Wednesday, March 12, 2014

Stadium boosters & critics debate sin tax at Sterle’s

Mark Rosentraub argues for the stadium sin tax at last night's Civic Commons debate.
Should voters support Cleveland’s stadium deals by voting for the stadium sin tax May 6? Or are we struggling under burdensome leases we can barely understand? Advocates on both sides argued the point last night during the Civic Commons debate as beer flowed at Sterle’s Country House.

Each side brought a numbers guy and a guy who argued from the gut. Mark Rosentraub, an economist who served on the Gateway stadium and arena board, made a case for the sin tax extension and the Cavaliers and Indians leases he helped renegotiate in 2004. City councilman Brian Cummins fired off figures to explain why he still has too many questions to support the tax.

Sounding simpler notes, Tom Yablonsky of the Historic Gateway Neighborhood organization argued that the stadiums have attracted residents and businesses downtown, while lawyer and sports blogger Peter Pattakos, with the newly launched no campaign, claimed the public should hold out in hopes of getting a better deal.

The debate format encouraged lots of back-and-forth, so several major questions about the sin tax were tested pretty thoroughly:

Do stadiums help downtown? Rosentraub, an expert on stadium financing, argued that sports don’t grow a region’s economy, but they do change the location of economic activity – meaning, they direct it to downtown Cleveland. He said 123,000 people commute from outside Cuyahoga County to jobs in Cleveland and pay $177 million in income taxes. The teams are part of “an amenity package that makes Cleveland a good place to work,” he argued.

Pattakos quoted Rosentraub’s writing, which calls sports’ spinoff effect on local business “quite small.” Yablonsky replied that downtown had only six residential addresses in 1990, before the baseball and basketball complex was built, and 62 now.

How else could we pay for this? Pattakos argued that stadium supporters should seek a seven-county tax, like in the Denver area, since plenty of Cleveland sports fans live outside Cuyahoga County. Yablonsky said state law doesn’t allow a multi-county tax. Cummins noted the state legislature changed the law to allow the sin tax extension. (Other Ohio counties can’t levy alcohol taxes.) Why not ask the legislature to allow a regional tax? he asked.

Cummins also suggested adding a $3 facility fee to tickets, on top of the 8 percent admissions tax fans pay now. “Could you raise the fees? Hypothetically, anything is possible,” replied Rosentraub. “Would the fans react negatively? Obviously.”

What are our obligations, even if the sin tax passes? Cummins said Cleveland still owes $128 million in debt from the football stadium’s construction, while Cuyahoga County still owes $88 million in Gateway construction debt. That costs Cleveland about $12 million a year and the county about $5 million a year. “The teams and the campaign have not told us anything about the sin tax paying down any of that debt,” Cummins said. The sin tax extension, expected to raise $260 million over 20 years, is meant mostly – maybe all – for repairs and upgrades.

Cleveland also pays $650,000 a year in property taxes at FirstEnergy Stadium, more than the Browns’ annual rent of $250,000. Meanwhile, the Gateway corporation itself has debts of $422 million, Cummins said, most of which “is probably never going to be paid.”

Yablonsky noted that Cleveland instituted several taxes in 1995 to help pay for the Browns’ stadium. “Those are right now dedicated to pay back the debt,” he said.

Cummins acknowledged that. He claimed the city raises: $27 million a year from those taxes, including a citywide parking tax and the sports and concerts admission tax.

“I actually talked to one of the CEO-presidents of one of the teams,” Cummins said. “He asked me, ‘Councilman, why aren’t you using your other taxes that you created to pay off the debt?’ I said, ‘We’d love to.” The problem, says Cummins, is that money is scarce. The state cut the local government fund and abolished the estate tax in the last few years. That cost Cleveland almost as much per year as the parking, admisssions and other taxes take in.

Can we get a better deal? Pattakos argued that a no vote on the sin tax would send elected officials and teams back to the negotiating table to change the leases. “If voters reject the sin tax this May, the teams aren’t going to leave this May,” he said. “They’re not going to leave anytime soon. We’ll end up with a better deal.”

Rosentraub said he already got the public a better deal in Gateway’s 2004 renegotiations with the Indians and Cavaliers. The deals, approved by the city and county governments, obligated the teams to pay for all maintenance that costs $500,000 or less – carpet, seats, etc. – if the public pays for major infrastructure, including roofs, heating and air conditioning. That, he says, saved the public about $3 million a year.

Yablonsky and Rosentraub cast a no vote on the sin tax as self-defeating, implying the teams don’t have much incentive to renegotiate.

“The reality is, if you don’t pass this, you still have to fulfill the terms of the lease,” Yablonsky argued. “So you put general fund money at risk if you don’t pass this. Effectively, you break the lease if you don’t come up with the terms to [make] the lease work.”


Anonymous said...

The kind of coverage you won't find in the PD or elsewhere. Bravo Cleveland Magazine and crown jewel Erick Trickey.

Roldo Bartimole said...

Mark Rosentraub did not tell us that in the deal he and Gateway made with the teams they gave away naming rights. The Progressive name earned the Indians more than $50 million and no one knows how much the more lucrative Q Arena name rights for Cavs owner Dan Gilbert provides him.

Further, the teams had no choice but to redo the lease. Otherwise, Gateway would have gone bankrupt. It simply couldn't pay its bills. That would have been highly embarrassing for Cleveland since it had the default label already. The teams were forced to redo the lease and must again.

To better inform yourself on the dealings via the sports teams I suggest you go to:

Roldo Bartimole