In this grim industrial city, a cheerless vista of abandoned factories, shuttered shops and decaying neighborhoods where population and property values are plummeting in an economic climate as cold as the wind off Lake Erie, February was a good month.
The weather was mild, raising spirits and sparing the city a snow-removal test that its battered old trucks might well have failed. Comedian Rich Little apologized for joking at the presidential inauguration that he would ward off a Soviet invasion of Poland by renaming it Cleveland because nobody wanted to go there. And the city government eased its desperate need for cash by finding a $35-million-a-year pot of gold -- in the wallets of suburbanites.
By a margin of nearly 2 to 1, Clevelanders voted to raise the city wage tax, three-quarters of which is paid by commuters. The tax most dreaded by Maryland and Virginia residents of the Washington area, the "commuter tax" that Congress prohibits the District from imposing, is a reality here, and the key to the city's fiscal stability.
Cleveland, dependent on troubled industries like steel and auto parts, has deep-seated economic problems on a far greater scale than those of Washington. Its rutted streets, boarded-up buildings and sagging porches on its weatherbeaten little houses epitomize the left-behind cities of the industrial Northeast.
So last month Cleveland again dipped into the pockets of suburbanites to foot its bills. After years of acrimony, failure, municipal default, racial politics and bad jokes about the burning chemicals on the Cuyahoga River, the city united to rescue itself in a political exercise that any mayor of Washington would envy.
Mayor George Voinovich, a white Republican, and City Council president George Forbes, a black Democrat, led a high-pressure campaign by community leaders of both races, the business establishment and the press for a one-third increase in the city wage tax. Even many commuters, who had no vote in the referendum, cheered as Clevelanders approved it at the polls.
"We could have made this white Republican mayor fall on his ass," said Forbes, who leads the all-Democratic council, 14 of whose 33 members are black. "But there was too much at stake. If we had played divisional or racial politics, it would never have passed."
The city government here has no responsibility for financing the public schools, which collect their own tax revenues, or for welfare and health care, which are handled by Cuyahoga County and the State of Ohio. Therefore, its annual operating budget is only $200 million, against Washington's $1.5 billion. In that context, a sudden influx of $35 million in new revenue has almost the same impact here as a doubling of the $296-million annual federal payment would for the District of Columbia.
According to Cleveland Finance director Willaim J. Reidy, it will enable the city to pay off $47 million in debts without borrowing, saving $21 million in interest costs on the eight-year loan that would otherwise have been necessary. That is the exact opposite of the approach taken by the District to paying off its $184-million cash deficit, which is to undertake long-term, high-interest borrowing and avoid a tax increase.
The "commuter tax" is legal in Ohio. A city is permitted to tax the wages of anyone who works there, regardless of residence. In Cleveland, where suburbanites hold most of the jobs and nearly all the high-salaried jobs, it is the commuters who fork over when the city tax goes up. It is a perfect arrangement for a depressed city where property values are actually declining and the electorate is dominated by the poor, the unemployed, the low-salaried and the elderly. The campaign for approval of the tax in the required referendum aimed squarely at the have-nots of the city.
Big yellow posters reminded voters that "it's a payroll tax. If you don't get a paycheck, you pay nothing," and "for every $1 Clevelanders pay, suburbanites pay $3." The campaign promised new police cars, new garbage trucks and "$80 million in matching state and federal funds" if the tax was approved.
The proposal before the voters was an increase in the city wage tax from 1.5 percent to 2 percent. Clevelanders rejected it when it was on the general election ballot last November, but this time, 62,000 of the 100,000 who went to the polls said yes. Political leaders here say two factors accounted for the change. On the one hand, the wage-earning homeowners who voted no when they were drawn to the polls by the presidential election stayed home this time, allowing the poor and the elderly, who were constantly reminded that they don't pay the wage tax, to dominate the outcome. Meanwhile, Voinovich's dire threats of further cutbacks in police protection, fire reponses and ambulance service impressed the voters. The tax is levied on gross earnings for individuals and most corporations, with no deductions or exclusions. At 2 percent, a person whose salary is $20,000 a year pays $400, up from $300 at the old rate.
It is too early to tell whether the new funds will save Cleveland, as Voinovich said they will, or merely slow its deterioration, but at least they give some breathing space to a battered community trying to restore its respectability. Cleveland now can buy new cars for its police force instead of accepting charity from mechanics who were repairing the old ones free to keep them running, and has already resumed taking job applications.
No amount of cash could cure all of Cleveland's problems. The city is a relic of itself, an anemic ghost of the industrial giant that was built on coal, iron ore and immigrant labor at the turn of the century. The population, which peaked at 915,000 in 1950, is down to 572,000, one of the steepest declines in the nation. Much of the city is in a post-abandonment phase, with vacated houses and apartment buildings demolished by the city.
In Hough, the impoverished black neighborhood on the East Side that was wracked by riots in the 1960s, the atmosphere is almost rural because so much land is vacant. As former city planning director Norman Krumholz observed on a tour of the area, "you'll notice that the teeming slums are no longer teeming."
Perhaps the starkest symbol of Cleveland's decline is the forbidding old White Motor Co. truck plant, a Dickersian monument on East 79th Street. In the 1960s, the plant employed 6,000 men; now only 300 work there, tending the parts warehouse. When a giant like White falls, it knocks down a lot of midgets around it: the bar across the street and the mom-and-pop grocery on the corner are closed and their owners have moved on. About half the retail outlets in the city are said to have closed since 1950.
The city's housing stock, consisting largely of 80-year-old frame dwellings, is crumbling. Very little has been built in recent years, and falling property values make renovation impractical, even for those owners who can afford it. "Gentrification," the restoration of old neighborhoods by middle-class homebuyers, is confined to a few blocks in a West Side area called Ohio City.
The water and sewer system, streets and bridges need hundreds of millions of dollars in urgent repairs. And the public school system, crippled by strikes, a $45-million budget deficit of its own and bitter fights over court-ordered busing for desegregation, is in disarray.
In that setting, $35 million in new revenue cannot by itself reverse the decline, but its symbolic value is enormous. City officials and community leaders are encouraged and even exhilarated by the success of the get-out-the-vote campaign and by the cooperation of groups that have frequently been in conflict. "It was now or never," said council president Forbes. He said there was "no way we could have restored the city to financial respectability without this. We couldn't run the city. It was not a priority issue when it was beaten in November, it only got lip service. This time it passed overwhelmingly in the black community, it carried every black ward. We all got behind it, council members, the Southern Chrisitan Leadership Conference, the ministers, the black leadership across the board.We knew that if more services were cut, we would be cut, too."
"We supported it, in November and now," said William O. Walker, the 84-year-old publisher of The Call and Post, Cleveland's black newspaper. Walker, whose building on the East Side overlooks vacant lots and a burned-out movie theater, said that Voinovich "told the people the facts of life. He got it over to the golden agers and the pensioners that they don't have to pay it, and he said Cleveland would be a laughing-stock again if it failed. This community is willing to tighten its belt, cooperate and work together for survival."
But passage of the tax increase was not just a raid on the white suburbs by the black inner city. The pillars of Cleveland's business community, tycoons of industry, law firms, banks and utility companies -- virtually all of whom live in the suburbs -- endorsed the tax and contributed tens of thousands of dollars to the advertising campaign that supported it, arguing that the additional revenue was needed to keep the city operating. Individual commuters may have been less than enthusiastic, but even some of them supported it.
Hy Yanowitz, who runs a popular low-budget Italian restaurant called Academy Tavern -- where diners get a full bottle of California wine for $3.25 -- lives in the suburb of Shaker Heights, but endorsed the customers to support it," he said. "Most of my customers aren't political, so I had to tell them. It's pennies a day for us, but it might save the city."
At Stefanec's Barber Shop, a bluecollar outpost where they still cut hair while it's dry, Steve Stefanec said the tax was approved because "Voinovich is sincere. You have to say that, the man is sincere. Nobody likes to pay taxes, but i don't mind if it's in a good cause." His barber shop has a reputation as a good listening post for public opinion, and Stefanec said he and his brothers "told the mayor straight out that the tax would pass."
Stefanec, 32, is an immigrant from Yugoslavia. He lived behind the shop, at 33rd and Superior, for 10 years, he said, but moved to the suburbs as soon as he could. "The city is in such bad shape," he said, "that it's automatic. You move if you can. The school system stinks. We were in such bad financial shape it was ridiculous. You could lose your car in the chuckholes." According to Stefanec, Clevelanders voted for the tax increase because the mayor promised that some of the money would be used to beef up the police force, and "what the people want is to stop crime. That's the only thing we don't like about this country. People are prisoners in their own houses."
Fear of crime was one of Voinovich's biggest weapons in pressing for approval of the increase. He painted such a grim picture of what would happen to police protection and emergency services if the tax plan failed that he created a mild backlash. "The mayor used scare tactics," said City Councilman Lester McFadden, whose tough West Side ward voted against the increase. "He was telling the senior citizens, if you have a heart attack, you'll die before the ambulance can get there. That's gross."
But the promise of better police protection swayed the voters. City councilwoman Fannie Lewis, a streetwise veteran of the Model Cities program, walked the streets of her ward, which included part of Hough, handing out a "fact sheet" urging approval of the tax. The benefits it listed included "290 new police officers on the street, 430 new police cars and 400 new police radios," as well as increased ambulance and fire coverage.
"I've always been a strong critic of the way the city handles its money," she said, "and on the council I found out that my fears were well-grounded. But I was concerned about the black-owned businesses holding on in my ward. Those guys work hard, they put their money in the community and they need police protection."
Finance Director Reidy said a stipulation that half the new revenue would be committed to capital improvements instead of wages was important in convincing the voters the money would be used to benefit them, not handed out in politically useful salary increases.
"It imposes some discipline on wage payouts," he said. "We deal with 22 unions that represent city workers, and we got each of them to agree to settle for a total benefits increase of 8 percent this year and 8 percent next year. That's less than the inflation rate." Many city workers live in the suburbs, but they supported the tax increase to save their own jobs, Reidy said.
He said Voinovich "inherited about $47 million in liabilities" from his predecessor, the controversial, pugnacious Dennis Kucinich. Cleveland defaulted on $15 million in bank loans under Kucinich, but he was the victim of years of questionable fiscal practices by the mayors before him and of the drastic decline in the city's resources during the 1970s. Kucinich was mayor at the end of a decade when property tax revenue to the city declined from $41 million a year to $25 million and tax-paying workers and businesses moved out, leaving the poor behind.
Reidy said that Kucinich's predecessors scraped through without raising income taxes by diverting $47 million on bond revenue and federal job-training funds into the operating budget, money that Cleveland must now repay out of the new tax revenue.
Cleveland is out of default now, under a 15-year agreement with banks that require it to balance its budget, keep accurate books and deposit pension funds in an escrow account. That arrangement, the replacement of the abrasive Kucinich by the mild-mannered and popular Voinovich and approval of the new tax have brought stability, if not optimism, in place of the chaos that prevailed here two years ago.
Cleveland's boosters, chiefly the corporate lawyers and business executives who have financed the "New Cleveland" campaign, are relentlessly upbeat about the city's assets and its future. They are sponsoring advertisements in magazines like Business Week to remind readers of Cleveland's cultural resources, world-renowned medical institutions and its record of philanthropic activities. One of the ads refers to "six great business centers of the world" -- London, New York, Tokyo, Chicago, Geneva and Cleveland.
"Cleveland is a vibrant and dynamic corporate headquarters city, one of the largest in the world," it says. "While still one of the world's great manufacturing centers, Cleveland today is moving in the direction of high technology and expanding employment in the professions and advanced services."
That is both Cleveland's hope and its problem. With the evolution of its economy away from manufacturing into the services and professions, the downtown area is thriving, but there is less demand for the services of the Eastern European ethnics, refugees from Appalachia and migrant blacks who made up the traditional blue-collar work force.