International Airport orWashington Dulles InternationalAirport in the Virginia suburbs.

For now, however, the airline isstanding by its commitment to itsCleveland hub.

Last September, shortly beforetheir merger won government approval, United and Continentalreached an agreement with then-Ohio Attorney General Richard Cordray to maintain the hub atCleveland Hopkins for at least fiveyears.

Failing to live up to that pledgecould cost the airline up to $20 million in damages.

However, days later, with JeffSmisek — theContinental, andnow United,CEO — on thestand, lawyerschallenging themerger in a SanFrancisco law-suit produced aninternal Conti-nental analysis

that suggested the new airlinewould abandon the Cleveland hub. According to that document, Cleveland Hopkins would lose 178of 211 daily flights once the two airlines are fully integrated, whichcould take five years.

Mr. Smisek responded angrily,saying the airline was committed toCleveland and that the documentproduced was only one of severalpost-merger scenarios the airlinegenerated as it was negotiating withUnited.

At a speech here last November,Mr. Smisek said emphatically that,“We are committed to Cleveland.”

He challenged his audience ofbusiness and civic leaders to showtheir support of the airline, meaningtheir commitment to prefer his airline could make a difference inwhether the hub remains.

“Every hub needs to earn its valueevery day,” he said. “The key forCleveland is to have a level of business travel so that we can haveeither consistent profitability orhave that hub’s profitability in aclear line of sight (ahead).”

— Jay Miller

“The Continental Cleveland hubneeds all the passenger demand itcan get,” said Mr. Zannoni in an exchange of e-mails sent during histravels earlier this month. “And I’mnot a fan of Akron-Canton’s strategyof diverting passengers from Hopkins, so I can’t morally supportit — it’s not really cheaper if it endsup costing the entire region theContinental/United hub.”

Like many frequent business trav-elers, convenience is Mr. Zannoni’stop priority, not rock-bottom fares.

So he is watching carefully to findout how air service will be deliveredin Northeast Ohio as the industrytransforms over the next few years.

And that service certainly may bepoised to change as the new UnitedContinental Holdings Inc. mergesits two airlines, and Southwest Airlines Inc. completes its mergerwith AirTran Holdings Inc., thedominant carrier in Akron.

‘Competitive advantage’ at stakeBoth Ricky Smith, director of port

control for the City of Cleveland,and Richard McQueen, the directorof the Akron-Canton Airport, say they are optimistic about their air service remaining intact as thesemergers are completed.

While both acknowledge thateach merger could upset the statusquo, they say the substantial increasein passenger traffic being forecastby the Federal Aviation Administra-tion will allow for continued growth.

Mr. Smith added that the openingof a casino and a new conventioncenter and medical merchandisemart also will spur travel activityinto and out of Northeast Ohio.

Few in the airline industry expectthe Southwest-AirTran deal to hurtthe region’s air service, thoughsome speculate that ClevelandHopkins could benefit if flights areshifted from Akron-Canton toCleveland, where Southwest alreadyhas a significant presence.

On the other hand, to some industry observers, the Clevelandhub very well may be a goner.

“Unfortunately, I don’t see toomuch good news for those peoplewho enjoy so many nonstop flightsfrom Cleveland Hopkins,” said BijanVasigh, a professor of economicsand finance at Embry-Riddle Aero-


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United CEO:Hubs ‘needto earn theirvalue’ daily

Landing: Hub an asset to businessescontinued from PAGE 21 CONTINENTAL IN CLEVELAND

■ Cleveland became a Continentalhub in 1987 after United Airlines severely cut back its service atCleveland Hopkins during the yearsafter air service was deregulated in1978. In January 1987, Continentalonly had six daily flights out of Cleveland. By 1990, it had morethan 150 flights on Continental andits regional affiliates.

■ Chicago O’Hare is the top dailydestination in terms of the number ofUnited or Continental flights fromCleveland, with 10 daily.

■ Houston is the top daily destina-tion in terms of the number of Unitedor Continental passengers travelingfrom Cleveland. (The company doesnot disclose market-specific

numbers.)■ Number of United or Conti-

nental flights each day: 182■ Number of passengers

departing on United or Continentalflights daily: 7,397 (average for12 months ended Oct. 30, 2010)

■ United or Continental desti-nations from Cleveland: 70

■ Percentage of Hopkins flightsthat are United or Continental: 73%

■ Cities where only United orContinental offers direct flightsfrom Cleveland: 52 locations overa one-year period (Some flights areseasonal.)

SOURCES: CONTINENTAL UNITED HOLDINGSINC., U.S. BUREAU OF TRANSPORTATION

STATISTICS, CRAIN’S RESEARCH

trimmed by United Continentalwould be made up by other airlines.

He said his clients are not as concerned about the Southwest-AirTran merger as they are withchanges in the service from the newUnited. The North Olmsted companymanages the travel needs of 200 largeand medium-sized companies.

“They’re concerned about if theCleveland hub is taken away or significantly reduced they’ll beforced to make a lot more connec-tions,” he said.

At least one company is workingon its own to boost travel on United.

William Conway, chairman ofChardon-based Fairmount MineralsLtd., in December sent all the firm’semployees an e-mail urging themto book their travel on the newUnited whenever possible.

“We urge that you select United-Continental Airline when flying inand/or out of Cleveland,” he wrotein a Dec. 21 e-mail. “The United-Continental hub is important toFairmount Minerals and the com-munity as a whole.”

Watching, waitingThe yardstick United will use in

regards to the service it offers atCleveland will be the demand andopportunity for the growth of airservice, said Jim Compton, executivevice president and chief revenue officer for United ContinentalHoldings in a recent interview withCrain’s Cleveland Business.

Last September, Jeff Smisek,then-CEO of Continental and nowCEO of the combined holding company, reached a written agree-ment with Richard Cordray, then Ohioattorney general, to maintain a hubin Cleveland for at least five years.

That agreement only requires thecombined airline to maintain 90%of its flights at Cleveland Hopkinsfor two years and allows for deepercuts in years three, four and five ifbusiness falls off dramatically or theCleveland Hopkins operation is significantly unprofitable.

“(As an airline) you have to beaware of the demand that’s outthere in the marketplace and to besmart about how you managethrough that,” Mr. Compton said.“That’s how hubs become win-winwith airlines and cities; you worktogether and manage that capacityand demand together.

“In Cleveland, we’ll continue towork closely with the Clevelandbusiness leaders and Ricky Smith,the airport director, to make surewe’re watching the challenges outthere and ensuring the sustainablefuture for Cleveland.” ■

Sections editor Amy Ann Stoesselcontributed to this story.

nautical University in DaytonaBeach, Fla., and a managing partnerof the Aviation Consulting Groupconsultancy. “We should see a significant amount of reduction intraffic from Cleveland Hopkins, infavor of Chicago and (WashingtonDulles International Airport).

“The proximity (to those twoUnited hubs) does not favor Cleve-land to remain a viable hub,” hesaid, echoing the sentiments of anumber of industry watchers.

Mike Boyd of Boyd Group Inter-national, an aviation consulting firmin Evergreen, Colo., said if ClevelandHopkins does lose its hub status,United and other airlines still willoffer a reasonable level of service.

“Cleveland will be well-served,but it will be served on the basis ofwhat Cleveland can support,” he said.

Even so, business leaders herestill believe that maintaining Cleve-land Hopkins as a hub is crucial forthe region’s economic development.

As a hub airport, Cleveland Hopkins has more direct flights tomore cities since Continentalbrings passengers to Clevelandfrom smaller cities such as Albany,N.Y., or Flint, Mich., and sends themon from Cleveland to even more cities.

The airport currently offersabout 250 daily nonstop flights to74 destinations; 52 locations over aone-year period are served exclu-sively by United or Continental.

Tom Waltermire, CEO of TeamNEO, the regional business attrac-

tion nonprofit, said having a hub atCleveland Hopkins is an asset whenhe talks to businesses considering aNortheast Ohio location.

“It’s extremely important, becauseright now we enjoy a competitiveadvantage (over nearby cities thatare not hubs),” he said. “It’s an attraction lever that we want to use.”

Not sitting backJoe Roman, president and CEO of

the Greater Cleveland Partnership,said his organization has conveneda task force of business leaders tomarshal an effort aimed at convincingUnited to keep the hub here.

The regional chamber of commercegroup launched the task force withan organizational meeting on Feb.14. GCP already has started surveyingits members and intends to make acase to the new United-Continentalmanagement that the demand forair service here is growing, despite arecent dip in the number of passen-gers using Cleveland Hopkins.

He said the survey, which is stillunder way, found that many expecttheir air travel needs to grow by 5%to 10% over the next one to twoyears. He also intends to argue thatnew projects like the conventioncenter and medical merchandisemart and the growth of so-calledmedical tourism trips to the Cleveland Clinic and UniversityHospitals will add to the need for acontinued high level of air service.

The task force will be led byWilliam Christopher, GCP’s chairmanand a Cleveland-based executivevice president of Alcoa Inc.

Rob Turk, executive vice presidentof Professional Travel Inc. of NorthOlmsted, believes that much of theflight schedule that might be

Smisek says joint airline‘committed to Cleveland’

Smisek


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Pittsburgh business leaders step up after US Airways exitDeparture hurt, but lessons can be learned from city’s reaction to lossBy DAN [email protected]

Losing hub status with anairline isn’t the end of theworld — or even the end ofairline travel — but it’s a

tough jolt for an airport.Just ask Pittsburgh.The other steel city lost its hub

status with US Airways in 2004, thefinal move in a series of cutbacksthat the airline had been making inPittsburgh.

The airline was struggling andfiled for bankruptcy in 2002 andagain in 2004. It cut flights and demanded concessions, includingreduced fees, from the airport. ButPittsburgh International Airportofficials did not give in, and USAirways finally pulled hub statusfrom Pittsburgh in November2004.

Along the way, traffic at the airport 20 miles from downtownPittsburgh plummeted faster thananything tied to aviation shouldfall — from nearly 20 million passengers traveling through thefacility in 2001 to only 8 million in2009 and 8.2 million in 2010.

And yet, over that same 10-yearperiod, the number of area residentsflying in and out of the airporteach year has roughly doubled,from 2 million to 4 million, saidBrad Penrod, executive director ofthe Pittsburgh airport.

When US Airways pulled backon its operations, competition increased and other carriers wereable to move in and take some ofits old routes, he said, offering lower fares at the same time. Thenumber of cities with direct flightsto and from Pittsburgh dropped,from more than 100 to 38, he said,but fares also dropped.

In fact, Pittsburgh went from being one of the most expensivecities to fly from to becoming oneof the cheapest, Mr. Penrod said.

While the average U.S. domesticfare increased by about 1% between2000 and 2010, the average airfareat Pittsburgh dropped by 28.3%,according to data from the federalBureau of Transportation Statis-tics.

Down to businessThat’s not to say there hasn’t

been pain — or that Pittsburghdoesn’t wish it had been able tokeep its hub status, said Ken Zapinski, senior vice president forthe Allegheny Conference on Community Development, a groupof business and civic leaders focused on regional economic development issues.

The Greater Pittsburgh Chamberof Commerce and companies suchas PNC Financial Services referredquestions to Mr. Zapinski, whomthey said was the business com-munity’s expert and spokesman ontransportation and air-service issues. Mr. Zapinski says it’s thebusiness community itself that hasenabled Pittsburgh to keep flyingto the degree that it has.

“By the end of 2003, it was clearto everybody that the region neededto be on top of what was going onin the aviation industry,” he said.

So business leaders, the airportcommission, the Allegheny Conference and local governmentofficials formed the Regional AirService Partnership that same year,he said. Its mission was and con-tinues to be to market Pittsburghto other airlines — making surethey were aware that new routeswere opening up in Pittsburgh —and it worked.

The business community calledmany of the shots, he said, by determining which cities were important and by promising tosupport new flights with their busi-ness. Two goals were established.

“We wanted to maintain twice-daily nonstop service to the 30most important business destina-tions, and we wanted to make sureour ticket prices in Pittsburgh werebelow the national average,” Mr.Zapinski said.

The Partnership was proactivein identifying carriers that wouldbenefit from newly availableroutes and actively marketingthose routes to those airlines.CEOs often attended the meetings,flying with Partnership staff tomeet with airline executives. Theyshared their corporate strategies

and discussed their present and future employee travel needs, asonly CEOS could, Mr. Zapinski said.

As a result, AirTran increased itsroutes to Pittsburgh, Southwest began flying to Pittsburgh in 2005and Jet Blue began servicing thecity in 2006.

Today, Pittsburgh has good airservice in the eyes of Mr. Zapinski,along with some of his corporatebackers.

“As a global company that hascalled Pittsburgh home for 142years, Heinz and our employees arewell served by the access and convenience that the Pittsburgh International Airport continues toprovide,” said Michael Mullen, aspokesman for H. J. Heinz Co. inPittsburgh.

Not without its casualtiesStill, pain has been felt in and

around the airport itself. Large portions of the airport now are darkand mothballed, said Mr. Penrod,the airport’s executive director. Theairport maintains the vacant areasin the hope that more carriers andflights will come to use them — or it could even become a hub for another airline some day, he said.

There has been significant job loss.For US Airways alone, Pittsburgh employment has gone from about13,000 in 2001 to about 2,500 today,Mr. Penrod said. An unknown num-ber of other jobs and businesses, sup-ported by US Airways and its people, likely were affected, he said.

“Those $80,000-a-year US Airways guys who worked at thehub all bought new Ford F-150severy year or two,” he said.

The lesson for Cleveland might be

A LONG, SLOW DESCENT AT PITTSBURGH INTERNATIONALA look at yearly passenger traffic at Pittsburgh International Airport, which in 2004lost its hub status for US Airways; the airline employed 13,000 at the airport in2001; now, that number is 2,500:

Year Total traffic (millions) % change2001 19.9 0.6

2002 18.0 -9.6

2003 14.3 -20.9

2004 13.3 -7.0

2005 10.5 -21.0

2006 10.0 -4.7

2007 9.8 -1.6

2008 8.7 -11.3

2009 8.0 -7.8

2010 8.2 2.0

to focus on triage the way that Pittsburgh has — and get the business community involved, saidMr. Zapinski. A key to maintainingservice, he predicts, will be market-ing the location to airlines that aremore focused on efficiency thanfinding expansion opportunities.

It might even cost money —businesses and local governmentshad to guarantee revenue for twoyears in order to get Delta Airlinesto begin a fight from Pittsburgh toParis in 2009. The economic crisis,coupled with high fuel prices thatdrove up ticket prices, meant thePartnership had to pony up $5 million last year to meet that guarantee, he said.

It’s too early to say for sure howthe flight will perform this year,but so far it’s tracking well aheadof last year’s performance in termsof ticket sales, according to Mr.

Zapinski, who said he hopes thePartnership won’t have to write asecond check to Delta.

Glass half-fullIn the meantime, while neither

Mr. Zapinski nor Mr. Penrod saidthey would classify the loss of USAirways as a blessing in disguisefor the airport or region, they bothsaid the community has been ableto salvage some positives.

Some businesses would ratherhave cheap, easy access to a fewkey cities, than more expensive access to many more, according toMr. Zapinski.

“For some companies right now,our level of service to the New Yorkmarket, the Chicago market, thePhiladelphia market, or Boston, orto Atlanta — is as good as it was inUS Airways’ heyday, and it’s muchcheaper,” he said. ■

SOURCE: ALLEGHENY COUNTY (PA.) AIRPORT AUTHORITY


responded by stepping up its ownmarketing efforts. One recentCleveland Hopkins television adtouted the freshened and expandedfood and shopping services at theairport. And recent ads targetingbusiness travelers have used the tagline, “More Flights. More Destina-tions. More Non-stops.”

Below are edited excerpts from thejoint interview with Messrs. Smithand McQueen that took place thismonth at Cleveland Hopkins.

QQ I understand this is the first timeyou two airport directors havemet. So let’s start with a sort ofget-to-know-you question. Whatdoes each of you see as the roleof your airport in the region? AA Mr. McQueen: We see ourselvesas an airport that serves NorthAmerica. We just completed a runwayextension that (will land Boeing)737s that can get to the West Coastand to Mexico and the Caribbean,which we couldn’t get to before.

We like to think that we add valueto the region. We have the low-costcarrier AirTran that has providedsome great fares for business travel-ers as well as to leisure travelers. AA Mr. Smith: This economy is notso much a regional economy or anational economy as it is a globaleconomy. We think Hopkins pre-sents an opportunity for this regionto connect to the world.

QQ I have to believe the biggestchanges thrown at you by the airlines in the last year were themergers of Continental Airlinesand United Airlines and Southwestand AirTran.

With the United and Continentalmerger, Mr. Smith, have you seenany changes?AA Mr. Smith: From the standpointof the airport interaction withthem, it’s been pretty much seam-less. We’ve established relationshipswith the new players and had discus-sions with them about their futurehere. Airlines tend not to look outfurther than six months; airportslook out 10, 20, 30 years. But to theextent they can predict (the future),they’ve been pretty open with us.

Mr. McQueen, I assume it’s tooearly to tell about the Southwest-AirTran merger. AA Mr. McQueen: The Departmentof Justice hasn’t even ruled on ityet. What we see though in the nearterm is nothing changes.

QQ Will the Southwest-AirTran merger mean the end of the low-cost carrier?AA Mr. McQueen. Southwest is a carrier that most airports over theyears have wanted to have in theirmarketplace. They have always setthe standard for low-fare carriers,and I think that is going to continueas they go forward.AA Mr. Smith: (Lower fares) are theircompetitive advantage, and I don’tthink they are going to change that.

In fact, the airport managerssee a growing role for Southwestfor business travelers.AA Mr. Smith: Given their tight budgets(businesses) appreciate the lowerfares, the lower cost of flying (onSouthwest).

The bigger challenge for South-west Airlines with respect to thebusiness community is the nonstoproutes. Continental has a numberof nonstops in their system and thebusiness community has an appetite


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Hub, no hub: Some upsides to bothCertainty helps, butoverdependence onone airline is a riskBy AMY ANN [email protected]

When the Southwest-AirTran and United-Continental deals wereannounced last year,

the Indianapolis International Airport took them as a chance totout the positives of not having ahub.

A September 2010 news releaseposted on the airport’s web siteeven put this spin on the develop-ments: “The good news is that because Indianapolis is not a hubfor any individual airline, IND has agood mix of passenger carriers,which is key to maintaining lowfares and overall airport strength.

“In fact, unlike other U.S. airports, because IND is less depen-dent on one particular passengercarrier, the central Indiana region is well-positioned for stable, con-tinued growth, despite turbulencein the airline industry.”

How’s that for a clear-skies-ahead outlook?

Universally, aviation and economic development officialsproclaim the benefits of having aconnecting hub, or an airportwhere an airline aggregates passengers. Hubs mean more direct flights, more visitors and aslew of economic benefits.

But — as in the case of the hub-less Indianapolis airport —there are other perspectives to behad and lessons to be learned.

In Indianapolis, for example,there is not a dependence on anyone airline. “We’ve never really feltany panic” when a single airline reduces services, said Chris Matney,Indianapolis’ air service director.

As of August 2010, the year-to-date market share of all passengercarriers in Indianapolis was: Delta,25%; Southwest, 17.5%; AirTran, 16.5%;US Airways, 13%; American Air-lines, 9%; United Airlines, 7%; Con-tinental, 6%; Frontier/Midwest, 4.5%;and other (Air Canada, etc.), 1.5%.

Make no mistake; Mr. Matneydoes not turn up his nose to the opportunities that come with havinga hub. Nor does it mean that theairport does not continuously workto keep its operating costs down whileaiming to grow and add new markets.

Still, he said, there are benefits to

having a good mix of carriers. “It’sthat balance of airlines that reallyhas allowed us to develop a fairlyeven relationship with all of ourpartners,” Mr. Matney said.

Milwaukee: ‘Best of both worlds’The Milwaukee airport, on the

other hand, has had its fair share ofups and downs when it comes tohaving hubs.

“We’ve had a very interesting halfa dozen years here with airlines,” saidPat Rowe, spokeswoman for GeneralMitchell International Airport.

Both AirTran and Frontier airlines currently have hubs at Milwaukee. The Frontier hub wasmaintained after the airline’s bank-ruptcy and subsequent acquisitionin 2009 by Republic Airways HoldingsInc., while the AirTran-Southwestdeal means “the next chapter ofthat book remains to be written,”Ms. Rowe said.

AirTran has the largest marketshare at Milwaukee, while Frontierruns at a very close No. 2; Delta andSouthwest are Nos. 3 and 4, respec-tively.

Ms. Rowe sees the current setup as“the best of both worlds.” No airlinecompletely dominates the market,which means more competitive fares,and the region still gets the elevatedservice levels of having a hub.

“What you lose when you don’thave any hub at all is service tosmall communities,” she said.

December 2010 marked the 16th

straight month of record passengergrowth at General Mitchell, according to statistics from the airport. The airport served 774,341passengers, an increase of 6.36%(46,274 passengers) over December2009’s 728,067 passengers.

Peter Beitzel, vice president of infrastructure and internationalbusiness for the Metropolitan Milwaukee Association of Commerce,said nonstop air service is what thebusiness community really wants.

“If Milwaukee went back to

LIST OF DOMESTIC HUBS FOR TOP AIRLINES■■ Delta Airlines: Atlanta, Cincinnati,

Detroit, Memphis, Minneapolis-St.Paul, New York (JFK), Salt Lake City

■■ United/Continental: Chicago(O’Hare), Cleveland , Denver, Houston (George Bush), Los Angeles,Newark, N.J., San Francisco, Wash-ington Dulles, Guam

■■ Southwest (Top 10 cities bydeparture as of November 2010;Southwest does not refer to theuse of hubs): Las Vegas, Chicago

(Midway), Phoenix, Baltimore/Wash-ington, Denver, Houston (Hobby),Dallas (Love Field), Los Angeles,Oakland, Orlando

■■ American Airlines: Chicago(O’Hare), New York, Dallas/FortWorth, Miami, Los Angeles

■■ US Airways: Charlotte, Philadel-phia, Phoenix

■■ AirTran: Atlanta, MilwaukeeSOURCES: BUREAU OF TRANSPORTATION

STATISTICS, CRAIN’S RESEARCH

Interviewcontinued from PAGE 21

for more long-haul direct flights asopposed to the puddle-jumping thatis characteristic of Southwest Airlines.

But I imagine that as they beginto take a larger share of the domesticmarket that you’ll begin to see themupgrade their aircraft. You’ll beginto see longer flights out of Southwestand the business community willhave a growing appreciation forthat. They’re not there at this pointbut there is a growing segment ofthe business community that iswilling to make that decision to flySouthwest or AirTran because ofthe savings experience, even thoughthere is some inconvenience.AA Mr. McQueen: I would echo that.There are some inconveniences whenyou travel (low-cost carriers).

QQ I know that Southwest operatesin some metropolitan areas fromseveral airports. But what if South-west management says, “Let’sleave Akron-Canton and consolidateour service into Cleveland Hopkins?”AA Mr. Smith: I never think aboutthat (laughter). If you look at theBaltimore-Washington area, South-west is operating in multiple airportsin what is the same market.AA Mr. McQueen: In any type of environment there are always ebbsand flows in your air service — at allairports. So there will be some balancing as the landscape changesthrough these mergers. And at bothof our airports we have other carrierswho will help fill in that void.

For example, Delta and US Airwaysare at both of our airports. If thereis a destination where they can makemoney, we have to be prepared to goand educate them ... and capitalizeon that opportunity.

QQ What if there was no longer ahub at Cleveland Hopkins?AA Mr. McQueen: We’ve never had ahub at Akron-Canton so I haven’thad to worry about that. We justwant to be best the partners we canbe with the (airline) partners wehave. I wish I had that problem.AA Mr. Smith: What you get with ahub is the service to the small markets that you otherwise wouldn’tget. This region gets servicethrough the hub that it could notsupport (without the hub).

QQ Mr. McQueen, this is the toughquestion, I guess. How would youfeel if the growing service atAkron-Canton ends up being areason that Cleveland Hopkins loses its hub status?AA Mr. McQueen: I don’t see (Akron-Canton) playing a role in that at all.Most of our traffic comes from ourcore market. Sixty percent of ourtraffic comes from our core marketof Summit and Stark counties. Wehad an all-time record year last yearwith 1.5 million passengers. I think(Hopkins) is seven times that.

There are synergies in all regionswhere you have more than one facility. ... Business begets business.We think that we stimulated morepeople out of Cleveland Hopkins togo to Atlanta when AirTran came in(to Akron-Canton) and lowered themarket price because (the other air-lines) matched (the lower price).

We think we can work togetherand it shouldn’t be a problem.AA Mr. Smith: I am hopeful that withthe acquisition of AirTran, whichmakes Southwest a stronger airlinethan it is today, that we will begin toexperience the “Southwest effect”(low fares enticing new travelers) inthis market. So the market will growand expand with new travelers whoaren’t using air service because theycan’t afford to.

having no real hub, that would hurtthe business community a lot,” Mr.Beitzel said.

Cincinnati: Delta ‘right-sizing’The 15-county, tri-state region

surrounding the Cincinnati/Northern Kentucky InternationalAirport knows what it’s like to havea hub and worry about what the effects of losing it might be.

In 2004, near the heyday of DeltaAirline’s hub status at CVG, the airport served 22 million passengerswith 655 average daily departuresto 140 nonstop cities. Following aperiod of cuts by Delta, the airportserved nearly 8 million passengersin 2010 with 200 average daily depar-tures to 70 nonstop cities, accordingto figures provided by the airport.

“We feel the air service levels nowdo not meet local communityneeds,” said Barbara Schempf, director of public and government affairs at Cincinnati/Northern Kentucky International Airport. Shesaid the top goals for CVG at the present include working with Deltato retain the CVG hub, and workingto get additional air service.

Douglas Moormann, vice presidentof economic development for theCincinnati USA Regional Chamber,said the reduction in service has notgone unnoticed by site selectors,although he said it’s impossible toquantify opportunities lost.

“It’s safe to say a reduction in thestatus of the hub … has a little bit ofa chilling effect on your business attraction efforts,” he said.

However, despite moves to“right-size” its CVG hub, Delta hasbeen willing to work with the region, he said. For example, cutsoriginally resulted in the loss ofgood access to the East Coast in asingle one-day trip.

“We went to Delta and said, ‘This is a real problem,’” said Mr.Moormann, who said the singlebiggest factor the region lost due tothe cuts has been convenience. But,he noted, “We still have very strongaccess.”

The lesson for Northeast Ohiofrom Cincinnati’s experience, Mr.Moormann said, might be this:“Look for places where the airlinecan help you.”

Cleveland: ‘Heartbreak Hotel’?Mike Boyd of Boyd Group Interna-

tional, an aviation consulting firm inEvergreen, Colo., said airlines are in aperiod of adjusting to economics andmarket forces.

The industry isn’t growing, andairlines aren’t in the market to setup hubs, so if Cleveland loses itshub, there may not be much hopefor another carrier to take its place.

As for Cleveland’s chances of getting a replacement hub for Continental, Mr. Boyd character-ized it this way: “Right up therewith an Elvis sighting.” ■


the largely vacant KeyBank Invest-ment Center, 800 Superior Ave.

Chaim Schochet — the 20-some-thing investment executive who man-ages Optima’s Cleveland investmentswith three- or four-day weekly tripshere from Miami — has noted thatthe company’s properties have notreally competed with one anotherin this market.

Optima’s 55 Public Square officetower is an older, class C buildingthat is seen as a moneymaker because it mainly serves lawyersdue to its proximity to downtown’scourthouses. While One ClevelandCenter and Optima’s most recentbuy — the Penton Media CenterBuilding at 1300 E. Ninth St. — areboth better class B buildings, insiderssay they tap different markets dueto technical matters such as floorsizes and shapes.

Then there’s the 1 million-square-foot Huntington Building, down-town’s second-largest office building,which is considered a redevelop-ment property. That’s because itslargest tenants, from HuntingtonBank to accounting firm Ernst &Young, will exit the 1923-vintagelandmark by 2012.

In the mood to buy?Sources familiar with the situa-

tion say Optima now is among thebidders pursuing KeyBank Invest-ment Center. The building’s purchaseby Optima would give the companycontrol over another potential redevelopment project.

Alex Jelepis, a Grubb & Ellis Co.senior vice president, said thelender-owned building is up forsale, but he would not comment onprospective bidders. Mr. Schochetsaid he was aware that the buildingis available from a unit of LennarProperties of Miami, but he declinedto say if Optima is pursuing it.

Mr. Schochet last week said hedid not have time to discuss Optima’sbig-picture plans for Cleveland because he was too busy closingthree property purchases. He wouldn’tsay where they are located, but noted that none is in Cleveland.

His comments show Optimacontinues its acquisition binge as

other investors only recently havestarted to return to the nation’s realestate market after the most bruisingrecession since World War II ended.

Some of Optima’s out-of-towndeals are head-turners. They showboth its desire to diversify its holdings geographically — andland major properties while manycompetitors were stalled — and itsvast financial resources. They alsoshow Optima has the resources todig deeper into Cleveland if it hasmore appetite here.

For instance, Optima last monthin Dallas scooped up the formerheadquarters of EDS Corp., whichnow is the headquarters of Compu-Com. CompuCom, a computermaintenance firm, leased back partof the 255,000-square-foot complexof four buildings. Previously, Optimabought the 1.5-million-square-footformer Motorola Corp. plant inHarvard, Ill., with plans to redevelopthe property that once housed5,000 workers.

On the contraryMr. Schochet’s terse explanation

for the buying spree in those citiesis the same one that he voicedwhen discussing his first Clevelandacquisition in 2008. He said backthen that Optima’s wealth was generated in the 1990s when it participated in the privatization of Soviet-bloc steel, tire and telecom-munications companies. Real estatein the United States presented a diversification play after the com-pany moved to Miami from EasternEurope in the 1990s.

Bargain-basement building pricesin downtown Cleveland, due to the sour local economy and weakrents, attracted Optima. Competing developers even today say the $20million Optima shelled out for the Huntington Building was asweet price, even though it will take millions of dollars of risk capital toremake the structure.

David Browning, managing directorof the Cleveland office of CB RichardEllis, said he views Optima as a classic contrarian investor.

“I believe their end game is tobuy these assets at a fair price,” Mr.Browning said. “In the long run,

they have faith in the market, andbelieve, based on these prices, theywill generate a profit when theysell.”

Mr. Browning noted that Optimais buying in Cleveland at a timemost institutional investors are focused on the more glamorous,24-hour cities of New York, Chicagoand Miami.

“Institutional investors won’ttouch a Cleveland, a Columbus or aCincinnati now,” Mr. Browning said.

Cornering the marketThe addition of one more building

in Optima’s stable may prove significant for downtown office tenants as a group.

That next building will give Optimaenough variety and scope that itmay be able to firm up the city’srents. That strategy was used by thelate Richard E. Jacobs as he boughtskyscrapers and built new ones inthe late-1980s in Cleveland. But Mr.Jacobs’ advanced age shortened thelength of his run. The loss of down-town tenants such as British Petro-leum also crippled the city’s officemarket for years.

With redevelopment propertiestied up under its ownership andbuildings such as Penton and OneCleveland Cleveland in its stable,Optima might be able to resist tenant demands for lower rents.

Mr. Browning said a disciplinedmarketplace stands to be a goodthing for downtown. He cited DukeRealty Corp.’s drive from the mid-1990s to the late-2000s to commandeer much of Cleveland’ssuburban office market.

“The other building owners benefited from Duke’s leadershipand discipline in the market,” Mr.Browning said. “If anything, the lastthree years have shown us that realestate is a service business. Whenthe owners’ and the tenants’ interestin operating properties gets out ofsync, things do not go well.”

Mr. Schochet said Optima is along-term owner and does not lookto sell when real estate turns around.

Kevin Piunno, a longtime Cleve-land real estate broker who servesas Optima’s leasing representative,said he believes Optima is investing


leaders with the governor’s budget,which is due to be unveiled nextmonth and is expected to cut statesupport to local governments. Municipal leaders’ concern is thatif they don’t support a substantialportion of the proposed legislation,which would allow them to reducepersonnel costs, the governor andstate legislators would have a reasonto be less sympathetic when it comestime to dole out limited local government funds.

Proceed with cautionNot surprisingly, Republican

officials tend to be more comfort-able with the pending legislation,but even they are not ready to wipeout collective bargaining entirely.

Bay Village Mayor DebbieSutherland, a Republican, said shebelieves collective bargaining “servesa purpose, and I would be cautiousabout eradicating the entireprocess.”

“But I think that there are somethings that can be improved, bindingarbitration being one of them,”Mayor Sutherland said.

Under binding arbitration, bothsides agree that a neutral third party — usually an attorney or an unaffiliated labor-managementprofessional — will evaluate the final positions of both sides andhave the last word on final terms of the agreement. Some public officials believe union sway oversome politicians has led to agree-ments overly generous to unionworkers.

Mayor Sutherland noted, though,that any changes made now in thelaw will not give cities and schoolboards quick financial relief.

“We already have contracts thatare in place,” she said. “Whateverchanges may come out of theprocess (in the Legislature), this isnot a short-term fix for us, and thismay not be implemented for somemunicipalities for three years.”

Bargaining backers

Cleveland Mayor Frank Jackson,a Democrat, is less enthusiasticabout legislative changes.

“I support collective bargaining,”Mayor Jackson said. “We’ve beenable to work through these issuesbecause we’ve developed relation-ships. But we do need some changeswith how we interact with eachother.”

Mayor Jackson said he would liketo be able to change work rulesmore easily.

“But at the same time if we donot protect the work force, they willlose out and I don’t think thatshould happen,” he said. “Whatthose work rule changes and pro-tections should be, should be discussed. But we shouldn’t wipeout all of collective bargaining.”

Likewise, Cuyahoga County Executive Ed FitzGerald, a formerLakewood mayor, said he never hasfelt constrained by the current

collective bargaining rules. “(As mayor of Lakewood) we

took numerous things to collectivebargaining and we almost alwayswon,” Mr. FitzGerald said.

“When people are talking abouthorror stories in binding arbitra-tion, I personally did not experiencethat.”

Mr. FitzGerald said the countyjust completed a round of labor negotiations where employees agreedto no pay increases and five fur-lough days.

“I discussed this with the governor(earlier this year) and he said, ‘I’mgoing to do this,’” Mr. FitzGeraldrecalled. “I told him honestly Ihaven’t had trouble reducing mybudget under the current rules.”

Changes afoot?At the end of last week it appeared

that some changes in the legislationwill be made.

Amendments last week movedaway from the complete elimina-

tion of collecting bargaining rightsfor state employees — state workerswould continue to bargain forwages but not benefits or workingconditions.

However, another amendmentto the bill, which was introduced bystate Sen. Shannon Jones, a Repub-lican who represents part of theCincinnati area, would prohibit allpublic employees from striking.Earlier bill language allowed non-safety workers the right to strike toa limited degree.

And while the bill initially took away binding arbitration as a way to settle disputes, Republican senators last week were looking foran alternative third-party contractreview process.

State Sen. Kevin Bacon, Republicanchairman of the Insurance, Commerce and Labor Committee,set a deadline of last Friday foramendments, though he had notscheduled additional hearings onthe bill. ■

Bill: Final version of proposed legislation may look different

Optima: Prices draw company here



FILE PHOTO/RUGGERO FATICA

The Huntington Building is part of the Cleveland portfolio recently amassed byMiami-based Optima Management Group.

for the future — as in for future gen-erations of the Schochet family.

“I’ve not seen anything like thisbefore,” Mr. Piunno said. “They really,really believe in Cleveland. They believe they had a chance to buy before Cleveland rebounded fromthe recession and the new conven-tion center and casino. They also

like the Midwest because of its industrial and agricultural basis,like the Ukraine.”

Mr. Schochet has rebuffed multiplerequests since last September fromCrain’s for in-depth interviews.

“That’s not him,” Mr. Piunnosaid, as Mr. Schochet wants to shunthe limelight. ■



PROFESSIONAL ASSOCIATIONS BASED IN NE OHIORANKED BY NUMBER OF MEMBERS(1)

Rank

Name of firmAddressPhone/Web site

Number ofmembers

Members NEOhio

Year founded Publications Meetings Description or mission Top executive

1ASM International9639 Kinsman Road, Materials Park 44073(440) 338-5151/http://asmcommunity.asminternational.org

34,524 1,5001913

AM&P, InternationalThermal Spray, EDFA

Aeromat 2011, Materials andProcessess for Medical Devices,International Thermal Spray Conf.

Serves materials professionals, nontechnicalpersonnel and managers by providing high-quality materials information, education andtraining

Stanley C. Theobaldmanaging director

2Workplace Benefits Association9221 Ravenna Road, Suite D8, Twinsburg 44087(330) 425-8399/www.workplacebenefits.org

22,500 NA1997 NA NA NA Walt Podgurski

CEO

3International Association of Information Technology AssetManagers1137 State Route 43, Mogadore 44260(330) 628-3012/www.iaitam.org

5,500 NA1998 NA IAITAM Annual Conference &

Exhibition NA Barbara RembiesaCEO, founder

4International Society of Explosives Engineers30325 Bainbridge Road, Cleveland 44139(440) 349-4400/www.isee.org

4,500 1501974

The Journal of ExplosivesEngineering, ISEEBlasters' Handbook

Annual Conference on Explosivesand Blasting Technique; OhioDrilling & Blasting Conference

Provides technology, education and informationto promote the safe, secure and controlled useof commercial explosives

Jeffrey L. Deanexecutive director,general counsel

5Institute of Mathematical StatisticsP.O. Box 22718, Beachwood 44122(216) 295-2340/http://imstat.org

4,155 101935

Annals of AppliedProbability, Annals ofApplied Statistics

NATo foster the development and dissemination ofthe theory and applications of statistics andprobability

Elyse Gustafsonexecutive director

6North American Police Work Dog Association4222 Manchester Ave., Perry 44081(888) 422-6463/www.napwda.com

3,300 1751977

NAPWDA News & Eventsto Enrich, Enlighten &Enable

2 meetings, 20 state workshops,1 national workshop

Dedicated to assisting police work dog teamsthroughout the world NA

7National Association of College Stores500 E. Lorain St. , Oberlin 44070(800) 622-7498/www.nacs.org

3,100 301923

The College StoreMagazine CAMEX (CAMpus Market EXpo)

To be the leading advocate and resource forcollege stores — helping them connect, grow,and succeed

Brian CartierCEO

8Association of Nurses in AIDS Care3538 Ridgewood Road, Akron 44333(330) 670-0101/www.nursesinaidscare.org

2,500 751987

Journal of theAssociation of Nurses inAIDS Care

Annual convention Education and support of HIV nursesAdele A. Webbexecutive director,CEO

8Herb Society of America9019 Kirtland Chardon Road, Kirtland 44094(440) 256-0514/www.herbsociety.org

2,500 2251933

The Herbarist and Herbof the Year Guides

Educational conference andannual meeting of members

Promotes the knowledge, use and delight ofherbs through educational programs, researchand sharing the experience of its members

Katrinka Morganexecutive director

10Society for Photographic Education2530 Superior Ave., Suite 403, Cleveland 44114(216) 622-2733/www.spenational.org

2,150 501963

Exposure Journal,members' newsletter

SPE National Conference, SPERegional Conferences

Provides a forum for the discussion ofphotography and related media as a means ofcreative expression and cultural insight

Virginia Morrisonexecutive director

11Society for Investigative Dermatology526 Superior Ave. East, Suite 540, Cleveland 44114(216) 579-9300/www.sidnet.org

2,000 501937 NA Annual meeting NA

Rebecca MinnilloJim Rumseyexecutive directors

12The North American Menopause Society5900 Landerbrook Drive, Suite 390, Mayfield Heights 44124(440) 442-7550/www.menopause.org

1,931 741989

Menopause (journal),Menopause Practice: AClinician's Guide

NAMS Annual MeetingTo promote the health and quality of life of allwomen during midlife and beyond through anunderstanding of menopause and healthy aging

Margery L.S. Gassexecutive director

13Marble Institute of America28901 Clemens Road, Suite 100, Cleveland 44145(440) 250-9222/www.marble-institute.com

1,710 151944

Newsletter, technicalmanual, consumermaterials

StonExpo/Marmomacc of theAmericas

Technical resource for industry and designprofessionals; establishes standards andspecifications for stone

Garis F. Distelhorstexecutive vicepresident, CEO

14Rubber Division of the American Chemical SocietyP.O. Box 499, Akron 44309(330) 972-7815/www.rubber.org

1,600 3001909

Rubber Chemistry andTechnology

Rubber Expo and AdvancedMaterials in Health Care

To expand the elastomeric profession andindividual development through educational,technical, and inter-active activities

Edward L. MillerExecutive director

15American Society of Sanitary Engineering901 Canterbury Road, Suite A, Westlake 44145(440) 835-3040/www.asse-plumbing.org

1,306 521906

Plumbing StandardsMagazine

Annual Meeting, E.J. ZimmerTechnical Seminar & Exhibition

ASSE is an ANSI accredited standardsdeveloper and certification body

James Bickfordinternationalpresident

16United States Association for Energy Economics28790 Chagrin Blvd., Suite 350, Cleveland 44122(216) 464-5365/www.usaee.org

895 141994

Dialogue, Working PaperSeries

Annual North Americanconference

A non-profit that advances the understandingand application of economics across all facetsof energy development and use

David L. Williamsexecutive director

17American Association of Neuropathologists2103 Cornell Road, Cleveland 44106(216) 368-3671/www.neuropath.org

845 101959

Journal ofNeuropathology &Experimental Neurology

Annual meetingThe association addresses the needs ofphysicians and scientists in the field ofneuropathology

NA

18American Holistic Medical Association23366 Commerce Park, Suite 101B, Beachwood 44122(216) 292-6644/www.holisticmedicine.org

800 851978 NA

iMosaic (Integrative MedicineOffering Science-basedAlternatives In Collaboration)

To help create a healthy world by promotingholistic/integrative principles and practice inhealth care

Steve L. Cadwellexecutive director,CEO

19Insurance Media Association9221 Ravenna Road, Suite D8, Twinsburg 44087(888) 282-1765 /www.insurancemedia.net

650 NA2003 NA NA NA Walter Podgurski

chairman, CEO

20Association of Specialty Cut Flower GrowersP.O. Box 268, Oberlin 44070(440) 774-2887/www.ascfg.org

600 151988 The Cut Flower Quarterly National Conference and Trade

ShowThe ASCFG provides production and marketinginformation to field and greenhouse cut flowergrowers

Judy Laushmanexecutive director

20United States Trager Association13801 W. Center St., Suite C, Burton 44021(440) 834-0308/www.tragerus.org

600 102001

Quarterly membershipnewsletter Annual membership conference Non-profit membership organization supporting

Trager practitioners in the USA NA

22Russian American Medical Association36100 Euclid Ave., Suite 330-B, Willoughby 44094(440) 953-8055/www.russiandoctors.org

550 1202002 RAMA Journal RAMA annual national conference Improvement of health care system

Boris Vinogradsky,MDchairman

23American Institute of OrganbuildersP.O. Box 35306, Canton 44735(330) 806-9011/www.pipeorgan.org

450 361974

Journal of AmericanOrganbuilding

Annual Convention (September orOctober Yearly) Pipe organ building education Robert Sullivan

executive secretary

23Precision Machined Products Association6700 W. Snowville Road, Brecksville 44141(440) 526-0300/www.pmpa.org

450 421933

Production MachiningMagazine

Precision Machining TechnologyShow

Provide programs and services to the precisionmachining industry in North America.

Michael B. Duffinexecutive director

25Hard Hatted Women4220 Prospect Ave., Cleveland 44103(216) 861-6500/www.hardhattedwomen.org

400 2501979 NA NA

Provides expertise for the successfulrecruitment and advancement of women in high-wage trade and technical careers

Terri Burgess Sanduexecutive director

26National Confectionery Sales Association10225 Berea Road, Suite B, Cleveland 44102(216) 631-8200/www.candyhalloffame.org

350 201898 Yearbook and roster

Annual general meeting, twoboard meetings and Candy Hallof Fame Banquet

Administers the Candy Hall of Fame andprovides scholarships to industry relatedstudents

Steve Forsterexecutive director

27American Aging Association2103 Cornell Road, Room 5125, Cleveland 44106(216) 368-3671/www.americanaging.org

201 41970 Age Annual meeting

To promote biomedical aging studies directedtowards increasing the functional life span ofhumans

NA

28Tire SocietyP.O. Box 499, Akron 44309(330) 972-7815/www.tiresociety.org

159 751979

Tire Science andTechnology

Annual meeting and conferenceon tire science and technology

An Ohio not-for-profit whose charter is toincrease and disseminate knowledge as itpertains to the science and technology of tires

NA

Source: Information is supplied by the companies unless footnoted. Crain's Cleveland Business does not independently verify the information and there is no guarantee theselistings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. Business lists and The Book ofLists are available to purchase at www.crainscleveland.com.(1) Source: Association websites, Associations Unlimited, individual associations. Fraternities, sororities, unions, honor societies and religious organizations are not listed.

RESEARCHED BY Deborah W. Hillyer


new emergency department and intensive care unit.

Ms. Murphy said it was too earlyto speculate what route Fairviewmight take concerning the helipad.For now, helicopters carrying patientswith continue to land in Tyler Fieldin the nearby Cleveland Metroparks,which is about a 15-minute drive upLorain Road by ambulance to thehospital.

“We’re going to move forwardwith the project and look at other avenues we can take,” Ms. Murphysaid.

Shifting gearsFairview’s planned renovations

would come just a few months afterthe Clinic spruced up Hillcrest Hospital in Mayfield Heights — itseastern hub — with a $163 millioncampus upgrade. The Clinic is workingto transform its community hospi-tals to ensure they aren’t duplicatingservices. Perhaps the most visiblemove the Clinic made in this area iswhen it eliminated more than 200positions last November as it consol-idated services and created “centersof excellence” across the health system.

In the past, Ms. Murphy said,many of the Clinic’s communityhospitals offered the same servicesand acted like competitors ratherthan partners. Fairview, consideredby many as the Clinic’s western hub,is a key component of that restruc-turing.

Lakewood Hospital, which sits justthree miles away, has shifted manyof its services to Fairview. Due to declining patient volumes, Lake-wood Hospital still operates a full-service emergency department butno longer a Level Two trauma center.Trauma patients now will be trans-ported to Fairview along with patients who would have used Lake-wood’s now-closed inpatient pedi-atric department, which only sawone or two patients a day.

“Trying to be a community hospitalthat does everything just doesn’thappen anymore,” Ms. Murphy said.

Big plans at St. John, tooThough the Clinic is the largest

medical provider in the western suburbs, Fairview is aware of itscompetitors, Ms. Murphy said. Shecited Southwest General in Middle-burg Heights, the MetroHealth Systemin Cleveland and St. John MedicalCenter in Westlake.

Still, the rivalry there isn’t nearlyas heated as in the eastern suburbswhere, for one, University Hospitalsrecently built the $298 million AhujaMedical Center in Beachwood,which sits down Interstate 271 fromHillcrest.

“The West Side is a whole differentanimal,” Ms. Murphy said.

St. John, jointly owned by the Sisters of Charity of St. Augustineand University Hospitals, plans toinvest $100 million into its facilityover the next few years, and Ms.Murphy said Fairview is keeping aneye on how the Catholic hospitaluses the money.

Cliff Coker, president of St. John,said the first phase of construction isexpected to begin in July. Plans callfor a new, 12-bed clinical decisionunit for patient observations and apost-acute care recovery unit. St.John also will upgrade its main entrance and lobby. Other plannedimprovements include new operatingrooms and an upgraded information


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Fairview: Clinic seeks to avoid community duplicationcontinued from PAGE 3 technology infrastructure.

“We are now in the executionphase of moving forward with theseplans,” Mr. Coker said. “There’s a lot on the table to get these thingsdone.”

Mr. Coker said St. John also wantsto upgrade its ambulatory network,but those plans haven’t been final-ized. Also, several new programs,such as UH’s Seidman Cancer Center,are coming to St. John, which Mr.Coker said should help the hospitalcompete with Fairview.

“The foundation of what we’re doing and the improved patient experience has helped rebuild theimage of our hospital,” Mr. Cokersaid. ■

A look at howan updatedFairview Hospitalmight turn out,looking alongLorain Road. RENDERING PROVIDED



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A look behind the curtain■ Interested in clean energy? Didn’t get aspot on the invite list when President BarackObama came to town last week to talk smallbusiness?

Never fear. I sat in on the clean energybreakout session led by Energy SecretarySteven Chu, one of five breakout sessionsled by members of the Obama administra-tion. Here’s a taste of the give and take.

Jim Garrett, CEO of Vadxx Energy, a company in Cleveland that produces fossilfuels from petroleum-based waste, said thefederal government should consider increasingthe cap on the number of visas it gives to educated foreigners. Dr. Chu said he is

“very in favor” ofexpanding the cap.

Aaron LeMieux,CEO of Cleveland-

based Tremont Electric, which has devel-oped a generator that uses a person’s move-ments to recharge portable electronicdevices, praised the U.S. Department of Energy’s ARPA-E program, which is designedto fund transformational energy research,but he added that it is still hard for smallbusinesses to get money from the federalgovernment. He said government officialsshould ask themselves if Thomas Edison,not General Electric, would be able to get financing for the light bulb if he invented ittoday.

Mr. LeMieux and another entrepreneur,Bob Schmidt, CEO of Cleveland Medical Devices,

both criticized the Patent Reform Act of2010. Mr. Schmidt said it would make patentstoo expensive for small businesses to attain.

Mr. Schmidt added that, if Mr. Obamawants to create jobs inexpensively, he shouldget the federal government to put moremoney into research and development.

“(Entrepreneurs) spend the money in theplace where it provides he biggest bang forthe buck,” Mr. Schmidt said. — Chuck Soder

Cohen & Co. wins valuable prize■ Cohen & Co. in Cleveland has acquiredThe Lipson Group Inc. in a deal that has morethan doubled the number of high-net-worthclients in the accounting firm’s family officeservices practice. No financial details weredisclosed for the acquisition, which closedFeb. 1.

Two of Lipson’s eight professionals nowwork for Cohen & Co., which has more than225 employees. Anthony G. Micheli andScott Lichtenstein will continue their workwith the 50 to 75 high-net-worth familiesthat also made the move. Family office services include tax planning, philanthropyand wealth transfer services.

Acquiring the number and type of clientsCohen & Co. picked up from Lipson whileadding only two employees is immediatelyaccretive to its bottom line, said RandyMyeroff, president and CEO of Cohen & Co.It would have taken a “long time” to acquiresuch “top-notch” people one at a time, he said.

“The clients are people who are well-known

in the Cleveland community, and we areprivileged to have the opportunity to workwith them,” he said.

Alan Gordon Lipson, who founded LipsonGroup in 1984, said his company approachedfour firms in Northeast Ohio about acquiringLipson after Lipson lost some partners.

“We had to decide whether to rebuild orthat it was an appropriate time to find ahome for the firm,” he said.

Mr. Lipson, 67, elected not to join Cohen& Co. but plans to provide wealth preserva-tion consulting services independently. —Michelle Park

Magnet’s incubator looks to narrow its focus■ Magnet hopes to attract clients with the right mettle to its incubator, which it is rebranding as “The Incubator of Magnet.”

David Crain, director of entrepreneurialservices at the manufacturing advocacygroup, said the Cleveland incubator’s 24,000square feet is a little more than 60% full,leaving room for more tenants.

Going forward, the incubator will be moretargeted in signing tenants. That changemeans a focus on companies for whichMagnet can provide not only space and officeservices, but also its engineering, design andmanufacturing services.

Not every tenant will be a manufacturer,but tenants likely will have some tie to man-ufacturing or engineered products, Mr.Crain said. “We want clients that are a goodfit for Magnet,” he said. — Dan Shingler

WHAT’S NEW

REPORTERS’ NOTEBOOKBEHIND THE NEWS WITH CRAIN’S WRITERS

THEINSIDER

THEWEEK FEBRUARY 21 - 27

The big story: President Barack Obama toldmore than 300 members of the region’s businesscommunity — many of them entrepreneurs —that efforts by small businesses and economicdevelopment groups in the region give him confidence that the United States can competein an increasingly competitive global economy.President Obama, who visited Cleveland StateUniversity’s Wolstein Center for the first of several Winning the Future Forums on SmallBusiness, talked about some of his own ideas forboosting the country’s economy, such as thepossibility that the federal government couldgive tax breaks to individuals who invest in startups.

New lease on life: Forest City EnterprisesInc. signed a lease agreement that will lead to theestablishment of the new Horseshoe CasinoCleveland inside the Higbee Building down-town. The agreement is with Rock Ohio CaesarsCleveland LLC, which will use the space forPhase I of its new casino. The five-year lease,which includes extension options, is for 303,000square feet on the lower level and first, secondand third floors of the building.

A job well done: Mark Coticchia in April willresign his position as head of Case Western

Reserve University’s tech-nology transfer office. Heplans to launch his own com-pany, which would providepublic and private institu-tions with various productsand services related to busi-ness development and tech-nology commercialization.Since Mr. Coticchia arrived atCWRU in 2001, the university

has created 29 spinoff companies that attractedmore than $200 million in venture capital.

German engineering: Röchling AutomotiveAG of Germany plans to open a new U.S. manu-facturing plant this year in Akron to supply fuel-saving engine and body undershields to FordMotor Co. and General Motors Co. Röchling saidit would invest over $10 million in the 75,000-square-foot plant. The company said a third carmaker it would not identify will start sourcingparts from the plant in 2013. The new plantwould be Röchling’s seventh in the United States.

In the money: The U.S. Treasury Departmentawarded a total of $53 million in New MarketsTax Credit allocations to two Northeast Ohioagencies authorized to disburse the valuablefederal tax credits. The Cleveland New MarketsInvestment Fund received $35 million in taxcredits and the Northeast Ohio DevelopmentFund in Cleveland received $18 million. TheCleveland New Markets Investment Fund is operated by Cleveland Development Advisors,a supporter of catalytic neighborhood develop-ment funds. The Northeast Ohio DevelopmentFund, operated by the Cleveland-CuyahogaCounty Port Authority and economic develop-ment consultant Ariel Ventures, focuses on international trade and advanced energy.


Weatherhead ShowcaseMarch 5, 2011 10:00am – 12:30pmRegistration starts at 9:30amTo learn more, visit weatherhead.case.edu/showcase

Excerpts from recent blog entries on CrainsCleveland.com.

BEST OF THE BLOGS

Stop us if you’veheard this one before■ Here’s one of life’s certainties: When there’sa list of the country’s most affordable housingmarkets, Youngstown will be on it.

Sure enough, CNNMoney.com said in itsnew list that Youngstown is the nation’ssecond most-affordable market,behind only Indianapolis, basedon numbers from the NationalAssociation of Home Builders.

The web site says 93.2% ofhomes in Youngstown are afford-able for families earning the median regionalincome of $53,500. (The median home priceis $68,000.)

“The (Youngstown) housing market hasbeen contracting in many communities andthe population has shrunk,” CNNMoney.com reported. “Now large mansions can bepurchased for less than $200,000.”

As insiders see it, thisis a swell time to sell■ Talk about a seller’s market.

TheStreet.com reported that for the weekthat ended Feb. 11, insider selling at S&P

500 companies outpaced insider buying bya ratio of 61.4 to 1.

“According to a weekly report out ofBloomberg, the total amount of insider buyingwas $21.4 million and the total amount ofinsider selling was $1.3 billion,” the site reported.“This marked the largest amount of total selling by corporate insiders so far in 2011.”

A chart of prominent companies with lotsof buying and selling activity for the week

ended Feb. 11 noted that insiders atEaton Corp. “sold 239,114 shares, or

$26,351,098 worth of stock, at an averageprice of $110.20.”

First kill the lawyers— so they can’t file

flimsy copyright suits■ “By our standards, Shakespeare was anintellectual property pirate.”

That was one of the provocative state-ments in a New York Times letter to the editorby James J. Marino, an associate professorof English at Cleveland State University. Hewas responding to a Times op-ed piece,“Would the Bard Have Survived the Web?”

Prof. Marino argued that Shakespeare“took his plots and characters from otherwriters for free. ... He routinely cribbed pas-sages from other books.”

Creativity for Kids has teamed with theCleveland Institute of Art to expand a productline that the company says “takes coloringbooks to a new level of fun and enrichmentfor children.”

The books feature original designs doneby students from the Cleveland Institute ofArt. The collaborative venture started in 2009.

New titles this year are Cool Metallics Pic-tures & Designs and Fun Things to Color A to Z.

Cool Metallics Pictures & Designs has 24pages with “cute and trendy designs featuringunicorns, cupcakes, rainbows and butter-flies.” Fun Things to Color A to Z also has 24pages and comes with eight washable markers.Its designs “are a great first coloring andlearning experience as they cover the alphabetfrom A-Alligators to Z-Zebras,” Creativity forKids says.

COMPANY:Creativity for Kids,ClevelandPRODUCT:Coloring &ARTivityBooks

Coticchia


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