Cleveland residents could vote in May on $160m in new tax subsidies to Indians, Cavs, Browns

One of the drawbacks of the Googlocene is that everything hangs on keywords; and so, because it didn’t come up in my various searches on “stadium” and “arena,” I completely missed Tuesday’s raucous Cuyahoga County council hearing about putting a measure on the May ballot to extend alcohol and cigarette taxes for 20 years and give the proceeds to local sports teams.

As a refresher: Back in the 1990s, Cuyahoga County built a passel of sports venues for the Browns, Indians, and Cavaliers, funding them primarily with tax surcharges on cigarettes, beer, and wine. (Upside: Drinkers and smokers don’t have organized lobbying groups. Downside: “Sin taxes” hit the poor far harder than the rich, who can only drink so many snifters of cognac.) Those taxes are set to expire next year, and the local sports teams see this as a great opportunity to get even more public money for upgrades to their facilities — everything from new water heaters to “replace obsolete scoreboard system,” which I guess fails to meet modern standards of humongosity — without “raising taxes,” since extending taxes that were set to expire doesn’t get counted as raising taxes for some reason.

Under the new plan, the sin tax would be extended for 20 years, raising about $13 million a year that would be directed to the teams. The Cavs and Indians are looking to go roughly 50-50 with that money, though the Browns are expected to demand something as well, albeit a lesser amount given that the Browns are already getting $2 million a year in added city subsidies for their own stadium renovations. The total present value would be about $160 million if the sin tax keeps bringing in the same revenue as it does at present, possibly more like $200 million if inflation causes it to rise.

The original leases on the three venues require the county-owned Gateway Corp. to pay for maintenance on the buildings, and Gateway officials insist that if the sin tax extension isn’t passed, the county would need to either raise the funds some other way, or risk having the teams break their leases and potentiall move elsewhere. That seems a pretty minor risk — there aren’t any open baseball or basketball markets close to Cleveland’s size (#18 in the Nielsen rankings), and while NFL teams don’t care as much about media markets, the Browns just got their own boodle to keep them happy — but it’s apparently the main justification for throwing a couple hundred million dollars in new money at Cleveland’s sports team owners.

The council is set to vote on holding a public ballot measure by the first week in February; if it’s approved as expected, then we should have quite the fun next three months talking about all the economic and ethical ramifications of this. Or just about the power of yes.

Cleveland to give Browns $22m for renovations just because

The city of Cleveland and the Browns owners have reached an agreement on how the $120 million worth of stadium renovations announced last week will be paid for, and it’s not as awful as it could have been: The city would kick in $22 million, paid off $2 million at a time over the next 15 years (part of that would go toward interest), and the team would cover the rest.

That’s getting off relatively cheap compared to some stadium reno deals, but then, the city is getting nothing back for its money: The Browns aren’t even agreeing to extend their lease at their 17-year-old stadium. Plus, the city already pays into a “capital improvement fund” under the team’s lease, but these more extensive renovations — which include a new scoreboard and new seating and concourses — would come on top of that.

The Cleveland city council is set to hold a hearing on the plan next Monday, and some councilmembers are already getting all gripey:

“I’ve got residents calling me, saying, ‘Please don’t support the stadium,’” said Councilman Kevin Conwell. “That stadium is modern enough right now, in my opinion. They’ve got to break out budgets to show me that putting up that money toward improvements won’t affect city services.”

Right now the $2 million a year is set to come out of the general fund, but if this proposal goes through, it’s almost certain to heat up talk of extending the cigarette and alcohol taxes that paid for the stadium in the first place, and splitting the proceeds among subsidies for upgrades for the Browns, Cavaliers, and Indians, the last of whom have been talking about getting city funding for major renovations for a couple of years now, though clearly they’re waiting for the Browns to go first. Following on the Atlanta Bravesnew stadium plans and the Carolina Pantherssuccessful renovation subsidy campaign, what Cleveland does is going to do a lot to set the tone of how cities with pre-millennial stadiums handle team demands for upgrades, so this is worth watching closely.

Indians sold fewer tickets in 2013, made 20% more money

The Cleveland Plain Dealer is reporting (based on that old favorite source, “it has been learned”) that even though attendance for the postseason-bound Cleveland Indians was down this year, ticket revenues were up by 20%. How’s that? Apparently the Indians, who as previously noted are trying to be more scientific about their marketing this year, have stopped giving so damn many tickets away for free:

It’s believed the Indians could have drawn more fans this year, but the organization reduced the number of free tickets available through promotions. This way the tickets they did sell generated more actual revenue because they weren’t discounted.

The Tribe’s dynamic ticket pricing system, which is used by at least 20 big league teams, will remain in place for next year. It has drawn criticism from some fans, but the Indians will continue to offer people cheaper tickets as an incentive to buy early instead of expecting to get cheaper priced tickets on the day of the game.

If this strategy really works, it’s interesting from a sports-marketing standpoint — and a fan standpoint, because you’re going to see lots of other teams copying it. But it’s also a valuable reminder that you can’t just look at attendance figures as a sign of a team’s financial health, because that’s just about how many tickets were issued, not what fans paid for them. Not to say that the Tampa Bay Rays are secretly rolling in dough — not until they can cash in on a new TV deal, anyway — but there are numbers more important than turnstile count.

Cleveland columnist threatens Indians move without more public subsidies

I missed it at the time (thanks to Roldo Bartimole of the Cleveland Leader for pointing it out), but the Cleveland Plain Dealer’s Brent Larkin wrote a column last week worrying about the Indians‘ crappy attendance despite being in a wild-card race, and hinted that the team could move if it doesn’t improve:

If this is the new normal, then another crisis over the Indians future here is inevitable.

It won’t happen soon. The team’s lease at Progressive Field doesn’t expire for a decade (though 1995 taught us that stadium leases can be worthless). And it will never happen while the Dolans own the team.

But if attendance remains in the tank, eventually it’ll happen.

Just as it happened here throughout the 1960s, when Seattle, New Orleans and Tampa all tried — and at times came perilously close — to steal the team. And just as it happened in 1990, when baseball’s commissioner came to town and all but guaranteed that if voters rejected the “sin tax” to build Gateway, the Indians eventually would move.

Larkin contrasted the Indians’ lousy attendance (28th in the league, ahead of only the two Florida teams) with that of the Minnesota Twins, who are terrible this year but play in a new sta — hey, wait a minute, don’t the Indians play in a nearly new stadium, too? One that was lauded for having turned the team (and the city) around when the Indians sold out 455 straight games from 1995 to 2001?

Larkin doesn’t actually say that the Indians need a new stadium (again), just that they need to be more “profitable” somehow. And as Bartimole notes, Cuyahoga County residents could soon be asked to extend the sin tax that paid for the Indians’ stadium — and use it for future major improvements for the Indians, Browns, and Cavaliers. Or maybe it would be simpler just to tax beer drinkers and give the money straight to the Indians owners to boost their profits and keep them happy — all the other kids are doing it.

Indians lower beer prices a dollar, threaten to overturn entire sports business paradigm

This is interesting:

The Cleveland Indians are making the cost of a 12-ounce domestic brew $4 at every home game.

For perspective, according to fancostexperience.com, the average price of a beer in Major League Baseball last season was $6.10 with the highest price at $8.00 for a beer to watch the Miami Marlins (lose)…

Cleveland did not stop at beer. Hot dogs go from $4.50 to $3.00, charging only $1.00 at 15 specific games. Most other food items will see a 25 percent price cut.

It’s interesting not just because it’s a rare example of a team with a new(ish) stadium choosing to lower concessions prices (beers were previously $5 in Cleveland) in order to draw fans, nor because it shows that even articles about Cleveland Indians beer prices can’t resist digs at how awful the Marlins are, but because of this article by Baseball Prospectus editor Ben Lindbergh, wherein he descibed how the Indians “applying some of the same principles to marketing as the game’s new breed of progressive GMs has to Baseball Ops.” For starters:

The Indians gave the company five years of historical data (2007–11) on attendance, ticket sales, and promotions, and ThinkVine used it to generate an agent-based model (as opposed to a more traditional econometric, or regression-based approach) that would help the team develop a “base probability” that an Indians fan would attend any given game. That base probability can then serve as the foundation of a forecast for attendance with one or more additional draws. In theory—and, King is confident, in practice, too—the model allows the Indians to quantify the effects of “exogenous factors” (team performance, weather, competing events, the Cleveland economy, etc.) and isolate the impact of marketing techniques.

I know we’re all used to thinking of sports franchises as money-hungry evil Machiavellian blood suckers, and they are (though economists still aren’t all in agreement on the blood thing). But sometimes they do things just because they’re dumb, whether it’s setting ticket prices so high that nobody sits in the good seats or giving Mike Hampton $121 million. Is it possible that jacking up food prices to beyond the point of ridiculousness is one of those?

According to Indians VP for marketing Alex King, maybe. Among his findings from the ThinkVine survey: dollar hot dog days were the biggest draw, even better than bobblehead giveaways. (Though fireworks nights did better at getting people out to the park when the team was losing.) And the most profitable promotions were cap giveaways, since caps can apparently be made for next to nothing, and everybody likes getting caps — as a result, you pretty much won’t be able to go near an Indians game this year without somebody shoving a cap in your hands. (Not mentioned in Lindbergh’s article: Caps are also a great form of free advertising.)

Now, there’s no guarantee that even if this “sabermetric” marketing catches on, it’ll be good for fans: It’s just as likely that teams will start identifying bargains they don’t need to be offering, and eliminating them. Or, it could just mean the end of six-dollar beers. Either way, though, it has the potential to change the economics of sports, so it’s well worth keeping an eye on.

Browns seek sin-tax extension for stadium upgrades

Sure enough, Cleveland’s sports teams are talking of extending the city’s sin tax that built two new stadiums and a new arena in the 1990s to pay for further upgrades to those buildings. However, it’s not the Indians leading the charge, according to the Cleveland Leader, anyway, but rather the Browns:

The Browns are banking on the support of the Indians and Cavs, who have yet to join their efforts, because without them it will be quite a challenge to get the sin tax renewed. One of the biggest challenges that they will face will be in changing the minds of state officials, as well as overcoming the tobacco and alcoholic beverage lobbies who were successfully able to insert language into a budget bill in 2008 that bans counties from levying local sin taxes.

It’s not immediately clear whether the teams are seeking the sin tax extension to pay for new upgrades, or just for upkeep that’s already required in their leases. (There’s a Crain’s article too, but it’s behind their paywall.) Not that there’s likely much of a difference in the eyes of the teams, but it’d help to put a figure on how much additional public money the three teams are hoping to avail themselves of before their leases start to expire in another 12 years.

Browns: We built selves restaurant, we deserve public money

Mark Naymik has a column in today’s Cleveland Plain Dealer detailing the claims the Cleveland Browns owners used about how much money they’ve put into renovating their stadium in order to talk the city council into giving them $5.8 million in public cash. And the list is pretty impressive, though probably not in the way the Browns owners hoped:

The team said it spent $50 million on stadium repairs and improvements it wasn’t required to spend.

That’s a good chunk of money, for sure. The figure, however, is a bit misleading. It includes escalators that were installed when the stadium was built. This amenity was an upgrade the team’s late owner believed was necessary to attract fans. The figure also includes a restaurant at the stadium, which generates profits for the Browns.

The Browns also counted sales and tickets taxes paid by fans ($35 million since 1999), team income taxes ($6.2 million) and its elecric bill ($24 million), leading city councilmember Mike Polensek to snort, “I’m glad you pay utilities and taxes like most other businesses.” (It’s also worth noting that these are agressively feeble numbers for a team paying only $250,000 a year in rent on a stadium it got for free, and casts even more doubt on some of the wilder claims of the tax benefits of having a team in your city.)

The real news here, as Naymik notes, is that the Browns are looking to get the city’s sin tax extended beyond 2015, and “there’s growing chatter that the Browns will join forces with the Indians and Cavaliers — whose facilities are 20 years old and in need of upgrades — to mount a campaign” to extend it. Which should answer anyone wondering what the shelf life is of modern stadiums: until the teams can gather the chutzpah to ask for new (or improved) ones.

Indians to seek subsidies for stadium upgrades?

It’s tough to beat an article with a headline like “To protect taxpayers, it’s time to pay attention to board meetings, even the boring ones.” But Mark Naymik’s column in today’s Cleveland Plain Dealer actually raises a potentially serious issue: The Indians are getting ready to demand major upgrades to 16-year-old Progressive (formerly Jacobs) Field:

The Cleveland Indians are working on a major improvement plan for Progressive Field, which, along with the rest of complex, is nearly 20 years old. It’s unclear when the team will present its wish list to Gateway and the board. Gateway has asked the Cavaliers — which is not as far along in assessing its capital needs for Quicken Loans Arena — to present a plan.

When the teams do ask for major improvements, the board will become more interesting. The requests will set off a new debate over who should pay for serious upgrades.

Board meeting minutes show the issue of expanding the current sin tax, which expires relatively soon, to pay for the improvements was discussed at the last board meeting.

As I’ve noted before, this is going to be an issue not just for Cleveland: The whole initial 1990s wave of new stadiums is getting to the point where team owners feel justified in demanding upgrades, so this could set a significant precedent in terms of who pays for them, and whether the teams need to kick in from the increased revenues that would (presumably) result. It’s very early yet, but fans and taxpayers in Toronto, Chicago, Baltimore, Arlington, Denver, and so on should definitely be keeping an eye on this.

Orioles, Indians mull stadium refits

The New York Times’ Ken Belson has been busy on the stadium beat; today he has a profile of how Janet Marie Smith has been re-hired by the Baltimore Orioles to help spruce up Camden Yards, the stadium whose design she helped oversee 20 years ago. (And which helped set off the whole retro trend that kick-start the stadium-building craze of the last 20 years.)

The most interesting bit, though, may be an aside about the kinds of rethinking that tenants of ’90s-era stadiums are considering as they see their honeymoon periods disappearing in the rear-view mirror:

The club levels at Camden Yards will get a second look because the corporate appetite for expensive suites has diminished. It hasn’t helped that the Orioles last had a winning record in 1997 and drew their smallest crowd ever at Camden Yards earlier this season.

The Orioles are not the only team thinking about makeovers. The Cleveland Indians, who opened Progressive Field in 1994 (it was Jacobs Field then), are among the 10 teams looking at ways to revive their parks, said Earl Santee, a senior principal at Populous, the architectural firm that designed Camden Yards, PNC Park in Pittsburgh, Coors Field and other retro stadiums.

This has been an issue I’ve been wondering about for a long time: What do modern stadiums that are designed for the luxury market do when that market evaporates? In olden times, it was easy enough to just rejigger ticket prices, but today’s class distinctions are cemented in concrete and steel — you can’t easily take just one chunk of glassed-in seats with their own restaurant and private entrance and turn them back over to the great unwashed.

Cleveland is going to be an interesting test case for this, as it has that vertical wall of club seats separating its lower deck from its upper. I’d love to see the recent generation of class-segregated stadiums retrofitted for more egalitarian uses, but it’s going to be a challenge.