Bengals stadium: Worst. Deal. Ever?

Good, long article in yesterday’s Wall Street Journal on the financial woes of the Cincinnati Bengals‘ Paul Brown Stadium — or rather, the financial woes of Hamilton County, which built the place in 2000 and within four years was suing on the grounds it had been hoodwinked into a sweetheart deal. Among the article’s highlights:

  • The initial $280 million price tag ultimately swelled to $350 million (if you believe the Bengals), or $454 million (according to the county), or $555 million (according to Harvard stadium expert Judith Grant Long, whose long-awaited book Full Count, I am assured, really is due out any month now). This last figure would set a record for public subsidies for an NFL stadium.
  • As a result, the county has been facing steep debt payments: $34.6 million in 2010, equal to 16.4% of the county budget. As a result, the county has been slashing funding for things like schools, the sheriff’s department, and youth programs, and is now set to repeal the property tax reduction that was the carrot to get county residents to approve the Bengals stadium (and an accompanying Reds stadium) in the first place.
  • Hamilton County hamstrung its own finances by agreeing to let the Bengals collect all parking revenues at the new stadium, while the public picked up all security costs. The team put pressure on the county by saying it would move to Baltimore without a sweetheart deal — but documents from the time indicate that Baltimore’s offer was capped at $200 million in public funds, and would not cover operating costs.
  • Even on the field, the new stadium has underperformed: “The Bengals had said that with a new stadium, the team’s revenue would increase, allowing it to sign better players, win more games and attract more fans to the area. In 2000, the new stadium’s first year, the Bengals had the same record they’d had the previous year, 4-12. Since then, the team has managed just two winning seasons in the new facility. Its attendance levels have actually dropped.”

The problem, it seems, is that unlike in other municipalities, Hamilton County footed the entire stadium bill itself — and counted on a 0.5% sales tax hike to make the bond payments. When sales tax revenues didn’t grow at the rate the county had hoped, it was left with a budget hole that’s grown progressively larger.

(The Bengals have since responded with a two-page letter that asserts that it’s the county’s fault for making a lousy deal, and anyway the real problem is the county took part of the sales-tax proceeds and wasted it on things like roads and public schools.)

One hopes this will be a cautionary tale for other local governments negotiating leases, but it probably won’t be, for reasons already discussed here. In case any local elected officials with lease talks on their agenda are reading this, though, here’s a handy crib sheet of quotes from the WSJ report on the Bengals fiasco to reference in your hearing testimony:

“The Cincinnati deal combined taking on a gargantuan responsibility with setting new records for optimistic forecasting,” says Roger Noll, a professor of economics at Stanford University who has written about the deal. “It takes both to put you in a deep hole, and that’s a pretty deep hole.”

“It’s the monster that ate the public sector,” says Mark Reed, Hamilton County’s juvenile court administrator.

Tom Luken, a former Cincinnati mayor and councilman, actively campaigned against the deal. “Anybody with half a brain can figure that this is a bad deal,” he says. “As it turned out, it was even worse than they painted it.”

And finally, the punchline: Hamilton County commissioners are set to vote today on spending another $307,000 on the stadium, to upgrade its instant-replay system from analog to digital — stadium upgrades being the county’s responsibility as part of that lease that taxpayers arm-twisted the Bengals into accepting. Next step: holography!

Bengals, Reds, agree to trade $10m in rent for naming rights and ticket taxes

Stop the presses! Hamilton County has actually gotten the Cincinnati Bengals and Reds to agree to kick in some money to help fill the county stadium fund’s $130 million gap:

The Bengals agree to pay additional rent of $8.1 million and to pay for a new field if needed within five years. In return, the team gets a $750,000 credit from the county, and the county gives up long-term naming rights.

The Reds will pay additional rent of $2.2 million and, in return, will get more from the county surtax of 25 cents per ticket once 2 million tickets are sold.

Okay, so it’s not exactly a lot of money. And if the Reds do well and sell more tickets, or the value of the Bengals stadium naming rights soars, then the county could actually be worse off under the new deal. And the county will still need to eliminate three-quarters of the countywide property-tax reduction that it handed out in 1996, in exchange for voters approving the sales tax hike that funded the teams’ new stadiums. Still, it’s a concession by the teams. Kinda. Sorta. Yay?

Bengals reject ticket surcharges to repay public stadium debt

The never-ending quest to bail out the Hamilton County stadium fund has circled back around to ticket surcharges again: Hamilton County Administrator Patrick Thompson has proposed an additional ticket tax of between 1.8 percent and 3.9 percent on Bengals and Reds tickets, plus property tax hikes to help fill an expected $130 million shortfall over the next five years.

Only one problem: The Bengals say they won’t go along with a ticket tax, rightly understanding that it would cut into their ability to jack up ticket prices as high as the market would otherwise bear. And both teams have the right to veto any ticket surcharges under their godawful stadium leases, so don’t hold your breath waiting for this one to happen.

Ohio pol: Fund stadiums by cutting health care for poor

Public stadium spending always has a cost — public anything spending always has a cost, as it’s money that can’t be used elsewhere — but it’s seldom made as explicit as in last week’s proposal by Hamilton County commissioner Greg Hartmann to pay for shortfalls in Cincinnati’s stadium funds by cutting health care spending on the poor.

Hartmann’s plan has drawn tons of criticism since, with his fellow commissioner (and longtime stadium critic) Todd Portune saying it proposed paying for ‚Äúsports palaces on the backs of the sick, the injured, the destitute and the poor,” while the Cincinnati Enquirer called it “outrageous” and “simply wrong on several levels.” The Cincinnati city council chimed in on Monday, passing a resolution to oppose the plan, with the resolution’s sponsor saying Hartmann’s scheme “basically takes from the poor, you might say, basically to give to the rich.”

All of which is true, but it’s worth noting that the original stadium-funding plan — a half-cent sales tax hike, which is currently running shortfalls thanks to the broken economy — was no less so: Not only do sales taxes hit the poor much harder than the rich, but that’s a revenue stream that now can’t be used for other public benefits (including hospital funding for the poor).

The real problem was giving to the rich in the first place — the only thing left to battle over now is whether to take from the poor (via health care cuts) or the middle class (via property tax hikes, the elephant in the room that the county commission is desperately trying to avoid). Nobody’s proposing trying to get the money back from the teams themselves — though I guess Portune tried that with his antitrust suit, only to be tripped up by that pesky statute of limitations.

Cincy stadium fund running $13m a year in red

Hamilton County, Ohio, is now projecting that its stadium fund will run a $13.2 million deficit for the year 2010 if tax revenues dip by a mere two percent, an amount that might be conservative in light of hard times. Commissioners are hoping to get concessions from the Cincinnati Reds and Bengals [ed. note: Good luck with that], and/or cuts from the Cincinnati Public Schools to close the gap.

Long before Bernie Madoff, Hamilton County Commissioners and insiders in the Cincinnati area knew that a day of reckoning would come as bills for the two stadiums came due. In 2004, County Commissioner Phil Heimlich called the stadium debt a “fiscal time bomb,” suggesting service cuts may be needed in the future.

Since schools have a tougher time threatening to relocate, the smart money on who will make the most concessions might be placed on education. The county could roll back property tax relief, but the commissioners argue that would be “the last option they will consider.”

One possible way to close the gap might be to offer naming rights to someone for the Bengals’ stadium, something that Bengals owner Mike Brown bypassed so that he could put his Dad’s name on the new facility. Betting that the taxpayers of Hamilton County will be able to benefit from naming rights revenue might be as unwise as betting on Cincinnati Reds games if you were a local legend.

What do we get for our money?

The New Jersey Nets revealed a few weeks ago that they’ll be dropping “New Jersey” from their road uniforms this season, as part of their never-ending plans to move to Brooklyn one of these years. And apparently New Jersey state senator Kevin O’Toole just noticed, because he’s hopping mad:

“New Jersey’s professional sports teams, the Nets, Jets and Giants, have no problem feeding at the taxpayer funded trough, yet seem to forget who their benefactors are when they order the teams’ uniforms,” O’Toole said. “The taxpayers of this state have poured hundreds of millions of dollars into infrastructure upgrades in the Meadowlands where all the teams play their home games. Is it too much to ask that professional sports teams that benefit from the support of the New Jersey taxpayer recognize the state on their uniforms?”

Actually, given the going rate for uniform advertising, you could argue that for “hundreds of millions of dollars” the Nets should have the outline of the state shaved into their hair, too.

Meanwhile, in Cincinnati, Hamilton County Auditor Dusty Rhodes is calling on the county to sell its luxury suites that it got as part of the deal to build the Reds‘ and Bengals‘ new stadiums, or at least get “something else of value” in exchange for giving them back to the teams: “At a time when county employees are losing their jobs … it is simply irresponsible and wrong to be giving away for free these assets.”

In the county’s defense, at least the suites are available to non-profit groups and by lottery to county residents, which is a public benefit of some kind, albeit only to a lucky few members of the public. That’s better than some other deals I could name.