crain's cleveland business

By JAY [email protected]

Finally.The city of Cleveland will roll out

today, Nov. 14, a sweeping down-town waterfront plan that MayorFrank Jackson believes will alter theway people think about the city.

The highlight of the ConsolidatedDowntown Waterfront Plan, as it’scalled, is a new, $50 million all-weather pedestrian bridge to linkdowntown to the Lake Erie water-front. The city already has appliedfor federal grant money to helpbuild the bridge.

The city also has plugged in a

spot for a waterfront hotel that, because of the new bridge, couldserve visitors to the new conventioncenter and medical merchandise mart.

It could take 20 years or more toflesh out what basically is a broadconcept for future developmentalong nearly three miles of Lake Eriewaterfront. Waterfront develop-ment has been anticipated foryears, at least since Mayor JaneCampbell’s 2004 lakefront planwhetted the appetite of citizens foraccess to the water.

But the city sees the overall designand legislation it is presenting todayto Cleveland City Council as creating

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VOL. 32, NO. 1

NEAR A BOTTOM?Rising home sales suggest modest market rebound,

yielding hope for real estate stakeholders

By STAN [email protected]

Rachel Torchia, owner ofGateway Title Agency, saidNovember “is usually oneof the deadest months” at her

Brecksville company, which handlesresidential real estate title transfers.That’s because the approach of winter

and the looming holiday season takemany prospective buyers’ minds offthe housing market.

This year is different.“So far it’s better than the last

couple of years, except when we hadthe federal (new home buyer) taxcredit,” Mrs. Torchia said. “That kept

MAR

C G

OLU

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See HOUSING Page 37

Chamber groupsready to revivereform agendaChanges in collective bargaining andeducation still sought after SB 5 rebukeBy JAY [email protected]

The voter rejection of state Issue2 was a big disappointment for thestate’s major business groups. Butthey already are planning on whichmeasures they will be pushing inthe months ahead as the Republican-dominated Legislature regroups.

Education reform is likely to be at

the top of the list.“Our greatest priority still is teacher

seniority and teacher accountabilitymeasures that we think are absolutelycritical for the Cleveland school system and other school systems,”Joe Roman, president of GreaterCleveland Partnership, said. “We wereinvolved in (those issues) beforethey turned into Senate Bill 5 and

See REFORM Page 37

See LAKE Page 7

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22 CRAIN’S CLEVELAND BUSINESS WWW.CRAINSCLEVELAND.COM NOVEMBER 14 - 20, 2011

REGULAR FEATURES

Big Issue ..........11Classified ........38Editorial ..........10

Going Places....12Milestones........39The Week ........39

COMING NEXT WEEK

Our Forty Under 40 section includes a twistthis year: As part ofour 20th annual installment, wecatch up with agroup of our Forty Under 40 alumni togauge their recent activities.

Honoring region’s brightestyoung leaders

Audit Bureauof Circulation

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G.D. Crain Jr. Founder (1885-1973)Mrs. G.D. Crain Jr. Chairman (1911-1996)

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BONUS ANTICIPATION BUILDS

Type of executive Higher Lower No change Don’t knowHuman resources 42% 10% 43% 5%

Technology 25 18 53 4

Accounting/finance 21 17 60 2

Advertising/marketing 19 13 53 15

Legal 12 4 73 11

All respondents 30 14 53 3

SOURCE: ROBERT HALF INTERNATIONAL; WWW.ROBERTHALF.COM

Bonus checks might be a little bigger this year. A Robert Half survey of 1,250 senior executives foundthat 30% of executives whose companies awarded bonuses last year said they plan to give higherbonuses this time around. Human resources managers were most optimistic about increasing bonuslevels in 2011 (42%), followed by technology executives, at 25%. Only 14% of all respondents expectedsmaller bonuses than in 2010. Here’s how the executives described their expectations for bonusesthis year:

20111114-NEWS--2-NAT-CCI-CL_-- 11/10/2011 2:00 PM Page 1

NOVEMBER 14 - 20, 2011 WWW.CRAINSCLEVELAND.COM CRAIN’S CLEVELAND BUSINESS 3

INSIGHT

THE WEEK IN QUOTES“The governor andthe speaker are ...going to take abreather and recali-brate and see what weneed to do next. … Ifwe do take up portionsof SB 5, it certainly isnot going to be some-thing we take lightly.”— Mike Dittoe, director of com-munications for Ohio HouseSpeaker Bill Batchelder. Page One

“Business is very goodfor us … we chose notto participate in theeconomic downturn.”— Jeff Schneid, Unistrut ServiceCo. of Ohio. Page 9

“A quality (mobile)application is goingto cost in the tens ofthousands of dollars.… Get something outthere, but start smalland measure it.”— Dan Young, principal, DXY Solutions LLC. Page 13

“Most businesses today, based on ourstandards, are smallbusinesses. … I thinkwe say 98% of allbusinesses are smallbusinesses.”— Gil Goldberg, Cleveland District director, U.S. Small Business Administration. Page 13

Metro’s building plan won’t stop at oneFunds must be committed by 2013 as condition of bondsBy TIMOTHY [email protected]

Even as they eliminate hundredsof jobs to balance their operatingbudget this year and next, officialswith the MetroHealth System are onthe clock to build multiple satellitemedical campuses as they look to

assure the future of the county-sub-sidized health system.

MetroHealth CEO Mark Moransees a planned $23 million healthcenter in Middleburg Heights as akey component in the health sys-tem’s quest to hang on to its marketshare and make inroads with newpatients. But the investment won’t

stop there, according toMr. Moran, who said therecently announced sub-urban campus is the firstof three, or potentiallymore, MetroHealth plansto build in coming years.

The investment would be financedwith the proceeds from $75 million

in bonds that MetroHealthissued in January 2010 to finance future capitalinvestments. But thosebonds come with a catch.

The bonds were issuedthrough the Build AmericaBonds program, a now-defunct federal stimulusinitiative. Under terms of

the program, MetroHealth has threeyears from the date of the bonds’

issuance — or January 2013 — tocommit the funds to specific capitalprojects.

Mr. Moran said he doesn’t in-tend to let the money slip away andaggressively is planning for moreoutpatient locations. If Metro-Health doesn’t commit the funds,the health system would be auditedto determine whether it earnedmore investing the net proceeds of

Moran

See METRO 7

See AUCTION Page 8

Auction of Chase Towerloan creates intrigueLocation near casino could draw plentiful interestBy STAN [email protected]

An Internet auction slated to starttomorrow, Nov. 15, for the $13 million mortgage on the office por-tion of the former Chase FinancialTower at Tower City Center in Cleve-land almost has as much drama as agunfight in the Old West.

Exactly who will show up for theauction adds mystery to this show-down. The building at 250 W. HuronRoad is within rifle range of Cleve-land’s coming casino — a location thatcould serve as a draw for bidders.

The auction brings to light a loandispute between the mortgagelender, J.P. Morgan Chase, and realestate giant Forest City EnterprisesInc., which developed the officespace that serves as the four-storybase for the eight-story Ritz-CarltonHotel that thrusts skyward above it.

The structure is one of seven Forest City developed at Tower City,an office-hotel-retail complex that alsoserves as the developer’s corporate

CRAIN’S FILE PHOTO

RUGGERO FATICA

Mike Ode (left) and his father, Fred, in front of the vault in the former bank they now use for Foundation Software’s offices.

GROWING THEIR OWN Foundation Software takes novel approach to avoiding the hiring

blues by turning inexperienced staffers into programmers

By CHUCK [email protected]

iring software devel-opers is hard.

That’s why FredOde is hiring physics

majors.The CEO of Foundation Software

Inc. in Brunswick has made it apoint to hire smart people withlittle or no software developmentexperience and to train them tobecome programmers.

The concept is a sharp depar-ture from standard practices in the software business. Compa-nies in Northeast Ohio and else-where almost never hire peopleto become software developers unless they already have learnedto write code. Many area infor-mation technology executives,however, say it is extremely hardto find programmers with theskills they need.

H

WILL IT CATCH ON?

See TRAINING Page 6

Foundation Software, based inBrunswick, is trying something newto solve the shortage of softwareprogrammers: hiring employees withno prior development experience,and providing them the necessarytraining.

Will more companies follow suit?Stacy Sadar, the membership

chairwoman of the Society for Information Management, saidbecause such training programs arescarce, more companies might notbe willing to try it.

“It seems like an awful lot of workto get what you want,” Ms. Sadarsaid.

Meanwhile, Brad Nellis, the

president of the Northeast OhioSoftware Association, said thestrategy might fit larger companiesmore than smaller ones, with onecaveat: the shortage of software developers isn’t getting any better.

“You get desperate. You’ve justgot to do something,” he said.

— Chuck Soder

headquarters.According to a listing on www

.auction.com by Archetype Advisors,a commercial real estate loan-saleadviser in Miami Beach, the $13 million loan on the office portion of



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Volume 32, Number 3 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the fourth week of May and fifth week ofMay, the fourth week of June and first week of July, the third week of December and fourth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH44113-1230. Copyright © 2011 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00.POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373.

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NE Ohio’s manufacturing sectoronce again flexing its muscleReport shows area’s industry recovery expected to outpace nation By DAN [email protected]

It might seem like a rusty old carto some, but Northeast Ohio’s man-ufacturing economy still has a prettyslick motor under the hood, and it’srevving up the regional economyright now.

Manufacturing, for once, is leadingthe nation’s economic recovery. InNortheast Ohio, the sector not only isgrowing faster than others, researcherssay, but it’s also growing faster thanmanufacturing in the United Statesas a whole — and will continue to doso over at least the next five years.

So says Moody’s Analytics, ashighlighted in the latest quarterlyeconomic report by nonprofit busi-ness retention organization TeamNEO. According to that analysis,Northeast Ohio’s manufacturingsector will grow by 27% from 2010 to2015 in terms of total output. That’sa much faster rate of growth thanMoody’s predicts for the nation as awhole, where it forecasts manufac-turing output to climb by 17% overthe same period.

“We really think that (manufactur-ing) is what’s driving our relativesuccess,” Team NEO chief executiveTom Waltermire said.

By “relative success,” Mr. Walter-mire means the 18 counties in thenortheast quadrant of Ohio are ex-periencing a lower unemploymentrate than the nation as a whole —about 8.5% here compared to 9% forthe United States. Northeast Ohiogained 30,000 jobs between fall 2010and fall 2011, Team NEO’s researchshows. About 8,000 of those jobswere in the manufacturing sector,which was more than the gains inany other sector, Mr. Waltermire said.

The survey says …Team NEO’s research is not the

only source indicating that manu-facturing is faring better here in theRust Belt than in some sunnier partsof the nation.

A recent poll by the Chicago-based tax, audit and accounting firmMcGladrey found similar results,said Karen Kulek, head of the firm’snational manufacturing and distrib-ution practice.

Each quarter the firm polls morethan 600 U.S. manufacturing compa-nies for their outlook on the economyand other factors affecting their business. About 35 of those compa-nies are in Ohio, Ms. Kulek said, andrecently they’ve been more optimisticthan their counterparts nationally.

“One of the main questions thatwe asked, that we’ve been asking fora long time, is, ‘What’s the currentcondition of your business?’” Ms. Kuleksaid. “About 43% (nationally) saidtheir businesses were either thrivingor growing … in Ohio, it was 52%.”

Likewise, when asked whethertheir sales would increase over thenext 12 months, about 80% of thosepolled nationally said they expectedan increase, while 88% of the Ohio

companies expressed such opti-mism.

Ms. Kulek said it’s hard to say de-finitively why optimism in Ohio washigher than the national average inboth the summer and fall surveys byMcGladrey, “but the companiesthat have made it through this lastrecession tend to be the companiesthat are the strongest,” she noted.

Also, companies that have investedin technology, made their workersmore productive or have reorga-nized and repositioned themselvesthe best are the ones enjoying themost success, Ms. Kulek said — and it’shard to imagine any region with moreexperience in reorganizing manu-facturing companies than Rust Beltregions such as Northeast Ohio.

It’s a gasThere also are various fundamental

factors driving the success of localmanufacturers, said Ned Hill, deanof the Levin College of Urban Affairsat Cleveland State University.

Dr. Hill said a weakening dollar,relative to the euro, is boosting exports to Europe, while shale gasdevelopment is helping to sustainlocal equipment manufacturers andalso is beginning to drive downcosts for the plastics and chemicalindustries in which Northeast Ohiois a big participant.

“I also expect that as the recoverygains traction, Europe willing, therewill be a revival in car and light truckproduction and sales, which benefitsNortheast Ohio through the automo-tive supply chain,” Dr. Hill said.

If Team NEO’s research is right,the industries to which Dr. Hillrefers will do better than most.

For example, the research pre-dicts the plastics and rubber indus-try in Northeast Ohio will increaseits output by a healthy 48.6% from2010 to 2015, while the smaller bev-erage and tobacco manufacturingsector will shrink slightly, by 3.8%.

The plastics industry is seeingrapid changes in how and where itsfeedstocks are produced, saidThomas Kedrowski, senior vicepresident of supply chain opera-tions at polymer producer PolyOne

Corp. in Avon Lake.Though he’s skeptical that rubber

and plastics will grow as rapidly asTeam NEO predicts — because domestic demand and other marketfactors also will determine whetherthat happens — Mr. Kedrowski saidmany feedstock suppliers to rubberand plastics producers now aregaining a cost advantage over theircounterparts in other parts of theworld due to shale gas.

But, overall, economic conditionsare improving — and for nearlyeveryone, say economists and researchers.

Love that tuneFor example, while beverage and

tobacco might suffer a small set-back, that’s not true for food manu-facturing generally, which TeamNEO predicts will grow by 17% overthe five-year period in its analysis.That growth likely will be driven bycompanies such as Shearer’s Foodsin Massillon.

Shearer’s employs 1,600 peoplein the United States and 1,100 inNortheast Ohio, said company co-founder and CEO Bob Shearer —including 300 that it’s hired here inthe last two years.

Companies such as Shearer’smust look at a number of factors indetermining where to operate — fromtransportation and energy costs tothe availability of local workers —and “Northeast Ohio is a great placeto manufacture,” Mr. Shearer said.

He no doubt believes it; the com-pany opened a new 100,000-square-foot plant in Massillon this year.

All of this is music to the ears ofDan Berry, CEO of Cleveland-basedmanufacturing advocacy and con-sulting group Magnet. It’s a tunewith which Mr. Berry already is familiar, but which he is far fromtired of hearing.

“Team NEO’s numbers confirmwhat we’re seeing and hearing inmany manufacturing sub-sectors,”Mr. Berry said. “Production at manycompanies has almost recovered topre-recession levels. And, as marketconditions improve, many are beginning to grow again.” ■



Huntington bolsters sizeof corporate banking teamBy MICHELLE [email protected]

Huntington Bank is gearing up todouble its corporate banking teamin Cleveland because it has seen itscorporate lending grow and hopesto capitalize on big developmentprojects here.

Huntington recently made twoadditions to the team and plans to fillanother eight high-level positions tobring its corporate banking staff toroughly 20, which, a spokesmannoted, would be a new high.

The corporate team handles loansand provides treasury management,capital markets and investment ser-vices to business clients with annualrevenue of $15 million or more.

Huntington has invested signifi-cantly in commercial banking acrossits regions, noted Jim Dunlap, regional and commercial bankingdirector for Huntington, to whom 11regions report, including Cleveland.

The hiring in Cleveland is driven,in part, by corporate loan growth inrecent linked quarters, said DanWalsh, Cleveland region president.Though the Columbus-based bankdoes not disclose regional numbers,Mr. Dunlap said its corporate lendinghas grown footprint-wide for sevenlinked quarters.

“I think that the Cleveland market seems a click or two aheadof what’s happening nationally,”Mr. Walsh said.

Huntington also is choosing togrow in Northeast Ohio because ofcurrent and planned infrastructureinvestments, Mr. Walsh said, citing themedical mart and casino in Cleveland.

Opportunities exist to put capitalinto motion and to strike partner-ships with companies involved inthose investments, Mr. Dunlap said.

“Cleveland is a very, very impor-tant market,” Mr. Dunlap said. “Youhave to be vibrant and vital inCleveland to be relevant in Ohio.”

The recent hires are RichardPohle, who comes from KeyBank tobe Huntington’s senior vice presi-dent, commercial region manager,and Karen Davies, who comes fromPNC to be Huntington’s senior vicepresident, commercial team leaderfor the Cleveland region.

The two bring a combined 46years of experience in commercialand industrial lending.

“The level of experience theyhave in the market has positionedus to take care of our more sophis-ticated corporate clients in the mar-ket,” Mr. Walsh said.

As for the investment involved indoubling a corporate team, Mr.Dunlap noted that a lot of the newemployees’ compensation is tied tovariable components.

“My bankers are highly incentedto generate revenue streams thatare sustainable,” he said. “They’renot as expensive as you would havehistorically thought.” ■

PE firm gets feet wet with deal

By MICHELLE [email protected]

In what its executives call a raremove, MCM Capital Partners inBeachwood has become the majorityowner of a company in its own back-yard.

Now, the private equity firm plansto double in five years the revenuesof Zinkan Enterprises Inc., a specialtywater treatment business in Twins-burg, said Harry B. Shimp, an MCMoperating partner who now is CEO ofZinkan.

MCM closed on its recapitaliza-tion of Zinkan on Oct. 31. Terms ofthe deal were not disclosed.

Zinkan specializes in under-ground dust control and water treat-ment, said its founder, Jim Zinkan.Its newest division is water reclama-tion.

MCM sees tremendous growthpotential in water treatment, waterreclamation and in the company’sproduction of chemicals used in hydraulic fracturing, said Mark Man-sour, managing partner. Hydraulicfracturing, known as “fracking,” is amethod of extracting oil and naturalgas from deep shale formations.

“It’s a market that we feel willgrow faster than GDP (gross domestic

MCM sees potentialwith majority stake inwater treatment outfit

product),” Mr. Mansour said of wa-ter treatment. “As water becomes ascarcer commodity, we think thecompany is very well-positioned togrow its business.”

MCM had searched for a handfulof years to invest in a water treat-ment business, Mr. Mansour said.This is the first such company onwhich it successfully bid.

“I think this is going to be themost interesting ride,” said Mr.Shimp, who has led two other MCMCapital companies. “If you look atthe opportunities from a macroeco-nomic basis in the world economyfor the next 25 years, I think you’llsee two that are dominant: energyand water. And we’re in water. That’sone thing that really excites me.”

Fighting giantsWork in water reclamation is one

reason Zinkan sought a recapital-ization for the first time since itsfounding in 1982, Mr. Zinkan said. Alack of depth in management is another, Mr. Zinkan added, notingthat he turns 73 in December.

“These are big jobs,” he said ofwater reclamation work. “It takes alot more resources to take that marketsegment on because you’re com-peting against giants.”

Zinkan, which operates distribu-tion centers throughout the UnitedStates plus a Beijing office, employsabout 50 people and has annualrevenue nearly $30 million. It hiredan additional four people in thefield in the past couple months andplans to hire another four by thefirst quarter of 2012.

Zinkan’s growth has been strongand consistent, said Mr. Zinkan,who now is chairman of a new five-person board being formed.

Mr. Shimp anticipates Zinkanwill continue to grow for a numberof reasons, among them the drive toreduce the level of particulate inmines, which requires dust control.In addition, the Chinese are becomingmore interested in the health andsafety of their coal mine workers, hesaid, and opportunity exists forZinkan in the fracking boom, bothin providing ingredients for drillingand treating fracking wastewater.

Mr. Zinkan and his son, Brian, thecompany’s chief financial officer,remain substantial minority own-ers, though their specific stakeswere not disclosed.

“With MCM Capital, the philoso-phy they have and the philosophy Ihave paralleled,” Mr. Zinkan said.“They like to see something grow …to let it grow.”

On average, MCM holds compa-nies for more than six years, Mr.Shimp said. Its recapitalization ofZinkan wasn’t financed by an offi-cial MCM fund, but by a group ofMCM investors. ■

“I think this is going to be the most interestingride.” – Harry B. Shimp, operating partner, MCM Capital Partners


Ode expects the number to increase,as long as the company keeps growing.

“That two to three will probablygrow to three, four or five the following year,” he said.

An eye for raw talentSo why should Foundation —

which employs about 80 people, including about a dozen developers— hire people with so little experi-ence?

For one, Mr. Ode said it is “almostimpossible” for his company to findsoftware developers. Beyond that,however, he noted that both newemployees aced a test designed toassess their ability to solve problems.

The company has a long historyof valuing raw aptitude over experi-ence, said Foundation presidentMike Ode. He described how FredOde, his uncle, started trying toconvince him to join the companyback in the mid-1990s, even thoughthey rarely had talked during theprior 10 years. But Fred Ode — whohimself took only three program-ming courses before getting a job inthe software field — had heardabout his nephew’s performance inschool and his work ethic.

“We are a company that looks forraw aptitude, talent and drive,”Mike Ode said.

Also key to Foundation’s strategyis the company’s extremely lowturnover rate, which should helpthe company retain new hires longenough for the training to pay off.Only one employee has left thecompany so far this year, excludingtwo high school students who leftfor college, Fred Ode said.

“When people fit our culture,they love it here. They stay,” he said.

The idea that a new hire mightleave before the training has paidoff might deter some companiesfrom following Foundation’s strategy,according to a few people whospoke with Crain’s.

However, the Computing Tech-nology Industry Association, orCompTIA, has done a few studiesthat suggest employees are inclined

to remain with employers that provide them a lot of training, saidSteven Ostrowski, director of corpo-rate communications for CompTIA,of Downers Grove, Ill.

“They feel a sense of being part ofa team,” he said.

Not for everyone, but …After speaking with several area

IT executives who belong to theNortheast Ohio chapter of the Society for Information Manage-ment, membership chairwomanStacy Sadar said none of them knewof any area companies that trainpeople with no coding experienceto become software developers.

Those executives didn’t seem interested in implementing theconcept themselves, said Ms. Sadar,who also is president of executiverecruiting firm RSI-Best GroupManagement Consultants of Rich-field.

That might be because companiesoften don’t have training programsneeded to teach someone with noexperience to develop software, shesaid. Plus, it might be easier forcompanies to find people who haveat least some experience.

“It seems like an awful lot of workto get what you want,” Ms. Sadarsaid.

While Fred Ode noted that thelearning curve to become a pro-grammer is “huge,” he said it goesdown dramatically if the new hirehas excellent problem-solving skills.

“If you hire someone who is basi-cally brilliant, it’s not going to bethat hard,” he said.

Brad Nellis, president of theNortheast Ohio Software Associa-tion, said the concept might be ofuse to larger companies, but he saidhe’s uncertain whether many smallercompanies such as Foundation couldafford the time and money it takesto train someone with no prior pro-gramming knowledge.

Then again, he said, it is only getting harder to find software de-velopers as the economy improves.

“You get desperate. You’ve justgot to do something,” he said. ■

“If you hire someone who’s basically brilliant, it’s not going to be that hard.” – Fred Ode, CEO, Foundation Software Inc.


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Training: Initial test gauges aptitudeThough a few members of the

local IT community said some companies might be able to adoptFoundation’s strategy, none of them embraced the idea without a few bigcaveats.

Mr. Ode, however, said the strategywill work for Foundation, in part because it has worked once already.

The company, which provides accounting software for the con-struction industry, three years agorehired a former employee from itsclient services division and begantraining him to become a softwaredeveloper.

Today, Mr. Ode describes that employee as one of Foundation’sbest programmers, even though hehas no programming experience otherthan a “very basic” introduction toprogramming course he took at DeVry University. The employee,who also took a database course atDeVry, studied engineering and economics at the University of Akronbut did not earn a degree.

Foundation went a step further afew months ago when it hired some-one with zero software developmentexperience with the intention ofturning him into a developer. Thatemployee, who has a bachelor’s degree in physics, is working inFoundation’s client services divisionfor now, which is intended to helphim learn about the company’sproduct and its customers.

Once he joins Foundation’s devel-opment team, it should take him lessthan a year to become reasonablyproductive, Mr. Ode said. The employee earns a modest salary nowbut will make more as he improved,Mr. Ode added.

Next year the company aims totrain two or three more new hires tobecome developers. Thereafter, Mr.

continued from PAGE 3


a clear roadmap for future city leadersand the business and developmentcommunities.

“No longer is it a debate ofwhether we can develop the water-front; this is what’s next,” the mayortold Crain’s in a City Hall interviewpreviewing the plan late last week.

The plan covers 90 acres, at least50 acres of which the city has setaside for private development. Therest is open for public promenades,bicycle and walking trails, marinasand other public uses.

The plan maps out sites for morethan 2.5 million square feet of officespace or residential construction,as well as for several restaurantsand parking space for several thou-sand cars.

Take that, criticsMayor Jackson said he believes

this plan answers the complaints ofcritics, especially critics in the busi-ness community, who say he doesnot have a vision for future devel-opment of the city. Now, he says,the ball is in the business and development community’s court.

“Everybody’s always talkingabout what’s the mayor’s vision,what’s the mayor’s plan and whydoesn’t the mayor articulate hisplan and why doesn’t the mayoruse the bully pulpit of his office topromote it,” he said. “OK, here.Now, what are you going to do?This is what you asked for.”

The mayor said he also believesthe city’s willingness to contributeto the financing of the Flats EastBank mixed-use project just west ofthe waterfront district will helpboost lakefront development. Hesaid it is an indication to developersthat Cleveland can make their dealshappen.

The city put up nearly $53 million in loans and tax abatementsfor the $272 million office-hotelcomplex now under constructionby the Wolstein Group and Fair-mount Properties.

Because the city anticipates thedevelopment along the lakefront of new, uniquely attractive officespace in a weak market for down-town real estate, regional develop-ment director Chris Warren saidthe current downtown office dis-trict that runs east from PublicSquare likely will evolve into more of a mixed-use neighborhoodwhere future development largelywould be residential.

Step by stepThe city legislation that will

enable implementation of the planincludes an agreement with theCleveland-Cuyahoga County PortAuthority that would give the citycontrol of several docks now usedby the Port of Cleveland and givesthe Port Authority new responsibil-ities for maintenance of the water-front.

At present, control of downtown

waterfront land is shared by the cityand the maritime authority. Thecity believes that with complete sitecontrol it will be better able to market the waterfront to developers,Mr. Warren said.

The locations of specific ele-ments in the plan are the best guessof architects and designers. Also,city planners want the public to understand that time and changingcommercial and recreational needsare likely to alter parts of the outline.

“The goal is not to do it all at onetime,” said Ricky Smith, director ofthe city’s Department of Port Con-trol. “We will do a phased strategythat will rely heavily on private investment.”

The plan has been two years in the making. The city hiredEhrenkrantz Eckstut & Kuhn Archi-tects of New York City and VanAuken Akins of Cleveland to bringtogether the city’s 2004 waterfrontplan and the Port Authority’s now-discarded 2009 development plan,which also was created by EE&K,into a cohesive downtown water-front plan.

Three-part harmonyThe planners divided the lake-

front into three development dis-tricts from west to east: HarborWest, North Coast Harbor and theBurke Development District.

The Harbor West district basicallyis lifted from the Port Authority’splan. It features a promenade along

the waterfront and eight buildingpads that could accommodate 2.2million square feet of office, retailand, perhaps, residential space.

This is the same area that theCleveland Browns have expressedan interest in developing. The citysaid last week in an email state-ment that it continues to work withthe football team on its develop-ment interest and also is “evaluatinginterest in the lakefront amongmany potential developers andend-users, including the ClevelandClinic.”

To the east is North Coast Har-bor, which would be dominated byan all-weather promenade and anoutdoor plaza. The promenade iswhere an all-weather pedestrianbridge would connect the GreatLakes Science Center and the Rockand Roll Hall of Fame and Museumto the under-construction conven-tion center and medical mart.

This area would include a marinaand a drawbridge that already arefinanced and are on the drawingboards. The city earlier this year announced plans for a $2 million,53-slip marina north of the RockHall. A $6.3 million drawbridgewould connect Voinovich Park tothe planned Harbor West District.

Adjacent to the marina, what isnow the East Ninth Street Pier,would be transformed into a festi-val pier with a building that mightinclude restaurants and shops, anew parking structure and season-


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Lake: Development will rely heavily on private investmental space for food trucks and othersummertime amenities.

Farther east is the Burke Develop-ment District. This area would betransformed into an office park thatfaces north onto a public park and a pier where floating office bargeswould be docked. The office parkcould include four new office build-ings totaling 500,000 square feet.

The barges would be similar to theone now docked adjacent to BurkeLakefront Airport that was the for-mer home of Hornblower’s restau-rant. The barge currently is occupiedby LeanDog, a software studio.

The city also has mapped a recon-figuration of the East Shorewaysouth of the Burke district. As it didwith the West Shoreway, the cityplans to turn the freeway into a moreaccessible, crossable boulevard.

One reason for adding morepedestrian crossings to the freewayis that the new waterfront plansketches in some unspecified devel-opment in the current municipalparking lot that is across the Shore-way from Burke airport. Mr. Warrensaid before any changes begin in theparking lot, suitable alternativespace for Cleveland Browns tail-gaters will be found.

The objective is to ensure publicaccess to the waterfront.

“We’re very committed to makingsure all the water edges are publicpromenades,” said city planning director Bob Brown. “There is no privatization of the waterfront here.” ■


Diversified manufacturerEaton Corp. said it hasbeen awarded an engi-

neering services contract fromthe U.S. Coast Guard valued atabout $20 million.

Under the contract, Eaton willprovide electrical infrastructurepreventive maintenance ser-vices, including circuit breakerretrofits and replacements, andpower service inspection andtesting for up to 12 Coast Guardcutter vessels in San Diego,Seattle, San Francisco andHawaii. A cutter is classified asany Coast Guard vessel 65 feetin length or greater and with adequate accommodations forcrew to live on board.

“This is a great opportunity forEaton to support the Coast Guardthrough our operational mainte-nance expertise,” Ken Narod, director of Eaton’s GovernmentSales and Solutions unit, said ina statement. “Our team of certi-fied engineers and expertise inelectrical power managementwill help the Coast Guard keepits vessels running safely and efficiently while increasing loadcarrying capacity, and providingsystem protection and monitoring.”

Eaton will be commissionedfor up to five and a half years.

ON THE WEB Story from www.CrainsCleveland.com.


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Auction: Market’s vacancy rate limits office property’s attractivenessthe building was transferred to special servicing status in May 2010.That step was taken after bankinggiant Chase, which later became atenant in the building it financed,terminated its lease and left vacantthe 125,000-square-foot office portion of the property.

Forest City had proposed a debtpayoff for the loan, which allows alender to secure repayment for aportion of a distressed loan if itgives the borrower a discount onthe principal outstanding.

“However, an agreement was notmade,” said the online ad, whichtrumpets an attention-fetchingopening bid of $1.4 million.

Forest City spokesman Jeff Linton

said going into default is “virtuallythe only way to get a lender’s atten-tion” on a loan like the one on the office space. He also noted thatForest City likes to acquire proper-ties by buying notes at a discount orby negotiating note purchases atdiscounts for loans outstanding.

Asked if Forest City might bid onthe loan at this week’s Internet auc-tion, Mr. Linton declined comment.

Another potential bidder is Cleve-land Cavaliers co-owner Dan Gilbert,whose Rock Gaming is involved ina joint venture with Caesars Enter-tainment Corp. to bring casino gam-bling to Cleveland and Cincinnati.

A clue in a signature?The casino interests confirmed

last April that they have an optionto buy the Ritz-Carlton Hotel fromForest City. Jennifer Kulczycki, RockGaming spokeswoman, declinedcomment on whether the casinojoint venture would bid on themortgage for the office portion ofthe building.

However, public records hintthat Mr. Gilbert or Cleveland’s casinointerests may be preparing to takea shot at the loan — or the property.

A business called “250 HuronLLC” was formed Oct. 19, accordingto records in the Ohio Secretary ofState’s office. The signature of JanisK. Kujan, a paralegal at the Honig-man Miller Schwartz and Cohn LLPlaw firm of Bloomfield Hills, Mich.,appears on that document as well

as on state records for Rock GamingCleveland LLC — Mr. Gilbert’sgaming concern — and for the casinojoint venture.

Rock Gaming’s Ms. Kulczycki declined comment on the signifi-cance of Ms. Kujan’s signature onthe 250 Huron LLC document. Ms.Kujan did not return a phone calllast week.

Jonathan Russo, Archetype Advi-sors’ agent for the auction, declinedto discuss the mortgage offering orthe loan negotiations.

Forest City tried marketing theproperty in 2008 after Chase shutits offices in the structure and consolidated in smaller offices inPost Office Plaza, a Tower Cityproperty that is across West Third

Street from the former Chase building.However, it took the property off themarket a year ago because of theloan workout efforts, according to asource familiar with the situationwho asked not to be identified.

Alex Jelepis, a Grubb & Ellis Co. senior vice president who specializesin office space, said the 250 WestHuron space was priced competi-tively for lease but is “view impaired”because it consists of the first fourfloors while the Ritz has superior views.

Will they, or won’t they?Whether someone would want to

own the mortgage — and perhapsthe 20-year-old office building throughforeclosure — in an office marketwith 22% vacancy is another question.

Even for longtime Forest Citywatcher Rich Moore, an analyst atRBS Capital Markets, whether ForestCity would bid on the mortgage onits own property is debatable.

“Right now all the real estate companies seem to love the idea ofbuying debt cheap. It’s a way to holddebt on a property they might like,”Mr. Moore said. “Forest City woulddo those kinds of investments. How-ever, I don’t think they would arguethat buying Cleveland real estate iswhat they’re about today. They aremore about their developments inNew York City and L.A. than Cleve-land. At the same time, no oneknows more about the asset thanForest City. If they have a chance tobuy it cheap, why not?”

As for whether the distressed loanmeans anything to the billion-dollardeveloper’s fiscal health, Mr. Mooreanswers quickly: “Heavens no.” ■



By DAN [email protected]

As long as people get old, fat andsick, Jeff Schneid probably is goingto be successful.

You see, Mr. Schneid sells con-struction supplies, and while thatbusiness isn’t booming generally,the segment he serves is in growthmode. His Westlake company,Unistrut Service Co. of Ohio, sellssteel support systems that go intohospitals. Hidden above the visibleceilings, Unistrut’s systems arewhat hold up the monitors, X-raymachines and lab equipment —plus, in some cases, people — thatare suspended from hospital ceilings.

“It’s kind of like a grown man’sErector Set,” Mr. Schneid says, describing the long and short piecesof steel framing that are designed,made and cut so that they can beassembled like kits at hospital con-struction sites.

The company is doing well, Mr.Schneid said, because the region inand around Cleveland where hesells most of his product still is experiencing a boom in health care

construction.“Business is very good for us, Mr.

Schneid said. “We chose not to partic-ipate in the economic downturn.”

Mr. Schneid bought the companyin 2007, along with a sister companycalled Diversified Fall Protection,which sells products to ensure thatworkers don’t fall from heightswhile working at factories and construction sites or in other high-risk settings. That business is growing,too, he said, largely as a result ofcapital investments by companiesin new plants but also because ofmore emphasis on safety generallyand increased marketing by thecompany itself.

Mr. Schneid said the two companiesare growing so fast that their combined revenues already havedoubled since he bought them, toan expected $7 million in revenuesthis year. He’s also more than doubled his payroll — from 12 employees in 2007 to 27 today —and still is looking for at least threenew people.

Not bad for a guy who doesn’thave a proprietary product.

Mr. Schneid’s company doesn’t

make the Unistrut systems it sells,though it does what most wouldconsider light manufacturing workin tailoring the systems for eachcustomer. The systems’ componentsare made by Unistrut in Harvey, Ill.,for which Mr. Schneid’s company is an affiliated but independent reseller. He can sell anywhere in thecountry, as can other Unistrut dealers.

But Mr. Schneid said he has apretty good lock on Northeast Ohio.That’s because when he acquiredUnistrut Service Co. of Ohio, he alsogot the company’s staff and itsdecades of experience in workingon hospital projects in the area, saidRon Makovich, an architect withMakovich & Pusti Architects in Berea.

“For what (Unistrut does),they’re the absolutebest. They’ve done somuch, so long, for somany — they’ve seenvirtually every conditionthat could exist.” – Ron Makovich, architect,Makovich & Pusti Architects


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Westlake hospital contractor unfazed by slumpUnistrut benefits from increasing demand for its suspension systems Handling weighty matters

Most of Makovich & Pusti’s work isfor hospital and health care projects,and Unistrut Service Co. of Ohio almost always is chosen to supplythe suspension systems, Mr. Mako-vich said. He said he isn’t surprisedthe supplier is doing well, even if theconstruction industry as a whole isin a slump.

“You have to recognize that forwhat they do, they’re the absolutebest,” Mr. Makovich said. “They’vedone so much, so long, for so many— they’ve seen virtually every condi-tion that could exist.”

Other factors also are affecting demand for Unistrut’s products, according to Mr. Makovich. He saidas health care technology continuesto advance, more equipment is developed that needs to be suspendedfrom hospital ceilings.

Mr. Makovich said the market forthe suspension systems also is growing because patients are growingbigger. As more patients weigh 300,400 or even 500 pounds, hospitalsmust find ways to move them. Manyare installing patient lifting systemsin their rooms, and those systemsare secured to a Unistrut frame, Mr.Makovich said. ■

UPCOMINGEVENTS

BRIGHT SPOTSBright Spots is a periodic feature in

Crain’s highlight positive business de-velopments in Northeast Ohio. To sub-mit information, email managing editorScott Suttell at [email protected].

■■ PartnerShip LLC, a subsidiaryof the Oberlin-based National

Association of CollegeStores, has moved to

a new headquartersbuilding in Westlaketo accommodate thesteady growth the

company is seeing inits business.The freight manage-

ment company providesshipping services to small and

midsize businesses nationwide. Ithas 39 employees.

John J. Finucane, PartnerShip’spresident and chief operating officer,said in a statement that the move toa 5-year-old building at 29077Clemens Road “will help meet ourgrowing workspace needs for yearsto come.” The 15,000-square-footbuilding has room for 80 to 90 employees, according to Partner-Ship.

Mr. Finucane said demand forthe company’s freight managementservices, which help customers reduce their overall shipping costs,“has increased steadily over the pastfour years, necessitating a near doubling of its employee headcountduring that same timeframe.”

The company’s business plancalls for continued growth that willrequire employing a total of 60 to 80people within five years.

Last year, PartnerShip opened aWest Coast sales office in Irvine,Calif. Four employees are basedthere.

■■ The University Park Alliance, a nonprofit community develop-ment corporation dedicated totransforming a 50-block neighbor-hood around the University ofAkron, has launched a business plan competition for entrepreneurs interested in locating a business in

University Park.The goal of the Start UP! Busi-

ness Plan Competition “is to helpattract and assist new business, especially business providing basicbut missing services in the Univer-sity Park neighborhood, and to giveaspiring entrepreneurs the oppor-tunity to bolster their business acumen,” according to a statementfrom the group.

Interested entrepreneurs can beginthe process by submitting an initialapplication, found at www.upakron.com/university-park-business-plan-competition, by Dec. 8.

Finalists will attend a mandatoryorientation session that will describeopportunities in the University Parkneighborhood. At that session, finalists will receive feedback ontheir applications and guidancefrom successful Northeast Ohio entrepreneurs and from the StudentVenture Fund at the University ofAkron (SVFUA).

Those selected to continue willreceive from the University of AkronResearch Foundation and SVFUAguidance on writing a business planand developing a strong businesspitch.

In spring 2012, finalists will present their plans to a panel ofjudges to determine the contest’swinners. Those submitting winningbusiness plans will receive up to$10,000 and assistance locating asite within University Park.

■■ Climax Metal Products Co., amaker of shaft collars, rigid couplings,keyless locking devices, bearings,abrasives and pulleys, has moved itscorporate headquarters to Mentor.

The company, which employs 65,has renovated a 50,000-square-footspace at 8141 Tyler Blvd. The buildingformerly was occupied by Aquama-rine Inc.

“This new facility allows us tohouse our offices, shipping depart-ment, finished inventory and machining all under one roof,” saidJerry Wheaton, owner and CEO ofClimax Metal, in a statement.

Forty Under 40■ Crain’s next Monday, Nov. 21,will publish its annual Forty Under40 section, highlighting a group ofNortheast Ohio business leaders under the age of 40.

We’ll also catch up with a groupof our Forty Under 40 alumni, asthis year marks the newspaper’s20th edition of the section.

You can be part of the celebrationnext Monday, too, by attending ourannual Forty Under 40 awards ceremony, being held this year atExecutive Caterers at Landerhavenin Mayfield Heights. For more information and to register for theevent, visit www.CrainsCleveland.com/marketing/forty.html.

Ideas at Dawn businessbreakfast series■ Crain’s breakfast series will wrapup on Wednesday, Dec. 7, with apanel discussion on best practicesfor hiring top talent.

For more information on theevent, including online registrationinformation, visit www.CrainsCleveland.com/breakfast.


After more than three decades inthis business, I like to think I understand the emotion of ourcritics and the disagreement

that column writing can stir amongsome readers.

Then along comes a scathing, obscenity-laced, one-line e-mail that gets even my attention. Apparently upsetover Crain’s suggesting thatOhio Republican lawmakersoverreached with Senate Bill 5— thus leading to its resoundingelection defeat last week — thewriter’s most printable word (notthat it is a word) was “libtard.”

I presume this deep thinkerwas hurling an epithet from thefar right, using a term I hadn’theard or read yet. My, how theextremists can react when they don’t gettheir way. Clearly, this person, who useda name I don’t believe is real, was angrythat we took the position that Ohio’sGOP majority that swept into office lastyear went too far in passing a law withsuch harsh reforms aimed at the state’spublic employees.

Of course, we now realize most of thestate’s voters felt the same way, irrespec-tive of their party affiliation. Now theGOP will come back and try to institutelegislative reforms that Ohioans do sup-port, like requiring state workers to paymore of their health care and pensioncosts. That’s change we could support,

and when we do, it probablywill anger someone from theother side. Oh, well …

* * * *WITH THANKSGIVINGbearing

down on us, thoughts turn tothe entire holiday season andits importance to business.

On that theme, I offer athought from an email sentfrom a friend in Chicago who’son a campaign to boost sales of

locally produced goods and services. Heand his wife, who run a business with offices here and in the Windy City, areimmigrants, part of that creative class ofwhich every city in America wants more.

And the email, created by someoneelse, had great suggestions on holidaygift-giving:

“It’s time to think outside the box,people! Who says a gift needs to fit in ashirt box, wrapped in Chinese-producedwrapping paper?” It went on to makevery interesting suggestions of gift-givingthat would help local businesses ownedand staffed by Americans, such as giftcertificates to restaurants or hair salons.Or a computer tune-up from a local whizkid trying to help pay college costs. Or acar detailing at a local body shop.

“You see, Christmas is no longer aboutdraining American pockets so that Chinacan build another glittering city,” theemail author wrote. “Christmas is nowabout caring about the U.S., encouragingAmerican small businesses to keep plug-ging away to follow their dreams.

“And when we care about other Amer-icans, we care about our communities,and the benefits come back to us in wayswe couldn’t imagine.”

While it’s logical to cut corners in suchtrying economic times, wouldn’t you feelgood by buying holiday gifts and servicesfrom local businesses, knowing that bydoing so you help the entire country liftitself past this “jobless recovery”? ■


Humble pieO

ne of our favorite quotes is from Clint Hurdle, a former Major League baseballplayer who now is manager of the PittsburghPirates. It goes like this: “There are two

types of player in this game — those that are humble, and those that will be humbled.”

Last Tuesday, Gov. John Kasich and his Republicancohorts in the Legislature had an entire humble pieshoved down their throats as Ohioans defeated Issue 2, a referendum on the collective bargainingbill the Republican had put into law last March. Itwasn’t even a contest, as more than 61% of voterssaid “no” to Issue 2, for a margin of defeat of nearly800,000 votes.

Gov. Kasich sounded appropriately chastened theevening of the election, the outcome of whichquickly became clear.

“It requires me to take a deep breath and to spendsome time to reflect on what happened here,” thegovernor said.

It shouldn’t take too long.Ohio Republicans were arrogant in their use of

power.They were overconfident and shortsighted, too.The arrogance came in creating a bill that went

well beyond the governor’s stated intention of helping local governments and school districts holddown their costs by limiting the extent to whichhealth care and pension benefits are subject to negotiation under collective bargaining agreements.

The overconfidence was evident in passing asouped-up, anti-labor bill despite tremendous opposition from public employees and their unionleaders, the latter of whom made no secret thatthey’d take out petitions to overturn SB 5 in a refer-endum if it was signed into law.

As for shortsightedness, the Republicans were likebad chess players; they made a move with little consideration for how their opponents wouldcounter it. They should have expected the unionsnot only to rally the troops to vote against the measure, but also to pour tons of money into adver-tising to convince other voters to align with theircause. And they did — by most estimates, to thetune of $25 million.

They were shortsighted, too, in failing to recognizethat a sound repudiation of SB 5 could jeopardizetheir ability to lead over the next year and beyond.

Less than 12 months after gaining political advantage to set the state agenda, Republicans inColumbus find themselves on the defensive. They’vesucceeded in energizing Democrats and their unionallies as they head into 2012 with elections for seatsin the Ohio House and Senate on the horizon.

They also may have blown an opportunity to take pressure off cities and school districts whenthey’re negotiating contracts with their unionizedemployees. We’ve got to wonder just how eager Republican lawmakers up for re-election will be toput forth a less-ambitious version of a collectivebargaining bill after the sound thrashing of SB 5.

It’s a sorry outcome for Gov. Kasich & Co., espe-cially because it didn’t need to be this way. Now,they’re eating humble pie, while the state starves forchange.

FROM THE PUBLISHER

PERSONAL VIEW

BRIANTUCKER

Please, tell us what you really think

Tech advances help banks develop bondsBy SID GOOD

Each generation seems to reflect a different relationship with itsbanks. As an aging Baby Boomer,I love the convenience of ATMs

to handle a majority of my banking needs,and I appreciate the value of accessing myaccounts online.

And while there are many in our parents’and grandparents’ generation who stillactually go inside a bank to conduct theirbusiness, younger generations havebeen forging a new banking relationshipdynamic that few banks have noticed orleveraged most effectively.

First and foremost, consumers are nolonger geographically dependent ontheir local banks. Depending on priori-ties for products and services, potentialbank customers can simply access the

Internet, identify what banks offer thebest options for what is most importantto that individual or family, and proceedto forge a relationship with that institu-tion.

Since geography no longer plays a significant role in this decision, the opportunity for a long-term relationshipbetween a bank and its customers is sub-stantial since there is no longer the needto switch banks when moving to a differentlocation. In addition, the opportunity forbanks is that they are no longer specifi-cally dependent on consumers who fallwithin their geographic footprints sincethey can now reach out to consumers

who can access their banking servicesonline.

Amazingly, though, very few banks offer any substantial outreach to youngerconsumers until they are college age,well past the time when banking servicesare needed.

In light of this phenomenon, banksneed to better leverage — albeit withparent engagement — the 10- to 19-year-old market. They are just beginning tobecome more engaged with personal finance issues and are most at risk ifgood personal finance habits are not established early. With over $200 billionin collective spending power, this agegroup is in desperate need of learningthe basics of personal finance, savings,investments, budgeting and other mon-ey management issues.

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

EDITOR:Mark Dodosh ([email protected])

MANAGING EDITOR:Scott Suttell ([email protected])

OPINION

Mr. Good is president of Good MarketingInc., a product development agency inCleveland that develops ideas for children’sproducts.

See VIEW Page 11



REBECCA RANALLOBay Village “Maybe people don’t savethe same way. I also thinkthere are more things youexpect to have now. … Mygrandparents owned theirown home, but they didn’thave as many posses-sions.”

➤➤➤➤ Watch more of these responses by visiting the Multimedia section at www.CrainsCleveland.com.

THE BIG ISSUEOver the past 25 years, the net worth of older adults has risen significantly while the net worth ofyounger adults has dropped, according to the Pew Research Center. What might explain this trend?

ELAINE DURDENCleveland “Young people, they don’ttake care of themselvesas much. …(Older) peoplehad their own gardens,they had fresh produce.Now people are eatingfast food.”

JEFF KREZEVICHPainesville “Older people 25 yearsago would graduate highschool and get a job at afactory and be safe at thefactory for 25 or 30 yearsand retire. … (Youngerpeople) don’t have thesame opportunities.Younger people today aregoing to be jumpingaround from job to job before they find their niche.”

JAMIE PEACOCKCleveland“I think everybody’s worried about spendingtheir money … on frivo-lous things right now without thinking of the future. That’s what separates our generationfrom the generation of ourgrandparents and even myparents.”

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Even though a significant numberof teens might already have savingsaccounts, write checks or have debitcards in their own name, most teensknow little about personal financeand investing basics. The goodnews is that, more often than not,they would like to learn more.

Even among major banks, if youcompare website homepages, thereis little that differentiates one bankbrand from the other. And there iseven less that identifies how the featured products or services arerelevant for younger consumers.The few exceptions seem to be thebanks that have begun to offerbanking apps as a convenience forall customers.

With the capabilities of Internetbanking and other social mediaplatforms, banks now have the oppor-tunity to nurture relationships withyounger consumers and make themcustomers for life. Few banks, however, have ever reached out toactually talk to younger consumersto determine what they want, whatis most important about any bankingrelationship, and how to make bankproducts and services more com-pelling to this age group.

It is, obviously, a moving target —one that will definitely change overtime. But the key is to be there frontand center when the need occursand the benefit can be provided.

We all save for different things atdifferent times of our lives (i.e., cars,

college, homes, etc.). And we all savefor the same things throughout ourlives (i.e., retirement, health care,etc.). Consumers need to know thatbanks are there for them at everystage of the process — a constantand consistent resource and partnerfor all financial needs.

It is not one size fits all. It is dynamic and always unique to everyindividual. Banks just need to learnhow to best deliver on this option. Itis done in the world of private banking.It just needs to be replicated in themass market for younger consumerson up. Fortunately, the dynamics ofthe Internet and other social mediaoptions make it achievable.

In this current economy, we expect our elected officials to be morefiscally responsible. We certainly require that of our families and our-selves. Banks that choose to work inpartnership with their customerbase — at all age levels — to achievethat goal will definitely benefit fromthe investment.

However, the earlier banks startto reach out to potential customers,the longer and more substantial thatrelationship will be. Tweens and teens,and their parents, will especially respond to relevant, engaging pro-grams just for them. The result islong-term, loyal customers and on-going, innovative growth. The onlyquestion that remains is, “What newbanking dynamic will be possible andnecessary to appeal to the next generation of bank consumers?” ■

IT pros content, expect raises in 2012By STAFFING INDUSTRY ANALYSTS

Eighty-nine percent of informa-tion technology professionals saidthey are happy in their current positions and 64% plan to stay withtheir current employer, accordingto a survey released last week byModis, an IT staffing division ofAdecco Group North America.

In addition, 44% of all IT profes-sionals expect a raise next year.

“These results are consistent withwhat we are seeing and hearing on a day-to-day basis at Modis,” saidModis president Jack Cullen. “ITprofessionals are generally happyin their current roles and are cau-tiously optimistic about what 2012may bring.”

Meanwhile, 65% of IT profes-sionals believe their IT team willstay the same size in 2012, while28% expect their teams to increase

headcount either marginally or significantly.

More than a third (35%) of ITprofessionals said networking withother IT people is the most effectiveway to land an IT job. However, only8% said social media tools such asLinkedIn, Facebook and Twitter aremost effective for landing an IT job.

The survey included telephoneinterviews of 502 IT professionalsfrom Oct. 7 to Oct. 14. ■

View: Engagement benefits bankscontinued from PAGE 10

Report shows hiring bysmall businesses lagging28% of respondents indicate reduced staffing

The October Small Business Employment Index issued by CBizPayroll Services indicates hiringamong smaller companies remainslethargic.

The unit of accounting and business services provider CBiz Inc.said its barometer for hiring trendsamong companies with 300 or feweremployees declined by 1.28% lastmonth after posting a decrease of0.81% in September.

The CBiz announcement followedADP’s October jobs survey, whichindicated that the private sectoradded 114,000 jobs in October.However, that number was downfrom a hiring increase of 122,000new jobs recorded in September.

Philip Noftsinger, business unitpresident for CBiz Payroll Services,said the latest results “show a steeper decline than in September,indicating that job growth at thesmall business level is still strug-gling.”

CBiz said of the companies thatwere surveyed, 28% reported a decrease in employee headcountwhile 22% increased staffing. Halfthe companies responding to thesurvey maintained their number ofemployees.

“With consumer spending likelyto heighten during the holiday season,it could accelerate economic activityand confidence,” CBiz stated. “Apickup in consumer spending couldhelp to propel the economy forwardand increase employer sentimentwhen it comes to hiring.”

Mr. Noftsinger said many employersthat are facing a year-end calendar“may be opting to slow the replace-ment process for positions openeddue to voluntary attrition in an effort to boost net income.”

“We should see some stabilizationto the numbers as we move into theholiday season and hope for jobgrowth during that period as well,”Mr. Noftsinger said. ■



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GOING PLACESJOB CHANGESCONSTRUCTIONWELTY BUILDING CO.: Alan Pollackto president, Welty Cleveland Group.

FINANCEFEDERAL RESERVE BANK OFCLEVELAND: Gregory L. Stefani tofirst vice president, COO.FIRSTMERIT CORP.: Jonathan H.Barko to vice president, commercialcredit services.KEYBANK: Rodney Drake to vicepresident and program coordinator,Plus program.OHIO COMMERCE BANK: A.James Totin to vice president, commercial lender.

FINANCIAL SERVICECIUNI & PANICHI INC.: Tony Constantine and Jeremy Harrisonto senior managers; Frank Eich tomanager; Kathleen Drescher, GregHenderson and Jake Roelen to senior accountants; John Ricchiutoto staff accountant.MCMANUS, DOSEN & CO.: DavidM. Wehner to senior accountant.WELLS FARGO ADVISORS:Stephen Reagh and Gary Fishbackto senior vice presidents, investment

officers.

HEALTH CAREMETROHEALTH: Dr. Sobia Hassanto Department of Rheumatology; Dr.Hari Prasad Kunhi Veedu to Department of Neurology.SUMMA HEALTH SYSTEM: Dr. Gus Kious to president, SummaPhysicians Inc.

INSURANCEWELLS FARGO INSURANCE SERVICES USA INC.: Richard S.Oleksyk to senior vice president;John W. Grabner to sales executive;Pamela Fleischer and JennaSchmidt to account executives.

LEGALBENESCH: W. Clifford Mull to associate.BROUSE MCDOWELL: ChristopherM. Huryn to partner.CALFEE, HALTER & GRISWOLD LLP:Jenny L. Sheaffer to partner; MonaMa and Lindsey Sacher to associates.JAVITCH, BLOCK & RATHBONE:William M. McCann and NevenkaPavlovic to partners. TAFT STETTINIUS & HOLLISTER LLP:H. William Beseth III to associate.

MANUFACTURINGFAIRMOUNT MINERALS LTD.:Christopher L. Nagel to chief financial officer; David J. Crandallto vice president, general counsel;Reginald L. Stover to vice president,people and talent development.ROGERS CO.: Erin Chom to marketing specialist.

MARKETINGLIGGETT STASHOWER: MarkSzczepanik to creative director; Linda Fantone to art director; Charlene Coughlin to senior projectmanager; Doug Herberich to seniorart director; Larry Peacock to account director; Angelina Broderickto project manager; Emily Tarr to account coordinator.

NONPROFITCLEVELAND COUNCIL ON WORLDAFFAIRS: Ambassador HeatherHodges to president and ambassadorin residence.CLEVELAND RAPE CRISIS CENTER:Katie Hanna to statewide director,Ohio Alliance to End Sexual Violence.

REAL ESTATEGUGGENHEIM INC.: James A.Samuels to senior vice president,Commercial Real Estate Group.

SERVICEINFOCISION MANAGEMENT CORP.:

HassanFishbackReagh

McCannMullKunhi Veedu

ChomBesethPavlovic

PrivettFriSamuels

Gretchen Fri to senior public rela-tions manager; Terri Privett to seniordirector, accounting administration.WESTERN RESERVE PLUMBING:Chris Sprague to service manager.

TECHNOLOGYBOUNDARY SYSTEMS INC.: MikeKanczak to director of sales; WadeMoravek to director of engineering;John Steinbrenner to controller.

TRANSPORTATIONGREAT LAKES TOWING CO.:John McClure to quality, safety andenvironmental manager and TroyWilliams to new construction manager,Great Lakes Shipyard.

BOARDSCUYAHOGA COUNTY LAND REUTI-LIZATION CORP.: Tony Brancatelli(City of Cleveland) to chairman; DanBrady to vice chairman.

AWARDSCLEVELAND INSTITUTE OF ART:Peter van Dijk and Cris Romreceived the Medal of Excellence.SOCIETY OF WOMEN ENGINEERS:Mary Verstraete (University of Akron)received the Outstanding Faculty Adviser Award.

Send information for Going Places [email protected].

FirstEnergy Corp.’sOhio utility companiessay they are now incompliance with a state law requiring them to buy a percentageof the power they sell from renew-able and advanced energy sources.

The utilities have struck deals tobuy 20,000 renewable energy credits and 5,000 solar renewableenergy credits from Ohio power pro-ducers. Each credit represents onemegawatt of power.

The utilities in 2009 and 2010

had failed to meetbenchmarks setby the 2008 law.

By the end of 2024, utilities inOhio must get 25% of their powerfrom renewable and advancedsources, including 0.5% from solarpower. At least half of the renewableenergy must be generated at operations in Ohio.

The recent credit purchases allowFirstEnergy’s Ohio utilities to meetthe state’s requirements for 2009,2010 and 2011. — Chuck Soder

FirstEnergy meets Ohio mandateON THE WEB Story from www.CrainsCleveland.com.

20111114-NEWS--12-NAT-CCI-CL_-- 11/10/2011 10:56 AM Page 1

SMALL BUSINESSI N S I D E

NOVEMBER 14 - 20, 2011 CRAIN’S CLEVELAND BUSINESS 13

15 ADVISER: FIRMS MUSTFOSTER MOBILEWORK FORCE.

Definitionof a smallbusinessarbitrary

By JAY [email protected]

In early November, U.S. Sens.Ron Wyden, a Democrat fromOregon, and Kelly Ayotte, a Republican from New Hamp-

shire, said they would introduce aresolution asking Congress not topass any legislation that would taxsales that small businesses make onthe Internet.

The senators’ nonbinding, “senseof the Senate” action was designedto match a similar one in the House.

Their goal, a press release fromSen. Wyden’s office said, was to ensure the growth of small businesseswould not be stifled by additionaltaxes resulting from online sales.

What the legislators don’t offer intheir resolution, however, is justwhich businesses would qualify forthe exemption they propose.

In other words, how small is asmall business? Or how large can abusiness be and still be a smallbusiness?

The state of Ohio gave one answer to that question last Tues-day, Nov. 8, when Gov. John Kasichrolled out InvestOhio, a tax creditprogram designed to encourage investments in small businesses.

This program defines a smallbusiness as one with less than $50million in assets or less than $10million in annual sales. The pro-gram estimates 900,000 Ohio busi-nesses fall into that category.

Of course, it’s only one of manyanswers to the question of what exactly makes a small business.

Many politicians have made theprotection of small businesses —evoking the image of the family-owned “mom-and-pop” operation— a major element of their politicalphilosophies.

But in practice, when legislationand regulations are written, the definition varies widely of howlarge a business can be and still beconsidered small.

The impact of the way smallbusiness is defined by government,especially the federal government,might surprise many business owners.

“Most businesses today, basedon our standards, are small busi-nesses,” said Gil Goldberg, Cleve-land District director of the U.S.Small Business Administration. “Ithink we say 98% of all businessesare small businesses.”

See SIZE Page 15

GETTING INTO THE APP MIX

Creating mobile applications for smart phone use benefits some companies, but developers say technology not necessarily for all

By CHUCK [email protected]

For the Winking Lizard, it madesense to develop a softwaretool for customers with smartphones.

Customers who take the BedfordHeights-based restaurant chain’s“World Tour of Beers” visit WinkingLizard locations again and again, oftentrying new beers.

Hence, they’ll take the time to loginto the mobile application, whichthey can use to check out ratings andreviews of the 250-plus beers that the

chain sells.But for a lot of small businesses,

spending the money to develop anapp for smart phones doesn’t makesense, said Jason Therrien, presidentof thunder::tech, which developed theapp for the Winking Lizard.

“We don’t think it fits most ofthem,” he said.

Small businesses need to be carefulwhen deciding whether to developtheir own mobile app, according toMr. Therrien and a few other localsoftware developers.

See APPS Page 14

Wide range of standardsused for classification


A company should seriouslyconsider creating one if it believesit has information that users — beit a customer, an employee or evena supplier — would want to accessfrequently, Mr. Therrien said. Oth-erwise, people will use Google tolook up what they need, he said.

Some companies also might optto develop a website designed towork well with smart phones instead of an app that users woulddownload onto their phones, he said.

For instance, thunder::tech is finalizing development of an online

product catalog for Pittsburgh-basedTriangle Fastener Corp., which sellsscrews, washers, rivets and sealantsto construction companies. ForTriangle, which has an office inCleveland, one advantage of goingwith a web-based tool was that itdidn’t have to develop differentapps for different smart phones.

Start small Other companies don’t even need

to go that far, Mr. Therrien said.“If you’re going to do anything

mobile, make your site mobile.Optimize the heck out of that,”

he said.Though mobile apps are a hot

topic, most small businesses haveyet to develop their own, said RandyCarpenter, senior director of mar-keting and public relations for theCouncil of Smaller Enterprises.

However, COSE itself does havean app. The Cleveland-based organization had thunder::techdevelop an iPad app for the 15COSE employees focused on recruiting and retaining memberbusinesses. The interface makes iteasier for them to show videos, tojump between information about

different programs and to emailinformation to prospects, Mr. Carpenter said.

Next year, COSE might start de-veloping apps members could use,he said, mentioning an idea for anapp that would help businessesfind ways to cut their energy costs.

“We’ve got a couple things onthe drawing board if all goes well,”he said.

DXY Solutions LLC of Clevelandoccasionally develops mobile appsfor small businesses, but most ofthe mobile software developer’sclients are Fortune 1000 compa-


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Apps: Optimize website for maximum utilitynies, said principal Dan Young.

The cost of the apps DXY typicallybuilds range from roughly $12,000to $35,000, Mr. Young said, notingthat some small businesses are deterred by the cost.

“A quality application is going to cost in the tens of thousands ofdollars,” he said.

Those who still are interested inhaving an app developed shouldstart with something small andcarefully analyze the costs and benefits, Mr. Young said.

“Get something out there, butstart small and measure it,” he said.

App happyApps that reside on the smart

phone itself have a few advantagesover web-based tools, according toMessrs. Therrien and Young.

For instance, they tend to befaster and can more seamlessly tapinto global positioning systems andother technology embedded insmart phones. But like Mr. Therrien,Mr. Young said some companiesare better off going with web-basedsoftware.

One example is Demopoulos &Associates LLC of Rocky River. Thesmall private investigation firm justneeded a simple tool that would allow people to use their smart phonesto file cases with the company, saidowner Pete Demopoulos. The webapp is working well so far, he said.

“It really has taken off for us,” hesaid.

BFG Supply Co. of Burton is going with an app customers woulddownload to their phones, once it isfinished. The distributor of horti-cultural products aims to let cus-tomers — professional gardenersand greenhouse managers — usetheir phones like barcode scannersto access information about variousBFG products.

The app also would contain amessaging tool that would let usersknow whether a BFG sales repre-sentative is available to talk by phoneor chat online, said Tim Gallagher,vice president of technology for BFG.

Small companies rarely have thestaff to develop apps internally orthe resources to do much researchon what type of apps customerswould use, Mr. Gallagher said. ForBFG, the prospect of improvingcustomer service makes the effortworthwhile, he said.

“You look for that opportunity toenhance customer experience,” hesaid. ■

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SMALL BUSINESS

Can you imagine any busi-ness being successful todaywithout offering employeesaccess to laptop computers

or ensuring they are equipped withmobile phones?

Today, mobile technology is sim-ply a given for businesses that wantto compete and win. While manycompanies invest in the technologynecessary to enable a remote workforce, most haven’t adopted policiesthat allow employees to use tech-nology to work from home or otherlocations outside the traditional office setting.

Working remotely from home oron the road — dubbed “workingwithout walls”— is no longer anemployee perk. Instead, it is a busi-ness imperative.

Through mobile technology,businesses now are not only able tocommunicate and collaboratefaster and more easily than ever before, but they are expected to do

so by clients and customers.These days, businesses move at a

velocity that does not allow time fortrudging through an alternativesnow route to the office or for waiting overnight for a project to besubmitted. Businesses unable tobreak away from their cubicles andoffice confines can expect to seetheir competitors surge past them.

Many companies are reluctant toallow employees to work remotelybecause they believe the home environment offers too many distractions and that work qualityand productivity will suffer. Thetruth is just the reverse, however:Productivity actually increases for employees who are enabled to work from home or outside the office.

That surprising finding was revealed in a recent study commis-sioned by Microsoft and conductedby Ipsos Public Affairs that surveyedmore than 4,500 employees across

the United States. In fact, 64% of total respondents

reported they are more productivewhen working remotely. Why? Thesurvey respondents said theirbiggest reason for working remotelyis to avoid commuting to work,which causes unnecessary down-time, expensive fuel costs and frus-trating traffic.

They also cited value in the opportunity to better balance theirwork and home priorities with aflexible work arrangement.

While boosted productivity is onebenefit of working without walls, thesurvey also revealed enhanced employee retention and job satis-faction, improved collaboration

among employees, reduced real estate expenditures and lowered operating and maintenance costs.

In addition, policies, practicesand technology that support work-ing without walls give companies access to a larger pool of talent. Today’s employees expect to be asmobile in their professional livesas they are in their go-anywhere-and-stay-connected personal lives— and they’ll apply first to thosebusinesses that enable them towork in a mobile fashion.

In short, businesses that fail toimplement telework policies andtechnologies are at a competitivedisadvantage, falling behind inemployee recruiting, satisfaction,retention and productivity.

The good news is that, accordingto the survey, more than threequarters of employees (77%) saidtheir companies provide technologysupport for working remotely.

This could be a missed opportu-nity since only a little more thanhalf (57%), however, work for com-panies that offer a formal teleworkpolicy.

This means that we may beequipping our employees with thetechnology they need to experi-ence the benefits of working remotely, but in many instances,we’re not empowering them to useit. In the survey, employees reportedthey work remotely an average offour days per month — but theywould prefer to do so nine days amonth.

For many businesses, their poli-cies simply have not caught upwith their capabilities; and thatlimits their ability to catch up andsurpass competitors.

Businesses need every advan-tage they can muster in today’seconomy, and getting a leg up can start with taking a step outsidethe office to enable the creativity,productivity and connectivity ofemployees.

Work to align your employeepolicies with the practices that willbest boost your business. ■

Mr. Sprecher is the enterprise account team manager at Microsoft, who works at the company’s office in Independence.

Fostering a mobile work force key to maintaining relevancyJOHNSPRECHER

ADVISER

Federal and state health andsafety regulations and tax reportingrequirements do change as com-panies pass various size mileposts,said Steven Millard, president andexecutive director of the Council ofSmaller Enterprises, the region’ssmall business advocate.

“Companies hit thresholds,” hesaid. “When they hire their firstemployee, everything changes be-cause there are new requirements.

“When they hire their 25th

employee, things change as well inthe way some regulations are writ-ten to kick in at 25 employees; whenthey hire their 50th employee, that’sanother threshold. Once you getpast that point, things don’t changea lot as you go higher, he said.

However, those rigid, govern-ment-imposed mileposts don’tusually impede the interest busi-ness owners have in growing theirenterprises,” he said.

“I don’t think that employers aregoing to intentionally not grow in most cases because of those requirements,” he said. “They mayat some point want to stay smallerbecause of the complexity but Idon’t think that a large number ofemployers are feeling that way.”

Just as regulations may get morecomplex as an enterprise grows,there’s no shortage of confusionwhen it comes to some standardsof determining a small business.

According to the SBA’s Table ofSmall Business Size Standards, cer-tain categories of manufacturers,among them glass and tire makers,are small businesses as long as theyhave fewer than 1,500 employees.

At the same time, however, under the industry-specific defini-tions of the SBA, a heating oil dealerthat hires its 51st employee is nolonger a small business. The tablehas hundreds of categories and setsa number of fairly precise cutoffs.

If you operate a family clothingbusiness, for example, the SmallBusiness Administration considers

you a small business if your salesare less than $35.5 million. But ifyou only sell children’s clothes,you’re cut off from SBA loan pro-grams at $30 million. If you sellwomen’s clothes, it’s $25.5 million;and if it’s men’s clothes, it’s only$10 million.

Moving yardsticksIn other corners of state and

federal government, and in the private sector occasionally, morerestrictive definitions are applied.

For example, most businessesthat qualify for an SBA-guaranteedloan probably don’t qualify for asmall business tax credit undercoming health care reform.

The Patient Protection and Affordable Care Act gives a busi-ness tax credit to small businessesto encourage companies to offerhealth insurance.

Its definition of a small business?One with fewer than 25 employees.

Many federal regulatory agenciesgenerally use the SBA’s definition,though they often refer to a sort ofcorollary definition from the SmallBusiness Regulatory EnforcementFairness Act of 1996.

That law says there is no defini-tion of “small business,” though itembraces the SBA notion that asmall business is one that is inde-pendently owned and operatedand which is not dominant in itsfield of operation.

Meanwhile, James Kraft, directorof the Small Business Develop-ment Center in Cleveland Heights,one of 63 offices around the countrythat counsels small business own-ers and aspiring entrepreneurs,has developed his own yardstick.

“We deal a lot with the startupsthat have one or two employees orthe existing business that might goup to 100 or 150 employees andhave a couple million dollars insales,” he said. “In many years ofworking, I don’t think I’ve seen acompany with much more than200 employees.” ■


Size: Employees, industrycan be determining factors



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Forgivable loans are enticingway to attract new talentD

espite a persistently highunemployment rate, busi-ness owners find it can bedifficult to entice just the

right person to fill a key position,especially in smaller companieswith more limited resources.

That means business ownersneed to get a little more creative inhow they attract and retain peoplewhose skills and expertise are criti-cal to the success of the company.

The forgivable loan as part of an employment agreement is oneimportant way to bring in and pindown key talent in a smaller organi-zation. Aptly named, a forgivableloan is exactly what its name suggests — a loan that can be forgiven if the terms of the loan arefully met.

A forgivable loan can be usedmuch like a signing bonus or a performance bonus to give key employees a bit of a windfall thatwill reward them, motivate themand perhaps even deepen theircommitment to the business.

However, the forgivable loan offers some tax benefits and hooksthat enable the loan to achieve theobjective in a more efficient, cost-effective manner.

Equally important, a forgivableloan must be documented carefullyto assure it achieves its intendedpurpose. It might act like a com-pensation package, but if it lookslike one or sounds like one on paper, it will not get the favorabletax treatment that makes it such acost-effective human resources tool.

The idea behind a forgivable loanis to give a key employee a lumpsum of cash to be used for any

personal reason they choose. Theterms of the agreement can estab-lish that the loan will be forgivenover the life of the agreement aslong as the employee remains employed by the company.

The loan amount is taxable as income to the employee, but the taxis spread out over the life of theloan. If the employee leaves beforethe loan is fully forgiven, then it isrepayable in full, with interest. Sofor the employee, the forgivableloan is a tax-deferred up-front pay-ment for future service, with a fairlybig club if the employee leaves thecompany before fulfilling the terms.

The Internal Revenue Serviceand case law have established thatthe forgivable loan will not be treatedas compensation for tax purposesas long as the loan represents abona fide debt agreement. If it werecompensation, it would be taxablethe day it is paid. But as a loan, it istaxable only as it is repaid or forgivenover time, making it the hook thathelps retain people in key positions.

Proper documentation of theloan agreement is key to assuring itpasses muster with the IRS. It mustbe established with a promissorynote or binding agreement signed

by both parties. It must contain aforgiveness or repayment schedule,interest charges that are based onmarket rates, and clear terms andconditions for forgiveness, repay-ment and default. Likewise, it can-not contain language referring to anaward, a bonus or compensation.

To illustrate how it might work asa retention tool, imagine a smallmanufacturing company needs tohire a general manager to overseeday-to-day operations. The companycan offer a competitive compensa-tion and benefits package, but itneeds to sweeten the offer to its topcandidate. As part of the offer, thecompany adds a $200,000 loan onsigning, forgivable in equalamounts each year if the manageris still employed with the companyin the same position five years later.

If the manager remains with the company all five years, gross income will be increased by $40,000each of five years to represent theforgiven loan amount each year ofemployment. If the employeeleaves before the fifth anniversary,the outstanding loan balance mustbe repaid, with interest and penal-ties as established in the loanagreement.

As companies continue theirquest to attract and retain the righttalent to fill key positions, the forgivable loan is a tool offering anappealing mix of tax benefits andincentives. ■

Mr. DeMarco is vice president and director of tax services for theregional accounting and businessconsulting firm of Meaden & Moore,headquartered in Cleveland.

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Phone 440-653-5003Fax [email protected]

EAGLE RENTAL PURCHASE4237 Fulton RoadMemphis Fulton Shopping CenterCleveland 44144www.rentfromeagle.comEagle Rental Purchase has opened alocation in the Memphis Fulton Shop-ping Center. It is the retailer’s fourth store;its other stores arelocated in NorthRandall, Board-man and Calcuttain ColumbianaCounty. EagleRental Purchase,established by JoeFischer and Randy Lewis, is a rent-to-own retail store that specializes inrenting home furniture, electronics,computers and appliances. [email protected]

To submit a new business, send thefollowing by email to Amy AnnStoessel at [email protected]:business name; address; city and ZIP;website; brief description of business;business phone number; businessfax number; business email address;and date that business opened.


Crain’s Cleveland Business Custom Publishing



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PRESIDENT’S LETTER

Opportunities during uncertain timesBy LISA H. MICHEL

The Estate Planning Councilof Cleveland, in conjunc-tion with Crain’s ClevelandBusiness, is pleased to pre-

sent the annual Estate PlanningSection.

It is the council’s goal to offerthe community valuable informa-tion related to financial, retire-

ment, insurance, businesssuccession, and estate andcharitable planning. Thearticles and commentaryon the pages that followhave been provided bysome of Northeast Ohio’smost experienced profes-sionals in these fields.

Estate planning is oneof the most overlooked areas ofpersonal financial management.It is estimated that more than120 million Americans do nothave up-to-date estate plans toprotect themselves or their fami-lies in the event of sickness, acci-dent or untimely death. Eachyear, this costs wasted dollars andhours of hardship, which can bematerially minimized with advanced planning and action.

The financial world in whichwe live continues to change. Un-certainty looms about the future ofestate and gift tax laws and domesticand international economic per-formance. Nonetheless, the needfor preservation of assets built overa lifetime for the benefit of family,heirs or charities is ongoing.

Evaluating how your personalobjectives for leaving a legacyhave been affected by the changein laws and market conditionsshould include consulting withprofessionals to advise you on themethods, techniques and docu-ments available to meet yourgoals. If you have concerns

regarding the transitionof a family-owned busi-ness, planning for retire-ment, creating a legacy foryour family or fulfillingphilanthropic goals, thearticles in this sectionwill address these issuesand the benefits of receiving comprehensive

tax and estate planning advice aspart of the planning process.

The Estate Planning Council of Cleveland is composed of a diverse array of more than 440professionals working in theGreater Cleveland area, includingattorneys, accountants, bankersand trust officers, financial plan-ners, insurance agents, appraisersand representatives from charita-ble organizations. Our membersare available to provide you withthoughtful, tax-effective and value-based planning. Our Coun-cil’s website (www.epccleveland.org)can be a useful resource to locateprofessionals to assist you with allof your planning needs.

We are pleased to be able toshare the insights and commentaryof our members and other areapractitioners with you in this annual publication. We hope thatyou will find the information in-sightful, helpful and valuable. ■

Lisa H. Michel is president of the EstatePlanning Council of Cleveland and atrust officer at Key Private Bank.

LISA MICHEL

TABLEOFCONTENTS

TRENDSExamining the potentialchanges in tax laws and theneed to give prudent attention toyour estate plan. S4-S9

PlusBusiness SuccessionPlanning: Planning forbusiness successioncan benefit charitiesand employees as well as the company’sowner. S10-11

Estate Plan Tactics:Managing thetransfer of yourwealth to lovedones throughtrusts and otheravenues. S12-S17

Charitable Giving:Sharing your success withcharitable

organizations canleave a lasting

legacy. S17-S20




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ESTATE PLAN CHECKUP

PLAN INSPECTIONS

Planning for the New Year:your annual financial physicalBy MARY EILEEN VITALE

New Year’s shouldn’t bejust about making reso-lutions to better your-self. Consider before

the current year’s end whetheryour financial affairs need to beupdated. This can include manythings we don’t think about dayto day. Moving forward, at leastannually, take stock of your financial and estate plan to prepare for future needs.

The following are a few of thefinancial aspects you should con-sider each year:

■ BANK ACCOUNTSAre these titled correctly?Do they provide for proper

transfer at death?

■ INVESTMENT ACCOUNTSAre these titled correctly?Are the asset allocations

diversified and updated to reflectyour risk tolerance and time toretirement?

Are the investments appropri-ate for your current income taxsituation?

■ 401(K) OR 403(B) RETIREMENTPLANS

Are your deferral/contributionpercentages correct for the

upcoming year?Will your deferral/contribution

percentages get you the maxi-mum company match?

Have you considered Roth versus Traditional IRAs?

Are the asset allocations diver-sified and updated to reflect yourrisk tolerance and time until retirement?

Are beneficiary designationscurrent?

■ CAFETERIA PLAN ELECTIONS

Are your withholding elec-tions current?

Medical spending/HSA deferrals

Dependent careInsurance coverage

■ PAYROLL ELECTIONSAre your tax withholding

elections correct?Is a portion going to

savings/investment?

■ HAS YOUR ANNUAL INCOME TAX PLANNING BEENCOMPLETED?

■ ESTATE PLANNING DOCUMENTS

Are your will/trusts current?Are named trustees, custodi-

ans and advisers appropriate?If you added a living trust,

did you retitle your assets?Do you have a durable power

of attorney? Is it current?

■ DO YOU HAVE A CURRENTHEALTH CARE POWER OF ATTORNEY AND LIVING WILL?

Mary Eileen Vitale, CPA, CFP, is principal with Howard, Wershbale &Co. Contact her at [email protected] or (216) 378-7210.

By LINDA DELACOURT SUMMERSand PATRICK TULLEY

Do you visit your doctorfor an annual checkup?When you do, isn’t itnice to hear that every-

thing is just fine and that thereare no changes? Sometimes,however, the doctor finds issuesthat need addressed.

Your estate plan needs acheckup from time to time aswell. While not as often as aphysical, every few years youshould evaluate your estate plan.

Consider the following as youevaluate your plan:

1Last will and testament.Who do you want to inher-it your property? Are your

executors and guardians still appropriate choices?

2Trust agreement. Do youhave a trust agreement? Ifnot, should you? A trust

agreement allows you to controlwho gets your assets and when.It can help you avoid probateand save estate taxes. At whatage do you have your assets being distributed outright toyour children? Are your childrencapable of receiving those assetsoutright without a detrimentaleffect on their desire to maketheir own way?

3Durable power of attorney.Have you given a trustedperson authority to handle

your finances and property if

you become incapacitated? Doyou have an alternate, just in case?

4Durable power of attorneyfor health care, living willand final arrangements.

In case you cannot, have yougiven someone the power tomake health care decisions foryou? Have you made your desiresknown to your family membersregarding life support? Are youan organ donor? Do you want tobe buried or cremated? Makingcertain decisions ahead of timeeases the burden on thosenamed to take care of you.

5Provide for the orderlytransfer of any business.If you own a business, you

should have a succession plan. If you are the sole owner, who isgoing to run your business ifyou are not there? If you own abusiness with others, do youhave a buyout agreement? Howis it going to be funded?

6Review account ownershipand beneficiary designa-tions. All of the estate plan-

ning documents in the worldwon’t mean a thing if your accounts are not titled properlyto work in conjunction with yourwill and/or trust. Part of yourcheckup should include con-tacting all financial institutionsholding your accounts and the life insurance companiesholding your policies and asking“how is my account titled”and/or “who is my beneficiary?”Many of you will be surprised atwhat you learn.

7Storage of documents andinformation. Where areyour original documents

stored? Do you have a completelist of your assets? Who, other than you, knows the password to the account infor-mation that you keep on yourcomputer?

Estate planning is not just aboutmaking sure your assets go to theright people in the right way. Italso includes the preparation ofdocuments and communicationof desires so that your loved ones’burdens are eased.

Just like with a physicalcheckup, do your estate plan-ning checkup not only for youbut for them. ■

Linda DelaCourt Summers and Patrick Tulley are estate planning attorneys at Ulmer & Berne LLP. Contact Summers at (216) 583-7212and Tulley at (216) 583-7234.

LINDA DELACOURTSUMMERS

PATRICK TULLEY



ESTATE PLANNINGAdvertisement NOVEMBER 14 - 20, 2011 S-5

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THE ESTATE PLANNING COUNCILOF CLEVELAND

PresidentLisa H. Michel

Vice PresidentMarie L. Monago

SecretaryBeth M. Korth

TreasurerJennifer A. Savage

Program ChairMichael T. Novak

Immediate Past PresidentRadd L. Riebe

Tired of paying for trades

instead of guidance?

Fee only, independent,

objective investment advice

How estate planning can help youBy DORIS SEIFERT DAY

One of the first things thatcomes to mind whensomeone hears “estateplanning” is saving taxes.

Many individuals do not bother topursue this planning because theybelieve that their assets will not beaffected by the federal estate tax.However, there are many advan-tages to estate planning.

Yes, there can be both federaland state tax advantages. Thesemay become less important if the federal estate tax threshold remains at $5 million and Ohioretains its plan to eliminate its estate tax in 2013.

Until that time, even for a smallestate, significant savings can berealized by taking advantage of estate planning techniques.

Planning requires you to reviewyour assets and decide who you would like to receive them.This review allows you to consider

whether your beneficiaries havespecial circumstances and if theywould benefit from receiving theinheritance in a form other thanan outright distribution.

Remember, if you do not specify who will receive your assets, state law will.

You may want to considerwhich specific assets (and not justan amount or percentage) a bene-ficiary receives. If you would liketo give a portion of your estate tocharity, some assets are more advantageous than others.

Consider the form in which youhold your assets. You can create agrantor trust, which will allow youto retain complete control of yourassets but avoid probate courtcosts and delays. It also offers other advantages, such as a trusteeto handle the management oftrust assets, when the grantor isunable or unwilling to do so.

It provides an opportunity toorganize and plan, which maymake your current asset manage-ment more efficient and stream-lined.

Consider estate planning andthe opportunities it may provideto you and your beneficiaries. Forquestions or concerns contactyour tax adviser. ■

Doris Seifert Day is director of taxation forWalthall, Drake & Wallace, LLP. Contacther at (216) 573-2330.

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Your legacy can truly make a difference.

The give and take in estate and gift taxationLawmakers increase exemptionwith a catch ... it expires in 2013By RADD RIEBE

Last December, Congresswas in the giving moodwhen it implemented a $5million exemption for gift

and estate taxes and dropped themaximum rate to 35%.However, as if too muchgood news is a bad thing,Congress chose to sunsetits largess so that on Jan.1, 2013, the exemptionreverts to $1 million,with a maximum tax rateof 55%. For Congress, thelure of a 55% tax rate isthat it produces $550,000in taxes for every $1 millionabove the exemption.

While favorable conditions exist for tax-efficient estate plan-ning, these conditions may notremain. It is unknown when thewindow of opportunity slamsshut.

Interest rates

In August, the Federal Reserveannounced its intention to main-tain low interest rates until mid-2013.

Estate planning strate-gies that take advantageof these historically lowrates are particularly appealing. The Section7520 rate, which the IRSuses in valuing annuities,life interests or interestsfor terms of years and remainder or reversionaryinterests, is at the lowest

it has even been. (See chart at right).

It appears there is only oneway rates can go in 2013 — up.The likely shelf life of low interestrates corresponds with the sched-uled expiration of the $5 millionexemption.

GRAT is to outlive the term sothat the remainder passes outsidethe grantor’s estate. There isgreater mortality risk in a 10-yearterm GRAT that makes realizingthe potential benefits from theGRAT less probable. Congress maypull the GRAT legislation at anytime and attach it to a bill whenevera revenue raiser offset is needed.The combination of the low 7520rate and the specter of this legis-lation showing up in a bill in thenear future presents a compelling reason to establish a GRAT today.

Tax ratesA substantial increase in estate

and gift tax rates is already lockedin for 2013, unless Congress acts.In all likelihood, Congress will notbe concerned with estate and giftrates until after the November 2012presidential election. It will be abrave individual who waits untilthen to find out whether 2013 willbe a good or bad estate tax year.

Valuation discountsThe Joint Select Committee on

Deficit Reduction will make a recommendation by Nov. 23 todeal with future deficits. TheObama administration has proposals to curtail valuation discounts in family-controlledbusinesses for transfers amongfamily members. Restricting valu-ation discounts is one area thatmay be viewed as a loophole closing rather than a rise in taxes.

Estate planning advantages today

Interest rates are low, two-yearGRATs are valid, valuation dis-counts are available, the top giftand estate rate is 35%, and theexemption amount is $5 million.It is difficult to foresee when anopportunity to transfer assets toloved ones will be as favorable asit is now. ■

Radd Riebe is a managing director in the Valuations and Financial Opinions Group at Stout Risius Ross Inc. in Cleveland. Contact him at (216) 373-2998 or visitwww.srr.com.

Grantor retained annuity trusts (GRAT)

Legislation is ready to go to requirea minimum 10-year term for aGRAT. The anticipated benefit of a

RADD RIEBE

TRENDS




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2012 marks an importantyear in estate planningBy JOHN PATRICK

The fundamental goal of estate planning is to protectindividuals’ assets frompotential losses. The primary

drain on an estate is transfer taxes,comprised of gift taxes assessedon assets gifted during a person’slifetime and estate taxes assessedon assets gifted upon death.

The last 12 months have seentaxpayer-friendly progress inhelping to avoid or minimizetransfer taxes. The 2010 Tax Actallows each U.S. citizen to protectup to $5 million from federaltransfer taxes through the 2012calendar year and reduced trans-fer tax rates from 45% to 35%.

The law also introduced theportability of a married person’sexclusion amount by allowingthe estate of a surviving spouse toutilize any exclusion amount thatwas not used at the deceasedspouse’s death. In June, the goodnews continued when Ohio enacteda law to repeal its estate tax fordeaths after Dec. 31, 2012.

There are no new federal orstate laws that will apply on Jan.1, 2012, to weaken the impact ofthese laws. However, 2012 is important under existing federaltransfer tax rates since it expiresDec. 31, 2012. Without action,

those rates will revert to 2001 levels ($1 million exclusion and55% maximum tax rate). PresidentObama’s fiscal year 2012 budgetproposal includes features not asadvantageous as the law he signedless than a year ago, but better thanwhat existed in 2001.

The proposal permanently restores the federal transfer taxlaws to 2009 levels after the 2012calendar year. Under the proposal,federal estate taxes will apply toassets valued over $3.5 million ata 45% rate. Each U.S. citizen willonly be able to gift up to $1 mil-lion on top of the annual gift taxexclusion (currently $13,000 ayear). The proposal limits dynastytrusts to a maximum term of 90years, and imposes a minimum10-year term for Grantor RetainedAnnuity Trusts, eliminating valu-ation discounts. Offsetting thesesetbacks, the proposal plans tomake the portability feature ofthe 2010 Tax Act permanent.

During these uncertain times,it is best to align yourself with askilled professional who will helpyou make the best decisions foryou and your estate. ■

John Patrick, Esq., is a shareholder withReminger Co., LPA, Attorneys at Law.Contact him at (216) 430-2207 [email protected].

TRENDS

Another brief reprieve: the ‘new normal’ for transfer taxes?

By LINDA M. OLEJKO

■ NINE YEARSThis is how long Congress went unable to draft a

long-term resolution for estate and gift taxes. The2001 tax reductions provided for a completerepeal of estate tax in 2010, but a full reinstatement of higher taxes in 2011. Higher taxes largely were postponed fortwo years by the 2010 Tax Act, which provides quite generous provisions thateach of us should now apply to our best advantage.

■ PLANNING FOR 2013 AND BEYONDIf Congress stands still through 2013, we

will again have a 55% estate and gift tax on all assets in excess of $1 million. This uncertaintyrequires us to implement short-term responses that will not hamper or impede post-2012 planning.

■ REVISIT YOUR ESTATE PLANQuestions worth posing: Under current law,

would your current plan leave your spouse withoutadequate resources? Do other provisions in yourestate plan divide property based on amounts defined by the tax consequences?

■ MAKE GIFTSEach of us has the ability to pass along $5 million

free of estate and gift tax through Dec. 31, 2012.

Families who can make large gifts should do so assoon as possible. However, is it prudent to relin-quish cash flow and security? Most fundamental is the need to understand the actual cash flow andlevel of assets you require to sustain your lifestyle

and, importantly, your peace of mind. Glenmede’s approach is to develop, withyou, a balance sheet and cash flow state-ment that projects your big picture andshows how your assets can fulfill yourneeds and your tax efficiency objectives.

■ GENERATION SKIPPINGThe $5 million gift tax exemption also

applies to gifts to grandchildren and more remote descendants. This is a particularly

good time to create a gift in trust for these generations.A “dynasty” trust can last through generations withoutadditional estate tax.

■ EFFICIENT MONETIZATION OF THIS BRIEFREPRIEVE

Many factors important to financial planning willcontinue to remain uncertain. We can, however,work with the facts we have to help clients craft anoptimal gifting and estate plan that considers theirunique personal needs and wealth objectives in thisclimate of evolving legislation.

Linda M. Olejko is vice president, business development for Glenmede. Contact her at (216) 514-7876 [email protected].

LINDA OLEJKO




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Best time for gifts? There’sno time like the presentBy JOSEPH M. MENTREK

For individuals whoare inclined to include a lifetimegifting program to

children and grandchil-dren as part of their estateplanning strategy, ques-tions abound. What togive? How to give? Howmuch to give? Who should bene-fit? With the continuing uncer-tainty in federal estate, gift andgeneration skipping tax laws, thequestion of when to give poses anadditional challenge.

Changes in federal tax laws thatoccurred near the end of 2010 increased and unified the lifetimeestate, gift and generation skip-ping tax exemption at $5 million,decreased the maximum tax rateto 35% and added the ability of amarried couple to effectively sharetheir combined estate tax exemp-tion amount through a conceptknown as portability.

These changes are scheduled to

sunset at the end of 2012,and again we are facedwith the possibility of reverting to the lower exemption and higherrates that were in place in2001. Many consider nowthrough the end of 2012as a window of opportu-nity to make significantgifts in case lawmakers

scale back the exemption.And while I would like to credit

our legislators for creating thiswindow of opportunity, in realitythe fundamental core of any gifting strategy is designed to remove value and future apprecia-tion from the taxable estate of thedonor.

So the sooner one is able tomake a gift, the better, because themere passage of time and the power of compounding value arethe factors most likely to makeany gifting strategy effective. Thefact that we are in a low point inthe valuation cycles of closelyheld business, real estate and

TRENDS

Ohio estate tax repealeffect yet to be seen By JOSEPH P. KOVALCHECK JR.

On June 30, Gov. JohnKasich signed the lawthat repealed the Ohioestate tax for those who

die on or after Jan. 1, 2013. Thelegislation was included as part ofthe Ohio budget bill.

The Ohio estate tax has beenaround since 1968, generating$333.8 million in fiscal year2009. Twenty percent ofthe estate tax was distrib-uted to the state generalrevenue fund, and 80%was distributed to the local government wherethe decedent resided.However, the tax pro-duces less than 1% of total annual revenues forOhio cities, villages andtownships. Additionally,because proceeds go to the localitywhere the decedent resided, it wasfelt that wealthy jurisdictions received a disproportionate shareof estate tax revenues. No estatetax revenues go to Ohio’s schools.

Before the repeal, Ohio wasone of 22 states that had estateand/or inheritance taxes. Amongestate tax states, Ohio had thelowest exemption amount, just$338,333, but also had the lowesttop rate at 7%. Some states are

following Ohio’s lead. Vermontincreased its exemption from $2million to $2.75 million, andNorth Carolina and Delaware increased their exemptions to $5 million to match the federalestate tax exemption.

However, other states are taking the opposite approach.Looking to increase revenues during these challenging economictimes, they are imposing new and

higher estate taxes. Illi-nois revised its estate tax,effective Jan. 1, 2011, taxing estates exceeding$2 million and with a toprate of 16%. Connecticutlowered its exemptionfrom $3.5 million to $2million per estate.

Gov. Kasich believesexcess state taxes are amajor reason that capital,

businesses and jobs have fledOhio in recent years. Many believe the elimination of the estate tax will help stop the exodusof Ohio residents who have fledto Florida or one of the other 27states without an estate tax, andwith luck, will attract new resi-dents and their businesses. ■

Joseph P. Kovalcheck Jr., CPA, is prin-cipal with M+N Advisory Services LLC.Contact him at (216) 363-0100.

other investment assets makes potential results more attractive.Add to that the leverage that can be achieved from more sophisticated techniques and historically low interest rates, and the opportunity increases exponentially.

So whether your motivation ishigh exemption amounts, low asset values or low interest rates,whatever gifting strategy youchoose to pursue, the sooner youact, the greater the potential bene-fits to you and your family. ■

Joseph M. Mentrek, J.D., is vice presi-dent, Meaden & Moore, Ltd. Contact himat (216) 928-5343.

JOSEPH MENTREK

JOSEPH KOVALCHECK JR.




Let’s get to know each other. Wealth doesn’t happen overnight. Our team of experts is here to listen, learn

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TRENDS

Despite uncertainty, properestate planning still will becompelling issue in 2013By JIM ROSEMAN

Historically, much of theestate planning that hasbeen done has been tothe drumbeat of estate

tax savings. The potential tax savings versus the cost of estab-lishing the plan was often verycompelling. For all of that,in modern tax historythere has not been a timewhen more than 2% to3% of estates in thiscountry were actually tax-able. For the 97-plus% ofthe population for whomtaxes were not a real issue,the planning was done forthe protection of self and family.

In 2011, a typical estate planwill have five major documents:

■ A revocable living trust■ A durable financial power of

attorney■ A durable health care power

of attorney■ A living will■ A last will and testamentThe primary purpose of these

documents is to govern the finan-cial landscape of the individualfor whom they are established. Ifproperly established and funded,they should preclude the necessityof having a guardian of the estateif the grantor becomes ill or infirm, and may avoid probateadministration at death.

In addition, if appropriate, thetrust may set aside assets in a waythat first garners the maximumavailable estate tax exemptions forthe grantor’s estate and avoids futuretaxation in the estates of spouses and

perhaps lineal descendants.The current federal exemption

from estate taxes is $5 million percitizen taxpayer. Left untouched,that exemption will expire on Dec.31, 2012. One camp wants the $5million exemption and the maxi-mum rate of 35% to be made permanent. President Obama has

preferred a return to the2009 exemption of $3.5million and a maximumrate of 45%. There are toomany variables involvedto predict the outcome,but it is reasonable to assume we will have somesort of estate tax.

In 2013, individuals still will be interested in protectingthemselves and others in theevent of illness or infirmity, pro-tecting minor lineal descendantsbeyond the age of 18, and pre-serving the maximum amount oftheir estate among other things.Some voices in the estate plan-ning industry have prophesizedthe end of the industry withoutmajor tax planning to drive it;but even if there is no estate tax,the more personal reasons for estate planning will exist andthey will just be more visibleonce again. ■

Jim Roseman is vice president, seniordevelopment officer for FirstMerit Bank.Contact him at (216) 694-5686 [email protected]. First-Merit Bank, N.A. and its representativesdo not provide legal or tax advice. Indi-viduals should consult their personal le-gal/tax adviser(s) before makinglegal/tax related decisions.

Portability comes with a catchBy STEVEN COX

On Dec. 17, 2010, the TaxRelief, UnemploymentInsurance Reauthoriza-tion, and Job Creation

Act of 2010 became law. The newlaw raised the federal estate tax exclusion amount to $5million (reduced by tax-able gifts made duringlifetime) for individualswho die in 2011 or 2012.In the past, without properplanning, a decedent either used the exclusionor lost it.

Now, for the first time,the unused portion of a decedent’sexclusion amount can be passedto his or her surviving spouse toincrease the amount available atthe survivor’s death. This “porta-bility” of the exclusion betweenspouses can provide a substantialtax break to widows and widowers.However, portability may not beas good as it seems. The rules governing portability contain sig-nificant limitations.

For example, portability applies

TAKE THE HIGH ROADThe current federal exemp-

tion from estate taxes is $5million per citizen taxpayer.Left untouched that exemp-tion will expire on Dec. 31,2012.

■ WHAT MAY HAPPEN?The $5 million exemption andthe rate of 35% could bemade permanent. TheObama adminis-tration has

preferred a return to the 2009 exemption of $3.5 million and a

maximum rate of 45%.

■ GIVEN THE UNCER-TAINTY, WHAT’S BESTFOR ME? People still will

want to preserve the maxi-mum amount of their estatefor the heirs. Even if there isno estate tax, the more per-sonal reasons for estateplanning will exist.

only to the last deceased spouse ofan individual. Therefore, if a widowremarries and her most recentspouse also dies first, she is limitedto the new spouse’s unused exemption amount, even if it islower than the amount remainingfrom the first spouse.

Furthermore, the lawexpires on Dec. 31, 2012.Unless the benefits areextended, portability willno longer be available after 2012. Survivingspouses and heirs relyingon the tax benefits ofportability may be disap-pointed if those benefits

are later disallowed. While manyexpect that portability will be renewed, there is no guarantee.Moreover, portability does notcover other taxes like the genera-tion-skipping transfer tax imposedon gifts to grandchildren and the estate tax imposed at the statelevel.

Portability is not automatic. Inorder for a surviving spouse to usea deceased spouse’s exclusionamount, an election must be

made by the executor of the deceased spouse’s estate on a timelyfiled federal estate tax return. Inmany cases, a return would beotherwise unnecessary because thedeceased spouse’s gross estate isless than the exclusion amount.

Under the new rules, even smallestates must file a return if theywant to preserve any unused exemption. Because survivingspouses can acquire unanticipatedwealth, every executor shouldconsider filing an estate tax returnwhen the exclusion amount wasnot fully used. Of course, thepreparation of a federal estate taxreturn often requires the paymentof professional fees and the cost ofappraisals.

While many couples may betempted to rely on portability as asubstitute for more traditionalplanning methods, the associatedlimitations, risks and hidden costsmay outweigh portability’s appar-ent benefits. ■

Steven St. L. Cox is a partner with Roetzel & Andress. Contact him at (330) 849-6714 or [email protected].

JIM ROSEMAN

STEVEN COX




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Business owners looking for salecan benefit from charitable givingBy PETER A. IGEL

Business owners anticipatinga sale often wish to satisfycharitable objec-tives using part of

their new liquidity. Thetax code rewards generosityfor donors who planahead.

The tax savings from acharitable contributiondepends on the donor’seffective tax rate, the typeof business interest andthe type of charity. Gifts of stockmade ahead of a potential sale allow a double benefit of claiminga contribution deduction and alsoavoiding reporting gain on thesale. Charities are tax-exempt onmost income, but could report“unrelated business income” on S corporation stock sales or onpassed-through income from asset

sales. Planners must consider: ■ The donor’s effective tax

rates in the year of an anticipatedsale, and in the preceding and

succeeding years;■ Whether an intended

charity is a public charityor private foundation;

■ Whether the busi-ness being sold is a C cor-poration, S corporation,partnership or LLC; and,

■ Whether the busi-ness will sell assets andliquidate, or whether it

will sell equity.Presale gifts to charity tend to

work best when C corporationstock is contributed to publiccharities, and when a donor hassome ordinary income to be offset by the charitable deduc-tion.

If a donor anticipates signifi-cant capital gains, contributions

might be better in the year beforeor after a sale, so that the charita-ble deduction will shelter incometaxed at higher ordinary incomerates.

Post-sale gifts are usually advis-able when a donor holds S corpo-ration, partnership or LLC inter-ests because charities could incursignificant unrelated business income in sale transactions. Thus,most sellers of pass-through enti-ties participate in the sale andcontribute sale proceeds later.

Professional planning, early inthe process, can guide a businessowner through the thicket of issues to create a win-win resultfor the owners and their favoritecharities. ■

Peter A. Igel is a partner in the tax groupat Calfee, Halter & Griswold LLP. Con-tact him at [email protected] or (216)622-8311.

Proprietors should consideremployee stock ownershipBy MICHAEL MATILE

There are a number of estate planning consider-ations for business owners thinking of

selling their firms, and amongthe options are employee stockownership plans (ESOPs), whichcan offer a number of benefits.

An ESOP is a transition alterna-tive for business owners to createpersonal liquidity and share ownership with their employees.Frequently thought of only as asuccession planning solution, anESOP also may deliver effectiveestate planning benefits beforeand, uniquely, after an ESOPtransaction.

For business owners who sellless than 100% of their stock toan ESOP, the time immediatelyfollowing the transaction pro-vides an opportunity to giftshares they still own at a reducedvalue due to the increased debtand temporary reduction in thecompany’s equity created as a result of the transaction.

Depending upon the circum-stances, some sellers may be ableto defer capital gains taxes on theproceeds from the sale to theESOP. The owners must reinvest

their proceeds within a year intoqualified replacement property(QRP), which is defined in the Internal Revenue Code. And if owners hold the QRP untildeath, it escapes income taxationduring their lifetime and also provides their heirs a stepped-uptax basis in the property upondeath.

Owners who wish to be chari-table with their estate plans also may be able to transfer QRPto a charitable remainder trustwithout it being considered a disposition that would triggergain. The trust does not pay taxwhen it disposes of the QRP, deferring the tax until the donorreceives payments from the trust.Likewise, QRP holders may beable to transfer it to a grantor-retained annuity trust (GRAT)without triggering gain as a disposition.

All in all, this may be the besttime for business owners tacklingestate and ownership-transitionissues to consider an ESOP. ■

Michael Matile is a senior wealth planner for PNC Wealth Management.Contact him at (216) 222-5885. PNCBank does not provide legal, tax or accounting advice.

PETER IGEL

BUSINESS ESTATE PLANNING




Mandel Building · 25701 Science Park Drive Cleveland, Ohio 44122 216.593.2900 · www.jewishcleveland.org

on receiving the2011 Distinguished Estate Planner Award

fromTHE ESTATE PLANNING COUNCIL OF CLEVELAND

Congratulations toGary A. Zwick

Walter & Haverfield, LLP

Low rates a boon for business succession By DEVIANI KUHAR

The increase in the exclusion from the estate, gift and gener-ation-skipping trans-

fer tax both during lifetimeand at death to $5 million(which will be adjusted forinflation to $5.12 million in2012) has been the mostnoteworthy development forthose assisting closely heldbusiness owners to transitionbusinesses to the next gener-ation. Close behind the risein the exclusion amount arehistorically low Section 7520rates and applicable federalrates (AFRs).

This month, the long-termAFR (for intrafamily loans in excess of nine years) willfall to an all-time low of2.67%. This astonishingly low rate could have profound implications for families who

want to pass their closely heldbusinesses on to younger genera-tions, but whose businesses pro-

Consider overlooked asset protection opportunitiesBy STUART M. HORWITZ

In today’s competitive busi-ness environment, companiesare looking for ways tostreamline their operations

and save money. Consider implementing certain

business planning techniquesthat will offer asset protectionwhile also saving you income taxes and help with your estateplan.

■ BUSINESS OPPORTUNITYTRUST (BOT). A BOT is effectivewhen you want to help a child orfriend start a business. Since mostventures take time to mature,losses may occur initially. Youwould be able to use these initiallosses on your own income taxreturn. If the venture is sued, youhave two layers of asset protec-tion — the entity and the trust.

If the venture eventually becomes wildly successful, yourchild/friend receives the lion’sshare of the appreciation, whileyou receive a nice return. With aBOT, you avoid all of the prob-lems inherent with a loan. If youloan your child/friend funds tostart a business and it fails, yourchild/friend receives all the losses(which they cannot really usesince they have no income).What’s worse, if a venture failsyou will not sue for the money so

the loan is treated as a taxablegift. A BOT avoids both theseproblems.

■ MANAGEMENT INCENTIVEPLAN (MIP). A MIP is much morethan just a simple deferred com-pensation plan or bonus plan. Itcan help protect your business assets from creditors, even frombankruptcy. MIPs provide almost all the benefits of anESOP, with lower administrativecosts. MIPs let you reward specificemployees (i.e. discriminate intheir favor).

Conversely, if an employeeleaves or engages in prohibitedbehavior, you do not have to paythem. This technique allowsback-end bonuses to be taxed ascapital gains and in some cases,not taxed at all. Finally, if yourheirs happen to be key employees,you can include them and notpay gift taxes.

The above are proven tech-niques that have stood the test oftime and have been vetted byboth the IRS and the courts. In thiseconomy, in which business own-ers are looking for a competitiveadvantage, these techniques maybe a good start. ■

Stuart M. Horwitz is managing memberof The Horwitz Group, LLC. Contact himat (330) 670-5300 or [email protected].

BUSINESS ESTATE PLANNING

duce relatively modest annualcash flows.

Grantor retained annuity trusts(GRATs) and installment sales using mid-term debt have longbeen favored methods of trans-ferring family business interests

to younger generations. Butif annual, pre-tax cash flowsamounted to less than 10%of the transfer tax value ofthe interest being trans-ferred or sold, a familycould not engage in thesetypes of leveraged transferswithout owners having toreceive back some of theirinterests (in the case of aGRAT) or face the uncertainprospect of renegotiatingthe note sometime in thefuture (in the case of an installment sale).

A sale using long-termdebt (more than nine years)was possible, but the ratetypically was unfavorable.

Long-term GRATs usuallywould offer a more favorableinterest rate than the long-term AFR, but the estate taxon potentially the full value

of the transferred business inter-est if the grantor dies during theannuity term of the trust causedmost planners to steer away fromthem.

But the landscape has changed

with the long-term AFR about todrop. For example, a business interest that generates 7.67% ofpre-tax cash flow per year couldbe completely out of the firstgeneration’s estate in 20 years if an installment sale of that interest were initiated in Novem-ber 2011. If the business interestcan be discounted by 25% forlack of marketability or lack ofcontrol, the required cash flowwould need to be only 5.75%, ona pre-discounted basis, to com-plete the transaction within 20years.

This development could have aprofound effect on families thatwant to engage in successionplanning. But they need to actquickly. Long-term Treasuryyields will rise again, and withthem, the long-term AFR will increase as well. ■

Deviani Kuhar is a partner and chair of the Estate Planning and Probate Department at Benesch, Friedlander,Coplan & Aronoff LLP. Contact her at [email protected] or (216) 363-4469.




Nick D. Shofar, Associate

Estate Planning and

Probate Practice Group,

Licensed to practice law in Ohio

MY BENESCH MY TEAM

For all the time and effort you’ve put intobuilding your wealth, you deserve peace ofmind in return. The kind that comes fromknowing your assets are protected, your wealthwill be distributed as you wish, and your futureis as secure as you can make it.

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Have you considered how taxes will impactyour wealth? Do you have a businesssuccession plan in place? Are you sure thatyour assets have been aligned properly withyour estate plan? Have you planned forcharitable gifts…long-term care…incapacity?

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The ups and downs of a GSTA generational skipping trust is a complex planning toolBy DAVE GAINO

You’ve read about Genera-tion Skipping Trusts (GST)in other sections of thispublication. Sound exciting?

It really is. Sound complex? It is,in fact, a very sophisticated butpowerful planning opportunity.It’s critical to understand the truepower of a GST before decidingwhether it is right for you andyour family.

To start, we can examine thepotential benefit of skipping estatetax at succeeding generations.

The table at the right shows thebenefit of a $5 million principalamount compounded at 3% growthper annum with no estate tax,compared to a 45% effective tax rateover five generations. The benefitis almost too good to believe.

So why not skip?First, neither the grantor nor

the spouse of the grantor can havediscretionary access to the principalor income. So you must be sureyou will not outlive your retainedassets.

Second, trust beneficiaries will

be able to enjoy the income fromthe trust but never have com-plete access to the principal, so itis important to consider whetherthey have access to other capitalfor discretionary needs.

The upside for the future bene-ficiaries is that the income enjoyedfrom trust assets will be geometri-

cally more from not having theprincipal depleted by estate taxevery 30 years or so. In addition,estate planning to shelter trust as-sets from tax is done once, at thestart of the trust. Future generationswill not need to concern them-selves with sheltering trust assets.

With the power of the $5 million

GST exemption set to expire onDec. 31, 2012, this tool should bethoroughly explored and under-stood while it is still available. ■

Dave Gaino is chairman of Apple GrowthPartners and serves as a principal of taxservices. Contact him at (330) 867-7350 or [email protected].

ESTATE PLANNING TACTICS

Survivorship stand-bytrust is a flexible choiceBy LARRY L. ROTHSTEIN

W ith so much uncer-tainty, people areseeking estate tax so-lutions that can also

provide lifetime benefits. A sur-vivorship stand-by trust may be agood fit as it can provide estatetax liquidity, lifetime benefitsand tax advantages.

It is most appropriate for amarried couple who may have anestate tax liability or other finan-cial obligations. For a businessowner, the insurance could“equalize” the inheritance forchildren not involved in the busi-ness. For families using a QPRT(qualified personal residencetrust), the insurance could provide substantial funding formaintenance and taxes. There aremany reasons to provide financialliquidity for children.

In a survivorship stand-bytrust, one spouse acts as the applicant and owner of a sur-vivorship life insurance policy. Asurvivorship life insurance policyinsures two individuals and paysa death benefit at the seconddeath. Since one of the insuredsis the owner, there is no gift orannual exclusion needed. Theowner has complete control overthe cash values of the policy during the lifetime. Policy cashvalues grow tax-deferred and mayalso be an alternative source offunds in retirement if it is laterdetermined that death proceedsare not necessary.

A “stand-by trust” is named asthe contingent owner of the policy. The trust language andnaming of beneficiaries may bechanged at any time during theowner’s lifetime since it will not

become irrevocable until theowner’s death. Upon the owner’sdeath, the policy automaticallytransfers to the trust as the con-tingent owner. The cash valuewill be included in the owner’staxable estate, and it is assumedthat lifetime exemption will beused to offset any tax due. Uponthe death of the surviving spouse,the proceeds will pass to the ben-eficiaries free of any income or estate tax.

If a non-owner spouse diesfirst, the surviving owner needsto gift the policy directly to atrust. This gift again would require the use of a portion oflifetime exemption. Since theowner is an insured on the policy, this would also trigger the3-Year Rule. As long as the ownersurvives three years of more, theproceeds then would pass incomeand estate tax free to the benefi-ciaries.

The survivorship stand-by trustprovides substantial flexibility forfamilies seeking to have theircake and eat it too. It provides astructure to eventually providetax-free death proceeds to theheirs and it also provides access to policy cash values on atax-advantaged basis during alifetime. This approach avoids theuse of any annual exclusion giftsand postpones the use of lifetimeexemptions until a first death.All and all, the survivorshipstand-by trust is an attractive approach, creating flexibility andan ability to deal with an uncer-tain future. ■

Larry L. Rothstein, CLU, is co-founder ofInsurance Management Consultants,LLC. Contact him (440) 801-1800 orvisit www.imcwealth.com.

GOOD BENEFITS

Principal amount Trust principalYears left to next generation growth before tax Tax savings

without GST without GST

1 $5,000,000 $5,000,000 $12,136,312

31 12,126,312 6,674,972 16,201,909 $5,461,341

61 29,458,016 8,911,050 21,629,457 20,546,966

91 71,502,336 11,896,201 28,875,202 59,606,134

121 173,554,936 15,881,361 38,548,232 157,673,574

151 421,263,382 21,201,528 400,061,854

This table shows the benefit of a $5 million principal amount compounded at 3% growth per annum with no estate tax, compared with a 45% effective tax rate over five generations.

GST untaxedtrust principal

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Keeping it all in the family:bloodline dynasty trustsBy ROBIN ROSE STILLER

An article about bloodlinedynasty trusts mightevoke thoughts of the trials and travails of

the 1980s “Dynasty” televisionfamily, the Carringtons. This fictitious family spent considerable time and effort to ensure that“outsiders” did notgain access to thefamily’s con-siderablewealth. Anindispen-sible toolto accom-plish thisasset pro-tection goalis a bloodlinedynasty trust.

“Dynasty”means powerand influenceextending overmany years.

A bloodline dynasty trust doesexactly that. It is an estate plan-ning vehicle that provides a setof instructions to administer and

distribute assets over multiplegenerations for the benefit ofonly those in the family blood-line.

Precisely who is counted in the bloodline is dictated by those creating the trust. Somefamilies include in-laws and

domestic partners in thebloodline, while

others excludeeven legallyadopted chil-

dren.There are three

primaryreasonsthat

clientswish to

createa trust

that will endure for

several genera-tions:

1To protect andpreserve the fam-ily assets from

those who would dissipate them,including creditors and formerspouses of beneficiaries;

2To create incentives that en-courage particular behaviorsand that develop and nurture

family values and relationshipswhile discouraging negative behaviors; and

3To achieve significant transfer tax savings.

Retaining the assets in a blood-line dynasty trust protects benefi-ciaries in a variety of situations,for example, those who are indanger of being sued due to theirhigh-risk professions, those whoown their own businesses, thosewho go through a divorce or abankruptcy, and those who makeirresponsible investment decisionsor who spend foolishly. Draftingflexibility and discretion into thedocument will allow the trust tocontinue until the assets are exhausted or the last of the blood-line descendants has died ... trulyan ending fitting a Carrington. ■

Robin Rose Stiller, Esq., is an OSBA-certified specialist in estate planning, trustand probate law with Smith and Condeni LLP. Contact her at (216)771-1760 or [email protected].

Roth IRA may be right for you

By MICHAEL G. RILEY

Roth IRAs can be a very ef-fective part of a retirementplan. Every case should beanalyzed sepa-

rately, but converting aportion of qualified retirement savings to aRoth IRA adds flexibilityand a hedge against income tax increases.

When a retirement account suchas a traditionalIRA is convertedinto a RothIRA, incometax must bepaid on theconverted amount.Properly handled, theconverted amount willprovide tax-free earn-ings and distributionsthroughout retirementand beyond.

There are also potential estateplanning benefits to Roth IRAs.

For example, Roth IRAs are notsubject to the lifetime minimumdistribution rules that require retirement accounts to be distrib-uted during retirement, generallystarting for the year in which age70½ is attained.

Distributions are required to bemade at death to the beneficiaries,

Donald Hopkins LLC. Contact him at (216)348-5400 or [email protected] from a

traditional IRAcan be beneficial

but with good planning these dis-tributions can be stretched overmany years.

In many estates, retirementbenefits make up the majority of the family’s wealth. In thesecases, it is sometimes necessary topay the retirement benefits to thecredit shelter or family trust tocapture the benefit of the estatetax exclusion in the account owner’sestate, but this is not an optimal

income tax or estate taxresult.

Portability ofthe exclusionamount mightalleviate this

problem, butportability may not

last beyond 2012.

Roth IRAs can be amuch more efficient source forfunding credit shelter trusts afterdeath because the credit sheltertrust will not be depleted by in-come tax on qualified Roth distri-butions.

Roth IRAs can deliver meaningfulbenefits for retirement and to estate beneficiaries, but there aremany competing considerations,so timely planning is needed.

Ask your tax adviser and estateplanning attorney if a Roth IRAconversion is right for you. ■

Michael G. Riley is a member in the EstatePlanning & Probate Department at Mc-

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Take care when choosing trusteesBy TINA MYERS

W hen creating a trust,choosing a trustee isoften not given thecareful consideration

it should. This decision cannotbe made under pressure, whenyou’re sitting across the tablefrom the drafting attorney.

One’s first instinct is normallyto name a family member, rela-tive, close friend or business col-league. However, there are manyfactors to consider when choosingthe most appropriate individualtrustee. There also are timeswhen using co-trustees or a professional trustee may betterprotect the trust’s integrity.

When choosing an individualtrustee, consider the individual’sability to make financial deci-sions, to understand and followthe trust instrument, and to accept fiduciary liability.

An individual trustee’s financialability doesn’t require invest-ment experience, but the personmust be familiar with the PrudentInvestor Rule in the state andshould be able to make prudent

financial decisions. The individual trustee is oftengiven the ability to hireprofessional investmentadvisers, but cannotblindly rely on the advicethey provide. The trusteewill have the ultimate re-sponsibility and shouldconduct adequate duediligence in selecting professionaladvisers.

An individual trustee shouldalso understand the underlyinglegal concepts. This will requiresome knowledge of the applicablestate’s governing trust law. If theindividual doesn’t have the req-uisite understanding of the legal issues, they should recog-nize when they need to seek thecounsel of an attorney.

Does the individual trustee understand the concept of fidu-ciary liability and that this entailspersonal liability? Will the bene-ficiaries be able to recover damagesfrom the trustee, personally? Notlikely, unless that individualtrustee is wealthy or has the appropriate insurance coverage.

If the candidate for trustee is

lacking in any of thesecharacteristics, then naming co-trustees couldbe an effective way tobalance the lack of skill.But, be careful since thiswould require “co-respon-sibility” in managing thetrust. If one trustee doesn’t uphold his fair

share of the responsibility, theother co-trustee must make upfor the shortfall.

There are many benefits of utilizing a professional trusteethat an individual trustee cannotprovide. Among these are trustcommittee oversight, manage-ment policies to assure trusteecompliance, longevity and theability to make good on losses incase of a breach of fiduciary duty.

Choosing the right trustee is notan easy decision. But failing toselect the correct trustee canthwart the whole purpose of awell-drafted trust. ■

Tina Myers, CPA, is tax manager forZinner & Co. LLP. Contact her at (216) 831-0733 Ext. 108 [email protected].

Estate planning for remarried, unmarried, same-sex couplesBy MISSIA H. VASELANEY

Generally, most couples,whether traditional ornon-traditional, havesimilar basic estate plan-

ning goals, which are toreduce estate taxes, avoidprobate and make suretheir assets go to their intended beneficiaries.

■■ MARRIED COUPLES WITHOUT CHILDREN

Most individuals diewithout drafting even asimple will. Consequently,states had to enact laws to governthe distribution of these individ-uals’ property. Intestate succes-sion statutes vary by state. InOhio, a married individual’sproperty will pass 100% to the sur-viving spouse if there are no chil-dren, so “he who lives longestwins” (or actually his side of thefamily wins).

■■ REMARRIED COUPLESMany remarried couples try to

use a first marriage distributionplan. They execute simple willsthat leave everything to eachother and then to their joint chil-dren. The flaw in this plan is thatthere is usually nothing to prevent

the surviving spouse fromexecuting a new will thatleaves everything only tohis or her children.

■■ OPPOSITE-SEX COUPLES WHO CHOOSENOT TO MARRY

Older couples may notwant to risk their assetsshould the other spouse

enter a nursing home. A prenuptialcannot prevent a spouse’s assetsfrom being subject to health carecosts. They also may not want tolose Social Security or other benefitsthat may result should they remarry.

■■ SAME SEX COUPLESMany same-sex couples feel

the disadvantages they suffer under the law are the direct resultof their same-sex status. However,the lack of rights and privileges is

not derived from their same-sexcouple status as much as it isfrom the fact that they are un-married. In most states, same-sexcouples are prevented from mar-rying, and thus tax benefits andpriority rights do not exist. Evenif a state allows marriage, it willnot be recognized for most federallaw purposes. Adult adoption isused by some same-sex couples asan estate planning tool. Onepartner may adopt the other,thereby making the adoptee anheir-at-law of the adopting partner.Such adoption is irrevocable.

The issues above are a smallsampling of concerns that differ-ent types of couples may face asthey contemplate marriage, theirfuture and the intended distribu-tion of their assets. An estateplanning attorney should be contacted to help chart the proper course. ■

Missia H. Vaselaney is a partner withTaft Stettinius & Hollister LLP. Contacther at (216) 706-3956 or [email protected].

MISSIA VASELANEY

TINA MYERS




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Do you have someonerelying on you for care?

If you are a caregiver, you arenot alone. According to a 2009study, “more than 65 millionpeople, 29% of the U.S. popu-

lation, provide care for a chroni-cally ill, disabled or aged familymember or friend during any given year.” At Hospice of theWestern Reserve, not only do weprovide exceptional services toeach of our seri-ously ill patients,we also assisttheir caregivers.

Caregivers often struggle to manage jobs,school, children and amyriad of other responsibilities,along with the stresses associatedwith caregiving. While providingfor the physical, social and spiri-tual needs of their loved one isconsuming, caregivers should notforget to also help make healthcare, financial and legal plansthat will reduce future stress.

More than 60% of Americansbelieve that our loved ones willmeet our end-of-life wishes. How-ever, fewer than 20% actually havediscussed their wishes with any-one. As a caregiver, you can helpyour loved one create an estateplan that includes end-of-lifechoices about health care as wellas financial considerations.

Everyone should have a livingwill and a durable power of attor-ney for health care. Make copiesof these documents to distributeto attorneys, financial planners,friends and relatives. Visit ourwebsite www.hospicewr.org forcopies of these documents.

Have you helped your lovedone review his or her will lately?

Wills should bereviewed afterevery life mile-stone. Help themcheck insurancepolicies and investments toensure that the

beneficiaries chosen years ago arestill appropriate — beneficiariescan be changed, without cost, atany time.

As part of our extraordinarycontinuum of care, Hospice of theWestern Reserve offers patients andfamilies access to a team of vol-unteer attorneys. These dedicatedindividuals help families preparethese vital documents, confiden-tially and free of charge. ■

For more information about Hospice ofthe Western Reserve services, call (800)707-8921. To download a copy of ourcaregiver guide, A Companion GuideWhen Facing a Serious Illness, visitwww.hospicewr.org.

Special needs trusts protect the future

By DAVID MYERS

ASpecial Needs Trust (SNT), sometimes called a“supplemental needstrust,” is a generic term

for a trust designed to supplementthe means-tested government benefits of a beneficiary with a disability. By maintaining eligibilityfor cash income and health insur-ance, a family may stretch its collective resources to care for theindividual with disabilities overtime.

What would prompt someoneto establish a SNT? See if you recognize your client:

■ A father is planning his estateand you discover he has a 9-yearold with cerebral palsy or a 22-year old who is bipolar;

■ a successful plaintiff in a per-sonal injury action has a permanentdisability and will lose his employer-

provided health insurance;■ a spouse or child in a divorce

case has multiple sclerosis or severe attention-deficit/hyperac-tivity disorder (ADHD), and support payments will reduce hisor her SSI;

■ an aged or disabled widow istrying to become eligible for Med-icaid.

Not all benefits are “means-tested.” Medicaid and SSI are, butMedicare and Social Security disability or retirement are not.

SNTs can be inter vivos or

testamentary, stand-alone or partof a will or trust. They may befunded with the disabled individ-ual’s money (so-called “d4A”trusts or “Medicaid PaybackTrusts” or the local CFMF PooledTrust). At his or her death, any remaining funds go to reimbursethe state. A third-party SNT istypically set up by a parent orgrandparent to hold a disabledbeneficiary’s share of the estate.Properly done, there is no repay-ment to the state when the bene-ficiary dies.

Finding the right Special NeedsTrust can preserve governmentbenefits so that the beneficiaryexperiences a net gain and thefunds (whether his own or fromanother person) make a real dif-ference in life, instead of simplyrelieving the government of itsresponsibility to pay benefits. ■

David Myers is a principal with Hickman& Lowder Co., LPA, with offices inCleveland and Sheffield Village. Formore information on estate planning for individuals with disabilities, visitHickman-Lowder.com.

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Settlor’s trusts arerelevant with orwithout estate tax

Collect digital asset information as part of the estate planning processBy CRISTIN R. SNODGRASS

Technological advances in thelast 30 years havedramatically

impacted all areas of ourlives. Practically everyonehas gone digital, includingthe older generations,and so have their assets.Digital assets include assets and data someoneowns, which are elec-tronically created andstored on computers andthe Internet.

Digital assets mayleave a paper trail or exist onlyelectronically. Determining theirexistence and accessing them isthe estate planner’s challenge inthe event of a client’s death orincapacity. Tax returns, credit reports and account statementscan help identify financial digitalassets.

Any device involved must beaccessed first — whether it’s asmart phone, desktop, laptop ortablet — and access could be con-tingent upon the device’s owner-ship. Passwords may also pose ahurdle, including passwords tostart a device and those used toaccess accounts, including email,

financial, social networking, e-commerce, and online data andmedia storage.

While attempts can be made toaccess the accounts without apassword, failed attempts can destroy or corrupt any informa-tion. A better route is engagingan electronic forensic specialist.

To help avoid the digital hunt,collection of digital asset infor-mation and planning for fiduciaryaccess to such informationshould be incorporated into theestate planning process.

Clients can create a physical orelectronic list of all accounts andpasswords. The lists can be stored

in a home safe, a safetydeposit box or in a paid or personal electronic passwordsummary account.

It’s important to ensure, however, thatsomeone else will haveaccess to them through aspecific designationwhen a bank or companyis involved. If anotherpassword is needed toaccess the list, it can bekept with the original estate planning docu-ments.

The documents them-selves should define digital assets,address fiduciary access to themduring incapacity and afterdeath, and direct their disposi-tion.

Issues related to digital assetsare just beginning to surface. Estate planners who incorporatethem in the discovery and drafting process for their clientsnow can help their clients’ families have an easier experiencelater. ■

Cristin R. Snodgrass, J.D., is a relation-ship manager for Key Private Bank.Contact her at (216) 828-7327 [email protected].

By RENNIE RUTMAN

Now that the federal estate tax exemption is $5 million and the Ohioestate tax exemption,

currently $338,333, is scheduledfor repeal in 2013, those with net estates valued at less than $5 million may wonder whetherthere is any real reason to utilizetrusts in their estate plans.

In many situations, there continues to be compelling non-estate-tax-related reasons for including a typical revocable trustin one’s estate plan. Such reasonsinclude:

■ Assets that are in the settlor’strust at his death generally canpass to the settlor’s beneficiariesfree from attachment by the settlor’s creditors. This creditorprotection is not available for inheritances passing to beneficia-ries by last will and testament.

■ Assets that are in the settlor’strust during his incapacity usuallycan be privately managed by asuccessor trustee (of the settlor’schoosing) without requiring probate court involvement. Assetsowned individually during inca-pacity often must be the subjectof a probate court guardianship

proceeding. Similarly, assets that are in the

settlor’s trust at his death usuallycan be privately administeredand/or managed for the settlor’sbeneficiaries with no need to involve a probate court. Assetsowned individually when onedies and that passvia last will andtestament tobeneficia-ries oftenmust be-come thesubject ofprobatecourt pro-ceedings.

Probate proceedings, which areoften costly and time consuming,necessitate the reporting of agreat deal of personal informa-tion (including information con-cerning the incapacitated/deceased person, his family, hisnamed beneficiaries, his assetsand his liabilities), which becomes part of the publicrecord. The use of a trust canavoid most, if not all, of thesedisadvantages.

■ Assets that pass to beneficia-ries through a last will and testa-ment are generally subject to thebeneficiaries’ creditors, including

divorcing spouses and judgmentcreditors. However, assets thatpass to beneficiaries via a settlor’strust generally can be used for thebenefit of the beneficiaries whilenot exposing the assets to theclaims of the beneficiaries’ creditors.

■ Assets that are payablethrough a last will and testamentto a beneficiary who is not yet age18 generally must be managed bya probate court-appointedguardian. When the beneficiary

turns 18, the inheritancegenerally must bepaid outright, in alump sum, to the

beneficiary — irre-spective of whetherthe beneficiary hasthe financial savvyor life experience to effectively managethe inheritance. However, assets that

are payable to a beneficiarythrough a settlor’s trust can be pri-vately managed by a trustee. Thisavoids the need to have a guardianappointed if the beneficiary is notyet 18, and permits the settlor to delay the distribution of the inheritance to the beneficiary until whatever age the settlordeems appropriate.

Suffice it to say that whether touse a trust in an estate plan is adecision that should be made afterconsideration of many factors, manyof which are not tax related. ■

Rennie Rutman is an attorney at Tucker Ellis & West LLP. She is an Ohio stateboard certified specialist in estate planning, trust and probate law. Contact her at (216) 696-4749.




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CHARITABLE GIVING

Philanthropy as a family teaching toolBy LAURA J. MALONE

For many families, the ideaof being a “philanthropist”has been associated withthe abundance of wealth.

However, in the modern age ofcharitable vehicles like donor-advised funds and giving circles,everyday families can becomephilanthropists. Even more important is that they can usethese vehicles to make philan-thropy a family affair.

Statistics show that roughlytwo-thirds of all wealth transfersfail. In many cases, these familiesgot so concerned with protectingtheir financial capital that theyneglect to focus on the values ofthe family that are typically expressed though social, humanand intellectual capital.

Philanthropy can make us feelgood and create a positive effecton the world around us. However,most people underestimate how philanthropy can have thecapacity to:

■ teach younger generationsmoney and wealth managementskills, decision making and re-sponsibility for themselves andthe global community.

■ become a conduit for conver-sations about wealth/money and

their meaning in the lives of allfamily members.

■ open deeper conversationsabout values and what mattersmost to individual members.

■ become a bridge/gift to thenext generation to nurture theirvalues and vision.

■ become the glue that holds afamily together in good timesand bad.

Today’s charitable vehiclesmake it easier to prepare yourfamily for wealth without expos-ing them to all of the wealth.They make it easier for parents totalk about the time, talent andtreasure they share with charita-ble organizations and expresswhy those organizations are important to you. Furthermore,they can support the cultivationof the rest of the family’s charita-ble interests.

While it is better to begin theseteachings early, we have seenthrough our donor-advised fundclients that it is possible at any age.The holidays can be a great timeto start since family and givingnaturally come together. ■

Laura J. Malone is director of gift plan-ning for the American Endowment Foun-dation. Contact her at 877-599-8903or [email protected].

Selling your art and collectiblesBy JAMES CORCORAN

Many clients who aredownsizing their resi-dences have works offine and decorative

art, furniture, antiques, books,jewelry, and sterling silver flatand hollow wear, etc. that theywant to sell.

Space considerations often areprimary in making decisions tosell. Another consideration isthat clients’ children and otherheirs have no interest in theproperty and would prefer not tobe burdened with it as an inheri-tance.

A third reason for consideringthe sale of high value personalproperty is to become more liquid in the current economicenvironment.

In the course of my 35 years asa certified appraisal professional,I have become acquainted with the owners/managers of morethan 80 reputable auction housesaround the world. We haveachieved notable success forclients by selecting the most appropriate and specialized auction house for the sale of eachitem of property brought to us.

For example:

■ A pair of 1973 Israeli limited edition prints. Local auc-tion estimate $400 to $600. Soldat an auction we selected for$7,700 net to client.

■ A French school of Paris(1960s) painting. Estimated locallyat $2,000 to $3,000. Sold for$12,500 net to our client in anout-of-town auction.

■ A set of watercolors by a deceased California artist.Local estimate $1,000 to$1,200. Sold elsewhere for net$10,200 to our client.

Neither my firm nor I personally has any conflict ofinterest in providing thishighly valuable service. Wenever buy clients’ property.We merely direct the client tothe best auction (or gallery)for the sale of their items atthe highest price possible.

We frequently handle theentire process from our receipt of the property:

■ Locating the best market

■ Negotiating with the auctionhouse

■ Insuring the property

■ Packing and shipping theproperty to the auction house

■ Insuring the property fromthe time we receive it until thetime of final sale

■ Taking necessary legal steps toprotect the client’s title to the workprior to the sale

In a period when a wide varietyof art, antiques and collectiblesare coming to market, CorcoranAppraisal Group provides a valu-able service to obtain the highestpossible prices for the sale ofclient property. ■

James Corcoran is a Harvard Law Schoolgraduate, and a certified member of thethree National Personal Property Societies.Corcoran Appraisal Group has been activeprofessionally for 35 years. Contact him at(216) 767-0770 or [email protected].




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To learn more about estate planning and life income gifts to the Museum, contact Sheryl Hoffman, Director of Major & Planned Gifts at (216) 231-4600, ext. 3310 or [email protected]

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Maximize the impact of giving through retirement plansBy PATRICIA FRIES

One of the easiest andmost “tax-wise” ways tomake a gift toUniversity Hos-

pitals, or another charity,is by using your retirementplan assets. In spite of theeconomic downturn,Americans are buildinglarge retirement plan bal-ances, mainly throughthe use of employer-spon-sored 401(k) plans.

Almost all retirement planshave yet to be taxed, and consid-erable taxes will result when retirement plan assets are used ordistributed directly to heirs. How-ever, if these retirement plans aregiven to a qualified charitable organization, they are received infull, with no tax due, resulting ina more significant gift to charity.

RETIREMENT PLAN DESIGNATION TO CHARITY

You can leave your legacy bynaming University Hospitals, oranother charity, as a beneficiary

of your retirement plan account.Charitable gifts of retirementplan assets at the participant’sdeath avoid both income and

estate tax to heirs. Whena participant makes a retirement plan gift, thecharity receives the giftdirectly from the quali-fied plan or IRA trusteewithout going throughthe probate process. Thisalleviates the delays andcosts associated with pro-bate, allowing the charity

to receive the gift more quicklyand cost-efficiently than if it hadbeen made from an estate.

DIRECT IRA ROLLOVERS TO CHARITY

Congress has reauthorized leg-islation that allows you to makelifetime charitable gifts from yourIRA accounts during 2011 with-out incurring federal income taxon the withdrawal. The IRA char-itable rollover provides you withan excellent opportunity to makea gift during your lifetime froman asset that would be subject to

multiple levels of taxation if it remained in your taxable estate.

IRA CHARITABLE ROLLOVER REQUIREMENTS

■■ You must be age 70½ or older at the time of gift

■■ Transfers must be made directly by an IRA administratorto the charity

■■ Gifts must be outright

IRA CHARITABLE ROLLOVER BENEFITS

■■ Counts toward your requiredminimum distribution

■■ Excluded from your gross income as a tax-free rollover

■■ Gifts up to $100,000

The extension of the IRA chari-table rollover will expire on Dec.31. Act now to take advantage ofthis limited charitable planningopportunity. ■

Patricia Fries, Esq., MBA, is director of gift planning for University Hospitals. Contact her at (216) 844-0430.

Not all charitable gifts created equalBy JAMES R. HICKEY

The words “charitable giving” often evokethoughts of taxdeductions, but

it’s not always that simplewith deferred giving.Some deferred gifts are revocable, meaning youcan revoke the gift at anytime, while others are irrevocable, meaning per-manent. When consideringa deferred gift, it’s important tounderstand that some gifts willprovide an immediate incometax deduction, while others willprovide tax benefit to your estate.

■■ TAX BENEFITS NOW

If a positive tax benefit onyour current year taxes is yourgoal, consider irrevocable

deferred gifts that involve a directtransfer of assets. Examples include charitable gift annuities,

charitable remainder annuity trusts, charitableremainder unitrusts andretained life estates. Thecommon thread amongthese gifts is that an assetis irrevocably transferredto a charitable organiza-tion, often making thetransaction eligible foran immediate income

tax deduction. In many cases,these gift options also providelifetime payments to the donorand other beneficiaries, givingyou a two-fold benefit.

■■ TAX BENEFITS LATER

If you are uncomfortable withletting go of an asset now, youmay appreciate a revocable gift

that allows you to change yourmind at a later date. There areseveral revocable gift optionsavailable including will bequests,estate notes, life insurance bene-ficiary designations, pay ondeath/transfer on death assets,and more. The revocability ofthese charitable gifts negates theopportunity for an immediate income tax charitable deduction.However, deductions are usuallyavailable to the donor’s estate asthe gifts mature.

Most importantly, talk to yourtax professional and charitablegift adviser to make sure your giftmeets your goals. ■

James R. Hickey, CFRE, CAP, is giftplanning director for Ohio PresbyterianRetirement Services Foundation, servingBreckenridge Village. Contact him at(440) 942-4342 ext. 1506.

CHARITABLE GIVING

PATRICIA FRIES

JAMES HICKEY




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Donor-advised funds:same benefit to the charity,bigger tax benefit for youBy MATTHEW S. OLVER

If you itemize deductions onyour tax return, one opportu-nity to harvest some tax savings is through charitable

donations. Generally, individualsdeduct the annual cash contribu-tions they make to non-profit organizations. Donor-advisedfunds offer you an easy way to re-move assets from your taxable es-tate and get a bigger income taxbenefit today but maintain flexi-bility regardingwho receives thedonation, howmuch and when.

A donor-advised fund is particularlyuseful when youhave a spike inincome (e.g. business sale, options exercise, bonus), if youbelieve your future tax rate willgo down (e.g. after retirement) orif you believe Congress will reduce the charitable deduction.

The tax benefit can be magni-fied by donating appreciated assets held more than one year,as you may be able to deduct thefull market value of the asset andavoid paying the capital gains taxyou would have paid by sellingthat asset.

“A donor-advised fund is similar to a private foundationbut requires less money, time, legal assistance and administra-tion to establish and maintain,”

says Kara Downing, portfoliomanager at Spero-Smith Invest-ment Advisers, Inc. When youdonate an asset to your fund, thesponsoring organization liqui-dates it and transfers the proceedsinto investments selected by thedonor from within the donor-advised fund’s available options.

The donor can use these fundsto make cash gifts to charitableorganizations over several years.When ready to make a donationto a qualifying charity, the donor

sends a grant request to yourfund’s sponsoringorganization,which thensends a check directly to thecharity indicatingthat it is from

the donor’s account. The charitable tax deduction is

taken when the assets are con-tributed to the donor-advisedfund, not when the check is sentto the charity.

Many community foundations,financial institutions and somepublic charities sponsor donor-advised funds. Consult your qual-ified tax professional to help youdetermine what makes the mostsense given your goals and finan-cial situation. ■

Matthew S. Olver, CFP, is senior vicepresident for Spero-Smith Investment Advisers, Inc. Contact him at (216)464-6266 or [email protected].

By SHERYL HOFFMAN

On July 1, the AmericanCouncil on Gift Annu-ities announced an increase in Single Life

and Two Lives-Joint & Survivorgift annuity rates. The ClevelandMuseum of Natural History

(CMNH) hasincorporatedthe recom-mended increases for allnew CharitableGift Annuities(CGA) made tothe Museum. ACharitable GiftAnnuity is a

wonderful way to create a legacygift while guaranteeing fixed pay-ments to you for life in exchangefor your gift of cash or securities.

A charitable gift annuity couldbe right for you if:

■■ You want to maintain or increase your income

■■ You want the security offixed, dependable payments for life

■■ You want to save incometaxes or capital gains taxes

■■ You would likeincome that may bepartially tax-free

■■ You are consid-ering a gift amountof $10,000 or more

To establish aCGA, a donor makesan irrevocable gift ofcash, securities orother property toCMNH. In exchange,CMNH pays a fixedamount each year forthe rest of thedonor’s life. When the gift annu-ity ends, its remaining principalpasses to CMNH. A CGA can beestablished for a Single Life or aTwo Lives-Joint and Survivor. Inthe case of a Two Lives CGA, thesurviving annuitant will continueto receive payments for the remainder of his/her life.

For example, a Two Lives-Joint& Survivor CGA of a minimum$10,000 gift will earn a couplewith younger age 82 and olderage 84 a rate of 6.9% for the lifeof the annuitants. The informa-tion below illustrates the benefits

of a $10,000 CGA forthis couple.

Charitable deduction:$4,321Annual payment:$690Tax-free portion:$525.78Ordinary income:$164.22

After 10.8 years, theentire annuity becomesordinary income. Partial payments for

the year of gift will depend onthe timing of your gift.

CGA rates, payments, charitabledeductions and tax free portionsare based on the age of the annu-itant(s), the timing of the giftand the amount of the gift. ■

Sheryl Hoffman is director of major &planned gifts for The Cleveland Museumof Natural History. Contact her at (216) 231-4600, ext. 3310 or [email protected]. Read more about charitable gift annuities and run calculations on rates and payments atwww.cmnh.org/site/GiftGuide.aspx.

HOW AN ANNUITY WORKS

By KERRY MINK WRAY

Acharitable annuity allowsindividuals to support acharity while receiving acash reward for years to

come. It is a great way to give adonation and pay yourself backover time, while reducing yourtax bill. For example:

■ Mary, 68, provides a one-time cash donation of $5,000 tothe charity of her choice. Her Annuity Rate of Return, deter-mined by the American Councilof Gift Annuities based on herage, gift amount and other factors, is 5.5%. The rate is fixedover her lifetime.

■ Her tax deduction the firstyear is $1,847.

■ She will receive $275 everyyear ($180 tax-free, $95 ordinaryincome).

Annuities provide a competi-tive and reliable rate of returnand allow donors to support theirfavorite charities at the sametime.

Kerry Mink Wray, JD, is development director of the BenjaminRose Institute. Contact her at (216) 373-1607 or [email protected].

*Calculations are for illustrativepurposes and should not be consid-ered legal, accounting or other pro-fessional advice. Actual benefits mayvary depending on the timing of thegift.

CHARITABLE GIVING

SHERYL HOFFMAN

TThhee ddoonnoorr ccaann uusseetthheessee ffuunnddss ttoo mmaakkeeccaasshh ggiiffttss ttoo cchhaarriittaabblleeoorrggaanniizzaattiioonnss oovveerrsseevveerraall yyeeaarrss..



CHARITABLE GIVING

Stewardship plays criticalrole in philanthropy

Retained life estates allow donors to bringhome and heart togetherBy AMANDA STEYER

Ahome often is a family’smost significant asset. Incorporating a home intoa charitable giving plan

can benefit the family, their heirsand a favorite charity. However,many do not know they can makea gift of their residence now andcontinue to live in it for the rest oftheir lives.

With a gift of a retained life estate, the owner of a residence orfarm irrevocably transfers owner-ship of the property to a favoritecharity, while retaining the rightto live on the property for life, aset term of years, or a combina-tion of the two. The residencedoes not need to be the principalresidence but may be, for example,a vacation home.

The donor retains the right tolive on the property during thattime and continues to be responsiblefor all routine expenses, such asmaintenance, insurance, landscapingand property taxes. When the retained life estate ends, the desig-nated charity then can use theproperty or the proceeds from thesale of the property for the directed purpose.

This gift plan entitles the donor to an immediate charitableincome tax deduction for a por-tion of the appraised value of theproperty.

The highest tax deduction isproduced when applicable federalrates are low. With October’s 7520 rate of 1.4%, the time for a retained life estate couldn’t be better.

Some individuals may be hesi-tant to gift their home due to theuncertainty of the later years.What if at some point they wantor need to move into a nursing

By TODD S. POLIKOFF

At minimum, all donationsstem from someone asking, whether throughdirect mail, phone banks

or direct solicitation. “Major gifts”require the additional element ofan organic belief by the donor inthe mission and vision of the or-ganization. A major donor’s sup-port of the organization musttransition from a cerebral thoughtprocess to an emotional response.

The most effective way to makethe migration from the head tothe heart is through a comprehen-sive donor stewardship plan.

At the Jewish Federation ofCleveland, donor stewardship is

Building strong relationships canmake a difference

defined as the development of anongoing relationship with donors,which includes recognizing themfor their contributions, ensuringthat the gifts are used in accor-dance with the donors’ wishes, reporting to donors what hasbeen accomplished, heighteningtheir interest and involvement,and soliciting additional and largerdonations.

Unlike cultivation, stewardshipdeals with the non-gift aspects ofthe donor relationship and hasno set timetable (i.e. annual orcapital campaign drives). Further-more, the Jewish Federation ofCleveland’s stewardship plan ismulti-generational and engagesentire families in the philan-thropic process.

The organizational benefits of a stewardship plan go beyond increased revenue. Proper stewardship reduces costs as it is less expensive to steward a cur-rent donor than to acquire a new

one at the same level. The donorstewardship process also trans-forms donors into force multipliersfor the organization.

Ultimately, the Jewish Federa-tion of Cleveland’s stewardshipplan is a strategy aimed at miti-gating the impact of the multipleeconomic and demographic chal-lenges facing the non-profit sector.

Many major donors today areexhibiting an increased level ofdiscretion in their philanthropy.This places an imperative on anorganization’s ability to assert itsrelevance in the eyes of the donor.Donor stewardship plans are themost effective way to ensure thatyour organization remains a topphilanthropic priority for yourmost supportive donors. ■

Todd S. Polikoff is a senior developmentofficer at the Jewish Federation of Cleveland. Contact him at (216) 593-2905.

home or assisted living facility? The retained life estate provides

flexibility with alternative optionsto consider. If they later decide to vacate the property, they mayrent, gift or sell their interest tofamily, a third party or the charity.

The retained life estate not onlyremoves the residence from thedonor’s taxable estate but also relieves the heirs or estate of theburden of inheriting the homeand arranging for a sale.

Ultimately, the donor can makea significant gift to a favorite charity during his or her lifetime

without in any way altering standard of livingor cash flow.

Discussions betweenclients and their advisersare always recommended.With the right guidance,the planning and imple-mentation of a gift of ahome can be a satisfyingand rewarding decisionfor families and charities.Cleveland Clinic’s giftplanning professionals

would be pleased to assist withthose conversations if there is interest in supporting its medicalmission. ■

Amanda Steyer, Esq., is assistant direc-tor, gift planning, institutional relationsand development at Cleveland Clinic.Contact her at (216) 636-0117 or [email protected], or visit clevelandclinic.org/giving.

Many do not knowthey can make a gift of their

residence now and continue to

live in it.

■ With October’s 7520 rate of 1.4%, a retained life estate is ideal.

■ The retained life estate notonly removes the residencefrom the donor’s taxable estatebut also relieves the heirs or estate of the burden of inheritingthe home and arranging for asale.



business going two years ago. Nowit’s not artificial. I’ve seen a steadyincrease in closings the last twomonths.”

She credits the pickup to sellerswho don’t want to go through anotherwinter with a home for sale. AndMrs. Torchia is not alone in seeingthe market improve, as others expecthigher monthly home sales com-pared with a year earlier to continuethrough the end of 2011 and to set a good foundation for a housingmarket recovery — albeit a fairlyweak one.

Data from the Northern Ohio Regional Multiple Listing Service,the source real estate agents andconsumers use to share for-salehome information, support Mrs.Torchia’s optimistic view. NORMLSreports the number of residentialproperties under contract in its 15-county coverage area was up 22% inSeptember, to 2,932 from 2,405 inSeptember 2010. Likewise, the num-ber of sold listings climbed 18%, to3,033 this September from 2,583 ayear ago.

Although some of those contractsmay not close, Carl DeMusz, CEO of NORMLS, said they indicate the rise in sales seen this summermay continue, although at a slowerpace than the busy warm-weathermonths.

All in all, what began as a dreadfulyear is becoming less so as the year progresses. Year-to-date salesthrough September, the most recentreporting period available, weredown just 3% from the first ninemonths of 2010.

“I feel we’re starting to see a recov-ery,” Mr. DeMusz said. “When I lookat the trend, I think we are prettymuch improving. We’ve seen thebottom and are on the way up.”


the offering than it paid on the debt.“It was my intent to make (this

bond issuance) as much aboutbuilding our ambulatory networkas possible,” said Mr. Moran, addingthat the health system has yet to buyland for additional health centers.

It’s expected that the bond pro-ceeds will finance at least two morecommunity health centers, whichwill be similar in size and scope tothe 57,600-square-foot buildingslated for construction next year atInterstate 71 and Pearl Road inMiddleburg Heights. The centerwill offer primary care, urgent care,physical and occupational therapyand other specialty services.

Mr. Moran wouldn’t disclose theareas MetroHealth is consideringfor other medical campuses.

MetroHealth’s move towardbuilding a strong health care networkisn’t a novel approach, as the Cleve-land Clinic, for one, has built a throngof new health centers throughoutthe region in recent years. But Mr.

Moran sees it as a necessary one.He insists that only providing care

at the health system’s aging maincampus on West 25th Street in Cleve-land isn’t sustainable as a businessmodel. More patients have migratedto outpatient settings, which oftenare more convenient and cheaperthan the inpatient services Metro-Health Medical Center provides.

“As we look forward, we expect tohold our share in this market, andthis location in (Middleburg Heights)is clearly part of doing that,” Mr.Moran said. “We will not hold ourshare staying where we are.”

175 years, and countingAs it is, the county’s safety-net

hospital is losing tons of money asthe volume of uncompensated careit provides is on track to total $130million this year, up about $11 million from 2010.

MetroHealth officials recentlyprojected the health system wouldstomach heavy operating losses —$6.3 million in 2011 and another

$21.1 million loss in 2012 — if cost-cutting measures weren’t taken. Asa result, the health system announcedthis month it was laying off 104 employees and eliminating 151 va-cant positions. It also will eliminateanother 83 jobs over the next sixmonths, in part through attrition.

Despite the operating pressuresit’s experiencing, Mr. Moran main-tains that MetroHealth can positionitself for a sustainable future by cre-ating the outpatient health centers.

“In a sense, MetroHealth is in asgood a position as it’s ever been inits 175 years,” he said. “It’s our re-sponsibility to look forward and saywhat the next 175 years are going tolook like.”

Bill Ryan, president of the Centerfor Health Affairs, an advocacy grouprepresenting Cleveland-area hospi-tals, sees wisdom in MetroHealth’sstrategy to augment its patient basewith more insured customers in order to offset the substantial char-ity care the system provides.

“It’s a strong model, and it’s all

about creating a sense in the com-munity about what you really dowell,” Mr. Ryan said. “It’s like anyother new venture. You have to re-ally create a marketable distinctionfrom the rest of the market.”

While Cuyahoga County officialshave been particularly critical ofMetroHealth’s finances in recentmonths, they declined to commenton the system’s outpatient strategy.

Hey, look at us!While Mr. Moran admits the

county’s health care market is saturated, he expects the new Mid-dleburg Heights medical center tobreak even within two years. Onceoperational in 2013, the site is expected to reach 60,000 patientvisits in the first year and then asmany as 113,000 annually.

The new campus is expected toabsorb the health system’s smallStrongsville office on Pearl Road,which MetroHealth’s Dr. WilliamLewis said is “bursting at the seams.”

“I think we have to look at our own

system and what we’re providing,”said Dr. Lewis, chairman of the system’s market development campaign. “There are large numbersof people who want to come toMetroHealth. They want an alter-native and deserve choice.”

Since summer 2010, Metro-Health quietly has tweaked opera-tions at its 16 smaller outpatient locations in order to boost patientvolumes, and so far, the effort appears to be working. Patient vis-its have climbed between 10% and17% at the sites since the changeswere made, according to PhyllisMarino, the health system’s vicepresident of market development.

Ms. Marino said she expectsMetroHealth’s planned outpatientlocations to be lucrative assets because of their urgent care centers.

“With all our reputation foremergency care and emergencyservices and convenience thesesites offer, that’ll be a great drawand a large point for our marketingefforts,” she said. ■


Metro: System sees building network as key to sustainable future

Issue 2, and we’re going to get rightback to it.”

Leaders of GCP, the other regionalchambers of commerce around thestate and the Ohio Chamber ofCommerce will be meeting thisweek to map a unified legislativestrategy, said Carol Caruso, GCP’ssenior vice president for advocacy.

The business groups banded together last year as the state bud-get crisis loomed and last Decemberissued a report, “Redesigning Ohio,”that was described as a road mapfor long-term change of govern-ment and taxation in the state at atime of unprecedented fiscal crisis.

Ms. Caruso said she expects sheand her colleagues will identify anumber of issues to pursue with theGeneral Assembly.

“There are several things thebusiness community cares an awfullot about,” she said. “It’s just, how doyou do it and when do you do it? Wejust hope the momentum continuesbecause the state just cannot afford”the current level of spending.

No time to retreat ‘too much’Many of the chamber groups’

recommendations for public employ-ment reforms ended up in Senate Bill5, which, as Issue 2, was resounding-ly defeated 61% to 39% last Tuesday,Nov. 8. SB 5 would have limited thecollective bargaining rights of stateand local public employees, includ-ing teachers, police officers andfirefighters. It would have expanded ano-strike law to all 360,000 publicemployees in the state and requiredthem to pay at least 15% of the cost oftheir health care benefits and 10% oftheir pension costs.

Ms. Caruso said she hopes thebusiness groups can move the Leg-islature to repackage some of thoseelements into new legislation.

“I just think that this is not the

time to retreat too much,” she said.“But obviously, the political realitiesare something we have to be verymuch aware of.”

Ms. Caruso said she is encour-aged about the prospects of makingsome headway on the reforms thechambers have identified becausepolling on Issue 2 showed supportfor some of the measures in SB 5.

One of those key issues that votersappeared to support is changing statelaw to give school districts moreflexibility in staffing. Current state lawrequires districts to adhere to a strictseniority system that protected olderteachers and forced districts to layoff talented younger faculty.

Sizing up the bites

Likewise, Ms. Caruso said shehopes the Legislature will renew theeffort to reduce what she described as“the disparity between what privateand public sector people pay in termsof health insurance and retirement.

“There was a lot of support forlooking into that as well,” she said.

The groups may press lawmakersfor ways to encourage communitiesand school districts to cut costs bycollaborating on services or merging.

“We will continue to pursue every-thing in ‘Redesigning Ohio,’” she said.“It’s just a matter of what kind of abite you take and the timing.”

She said she’s had a good receptionfrom some legislators on educationissues.

Mike Dittoe, director of commu-nications for Ohio House SpeakerBill Batchelder, wasn’t ready to talkabout specifics, but he did suggestthat parts of SB 5 could be revived.

“The governor and the speaker aresaying they are going to take abreather and recalibrate and see whatwe need to do next,” he said. “If we dotake up portions of SB 5, it certainly isnot going to be something we takelightly.” ■



Reform: Some legislatorsreceptive to reform ideas

Housing:Economystill needsto recover

“We just hope the momentum continues because thestate just cannot afford” the current level of spending. – Carol Caruso, senior vice president for advocacy, GCP

Better, if not great

While many brokers agree activity is up, the bruising downturn hasothers less willing to call the bottom,although the word “optimistic” isstarting to work its way back intotheir vocabularies.

The other evidence of improve-ment is declining inventory, whichNORMLS reports as new listings.Those listings, through the first ninemonths of 2011, were down 12%, to62,164 from 70,502 a year ago.

Dennis Steed, broker and co-owner of ReMax Crossroads inStrongsville, said he’s encouragedby that statistic, which is better — ifnot great.

“Yes, it’s 10 months of inventory,”Mr. Steed said. “When we get to sixmonths of inventory we will be backto what experts call a balanced market. We have seen as much as 18months of supply at times since thisdownturn has started.”

At Howard Hanna, sales are surpassing new listings coming intooffices at a two-to-one rate, saidHoward “Hoby” Hanna, presidentof Howard Hanna Ohio.

“Fewer people believe it’s a goodtime to put a house on the market,”Mr. Hanna said. “But we are seeingbidding battles on houses again. Ifyou have a house that is done right,in the right neighborhood without alot of for-sale signs, we are seeingstrong sales.”

However, none of that means it istime to break out champagne. Sta-bility looks good compared to thepast few years of the downturn, but offers little reason to celebrate.

“I think this is what we will look atin housing for a long time,” Mr.

Hanna said. “Unfortunately, wewon’t see big jumps in apprecia-tion.”

It’s all about the dealAiding sales are interest rates at

near-record lows of 3% on 30-yearloans and big drops in values ofsome homes. Zillow, the online realty data provider, reports 32% ofall sales in the first half of 2011 werebelow the prior purchase price in the Cleveland-Elyria-MentorMetropolitan Statistical Area.

Cash buyers snapping up bar-gains also are a factor in the market.

“The only buyers that are consis-tently out there are first-time homebuyers,” said David Sharkey, presi-dent of the Progressive Urban RealEstate brokerage of Cleveland. “Existing homeowners are comfort-able staying where they are. It’s a market driven by fear and has become less about the house thanabout the deal.”

From here, the market will improve markedly only if the localeconomy rises and the region startsgaining jobs and population,Messrs. Sharkey, Hanna and otherssay.

For sellers of real estate, the onlyanswer now will be to go back tofundamentals.

“It’s down to aggressive pricingand exceptional showmanship now,”John Vrsansky Jr., owner of On Target Realty in Rocky River, said.

And when he says aggressive, hemeans aggressive.

“I’ve been in the business 38years,” Mr. Vrsansky said. “Pricesfor bungalows in Parma are $40,000to $50,000 now, just like when Istarted.” ■

Month Under contract Sold

September 2011 2,932 3,033

June 2011 3,277 3,481

March 2011 3,159 2,645

December 2010 1,791 2,476

September 2010 2,405 2,613

HOME MARKET PERKS UPAccording to data from the Northern Ohio RegionalMultiple Listing Service (NORMLS), the number ofarea residential properties under contract and soldare up over this time last year, though still are downfrom the year’s peak in May.

MARC GOLUB



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Covering the earth, but not Penn State■ Cleveland-based paint giant Sherwin-Williams Co. took swift action last week, and ithad nothing to do with new product devel-

opment.The company’s logo prior to

this week adorned the backdropbanner used during Penn State’s

sports news conferences. Butwhen news of a child sexabuse scandal involving former Penn State defensive

coordinator Jerry San-dusky broke on Satur-day, Nov. 5, Sherwin-Williams spokesmanMike Conway said the company’s Eastern

Division, located in Newtown Square, Pa.,acted quickly to remove the logo from thesignage.

“We did what any company would do inthis case,” Mr. Conway said. — Joel Hammond

Say it loud — we makethings, and we’re proud■ After decades of taking the blame for thedecline of the Midwest, manufacturing issuddenly a bright spot.

So much so, in fact, that the sector’s suddenrevival is the theme of Team NortheastOhio’s new tagline.

Soon, “We make things here” will startshowing up on brochures, slideshows andon the website of the business attractionnonprofit. It replaces, “It all adds up for

business,” which has had a five-year run.“We wanted more of a value message,”

said Jenny Febbo, Team NEO’s vice presidentof marketing and communications. Of theslogan it’s replacing, she said, “It’s a goodmessage, but not very differentiating.”

The change is a reflection of economic research showing that between 2010 and2015 manufacturing output in the 18 countiesin the group’s territory is expected to growat a rate nearly 10 percentage points fasterthan manufacturing in the rest of the country.

Ms. Febbo said this new catchphrase willremind site selectors of that prospect forgrowth and of the region’s heritage in chem-icals, rubber and plastics, as well as metalfabrication. — Jay Miller

Prank callers achieve their goal in hockey call■ With public ticket sales for January’s“Frozen Diamond Faceoff” — the outdoorhockey game at Progressive Field pittingOhio State against Michigan — beginningtoday, Nov. 14, the Indians set up a confer-ence call last Wednesday with Michigancoach Red Berenson and Ohio State coachMark Osiecki to drum up a little interest.

Except the call didn’t go quite as planned. After a question asking for Mr. Berenson’s

general thoughts on outdoor hockey and myquestion about these games’ effect on recruiting — hit my blog at www.CrainsCleveland.com/section/blogs04 for thosedetails — awkwardness ensued. The nextquestions involved references to Jerry San-dusky, the disgraced former Penn State coachaccused of molesting adolescent boys; a

term that can be used inappropriately for an area on hockey goaltenders; and othertopics that made even this young, hard-to-embarrass reporter blush.

It’s a tried-and-true spoof tactic of suchpioneers as Gary Dell’Abate, also known as“Baba Booey,” from “The Howard Stern Show.”

After repeated requests for serious questions and admonishment for the non-reporters on the call, Indians representativesmercifully and finally cut off the call, andprobably learned a lesson for the next one.— Joel Hammond

My, that wasted time really does add up■ Your average Joe and Jane say an hour oftheir time is worth about $21.

Based on that figure, the people who re-sponded to a report commissioned by TOATechnologies Inc. of Beachwood lose an av-erage of $243 each year waiting at home forthe cable guy, the plumber or somebodyelse to show up for an appointment.

Multiply that annual figure by the size of theU.S. labor force and you’ve got $37.7 billionin lost economic value, according to the report,which was based on an online IBOPE Zogbysurvey of more than 1,000 U.S. adults.

So, what’s the solution? Why, it just so happens that TOA Technologies sells software designed to help companies givecustomers a better estimate as to when thatcable guy or that plumber will show up.

Good. Now that that’s taken care of, youcan start thinking of ways to spend your extra cash. I plan to use mine as a pillow. —Chuck Soder

MILESTONESCOMPANY: GrafTech InternationalLtd., ParmaTHE OCCASION: Its 125th anniversary

Looking back, it’s apparent that 1886 wasquite a significant year. It was the year a newproduct named Coca-Cola was patented, the

Statue of Liberty wasdedicated and a businessknown as The NationalCarbon Co. was foundedin Cleveland.

National Carbon startedas a maker of arc carbonsfor lighting, but by 1900had made significant innovations in the produc-tion of dry cell batteries,dynamo and motor

brushes, and graphite electrodes for thesteel industry.

Today, 125 years later, producing thoseelectrodes is still a big part of the businessof GrafTech International Ltd., the globalcompany based in Parma that began life asNational Carbon.

Chairman and CEO Craig Shular saidGrafTech has achieved its longevity throughteamwork and innovation, and “must growstrategically to ensure we’re around for another 125” years. To that end, GrafTechsaid it’s leveraging its material scienceknowledge and industrial manufacturing ex-pertise to create new products.

Among them is its eGraf SpreaderShieldSS1500 flexible graphite heat spreader,which GrafTech describes as the “highestthermal conductivity material commerciallyavailable” for use in lighting and advancedelectronics, such as smart phones.

GrafTech operates 16 manufacturingplants — including the plant National Carbonopened in Lakewood in 1894 — and employsabout 3,000 workers on four continents.

REPORTERS’ NOTEBOOKBEHIND THE NEWS WITH CRAIN’S WRITERS

THEINSIDER

THEWEEK NOVEMBER 7 - 13

The big story: Ohioans voted overwhelminglylast week to repeal Senate Bill 5, the Republican-backed law that sharply curtailed the collective

bargaining rights of public employees. The lopsided 61%-to-39% vote on the

referendum known as Issue 2 wasa victory for Democrats andorganized labor in Ohio. Theheads of regional chambersof commerce from acrossOhio already were laying out

plans to meet this week tomap out a unified legislative

strategy to present to members ofthe General Assembly on where to go from here.See story, Page One.

United lands downtown: The GreaterCleveland Partnership said United Airlinesplans to locate its Great Lakes regional sales office in GCP’s new PlayhouseSquare officebuilding at 1240 Huron Road in downtownCleveland. GCP did not disclose terms of thelease arrangement with United. However, thecity’s chamber of commerce group has made retaining a United hub operation at ClevelandHopkins International Airport a key priority following the merger of United and ContinentalAirlines, which has had a hub at Hopkins fornearly two decades.

Parts-hunting: TransDigm Group Inc. entered into a definitive agreement to acquireHarco Laboratories Inc. for about $84 million incash. Harco, based in Branford, Conn., makesproprietary components for commercial aircraftmade by Boeing, Airbus and Embraer. The partsinclude thermocouples, sensors and engine cable assemblies and are found on engines madeby Pratt & Whitney, Rolls-Royce, InternationalAero Engines and Honeywell. TransDigm, itselfa supplier of aircraft parts, put Harco’s revenuein fiscal 2011 at $37 million.

Charity case: Ohio Grantmakers Forum, anassociation of foundations and other grantmakingorganizations, has come out in opposition to efforts by the Obama administration to cap thecharitable deduction at 28%. The grantmakersgroup said the proposed decrease of seven per-centage points in the deduction “would bringabout dramatic drops in charitable giving at thevery moment when such gifts are desperatelyneeded in communities all across our state.”

Jack hits the road: Strayer Education Inc.,a large, Virginia-based for-profit college operator,announced it had acquired the Jack Welch Management Institute, an online master’s degreeprogram that had been part of Chancellor University in Seven Hills. The management institute, founded by former General ElectricCEO Jack Welch in 2009, was the centerpieceacademic program at for-profit Chancellor. In anews release issued by Strayer, Mr. Welch saidhis vision always has been to build the instituteinto the No. 1 online business school in theworld, and that bringing the institute to Strayer“provides the educational foundation to achievethis vision.” Chancellor officials in the past hadmaintained that the institute was a key part ofthe college’s growth strategy.

This and that: Specialty chemicals maker Lubrizol Corp. agreed to buy Chemtool Inc. ofRockton, Ill., a producer of custom-formulatedgreases. … The Karcher Group, a web design,development and marketing firm based in NorthCanton, acquired SitesNow, a web design, devel-opment and data services company in Cleveland.Karcher Group said the acquisition expands itsgeographic reach and market share in NortheastOhio “while providing greater depth of data services for its clients.”


BEST OF THE BLOGSExcerpts from recent blog entries onCrainsCleveland.com.

States take their shots atprivatizing liquor business■ Ohio is getting plenty of company as statesloosen the grip they’ve held on alcohol sales.

“Lawmakers in Utah, where even high-alcohol beer is sold through state liquorstores, were urged by an advisory panelthis year to put the business in privatehands,” Bloomberg reported. “Pennsylvania,Virginia and North Carolina have consid-ered privatizing state liquor outlets.” InWashington state, voters weighed in ona ballot measure backed by CostcoWholesale Corp. to end state control ofliquor retailing.

Mark Filippell, a managing directorat Cleveland investment bank WesternReserve Partners LLC, which recom-mended in a January report that Ohioprivatize its liquor business, toldBloomberg, “This is something thegovernment shouldn’t even be in. Whyisn’t the state in the milk distribution busi-ness? Why isn’t the state in gasoline distri-bution? What about baby food?”

Bloomberg noted that many of the proposals nationwide “involve making alcohol more widely available, increasing licensing fees and tax revenue.”

Logical enough. But Michael Scippa, aspokesman for Alcohol Justice, an industrymonitor based in San Rafael, Calif., toldBloomberg that any gains to states may bewiped out by other costs, from car accidentsto domestic violence. “Increased availabilityincreases overconsumption, which increasesalcohol-related harm,” he said.

Looking for a positivestory? Read on■ One of the true advantages to living in

Shular

Northeast Ohio is the excellence of the region’s public libraries, and new rankingsfrom Library Journal reinforce this idea.

The publication’s Index of Public LibraryService ranks more than 7,000 library systemsin four categories: library visits, circulation,program attendance and public Internet usage. It combines rankings from those categories into an overall score. Libraries

are broken into nine budget categories.In the largest budget category, $30

million-plus, the Cuyahoga County PublicLibrary is rated as the best library in thecountry, while the Cleveland Public

Library is No. 4 nationwide.Other top-10 libraries in their

budget categories are the Stark CountyDistrict Library in Canton; the ShakerHeights Public Library; the ClevelandHeights-University Heights Public Library; and the Lakewood Public Library. There are several other librariesin Northeast Ohio that are in the top 20in their budget categories.

You want to go whereeverybody knows your name■ A crowdsourced project by Planetizen.comset out to find the 100 best public spaces inthe United States and Canada, and it turnsout that two of the top 19 are in Cleveland.

At No. 11 is Star Plaza in downtown’s theater district, while the West Side Marketranked No. 19.

Another northern Ohio space, the cool-looking Richland Carrousel Park in Mans-field, was No. 29.

Planetizen.com said that in evaluatingthousands of public spaces, it found themost successful ones have four key qualities:“they are accessible; people are engaged inactivities there; the space is comfortable andhas a good image; and finally, it is a sociableplace, one where people meet each otherand take people when they come to visit.”


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