Gravy Train

What Forest City wants, Forest City gets. You pick up the check.

Jeffrey Beck Center, 17801 Detroit Avenue, Lakewood Through December 14, 216-521-2540
For nearly two years, Cleveland's only downtown shopping center has borne the telltale signs of a mall on the skids.

It started when Dillard's pulled out in January 2002, leaving Tower City Center without a department store. Then the Disney Store and the Nature Company left. Express was replaced by an embroidery shop.

This summer, the mall took the drastic step of instituting free weekend parking, but even that seemed to do little to woo shoppers. Beachwood Place and Great Northern offer spacious parking. They also have department stores. Tower City has an empty shell.

To the politicians who run this city, Tower City's troubles quickly became a crisis in the making. After all, it's the only major shopping center left in the downtown core. But, just as important, the mall was a major investment for two groups that politicians strive to appease: taxpayers and Forest City Enterprises.

Forest City is one of the few big companies still based in Cleveland that isn't a bank or a law firm. Started by the Ratner family in 1921 as a lumber supplier, it has since become a $5.3 billion concern and one of the biggest developers in the nation, with offices in Denver, D.C., Chicago, New York, and Los Angeles. Today, its high-profile projects are in trendier cities: shopping malls in San Francisco, The New York Times building in Manhattan. Still, company headquarters remain in the Terminal Tower, and despite going public 40 years ago, the business is still under family control, with Ratners and their in-laws holding more than half its board seats.

The company's geriatric chairmen, onetime brothers-in-law Albert Ratner and Sam Miller, have spent their lives in this city. Both keep low profiles, but both have serious connections. Articulate and savvy, Ratner is known for generous contributions to just about every power player in town. The prickly Miller, who married and divorced Ratner's sister and rose to become Forest City's co-chairman and treasurer, has famously great relations at City Hall. Even former Mayor Mike White, who couldn't seem to get along with anyone, considered Miller one of his best friends.

Such warm relations have a way of paying dividends, and Tower City's construction was a prime example. The complex benefited from some $35 million of taxpayer bucks: $23.2 million in low-interest loans, plus $12.5 million in federal highway grants for the roads and bridgework around it. When the federal money required a local match, the city chipped in another $2.2 million. RTA also paid some $54.9 million to renovate its station in the mall's basement.

That was 17 years ago; many of the loans haven't even come due. And with the complex's only department store gone, city officials had good reason to worry.

But the company had a ready solution: more tax dollars. And what Forest City wants, Forest City gets. That's just the way things go around here.

The Forest City money trail isn't really a trail. It's an eight-lane superhighway that runs through federal, state, and local government. The Ratner and Miller families have given federal candidates and committees $770,000 since 1995. State candidates received $139,650 during the same period.

The sums are made even more potent by the families' method of giving. The law bars individuals from giving more than $2,000 to any one candidate each year. So 18 or 19 members of the Ratner family simply write checks on the same day to the same politician.

It's called "bundling." And while it may look like an end run around the law, it's perfectly legal. It's also smart business. "You get more bang for your buck if you're all giving on the same day," says Catherine Turcer, legislative director for Ohio Citizen Action. "When you think about a $1,000 contribution and what it means to a campaign, $19,000 is a lot of money."

(On behalf of the company, Miller declined comment, saying that Forest City prefers to stay out of the newspaper. He then deployed his trademark snarl and told a Scene reporter to "get a job with a real newspaper," ending the conversation.)

The families' political leanings are clearly Democratic. Over the last eight years, they've given the Democratic National Committee $60,000; another $23,000 went to its congressional and senatorial committees. Even the Ohio Democratic Party, a losing cause if ever one existed, got checks totaling $8,800.

But the family has no problem helping Republicans who can return the favor. Congressman Ralph Regula of Wooster has accepted $33,700 from Ratners and Millers since 1995. Regula is vice-chairman of the powerful House Appropriations Committee, which in June approved a $9.2 billion package to privatize military housing.

Three months later, a partnership led by Forest City won a 50-year contract to do the job in Hawaii. The project's worth: $358 million.

"In most cases, campaign contributions don't buy something," Turcer says. "There's no straight-quid-pro-quo corruption. But it does get you access to politicians. If someone's giving you $1,000 -- or $19,000 -- you're going to take their phone call really quickly."

Consider Senator George Voinovich, who, as mayor of Cleveland, was instrumental in securing federal money for Tower City. He's taken $30,000 from the Ratner and Miller clans since 1995. In 1997, while he was governor, his Department of Development gave the company $1 million for its Emerald Corporate Park.

Or consider Parma Mayor Gerald Boldt. His campaign took $4,000 from Millers and Ratners in 1995. (The sum may not seem big, but it was five percent of his total purse.) Boldt then supported a $500,000 low-interest loan from Cuyahoga County to clean up a vacant Walgreen's at Forest City's Parmatown Mall. The company wanted to build a Wal-Mart there.

But the gifts pale in comparison to those received by Cleveland Mayor Jane Campbell. She's raked in $62,000 from various Ratners and Millers in the last three years, including $40,000 in 2001 alone, according to county records. And the families weren't even putting all of their money on one horse. Before County Commissioner Tim McCormack was eliminated in the mayoral primary, they gave him $20,000.

McCormack had raised holy hell about the Wal-Mart deal. He says he was first told that half the sum would be a gift, not a loan, and he fought to make sure that it would be repaid in full.

"If the Wal-Mart corporation had received a grant with money we set aside from the general fund, I don't know how I could explain to you, to your parents, to your friends, that your assets were being given as gifts," he says. But he didn't kill the deal outright: "I can understand that Parmatown needs to fight to stay viable." The loan, with its 2.5 percent interest rate, was approved.

It's a pretty good racket: Throw money to a few friendly pols, then use your clout to get even more back. Indeed, records show that Forest City's generosity to politicians is matched only by its aversion to paying its own way.

Exhibit A: In 1990, the company received a $9.2 million loan to rehab the old post office, part of its Tower City complex. The loan came from the feds, but the city controlled the terms. It was supposed to come due in 30 years, with interest calculated at three to five percent.

But Forest City adroitly maneuvered for changes. First, after project costs escalated, Mayor Voinovich waived the interest without even telling City Council. That saved the developer an estimated $10 million.

Then, in 1999, the company offered to pay off the loan early -- but thought it should only have to pay $3.9 million. Councilman Mike Polensek, a critic of the plan, says Council eventually accepted a $5.2 million payoff, which allowed Forest City to keep a free $4 million.

Exhibit B: The company pushed for a similarly sweet deal on a $7 million federal loan to rehab the Halle Building on Playhouse Square. In 1994, company officials started pestering the city, which controlled the terms, to accept $3 million and consider the loan paid in full, according to city records.

Cleveland's development director, Howard Gudell, cried foul. First, the law director didn't think the city had the authority to do it, Gudell wrote. Second, to prevent the city from losing its shirt, it would have to invest the money and get a 32 percent return -- just to break even. That, Gudell dryly informed Forest City, "is not an investment option for us."

The company nonetheless managed to get its way. In 1997, it announced that it was moving its offices from suburban Brooklyn to the Terminal Tower. In exchange, the city agreed to eat $3.5 million of the Halle loan.

When Tower City began to falter, the company assumed its default position: It once again sought public money.

More than a decade ago, Forest City was instrumental in starting the Downtown Cleveland Partnership. It chips in annual contributions in the thousands of dollars, as well as providing cheap rent. Allan Krulak, a Forest City vice president, sits on the partnership's executive committee.

The organization's goal is to shore up downtown businesses. Its biggest expense is typically the holiday-lighting ceremony on Public Square -- which, perhaps not so coincidentally, draws thousands of shoppers to Tower City.

But the Partnership's annual budget is only about $1 million. So in the summer of 2002, Albert Ratner and some friends formed a new group, the Cleveland Attractions & Events Task Force, to better promote downtown. In September, the task force's first project, Free Spirit Weekend, brought thousands downtown to visit the Rock and Roll Hall of Fame, see free movies -- and, of course, shop at Tower City.

But the task force's plans were too big to be funded solely by donations and grants. It wanted tax dollars, and it found an open purse at the Convention & Visitors Bureau of Greater Cleveland.

The bureau is charged with attracting tourists from other regions. Its particular focus is overnight visits, a goal that doesn't particularly coincide with Forest City's dreams of rerouting suburban shoppers downtown. But the bureau had something that made it irresistible to the company: full access to the county's 7.5 percent bed tax. The CVB received some $7.2 million in bed-tax revenue in 2002 and is counting on $6.7 million in 2003, according to records.

Joe Zion, the bureau's executive vice president, confirms that in February of 2002, Ratner and other business leaders kicked off a series of conversations to see what the bureau could do to promote downtown.

The bureau was clearly receptive. By November, it had quietly launched a new game plan. In addition to luring tourists from Detroit and Columbus, it would work to bring people downtown from Beachwood and Westlake. Its 2003 budget, approved with no dissent, included $900,000 in new expenses: $250,000 for "arts and cultural tourism," another quarter million to underwrite the Grand Prix and Tall Ships events, $300,000 for the Events & Attractions Task Force, and $100,000 for a "community fund."

Thanks to decreased hotel business following 9-11, bureau revenues were already down. Devoting so much to the new campaign meant slicing other activities. The bureau cut $700,000 from its "meetings and convention" fund, which targets businesses and associations looking for a place to meet. (Ironically, the bureau was pushing for a new convention center at the same time, claiming that it couldn't attract enough meetings.) The bureau also slashed $700,000 from its "travel and tourism" fund, which sells Cleveland to places like Pittsburgh and Indianapolis. Each fund was virtually halved.

It couldn't have been great for tourism, but it was good for Forest City. The new Ratner-backed task force got $300,000. The holiday-lighting event was expanded into "Winterfest" and given a huge cash infusion. This winter, it's slated to receive $400,000 in bureau funds.

The amount is significantly higher than for other events the bureau sponsored. The Taste of Tremont, for example, received just $1,000. Even the Gravity Games, which brought an estimated 160,000 people downtown this summer, got a mere $50,000. The only event that came close to Winterfest's subsidy was the Grand Prix, which received $250,000. (The race, incidentally, is sponsored by US Bank, whose CEO Andy Randall sits on the bureau's board.)

Oddly enough, the Winterfest expense was never discussed at a board meeting, according to minutes examined by Scene, nor was it included in the budget approved in November.

Interim president Dennis Roche, who took over after this year's budget was approved, has no problem with the Grand Prix sponsorship; it's the sort of big event that attracts people to Cleveland and draws national attention.

But Winterfest does little more than bring people in from Bay Village. Even Roche admits discomfort. "Indisputably, it's a local, narrowly defined regional event," he concedes. "Those concerns have been expressed." Still, he argues, "It's an investment in community attitude here, which is important."

It's also a strategy that runs contrary to tourism-industry logic. The goal, after all, is to bring new money into the metro area, not simply to recycle money you already have.

The Columbus Convention and Visitors Bureau doesn't subsidize events for people already in the metropolitan area. "Our core mission is to put people in hotels," says spokesman Brent LaLonde. "Heads in beds." It's the same in Detroit. Cincinnati spends just $20,000 a year promoting events to its suburbs; Indianapolis spends "less than a grand," according to a spokesman.

Roche has made it clear that the Cleveland bureau won't be pursuing the same strategy next year. Promotion of in-town events will be dramatically curtailed, he says. "As the bed-tax revenue drops, we need to think about what is our core mission and what are we supposed to get for our investment of public money."

As for funding Winterfest, he says, "We can't -- and won't -- do it every year."

If bed-tax money proved tempting to Forest City, a big new tax levy was pure catnip. Especially a tax providing direct opportunities to, say, prop up a lagging shopping center.

For years, Forest City worked to increase foot traffic at Tower City. It found government to be its most useful tool. When Gateway was built in 1993, RTA agreed to a $12.8 million underground walkway to Tower City, picking up 80 percent of the tab, according to its records.

In the early '90s, the federal government was scouring Cleveland for five acres upon which to build a new courthouse. At the time, Gateway was drawing record crowds, and downtown seemed flush with potential; quite a few land owners refused to meet the feds' $20 million asking price, says Richard Latkowski, the project manager for the General Services Administration.

Forest City's executives didn't even wait for a phone call. They got on the horn and suggested a 4.4-acre sliver they owned on the edge of Huron Road.

It didn't look like a prize, Latkowski admits. "It was at the edge of town," he says, practically hanging off the hillside and separated from the rest of downtown by the six-lane road. But Cleveland's planning director, Hunter Morrison, who is married to Mayor Campbell, was convinced that Huron had potential. "He envisioned it someday to be like Michigan Avenue in Chicago," Latkowski says.

So the feds paid $18.3 million for the acreage, even though the county had appraised it at just $4.7 million, according to records. (An independent appraiser set it much higher, Latkowski says.) The feds also arranged for Forest City to build a $2.5 million tunnel under Huron, connecting court workers to Tower City. Today, government spokesman David Wilkinson says, more people get to the courthouse from the tunnel than any other entrance -- passing Tower City's shops and food court in the process.

Forest City had to know that plans for a new convention center could prove even more lucrative. After all, conventioneers aren't just office workers passing through. They're captives of their location; they need places to eat and shop. And they have money to spend.

By 2003, the idea of replacing the city's tired old convention hall was nothing new. Mayor White had assembled a task force four years earlier to determine a location. The group examined four options and settled on expanding the existing site, going so far as to commission sketches of how it would look.

In true Cleveland fashion, however, the group's handiwork did little more than gather dust. There was a school levy to pass, then a mayoral election. By the time Mayor Campbell gave the go-ahead to revisit the issue this spring, the task force's work was virtually forgotten.

This time, however, politicians and business leaders were intent on bringing the issue to the ballot. Frightened by tales of the "Quiet Crisis" and convinced of impending doom, civic leaders were desperate to do something. "There's a perception factor, when you don't see a lot of cranes in the sky," says County Commissioner Jimmy Dimora. "You think, 'Why isn't anything going on? Why aren't any dollars being invested, any jobs being created? Why are we stagnating?'"

Campbell took a characteristically hands-off attitude. She wanted the business community to examine locations and make a recommendation, and then go from there. It wasn't a bad idea; business leaders, after all, were pushing the hardest. But it made for a process rife with conflicts.

"Everybody who had a site had a proprietary interest in it," says architect Paul Volpe, who helped the city planning commission evaluate proposals. "People were looking at it from the standpoint of their particular goals."

Adds Commissioner Tim McCormack, "The decisions were being made not in public meetings, but in private deliberations. It's a problem, and I think it was destructive."

Cleveland Tomorrow, which spearheaded the process, makes no pretense of being independent from corporate interests. Corporate interests are its entire agenda; it represents the CEOs of the city's 50 biggest companies, and its connections to Forest City are particularly strong. CEO Charles Ratner is on Cleveland Tomorrow's board, and its offices are in Terminal Tower, where its benefits include reduced rent, courtesy of Forest City. (Director Joe Roman did not return repeated calls for comment.)

The group started at square one, fielding proposals from what seemed like every developer in town, each peddling his leftover land as a diamond in the rough. Bert Wolstein wanted a site by I-90. Peter Spittler wanted something on the lakefront. Werner Minshall, who recently bought the Galleria, wanted it there. And old rivals Al Ratner and Dick Jacobs teamed up for a site in the Warehouse District -- in the shadow of Tower City.

By summer, the group hadn't yet picked a site, but a consensus had begun to develop. Namely, everyone agreed that Ratner's site was awful.

So, in July, Forest City went for the Hail Mary. It withdrew its original plans and suggested a new site: the western edge of Tower City itself.

Plenty about the site didn't make sense. Like the federal courthouse, it was at the very edge of downtown, unlikely to generate foot traffic for any business but Tower City. It wasn't close to the mid-level hotels likely to attract conventioneers, which are clumped around the old center, near East 6th Street. And because the site was literally on the bank of the Cuyahoga, says City Planner Chris Ronayne, it would have to be built on "stilts" -- never a cheap proposition.

Perhaps oddest of all, it was practically the same site that White's task force had examined in 1999 and found wanting.

"There had been questions about the road infrastructure and what the real costs would be," recalls Ken Silliman, a White aide who co-chaired the task force. "The committee had thought the [existing convention-center site] was a better idea."

But the CEOs making the decisions this time around weren't about to let that stop them. No one developer stood to profit by expanding the existing site. Meanwhile, the most powerful family in town had lined up behind its alternative. Cleveland Tomorrow and City Hall were inclined to do the same.

The Campbell administration went behind closed doors with Forest City and drew up a "memorandum of understanding" outlining the deal: The city would pay the developer $30 million for the land and the right to build on it. Forest City would build an 80,000-square-foot expansion.

Some council members were horrified. Polensek points out that the city simply handed Forest City all parking proceeds, plus potential profits from concessions. Campbell's team, he says, "didn't just get hosed; they got the upper and lower radiator hose. And they came out smiling."

The outrage may have been muted only because the deal fell apart before county commissioners saw it. Armed with a poll showing that the levy faced certain defeat, Campbell yanked the city's support and effectively killed the project.

Ronayne, Campbell's planner, defends both the negotiations and the site. He says that the city had to consider the total package. To sweeten the deal, Forest City was promising to build some 2,000 houses on the adjoining Scranton Peninsula. "If that site brought in other economic development opportunities, that gave it a lead," he says.

The housing addition certainly made the site more palatable, Silliman says. But Tower City's malaise also may have played a role. "What changed since our task force met? Dillard's closed," he says. "The question of whether Tower City needed some additional attraction to continue on its course -- that was a new question we weren't facing in 1999 or 2000."

In essence, the city chose to shore up a frail shopping mall instead of looking at the big picture.

Some councilmen are openly critical. "Here was a site that wasn't even on the playing field," Polensek says. "It was in the outer universe, out there by Uranus -- and there's a reason I use that term. And then suddenly it became the center of the universe." When he read the research on the site, he saw a rush job: "'Let's get it done' -- without any thought of what the impact would be, what the spinoff would be."

Says Councilman Mike Dolan, "The negotiators for Forest City were very sharp, shrewd, talented, and experienced. They threw the kitchen sink at the Cleveland team."

Dolan believes the promise of housing was a smoke screen: "We were in the midst of the greatest economic boom we'll ever see, and there was not one stick of housing built. If there was a market for it, they would have built it."

Rival developers are even more skeptical. Minshall says the process was "flawed," adding, "Forest City gave the city exactly what it wanted. They were talking about a mega-Taj Mahal facility and promising all this additional development, which is just horseshit. If the free market would dictate the development of housing downtown, it would be built. But Forest City would promise whatever they needed to promise to get the convention center at that location."

Minshall is not upset about the Tower City site being thrown into the talks at the last minute. But, he says, "I think the fact that it came in at the 11th hour did more to make it fail in front of the citizens than it did to make me think we got screwed. By picking a site that wasn't fully vetted -- and it was pushed by the big guy in town, who'd received numerous other projects in the last 15 years . . . to the average voter, it stunk. And it looked like an inside deal."

Wolstein is even less polite. "If we put forward something that was selfish, it shouldn't be chosen. I don't think that site had any merit. You look at a convention center -- you need land, parking, staging areas, room for expansion, good roads, good visibility. This didn't have any of that."

Is it possible for a developer who isn't Forest City to get a fair shake in Cleveland? "I don't have any comment on that," Wolstein says, then adds, "And you should quote me on that. Because sometimes that says more than saying anything."

The convention-center issue isn't dead. The Greater Cleveland Growth Association declined comment for this story, but did issue a statement saying it believes the August debacle was "a detour, not a dead end." The agency's marketing director then called back to suggest that Scene talk to labor leaders, who are currently pushing the project.

Even Campbell, who pulled the plug, doesn't discount the possibilities. Ronayne says that she continues to believe the city needs a new convention center; she's merely seeking "innovative" ways to finance it.

Ironically, Forest City is the one entity to emerge from the debacle unscathed. No one is guaranteeing its site, but few are condemning it, either. Dimora notes that the location got one of the only favorable responses in the poll that scuttled the issue; 52 percent, he says, thought it was just fine.

While leaders gear up for the next big push, Forest City continues to build. The company has major projects under construction on both coasts and a massive housing development under way in Denver. It's now talking about buying the New Jersey Nets and working on a publicly financed arena in Brooklyn.

Though its cranes are absent from the Cleveland skyline, it's not fair to assume that the company is giving up efforts here.

For one thing, there's that walkway connecting the federal courthouse to Tower City. Sure, Forest City was supposed to ante up the full $2.5 million, but Miller is now pushing for $1 million in federal funds, The Plain Dealer has reported.

It's easy to imagine the arguments. Tower City needs a shot in the arm; Forest City has done great things for Cleveland. And when it comes to Cleveland's most connected developer, the money never stops flowing.

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