Friday, January 24, 2014

Council president Kelley defends Browns deal, supports sin tax

Kevin Kelley got grilled about Browns stadium funding on Tuesday. Cleveland’s new city council president sat in a circle at Speakeasy, the bar below Bier Markt on West 25th, and took questions at the end of a Civic Commons event. Five straight people asked him about the council’s November vote to pay $30 million for stadium repairs and upgrades over the next 15 years.

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.’”

1 comment:

Roldo Bartimole said...

Leases are not written in stone.
The Gateway lease was changed a few years ago when Gateway was in such bad financial condition it couldn't pay its land property taxes (it is tax exempt on the physical stadium and arena). It would have been too embarrassing for Gateway to go bankrupt so they worked out a deal whereby the teams would pay operating costs, including land taxes, changing the lease. What is little emphasized is that the teams took the naming rights away from Gateway in return. Not necessarily a good deal in the long run for the non-profit Gateway that runs the facilities built with mostly public money. The County is still paying for Gateway bonds, now having paid $123 million as of last year; plus other funds, including $38 million in city admission taxes.
These facilities are a drain on the taxpayers of Cuyahoga County and Cleveland and this nonsense has to stop.