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Ed Morrison · Med Mart: Feeble leverage
January 10th, 2009
Cross posted at Map the Mess. Got ideas on how to sort out the Med Mart Mess? Submit them here.
In an AP story last week, County Commissioner Peter Lawson Jones, the designated driver on the Med Mart deal, steps forward to explain the situation. (What happened to Commissioner Hagan?)
Cleveland development project delayed
On it’s face, the deal looks like a really lopsided public private partnership.
The Public investment:
“The revenue stream already exists to support an estimated $490 million for construction and close to $1 billion for the debt payoff…”
The private investment:
Merchandise Mart Properties will get the Medical Mart revenue, but will also be responsible for capital improvements. It committed $20 million toward the project.
Downtown development projects work when public money leverages private investment. In solid projects, typically these ratios in the neighborhood 4:1 or 5:1. In other words, 1 of public investment leverages $4 or $5 of private investment. They can range upward of $10 or higher.
In the Med Mart project, a public investment of $490 million apparently will leverage $20 million: A leverage ratio of 0.04:1. For every dollar of public investment, the private sector is putting up 4 cents. (And we’re not really sure whether the public investment will have to be extended to cover additional road infrastructure.)
For comparison, take a look at how the City of Vancouver, WA estimated returns from its convention center investments: Downtown Development Return on Investment Study. They conclude:
The estimated public investment leverage ratio associated with the City’s investments is 9.3:1.
Is it any wonder that the Med Mart has left a lot of unanswered questions?
In a letter to the editors of the PD this week, a reader notes:
I have a degree in business and still can’t figure out this medical mart deal. The citizens of Cuyahoga County must shell out almost the entire three-quarters of a billion dollars to build the complex, which we then must hand over to a private company (which is not financially sound, according to the latest reports) to run at a profit — not to us, but to them. For what? Vague promises of a jump-start to Cleveland’s economy.
Medical mart negotiations are a joke
Without more public information, we are all stumbling around a dark house with a failing flashlight.
Last 5 posts by Ed Morrison
- Google's Eric Schmidt and his talk in Pittsburgh: Technology, innovation & the global economy - March 18th, 2010
- Good summary on proposed changes to No Child Left Behind - March 18th, 2010
- Amazing Time-Lapse of the Milky Way over Hawaii - March 17th, 2010
- The strategic challenges facing Midwest auto communities - March 16th, 2010
- Youngstown's STEM (and STEAM?) - March 14th, 2010
