For Clevelanders who follow politics, today’s the aftermath of a major conflict.
Nearly the entire political and business establishment lined up to support Issue 7, the alcohol and cigarettes tax for stadium renovations. A scrappy coalition of activists opposed it with a ferocity that had nothing to do with spending 7 1/2 more cents on a six-pack of beer.
The final score: Issue 7 passed, 56 percent to 44 percent. What’s that mean, beyond the price of a cigarette pack or a scoreboard? A lot. Here are a few keys to understanding the vote.
It’s a sports town. Someone recently wrote that losing the Browns in 1995 wounded Cleveland as badly as losing the Dodgers did Brooklyn. It’s true. For many Clevelanders, the sports teams make up a huge part of the city’s identity.
The major leagues drive hard bargains with cities. The public cost of owning Progressive Field, Quicken Loans Arena and FirstEnergy Stadium is going above $1 billion with this vote – to $1.2 billion from 1990 through 2035, Cleveland Magazine has calculated. Yet, we learned yesterday, a majority in Cuyahoga County is willing to pay it.
The frugal populists revolt. A lot of people in Cuyahoga County – about 44 percent of people, it turns out – think it’s unfair, outrageous, and illegitimate to spend tax money to build and renovate sports stadiums. Issue 7 gave a new generation a chance to join a rematch of the May 1990 vote on Gateway, which realigned local politics in ways that still resonate.
Many sin tax opponents weren’t just resisting the great expense of being a sports team’s landlord. They were frugal populists who treated Issue 7 as a vote on the entire Cleveland political system, especially the alliance of government and business.
The best way to understand most Cleveland political debates isn’t party politics. It’s, do you believe in spending tax money on “public-private partnerships” that draw people and business downtown? Or do you thinks that’s corporate welfare, giveaway of money better spent on other needs? That debate has run through our politics for decades, from tax abatement in the ’80s through Gateway in 1990 through the convention center debate in 2007, to the sin tax rematch yesterday. (For more on this great divide, check out my commentary after George Voinovich retired – the conflict traces back at least to his years as mayor.)
Populism declines in City Hall. Plenty of voters may have wanted to pressure the sports teams for a better deal, but almost no politicians did. Some were pragmatic, believing the city and county had little leverage to reopen lease negotiations midway through a binding contract. For instance, Mayor Frank Jackson voted against the stadium leases in the ’90s as a city council member, but felt bound to honor them as mayor.
Still, the near-unanimous support for Issue 7 among city and county officials reflects a political realignment. There aren’t many Dennis Kucinich-style leaders, ready to fight big business, in Cleveland politics anymore.
Money talks. Of course money affects elections. And the business-political alliance will always outspend the frugal populists. Issue 7 supporters spent more than $1 million, mostly from the teams, to get their message out. Polls suggest that helped sway undecided voters and turn the election around. Opponents had much less to spend.
What now? The debate about public stadium spending isn’t over. For one thing, the city and county have no agreement on how to split up the new sin tax money. I asked city council president Kevin Kelley about that on WCPN this morning, and he couldn’t say how it’ll be resolved.
The city and teams would like an even three-way split of the funds. But the county council isn’t inclined to do that. It may keep control of the sin tax funds and force the city to come to it, hat in hand, every time FirstEnergy Stadium needs repairs. Or, the city and county may negotiate a cooperative agreement on how to split the money, maybe with some new committee deciding how to set priorities.
I wouldn’t even be terribly surprised to see the Gateway board take over FirstEnergy Stadium. Gateway already has a system for comparing and prioritizing repairs at Progressive Field and Quicken Loans Arena. So why not bring the football stadium under that system, once the funding source is the same?
Whoever’s in charge of spending the stadium tax money will have an important job. They’ll have to manage the teams’ renovation requests so the costs don’t exceed the projected $260 million tax revenue. If the anti-sin tax crowd wants to stay engaged, it has plenty to watch and probe.
Showing posts with label sin tax. Show all posts
Showing posts with label sin tax. Show all posts
Wednesday, May 7, 2014
Monday, April 28, 2014
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.
==
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.”
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.
==
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.”
Wednesday, April 23, 2014
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.
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.
Friday, April 11, 2014
Sin tax opponents propose $3.25 fee on all sports tickets; is pro-tax side getting scared?
The fight over the stadium sin tax just got more interesting. After some uncertain steps, the opposition found its footing today. They proposed a simple alternative to the tax on alcohol and cigarettes -- a $3.25 facilities fee on every sports ticket.
"It takes the maintenance cost off the shoulders of those who can’t afford tickets or choose not to purchase them," says the No side's five-page, footnoted proposal, "and places it on those who actually use these venues, more than half of whom come from outside of Cuyahoga County."
"It takes the maintenance cost off the shoulders of those who can’t afford tickets or choose not to purchase them," says the No side's five-page, footnoted proposal, "and places it on those who actually use these venues, more than half of whom come from outside of Cuyahoga County."
At first, the opposition seemed like a pretty small group with a scattered message. But they are making headway. The Yes side on Issue 7 has decided it can't ignore them anymore. Are they getting scared?
The Keep Cleveland Strong campaign just sent out a press release saying a facility fee would "punish Cuyahoga County families and sports fans." It quotes three county council members and city council president Kevin Kelley.
"These various ideas have been hatched and then publicly floated with apparently little thought, and none of them have stuck," says an especially disdainful county councilman Dan Brady.
But this idea might stick -- at least as the counter-argument the town debates between now and May 6.
Will Issue 7 be a jocks vs. nerds vote? Fans surely don't want ticket prices to go higher. The Yes side notes it'll cost $13 more to take a family of four to a ball game. The average Clevelander may well prefer paying 7 cents on a six-pack of beer to that. Maybe the opposition has handed the sin tax side a winning argument.
But maybe not. Warnings of higher ticket prices could rebound against the teams. Our ticket prices may be low compared to other cities, but plenty of fans think they're gone up too much for frugal Cleveland. Think of the anger against the Indians' dynamic pricing system, which raised the cost of cheap seats by much more than $3.25 in the last few years.
Also, the No side cleverly notes that the Q already levels a $3 facility fee on concerts and all events other than games, and it doesn't seem to have hurt concert bookings.
Last week, Brent Larkin wrote cryptically that the Yes side's latest poll "shows that the tax extension has a reasonably good chance of passing, although it’s far from a sure thing." I think that means it's losing so far. That could change, as the Yes campaign ramps up its message. But it feels like the debate just realigned with 3 1/2 weeks to go.
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. |
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.”
Friday, January 24, 2014
Council president Kelley defends Browns deal, supports sin tax
Kelley said the Browns’ lease binds the city to make the repairs. But he found the agreement between the cash-strapped landlord and billionaire tenant a tough sell.
“Are we always going to own Browns Stadium?” one woman asked. “Is there a plan ever to have the Browns buy Browns Stadium?”
“The city owns the stadium, and we probably always will,” Kelley said. “We owned the one before it.” That’s common in most cities, he said.
Kelley said he voted for the agreement because the city’s lawyers and a study by the engineering firm URS pegged the city’s lease obligations at about $30 million. “I wasn’t going to authorize a nickel that wasn’t contemplated in the lease,” he said. The Browns wanted the city to do more, “and the city pushed back quite a bit.”
Three weeks into the 45-year-old Old Brooklyn councilman’s job as president, stadium funding is the big question he’s got to face. Yesterday, Kelley urged the Cuyahoga County Council to put the “sin tax” on alcohol and cigarettes on the May 6 ballot and encouraged county residents to vote for it.
“We as a community made a decision through the ballot box that we wanted to build these sports facilities,” Kelley told me today. FirstEnergy Stadium, Progressive Field and Quicken Loans Arena are all publicly owned, part of the deals struck in the 1990s to bring the new Browns to town and make the Indians and Cavaliers happy long-term tenants.
“We own these,” Kelley told me. “We have to make these repairs. It’s either going to come out of the sin tax or it’s going to come out of the general fund, which pays police officers, firefighters, which pays EMS, which pays for recreation centers. It maintains the parks our kids play at. It plows our streets.
“It’s not a giveaway of public funds to rich owners,” he insisted. “It’s meeting the obligation that we as a community made many years ago -- because the city and the county have to make these repairs. We have leases, we have obligations. It’s either a penny a beer, 4½ cents on a pack of cigarettes, or it’s going to come out of the general fund.”
The Browns’ stadium lease, approved in 1996, looks different to many Clevelanders in 2014. Back then, Cleveland, wounded over the Browns’ forcible removal to Baltimore, was determined to get an NFL team back.
Now, the bills are mounting. City Hall is tapping its general fund for $2 million a year to fix and improve the football stadium. It still owes $11 million a year on the stadium’s construction debt. Up to now, the sin tax has covered those debt payments, but it expires this year.
To my surprise, Kelley told me the county council hasn’t decided if a sin tax renewal would cover all of the football stadium debt. The council still has to agree on how much of the hoped-for tax money would go to FirstEnergy Stadium and how much to the Q and Progressive Field. That may or may not happen before the tax renewal goes on the ballot.
At Speakeasy on Tuesday, one voter suggested the city needs to demand better lease terms from the Browns. “Many people say that deal was made somewhat under duress, there was a desperation for some kind of team,” he told, “so it wouldn’t be out of line to renegotiate in some fashion by being really aggressive.”
I asked Kelley about that. “You would need both sides come to the table to open it up,” he replied. “I don’t know that that discussion has been had yet.” He suggested the city would find itself in a tough bargaining position. “It’s difficult to open negotiations in the middle of a lease,” he said. “Now that we’re in this lease, it’s very challenging to say, ‘We’ve changed our minds.’”
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