Sin tax extension would push public funding of stadiums past $1 billion

Two generations of Cleveland leaders have overspent on public stadiums, our columnist Michael D. Roberts argues in Cleveland Magazine’s May issue. “The vexing sin tax that we are being asked to extend for 20 years to support Cleveland’s professional sports facilities is the price of incompetence by public officials,” he writes. “Their lack of diligence and vision may cost the community more than $1 billion in the name of sport.”

Mike’s opinions are his own, but I helped him confirm the big numbers in his story. If Cuyahoga County voters extend the alcohol and cigarettes tax May 6, the public’s spending on Progressive Field, FirstEnergy Stadium and Quicken Loans Arena will jump past $1 billion.

One complaint I’ve seen in the sin tax debate is that good numbers on our public stadium spending are hard to find. So I’m publishing our numbers here.

But first, here is my stab at explaining the total costs of the sports facilities in five easy points:

• 1st and 2nd sin tax. The first sin tax, approved in May 1990, lasted 15 years and paid for much of the construction of Progressive Field and Quicken Loans Arena. The second sin tax, approved in November 1995, went into effect in mid-2005 and helped pay for FirstEnergy Stadium. It expires in mid-2015.

• 3rd sin tax. Issue 7, on the ballot May 6, would extend the sin tax again, from 2015 to 2035, to pay for renovations to all three facilities.

• Cost overruns. The construction of Progressive Field and Quicken Loans Arena in the 1990s went over budget and added up to more than the first sin tax could pay for. So Cuyahoga County borrowed money and spread the payments all the way to 2023. We’re still paying the construction debt.

• Other city taxes. Although county voters extended the sin tax in 1995 to help build the football stadium, Cleveland needed more sources of money for the project. So the city council raised three taxes: an 8 percent parking tax, a 2 percent hike in the entertainment admissions tax, and a $2 tax on car rentals. Those taxes have brought in about $243 million since 1995.

But they aren’t earmarked for the stadium -- they go into the general fund. So you can’t count them all as stadium spending. For about seven years (roughly 2006 to 2013), the sin tax covered the city’s payments on the stadium construction debt. Cash from the other three taxes was spent on other needs. Now that the sin tax isn’t earmarked for debt service anymore, the other taxes’ $15 million a year roughly cover the $13 million the city pays in stadium debt service.

• The cost of debt. Much like a mortgage on a $100,000 home will probably cost you more than $200,000 over 30 years, the interest on stadium and arena construction debt has added up over the decades.


Here’s what taxpayers have spent, or committed to spending, on construction and renovations at Progressive Field, Quicken Loans Arena and FirstEnergy Stadium, since 1990:

Sin Tax:

Sin tax 1990-2005, for Progressive Field and The Q:       $238 million

Sin tax 2005-2013, for FirstEnergy Stadium:                      $113 million
       ($87m for construction debt, $26m for repairs)

Sin tax 2014-mid 2015                                                     about $23 million
      ($3m for repairs, $20m to county)

Gateway cost overruns, not paid by sin tax:

Admissions tax from Q, hotel tax, etc. to pay off Gateway bonds:
        2002-2014:                                                                            $54 million
              ($62m, but $8m paid by leftover sin tax)
        2015-2023:                                                                            $37 million

(Total doesn’t include about $17 million more in reported ‘90s overruns; couldn’t acquire a public record on how they were paid)

County general fund $ to pay off Gateway bonds:
             1992-1999:                                                                         $47 million
             2000-2014:                                                                       $83 million
             2015-2023:                                                                        $39 million
                (-$20m in 2014-2015 sin tax, could help pay this)

FirstEnergy Stadium construction costs:

local taxes other than sin tax, for construction:                    $16 million

other public sources for construction:                                      $47 million
   city electric, water     $6 million
   RTA, sewer district   $5 million
   state                         $36 million

Construction debt service, 1997-2013:
   $75 million principal paid
   + $120 million interest paid
   = $195 million paid so far
   - $87 million sin tax paid to debt service
   = debt service paid with general fund*                                $108 million
         (*new taxes were raised to cover this)

Construction debt service still to pay, now until 2028:      $162 million


Total paid + debt obligations:                                         $947 million

Sin tax 2015-2035 if passed, for renovations:                   $260 million+

Total with sin tax extension:                                        $1,207 million

My sources are documents from Mayor Frank Jackson’s office and county executive Ed FitzGerald’s office. You can download the original documents by clicking these links: sin tax revenue, county debt service, Browns stadium presentation, city tax revenues (not all of this went to the stadium), cost of Browns stadium, city debt service.

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Our calculation of $1.2 billion in public stadium costs if the sin tax passes -- not reported elsewhere in town -- will probably give the tax’s opponents a new argument. Enough! they’ll say.

“You would think that county officials, Mayor Frank Jackson and the Greater Cleveland Partnership would have a persuasive argument to ask the teams to renegotiate the leases and give the community some relief,” Roberts writes.

Supporters will likely argue that the public hasn’t had to pay much at all to renovate the publicly owned stadiums up to now. The city says it’s paid $10.5 million on football stadium capital projects, while Gateway says it’s paid zero in capital repairs costs so far.

The pro-sin tax side also says the three teams have generated much more than $1.2 billion in economic spinoff in the city, especially downtown. They could also respond to the big numbers with their argument that we should pay for renovations to “protect our investment.”

We don’t know how sin tax money will be spent

If the “sin tax” for stadiums passes May 6, who decides how much will go to the city of Cleveland, and how much to Gateway?

Who’ll decide what gets replaced first — the Quicken Loans Arena roof or the ramps at Progressive Field or the seats at FirstEnergy Stadium? Can any of it go to pay off construction debt, or will it all go to repairs and new scoreboards?

We don’t know. No one does. The city and Cuyahoga County still have to negotiate how they’ll share the alcohol and cigarette tax money. The negotiations won’t be easy. And they don’t intend to hash it out until after voters approve the tax.

“We do recognize that this is a gap in the legislation,” county councilman Dave Greenspan told me recently. “It is an issue we will need to deliberate on.”

The “sin tax” on alcohol and cigarettes is a county tax. So if voters extend it, the Cuyahoga County Council gets to decide how it’s spent. But city, county and business leaders say the extension is meant for repairs at all three publicly-owned sports facilities. (You can see the Indians' and Cavs' wish lists and a report about the Browns' stadium here.)

The city owns the football stadium, while the public Gateway corporation owns the baseball stadium and basketball arena. How will the money be divided?

“I think it will probably be even,” Mayor Frank Jackson said at the February press conference that kicked off the pro-sin tax campaign. Jackson wants the tax revenue, a projected $260 million over 20 years, to be split equally among baseball, football, and basketball.

But at a January meeting, Greenspan and three other Cuyahoga County council members warned Jackson’s chief of staff, Ken Silliman, not to expect an even split.

“A third, a third, a third is not something I am interested in,” Greenspan tells me. “I’m a big believer that the money follows the need. If in one year, Progressive Field has greater needs than the other two, that’s where money will go.”

The city and county haven’t had to share stadium money like this before. The first stadium sin tax, from 1990 to 2005, was earmarked for Gateway, to build Progressive Field and the Q. When the tax was renewed for 2005 to 2015, the first $116 million was earmarked for building and repairing FirstEnergy Stadium. (The last year or so of the tax will go to the county.)

But if the tax is extended to 2035, the city and county will have competing interests for the same pot of cash. The Jackson and FitzGerald administrations want to negotiate a cooperative agreement to figure out how to sort through those interests.

It’ll be tough. The Browns’ lease is more complex and vague about what the public has to pay for than the Indians’ and Cavs’ leases. The football stadium is newer and is used less often, but it’s bigger, and it’s battered by lakeshore winds. Gateway already has a system for weighing Progressive Field’s repair needs versus the Q’s. But that doesn’t help any with the football stadium -- unless Gateway were to take it over too.

The county will have the upper hand in negotiations with the city, because it levies the tax. But the cost of public stadium ownership is falling harder on the city right now. Cleveland is still paying off $13 million a year in construction debt on the football stadium, while the county is paying off $9 million a year in debt from the Q.

Could any sin tax money go to those old debts? City councilmen Brian Cummins and Mike Polensek have asked that question, and Jackson has entertained the possibility. But it seems unlikely. The county council sounds unwilling to hand over a straight third of the tax money to the city, and the county seems entirely focused on future repairs, not past debt.

Why wasn’t this all figured out before the tax went on the ballot? Greenspan asked that question at the January meeting.

“Those discussions need to happen, in my opinion, before the vote in May,” he said then, “so that the voters understand the complexity and understand the fundamental decision-making process as to how these funds are going to be used.”

He was ignored. Our elected officials would rather present a united front to get the tax passed, then argue about the messy details later.

Roldo rises again to fight the stadium tax

Last week, Roldo Bartimole, the 80-year-old independent journalist, took a step most writers wouldn’t take – up to the speaker’s podium at a Cuyahoga County Council meeting.

An old debate has returned anew, and Roldo arose, as he did in the ’90s, to rail against the alcohol and cigarette tax that funds Cleveland’s stadiums.

“I think this is beyond reason, and I think any serious person would feel so,” he told the council in his high-pitched rasp. “Why would you want to place on the ballot another heavy tax burden, for who knows what real reasons these three team owners would use the money for?”

The council did not take his advice. This week it voted 11-0 to place a renewal of the “sin tax” on the May 6 ballot. A couple of hours later, I called Roldo and told him about the unanimous vote. He laughed. “Really unbelievable,” he said.

In my 14 years in town, I’ve never seen Roldo speak in public on an issue before. But his journalism has long had an activist bent. He recalls arguing with Mike White and Tim Hagan at press conferences and with Art Modell on the field of old Municipal Stadium. For 24 years, with more doggedness than the Browns chase quarterbacks, Roldo’s nipped at the ankles of Cleveland sports team owners, growling that the public shouldn’t build or own major-league stadiums.

The sin tax is "an unfair tax, a regressive tax, welfare for wealthy people,” he says. “All three owners are either billionaires, or members of families that are billionaires.”

I tried some pro-sin-tax arguments on him. The city and county own FirstEnergy Stadium, Progressive Field and Quicken Loans Arena. So shouldn’t the public pay for their upkeep?

“The point is, they should get themselves out of the business,” Roldo replied.

We’re the landlord. The teams are our tenants. If we break the leases, will the teams leave?

“The teams can leave, then,” Roldo answered. But he added, “I don’t think they’re going to go up and leave. They would take a lot of flak themselves for leaving a city. They’ve already done that with the football team. Would they do it again?

“No, I think Cleveland has an opportunity to start something that will go national: the teams start supporting themselves. They stop becoming welfare clients of a city that can’t even afford to educate their children.”

I read Roldo often, and I think he can spend too much energy fighting battles lost in the ’80s and ’90s. Public stadium funding and tax abatements for new business, the two biggest evils in his worldview, are common across the country now. Cities face tough compromises if they want to compete.

Yet a recent poll shows the stadium sin tax losing by almost 10 points. Greater Clevelanders are weary of the cost of public stadium ownership. Sports teams have gotten richer since the 1990s, Cleveland and Cuyahoga County have grown poorer, and everyone knows it.

So Roldo is relevant again. For him, the May 6 vote is a rematch, a sequel 24 years in the making. In his career-defining battle against the stadium and arena project in May 1990, Roldo printed “LET JACOBS PAY” buttons and bumper stickers to tweak then-Indians owner Dick Jacobs.

The Gateway project squeaked through with 52 percent of the countywide vote, but it has haunted local debates about public-private projects ever since. Last week, Roldo gave the county council copies of an infamous 1990 pro-Gateway ad, filled with grandiose, broken promises.

“I want to get the teams off welfare,” Roldo says. “A free stadium and not even pay property taxes? Does the museum come and say, give us $100 million over a long period, it’s hard to keep up?”

Voinovich's two legacies, in Washington and Cleveland

George Voinovich hasn’t changed much in 31 years. That’s clear from a moment in his recent Washington Post interview when he recalled his 10 years at Cleveland City Hall.

“When I was the mayor, shooting for those All American City Awards each year was a real motivator,” he said. “And it never would have happened without the private sector and urban pioneers helping us rebuild a city where Cleveland used to be.”

He’s echoing a line from his 1979 run for mayor: “I want to build a great city where Cleveland used to be.” It’s a line I quote in “The Great Divide,” my piece on Voinovich in Cleveland Magazine’s December issue.

My story describes how Voinovich realigned Cleveland politics as mayor by introducing the phrase “public-private partnership” into our vocabulary. In the 30 years since, our biggest arguments haven’t been between conservatives and liberals. They’ve been about whether you see Cleveland the way Voinovich did, especially whether you’re for or against big public-private projects downtown, from Gateway to the Rock Hall to the Medical Mart. The Post interview picks up on Voinovich’s ideology, asking him how he’ll be involved in public-private partnerships after he retires from the Senate Jan. 2.

In Washington, Voinovich will be remembered for his role as a deficit hawk and his moderate politics. He showed both streaks in this month’s climactic lame-duck session, blasting the Obama-Republican tax-cut compromise for running up more debt on one hand, and on the other, voting to allow gays to serve openly in the military and supporting the New Start arms control treaty.

At home in Cleveland, he’ll be remembered for his philosophy of partnership. Last week, when county executive-elect Ed FitzGerald created a task force of business executives to aid the transition to a new county government, his announcement explicitly referred to Voinovich’s 1980 task force that helped the city climb out of default. And the county charter calls for FitzGerald to sit down with representatives of labor, nonprofits and business to develop a new economic strategy for the region. Voinovich may be retiring, but his philosophy is written right into our new government.

FitzGerald argues Dolan should bow out of major downtown development decisions

This weekend, Ed FitzGerald e-mailed me his letter to the Ohio Ethics Commission about Matt Dolan’s conflict of interest with the Indians. It argues that if Dolan is elected county executive, he should have to bow out of any decisions about the casino, the RTA, Public Square, or roads, bridges, or sewers downtown -- because they all “directly and uniquely impact the Cleveland Indians.”

The casino because it’ll be a block or two from the stadium, I assume. But the RTA? Because people take the Rapid to ball games, I guess?

Dolan told me last week that if he’s elected county executive, he’ll let the county council president take the lead on Indians matters and Gateway appointments. He asked the Ethics Commission to give him advice on his plans.

But FitzGerald, his main opponent, is pushing the commission to go way farther than that. He also wants it to rule on whether Dolan should return the huge campaign contributions from his father, Indians owner Larry Dolan, “to avoid even the appearance of impropriety.” FitzGerald’s letter, written Oct. 8, pegs the elder Dolan’s contribution at $280,000. On Thursday, we learned Larry Dolan’s now given a total of $630,000.

The Ethics Commission isn’t answering Dolan’s request until after the election. No wonder: It’ll also have to deal FitzGerald’s letter, which reads more like a political argument than a request for a legal opinion. At one point FitzGerald talks about “an assessment of the appropriateness of Mr. Dolan’s candidacy and potential service as County Executive.” That’s up to the voters, not the Ethics Commission.

But politically, FitzGerald’s playing an interesting card here. He’s saying taxpayers should trust him, not Dolan, to represent their interests on downtown development issues. He’s trying to tap into the mistrust of sports teams’ political influence in Cleveland, a concern that dates back at least to the Gateway project. And he’s again reminding voters that Dolan’s millionaire family is funding the TV attacks against him.

To read FitzGerald’s letter to the Ethics Commission, click here. To read Dolan’s letter, click here.

Dolan's Indians dilemma: How he'd avoid conflicts

I called Matt Dolan this week to ask him something I've wondered about for a while -- how he'll avoid dealing with the Cleveland Indians if he's elected county executive.

"If the Indians are involved," Dolan told me, "there will be program in place so I’m not involved in any decision-making." He says he'd ask the county council president to take the lead.

Dolan -- whose father, Larry Dolan, is the Indians' owner -- first addressed the issue this summer. It's a touchy subject, since Dolan's family is donating $1 million to his campaign. His main opponent, Ed FitzGerald, has needled him for the conflict of interest.

The thorniest challenge: The county executive will appoint three out of five board members of the Gateway Economic Development Corp., the Indians' and Cavs' landlord. Dolan wrote to the Ohio Ethics Commission on Sept. 27, asking for an advisory opinion on his plan to recuse himself from that decision. (To read a copy of his letter, click here.)

So I asked Dolan, how can an executive recuse himself from making an appointment? He said he'd pass the decision on to the county council president and a bipartisan advisory panel.

The panel is an idea he proposed in April. It would help the executive choose potential members for dozens of appointed boards and commissions. (See this page of his website.) "They would submit recommendations of who they’ve screened," Dolan said.

"For the Gateway appointment, they would submit it directly to the council president. The council president would make the appointment to council." Then council could approve or reject the person.

Dolan's answer fits what Jennifer Hardin, chief advisory attorney for the Ohio Ethics Commission, told me when I asked how other government executives recuse themselves from appointing someone.

"In most cases, where there are several branches of government involved, another branch may be able to substitute," Hardin said.

What about other decisions the county executive might have to make about the Indians? Say, if the Indians ask for money to renovate Progressive Field?

"If there's a scenario in which the Indians make a request on Gateway," Dolan said, "then the Gateway folks will be instructed to work directly with the council president." No such scenario has come up in the 11 years his family has owned the team, he added.

But the Indians began exploring possible upgrades to Progressive Field in May. The team's lease says Gateway has to pay for any "major" capital repairs costing more than $500,000. But Gateway is not flush with cash, so the team might ask the county and city, which control Gateway, to pay.

"I don't speak for the Indians," says Dolan. "They’re talking about doing renovations. There's no indication at all how Indians intend to finance it. My opponents just assume the county is going to pay for it. That's not accurate."

In 2006, the Cavaliers briefly floated the idea of having taxpayers spend $30 million to renovate Quicken Loans Arena. It fell to Jimmy Dimora, as a county commissioner, to shoot the idea down.

But the mayor of Cleveland would probably take the lead in dealing with any major renovations to the baseball stadium. Under Gateway's structure, the city is the contact for Progressive Field, Dolan notes, while the county is the contact for The Q.

Dolan's letter to the Ethics Commission asks for "a timely response," since "we are drawing constantly closer to the end of campaign season." But Hardin says the ethics commission won't respond until November or December, if Dolan wins.

Dolan's letter asks if recusing himself would be legal. But he says voters shouldn't be concerned that he won't get an answer by Nov. 2. He says he phrased the letter that way because having an advisory opinion backing him up would protect the county in case anyone filed a taxpayer's lawsuit to challenge a Gateway appointment.

"I’m doing the appropriate steps leaders do to prevent any problem in the future," he said.

To read my coverage of the county executive race in Cleveland Magazine, including pieces on the leading candidates, click here.

Dolan, FitzGerald exchange punches over corruption, family ties

Matt Dolan and Ed FitzGerald think they've found each others' weak spots.

Dolan's on the air with an attack ad that tries to tie FitzGerald, the Democratic front-runner for county executive, to the county corruption scandal.



Dolan's ad notes FitzGerald got campaign contributions from several figures in the scandal -- a fact first reported on this blog and in Cleveland Magazine's September-issue coverage of the county executive race. It doesn't say FitzGerald has given most of that money to charity. It cites FitzGerald's cameo appearance as PO14 in Dimora's indictment and slams him for opposing the new county charter.

FitzGerald has put out his own ad touting his anti-corruption bona fides as a former FBI agent.



He's also punching back. This morning he's holding a press conference at the county administration building, attacking Dolan, his Republican opponent, for a conflict of interest. Dolan's father owns the Indians, yet as county executive, Dolan would have to appoint members of the Gateway board, which oversees Progressive Field. From FitzGerald's press release:

Dolan has described his personal financial interest as being a "beneficiary to a trust" that owns a portion of the Cleveland Indians. The new County Executive will be involved in appointing 3 of the 5 members of the Gateway Economic Development Corporation, the landlord for the Indians and the Cavs. Gateway sets financial terms with the sports teams, often involving large sums of money. ... In addition, candidate Dolan has received $430,000 in campaign contributions from his father Larry, owner of the Indians, and uncle Charles Dolan.

Dolan has asked the Ohio Ethics Commission to offer advice on the Gateway issue. He's also said he'd recuse himself from Indians-related matters (which might not be easy). {Update, 10/20: Here's my new post about how Dolan says he'd handle this.} He went online Tuesday with a letter defending his family's donations to him.