Developers and city leaders of Cleveland are considering how to redevelop a 400-acre (162 ha) neighborhood to the southeast of the downtown corridor. Once known as the “Forgotten Triangle,” the area is now part of the Cleveland Opportunity Corridor, with plans to reconnect the neighborhood to the University Circle area by 2021 via a multimodal boulevard.
ULI Cleveland hosted its “Opportunity Corridor Panel Conversation” in this same neighborhood. The Orlando Baking Company was the meeting site (which bought eight acres [3.2 ha] of property for its business for $1 in the late 1970s), and the panel discussion centered on an interesting plan in Cleveland to combine a transportation roadway rehab with economic development that will ultimately spill over into some of the poorest neighborhoods in the city.
Roughly a third of area properties are vacant. About 50 percent of the population of 2,000 live below the poverty line, with 70 percent of the children under 17 living in poverty as well. The population is 96 percent African American, with only 6 percent having a bachelor’s degree or higher. The neighborhood’s median income was $16,628—about half the national average—and average home sales prices were around $20,000 in 2017.
“When we talk about transportation improvement, and the job opportunities that may come with the economic development that spills off from that, we are not talking about bringing new people into the neighborhood to work,” said Freddy Collier, director of the Cleveland City Planning Commission. “This is about raising the level of those living in this area, and bringing in jobs to people who already live here.”
The “Opportunity Corridor” project began as something completely different. In the early 1960s, when Cleveland’s population was much higher, the city was looking to extend its interstate freeway system through the city to give people from the suburbs a quicker drive through the poorer areas. But over time, many neighborhoods and suburbs fought against such extensions, and a grand freeway plan through the neighborhood was scrapped
But around the turn of the century, the transportation plan resurfaced as a new inner-city boulevard that would link a freeway endpoint near downtown to the University Circle area, home of the big economic engines of Case Western Reserve University and the Cleveland Clinic. That was kicked around for many years, before this iteration of the plan was conceived in 2008.
The first part of the road construction of the 3.5-mile (5.6 km) route has begun, and an IBM healthcare data analytics campus with 300 employees and 500 new residential units has begun construction very close to the Cleveland Clinic. The office building alone will cost $11.1 million to build.
The parts of the corridor further away from the health care district—anchored by the Cleveland Clinic—have more potential challenges for development. The cost of the roadway itself is $331 million, with most of that being covered by state transportation grants. But there will also be about 1,000 acres (400 ha) of adjoining property at play for possible repurposing—housing, industrial, offices, commercial, transit-oriented-development—but each with its own cost.
One major advantage is that the city owns a big portion of that acreage, due to property foreclosures, manufacturing plant closings, and the general movement of the population out of this area.
But multiple costs need to be taken care of to move the economic development portion of the project along. One is expensive brownfield environmental cleanup, and other costs will be getting public subsidy funding for companies and real estate development firms wishing to take a risk on investment in this area of Cleveland. One program being used is the U.S. Treasury’s Opportunity Zones program, a federal tax incentive that will target high-poverty census tracks for economic development.
“Working on market rates alone will not work well in an area like this,” said Radhika Reddy, founder of Ariel Ventures, a Cleveland-based business advisory firm that has expertise in New Markets Tax Credits (NMTCs).
“There must be many different tax credits to bring this home, but also construction subsidies, energy credits, and public environmental remediation,” she said. “They all have to be put together, but it will work as a good way to get investor capital to this area.”
At this point, the roadway is scheduled to be completed in 2022, though there are no firm real estate development projects on the board. Collier said the city is in the process of marketing the area both nationally and locally as a place to relocate to and invest in. “We are seeing this road project as the linking of two bookends—the interstate highway access and the University Circle growth area—a place that businesses and new residential development want to be near,” he said.
But there are still some major questions about whether the big economic development for a 3-5-mile (5.6 km) roadway in a poverty area of an aging city will happen. Many critics have said the Opportunity Corridor is nothing more than an express passageway through a poor neighborhood to get those commuters to their high-paying jobs near the Cleveland Clinic faster. And others have said that many cities—particularly in the Midwest—have vacant-land deals available, and Cleveland’s offer will be no different in the real estate market.
The discussion of how the adjacent neighborhoods will benefit has been a contentious issue for the decades, and that subject came up repeatedly at the ULI panel discussion meeting. “It has been a long time coming for people in the neighborhoods here, and there is still a lot of doubt,” Cleveland City Council member Phyllis Cleveland, whose ward includes much of the Forgotten Triangle neighborhood, told the panel. “A lot of the poor people feel they will be displaced because of the needs of the group with more income.”
Collier addressed her concerns. “For those who think this is a transportation project by itself, well, they don’t understand,” he said. “This is about using investment to add value to existing neighborhoods that have been devalued for decades, and for the people who live there now to benefit from the added value.”
But Cleveland attorney and longtime member of the Cleveland Planning Commission Anthony Coyne asked, “How do you get that value capture to go back into the neighborhoods?” pointing out that city tax abatements and other public subsidies do not ensure that the increased economic development tax base ever gets into the city’s coffers for basic services (e.g., pothole filling, parks, school districts, police and fire).
There are no clear answers to that question or any assurances that developments along the new boulevard will improve the quality of life in the neighborhoods nearby. But the promoters think this area will have some unique aspects to it—several local transit stops within the corridor, proximity to the growing health care development district that has flourished in recent years, and the availability of cheap vacant land for businesses like urban agriculture that are trending up these days. That uniqueness will pull up the surrounding areas, Collier said.
Jim Doyle, founder and principal of Cleveland-based Hemingway Development, which brokered and oversaw the IBM deal near the Cleveland Clinic, thinks the movement toward the central city by both business operations and residents is a sign that this project is one that is coming at the right time and to the right place.
“Since the IBM office deal was announced, we have been inundated by inquiries from lenders and investors who want to know the particulars of the federal Opportunity Zone tax credits available in this project,” Doyle said.
“This project has shifted a bit from being a transportation project mainly, to one that now has bigger economic development and neighborhood improvement components to it,” Doyle continued. “But Cleveland has had real pockets of growth, developers have seen those and want to get in on new ones, and this will feed off the success those growth pockets have had.
“I don’t know if this will bring out-of-state businesses into the city, or keep the existing ones here, but I think this will be a big plus for the city,” he said. “Because this will build off the positive development that has already been done, and do so in a part of the city that will really benefit from it.”
