Cleveland Music Venues Chafe Under 'Unfair' Admissions Tax
Cleveland is a city that proudly touts its rock ’n’ roll legacy. The Rock and Roll Hall of Fame and Museum website paints a cozily nostalgic picture of post-World War II teens packing downtown record stores to shell out money for the latest tunes. It details the Beatlemania frenzy that led then-Mayor Ralph Locher to ban the mop-headed Brits from Cleveland in the mid-’60s. Even the term “rock ’n’ roll” was mainstreamed locally, thanks to Record Rendezvous owner Leo Mintz and deejay Alan Freed, or so the legend goes.
Elvis Presley, the O’Jays, the Rolling Stones, Bruce Springsteen, David Bowie, Patti Smith, Nine Inch Nails, U2, the Who and ZZ Top were just a handful of the showcase acts that made Cleveland a mandatory stop, packing Public Hall, Cleveland Arena and Municipal Stadium. Where bands played became as important as the radio stations and record stores that carried their music, with venues like Phantasy Night Club, The Odeon, Empire, the Cleveland Agora and Beachland Ballroom giving enthusiasts a place to rock out with their genitalia out, if such was their desire.
Some of these clubs are long gone, while others hang on in the midst of a down-tempo music scene harmed by a struggling economy and a population in decline. The city of Cleveland isn’t doing music venues any favors these days, either. Last year, music-club operators learned they would have to pay back payments of admissions taxes dating back three years, a move that critics deem a threat to venues working out of the same city that built a museum dedicated to the roots of rock.
The irony is not lost on club owners, who have spent the last year pushing back against the newly resuscitated 8 percent admissions tax they believe will only add to their ongoing struggle for survival. They question how the self-proclaimed “rock ’n’ roll capital of the world,” one trying to retain its label as a first-class city, could hamstring a potential revenue-drawing mechanism with second-class business practices.
In the last few months, Cleveland officials have come up with compromise legislation that could take the financial pressure off of smaller venues. Club operators, meanwhile, have formed an alliance to convince the city to lower the tax or ditch it entirely. Players on both sides hope to reach some kind of middle ground before the Rock Hall induction ceremonies April 14.
Still, venue owners are worried about keeping their doors open and wonder if government officials truly understand that “Cleveland Rocks” must be more than a catchy jingle for the city to flourish.
On a warm, windy day in early March, a half-dozen club owners gathered in a third-floor office at the Agora. The group meets every week at the warehouse-like building on Cleveland’s East Side to discuss business, with much of that talk revolving around the burdensome tax issue.
The group looks a bit weary. Cell phones beep constantly with calls or text messages. Running a club is a seven-days-a-week affair, and ruminating over taxes is probably the last thing they want to be doing on a weekday afternoon.
Beachland Ballroom owners Cindy Barber and Mark Leddy say their concert hall, at 15711 Waterloo Road in the Collinwood neighborhood, faces a demand for $400,000 —three years’ worth of admissions taxes plus penalties and interest.
“We didn’t even know the other [club owners] were having problems until we talked to them,” says Barber. “We were all fighting the same battle.”
Beachland started receiving summons from the city in 2009, say its owners. The paperwork had details on head counts and how much the club charged at the door. Leddy laughingly recalls spying out-of-place characters “wearing Dead Boys T-shirts from Hot Topic” and wonders now if they were undercover city employees.
Like most cities, Cleveland is looking to accrue tax revenue any way it can, notes Leddy.
But the city’s music-club scene is far from a gold mine just waiting to be tapped. Squeezing blood from a rock may be a more appropriate image.
“We operate in the red most of the time,” Leddy says. “The clubs in Cleveland are not some big money pot.”
Smaller venues in Cleveland were already having problems before the admissions tax became a serious worry, says Hank LoConti, who founded the Agora in 1966. The Odeon in Cleveland’s Flats closed in 2006. The House of Blues franchise took another chunk of business when it came to town in 2004.
The eight percent admissions tax has muddied the situation even more, says LoConti. Akron, Lakewood and Columbus don’t charge the tax, while Cleveland Heights has a 3 percent fee. With 8 percent taken from a show’s gross, Cleveland could become less competitive in drawing acts, because after paying the performer and dealing with security, advertising and production costs, there is little cash left to support a venue’s bottom line.
“A great night for us is 15 percent of revenue coming in at the door,” says Chris Zitterbart, owner of Peabody’s Concert Club.
Musical hotbeds like Chicago and Austin “encourage musicians to move into the city,” LoConti says. “Here, they’re taking it off the backs of the smaller clubs.”
Cleveland councilman Jay Westbrook understands how unfair this is. Westbrook, who represents the Denison, West Boulevard, Cudell and Edgewater neighborhoods on the “midwest” side of Cleveland, was among four councilmen to introduce legislation last fall that would exempt clubs holding fewer than 700 people from the city’s 8 percent admissions tax.
The plan was inspired by a similar tax-collection strategy in Seattle, a city that exempts profit-making music clubs from admissions taxes. Chicago has enacted the same policy.
“These are hardworking entrepreneurs, a creative force bringing development to our neighborhoods,” says Westbrook, pointing to Beachland’s uplift of the surrounding Waterloo Arts District. “The city does not seem to realize this yet.”
The current fee is an expansion of a 1947 statute that taxed medium- to large-scale events like sports and concerts. That tax grew to 6 percent in the ’90s to pay for the construction of Jacobs Field and Gund Arena. The city added to the tax again when the new Browns stadium was built. The $15.9 million of admissions tax collected in 2010 went into the city’s general fund, helping to subsidize municipal operations like police, fire and street repairs, according to documentation published by the city’s finance department.
Until recently, the collection process for the 8 percent tax was not strongly enforced, says Westbrook. The city coming out now, counting heads at clubs and generally “acting like [club owners] were avoiding paying their parking tickets, that was an overreach,” he adds. “The government should not be beyond correcting its mistakes.”
The tax-exemption proposal introduced by Westbrook and friends was met with a more conservative measure by Cleveland Mayor Frank Jackson in March. Under Jackson’s legislation, the 8 percent tax would apply to only a quarter of the money collected by clubs that can accommodate up to 250 patrons and 50 percent collected by clubs that can hold 250-500.
The possibility of a compromise is attractive to venue owners, although the mayor’s proposal does not go far enough to help out larger spaces like Peabody’s.
Located near the campus of Cleveland State University, the club, like most of its brethren, doesn’t make a huge profit at the door but from drinks sold during shows. What’s more, the smaller clubs that would benefit from a lower tax are in support of the larger venues when it comes to an across-the-board exemption.
“We are all in this together,” Zitterbart says.
The mayor’s proposal does not take into account the trickle-down of larger clubs having to pay the full tax, says Sean Watterson, owner of the Happy Dog, at West 58th Street and Detroit Avenue. If a venue like Beachland can’t pay for an act to come to town, why would that act settle for a smaller club, or come to Cleveland at all, with markets like Columbus growing in size instead of shrinking? (Census figures show the population of Columbus climbed 10.6 percent over the last decade, compared to a 17 percent drop over the same period in Cleveland.)
Instead of the mayor’s small-venue proposal, Watterson would like to see a solution that benefits everyone, perhaps an annual fee that can still be tied to the size of a club.
“This is supposed to be the Rock and Roll Hall of Fame city,” he says. With clubs acting as “economic drivers” bringing in money through sales and payroll taxes, not to mention residents looking for something fun to do, “we’re an integral part of these neighborhoods.”
“There would be a huge impact if clubs started to close,” says Cleveland music-scene veteran Paul Schlachter, owner of Now That’s Class on Detroit Avenue. The absence of higher-profile venues “would turn some areas into a ghost town. It’s pretty obvious, but the city doesn’t see it. Cleveland has a chance to be on the rise, but the city has to back everyone up.”
For Cleveland’s part, the Jackson administration has referenced a 2009 efficiency study that called for the city to do a better job of collecting existing taxes. “When a venue fails to remit the admissions tax that it collects, then the venue becomes responsible to pay the tax plus interest and penalties,” the document reads.
In addition, city Finance Director Sharon Dumas told council members in a February letter that the tax exemptions coming out of Chicago and Seattle are the only examples of for-profit tax exclusions in the country. Cities like Nashville and Memphis don’t charge a door tax but subject tickets to sales taxes. The State of Texas also imposes a 10 percent sales tax with the same characteristics as Cleveland’s admissions tax.
These revelations don’t mean much to Cleveland’s club owners. Along with running her music venue, Beachland’s Barber volunteers with an economic-development corporation that brings business into the region. She has spent time driving visiting entrepreneurs around the city to get them to relocate here. Dealing with the admissions tax folderol “makes me want to move to Seattle,” she says.
Her business partner, Leddy, knows Cleveland has its money issues, “but that’s where leadership comes in,” he says. “They won’t be able to solve their problems by taxing us.”
In February, members of the newly formed grassroots Cleveland Music Club Coalition (CMCC) staged “Defend Music Night” to raise awareness of the issue and showcase the diverse local talent that got its start in Cleveland. Turnout was strong, with patrons signing petitions in support of clubs getting full exemptions.
Music can be a thriving industry for Cleveland and Cuyahoga County, says Happy Dog’s Watterson. Cleveland is home to an eclectic mix of music education and industry, from the Cleveland Institute of Music to vinyl-pressing company Gotta Groove Records to recording studio Eighth Day Sound.
A study by the Community Partnership for Arts and Culture determined that there are 2,718 music-industry workers in “core” positions of performance, promotion and recording countywide, adding up to $115 million in payroll and comprising 0.4 percent of the work force.
These numbers may seem small, but according to the study, those core workers helped generate an additional 3,492 jobs in everything from retail to education, with a total economic impact of $840 million, defined as the total value of goods and services generated by musical and music-related activities.
“The foundation is here,” says Watterson. “The depth of our [industry-related activities] blows other cities away.”
Agora owner LoConti has been around long enough to witness firsthand both Cleveland’s boom days and the leaner times of recent years. With Cleveland trying to revitalize downtown through efforts like the new casino, he would like to see a more concerted effort to help the clubs that will keep casino patrons within city limits after hours.
“What does Cleveland want to be, a large city or a one-horse town?” LoConti asks rhetorically.
It’s unknown if a compromise on the 8 percent admissions tax will be reached before the Rock Hall ceremonies later this month. But venue operators hope that if Cleveland is truly listening to the money talk, it will recognize music clubs as an economic engine speeding the city toward a brighter, hard-rockin’ future.