This week in boondoggle vivisection: Plenty of good seats available in SF, Cleveland, Ottawa

We’ll get to the weekly news roundup in a minute, but first, I need to mention this editorial from yesterday’s Globe and Mail, which makes several eminently reasonable points about how Calgary shouldn’t capitulate to the Flames owners’ extortion attempts for arena cash (“using past bad decisions to justify terrible future decisions does not qualify as logic,” “arena financing is a hamster wheel, and here is an opportunity to jump off”), and then says this:

Everyone involved should take note of a remark this week by Neil deMause, renowned stadium boondoggle vivisectionist and creator of the fieldofschemes.com website: “The number of mayors who’ve been voted out of office for standing up to sports team subsidy demands remains zero.”

That’s right, I am a major-newspaper-certified renowned boondoggle vivisectionist, y’all. Clearly it’s time to order some new business cards.

Okay, the rest of the week’s news:

  • The Los Angeles Rams aren’t the only California team having trouble getting fans to turn out for games in the September heat: The San Francisco 49ers are seeing so many empty seats on the sunny side of their stadium that they’ve hired architects to see if it’d be possible to add a sun shade. One problem: The stadium can’t get any taller, as it’s in the flight path of San Jose’s airport. Until then, the 49ers are handing out free water bottles and sunscreen to fans on the hot side of the stadium, which is nice and all, but probably isn’t what you want for your big marketing push. This once again points up how smart the 49ers management was to stick fans with PSLs before the team got lousy and people noticed how crappy the new stadium was for actually watching football in.
  • And speaking of empty seats, the Cleveland Indians won their American League–record 22nd straight game yesterday, but they still can’t sell out their ballpark, which not that long ago saw a record sellout streak of 455 straight games. Indians GM Mike Chernoff blamed Cleveland’s small size, the start of the school year, and “weekdays,” three things that apparently didn’t exist in the ’90s. At least he didn’t blame the 23-year-old stadium or demand upgrades as a solution — yet, anyway.
  • And also speaking of empty seats, the Ottawa Senators have begun tarping over part of their upper deck for every game, because they can’t sell tickets there. The Senators owner is already blaming his 21-year-old arena for that one (apparently the last owner built it in the wrong place), so team president Tom Anselmi was left to say: “We just need more of us to come to more games more often.” Can’t argue with that!
  • And also also speaking of empty seats, the 2018 Pyeongchang Winter Olympics have only sold about 5% of available tickets so far to actual fans (ticket brokers have bought up another 18%), with less than five months to go before the games start. If you’re looking to snap up a bargain to watch curling, though, be forewarned: Not all the new hotels planned for the Olympics are finished yet.
  • And speaking of seats that a team hopes won’t be empty, the Oakland A’s will be letting in fans for free to a game next April against the White Sox. Make jokes all you want about how dismal an A’s-White Sox matchup will be, it’s still free baseball, and you never know what you might see that you’ve never seen before.
  • NHL commissioner Gary Bettman declared that that the scaled-down Nassau Coliseum is “not a viable option” for the New York Islanders, two weeks before the team is set to present plans to Nassau County for a new arena near Belmont Park. A total coincidence, I’m sure.
  • The Rhode Island state senate started hearings on a new Pawtucket Red Sox proposal yesterday, with the team owners and their allies noting that “the team’s 54-percent share of stadium costs is the highest portion of private investment in 14 AA and AAA ballparks built over the last decade,” according to the Providence Journal. What was that someone was just saying about using bad decisions to justify terrible future decisions?
  • Deadspin’s Drew Magary has come up with a new nickname for the Atlanta Falcons‘ new iris-roofed stadium: Megatron’s Butthole. Drew Magary needs to be put in charge of all stadium nicknames, starting immediately.

Cleveland to Browns, Cavs, Indians: Everybody gets $57m in tax money, now play nice

And it’s official: The Cleveland Browns, Indians, and Cavaliers will get equal cuts of the “sin tax” extension voters approved back in 2014:

Each team will get $4.6 million per year for the next 20 years. The money can be used to upgrade the stadiums and arena where they play.

Via the magic of net present value calculators (even those that don’t know how to spell “principal”), we can determine that this revenue stream will be worth about $57 million in today’s dollars to each team. It shouldn’t be hard for each of them to find ways to spend that down — especially with the Cavs already asking for another $70 million to pay for a new super-spendy glass exterior wall — but if all else fails maybe they can just buy some IBM “Internet of things” gewgaws and call it “infrastructure.”

County official proposes diverting one-third of tourist dollars to build Cavs a glass wall

It’s been almost eight months since the Cleveland Cavaliers asked for a $140 million expansion of their arena to add more public space and give it a glass exterior wall, and Cuyahoga County Executive Armond Budish said, “Let me get half of that for you.” Now, Budish thinks he may have found some of the money, asking the local tourism agency to use hotel tax money to pay for the Cavs’ renovations.

Destination Cleveland collects about $15 million a year in hotel taxes, and paying off $70 million in Cavs expenses would cost about $4-5 million a year, so this would clearly be a hefty chunk of change, unless Budish has other revenue sources in mind as well. The Cavs are already getting a cut of the alcohol-and-cigarette-tax extension that county voters approved back in 2014 — Budish recently proposed splitting the proceeds evenly among the Cavs, Indians, and Browns, as nobody bothered to work that out beforehand — and since that amounts to about $170 million in total present value, Cavs owner Dan Gilbert is effectively asking for $70 million on top of the $60 million he just got two years ago for renovations. But really, who can put a price on the enjoyment that local sports fans get from a glass wall?

Cleveland Indians remove 7,000 seats, replace them with ugly beige Legos, call this progress

The Cleveland Indians responded to years of declining attendance at Progressive Field this season by spending $26 million* to get rid of 7,000 seats, replacing them with a new sports bar, among other renovations to the now 20-year-old stadium. And if that sounds like it will make the stadium — which was much more hulking than its Cleveland Stadium predecessor, despite having 30,000 fewer seats — more intimate, you probably shouldn’t get your hopes up:

May I be the first to say “ew”?

The problem with the outfield upper deck at the Indians’ stadium, really, is with the deck below it: By making room for a wall of triple-decked luxury suites in the infield (and then not lowering the upper deck once it gets to the outfield, the Indians guaranteed that the top-level outfield seats would be a million miles from the action. That they’re now retrofitting that section with what look like beige shipping containers with retired numbers painted on them is just an indication that 1) stadiums designed with tons of corporate seating are really tough to retrofit for normal humans, and 2) the Indians management wants to leave room to reinstall seats in case the throngs who came to the games during the stadium’s initial eight-year honeymoon period somehow rematerialize.

*This is not actually $26 million in Indians money, of course, since the team just got well more than that in new county subsidies last year to pay for future renovations. Though I guess at least there’s some fitting symbolism in using the cash to set up a new bar, since local alcohol drinkers are going to be the ones paying for it.

Cuyahoga exec says subsidy-for-wins plan just one option: “Hey, I’m open to ideas”

As promised, Cuyahoga County Executive Ed FitzGerald held a press conference yesterday to propose taking 20% of the public “sin tax” subsidies approved for the Cleveland Cavs, Indians, and Browns last month and making them contingent on the teams winning games. Under FitzGerald’s plan, which he called a (wait for it) “win tax,” a “fan advisory council” would come up with the actual criteria for how the $52 million in tax money would be divvied up among the teams based on wins and losses.

A couple of hours after that, no doubt spurred by my description of his idea as “walking the fine line between stupid and clever” (politicians just can’t resist a good Spinal Tap reference), FitzGerald called me to explain further just what the heck he was thinking. Among the questions he answered:

What on earth made you come up with this idea? “The tax issue that passed didn’t set up a distribution method,” he explained. When his staff got together after the vote to talk about how to divide the $260 million pie among the three teams, one idea he came up with was to “do something to address performance of these franchises over the past 50 years.”

Do the teams really need an added incentive to win, given that they’re already rewarded with 1) wins and 2) added revenue from people buying tickets to see winning teams? “I don’t think this is something that is going to be of such force that it’s all of a sudden going to take a team not inclined to care about winning and turn it around,” said FitzGerald. Not that he wanted to imply that Cleveland’s sports team owners didn’t care, mind you — the man’s a politician after all — but, as he put it, “Have there ever been instances in America of team owners not caring about winning? Yes.” Adding an additional economic incentive might tip some kind of balance, or at least let teams know that Clevelanders want their teams to win, in case the Indians’ attendance numbers didn’t tip them off.

Is winning games really the most important thing to be paying teams for? What about economic impact or something more tangible? FitzGerald said he’s open to ideas for tying subsidy levels to other factors as well, such as economic development or local hiring. (I threw out Jay Weiner‘s old suggestion for requiring a certain number of affordable tickets in exchange for public subsidies, and he said that could be part of the mix, too: “Hey, I’m open to ideas.”) There’s still that other 80% of the money that needs to be handed out, after all, so somebody needs to come up with some criteria for how to do that.

Is all this legal? FitzGerald’s lawyers think so. Scoring systems for payment are something that “happens with construction contracts all the time,” he said, so why should this be any different?

Did he really say that Cuyahoga County had to adjust its budget when LeBron James left?That’s what he said. More specifically, overall ticket tax revenues went down the year that James bolted for Miami, something he attributes to suburban fans spending their money closer to home rather than going to Cavs games: “It doesn’t mean they all stayed home on their couch.”

In short, FitzGerald made clear that he’s mostly just trying to start a conversation here, though you’re welcome to wonder how much his big ideas are motivated by wanting to reform the process and how much by wanting to juice his gubernatorial campaign. (Not that you can really ever separate the two when someone is running for public office.) Nothing’s going to get decided until the county council signs off on it, which doesn’t need to happen until the sin tax extension kicks in next spring, so this is likely to be a long conversation.

On the stupid side of the ledger, none of this really matters, because the teams are going to get the $260 million regardless — any funding criteria will just determine who gets what. (In other words, if all three teams continue to lose, they’ll still get paid.) And as Deadspin points out, paying based on straight wins could encourage bad long-term decisions, since “there are often times when it’s good to lose, like when tanking for a draft pick.”

On the clever side, though, it’s never bad to be talking about what you can demand from team owners in exchange for public funds, even if it’s just a matter of trying to get them to compete with each other for a pool of preexisting money. Yes, it might have been better for FitzGerald — who signed off on the sin tax referendum back in January — to bring all this up before the vote, so that taxpayers would actually get their money back if the teams didn’t live up to their promises of creating economic development and winning championships. But, you know, baby steps.

UPDATE: Just noticed that WCPN’s Nick Castele (whose show I appeared on yesterday — listen to it here) points out that Ohio state senator Shirley Smith did propose a subsidies-for-wins formula before the sin tax vote. It went nowhere, but credit for trying.

Cuyahoga official wants to tie Indians, Cavs, Browns subsidies to teams actually winning games

Cuyahoga County Executive Ed FitzGerald has an idea for deciding how to hand over those $260 million in new cigarette and alcohol taxes approved last month to the Cleveland Indians, Cavaliers, and Browns, and it’s a doozy:

FitzGerald is expected on Thursday to propose tying distribution of 20 percent of the county’s sin tax to on-the-field performance from Cleveland’s professional sports teams, according to sources briefed on the plan.

The 20 percent — estimated to be at least $2.6 million a year — would be awarded to FirstEnergy Stadium, Progressive Field or Quicken Loans Arena based on the success of the teams using the facilities.

That’s … kinda crazy, but it just might work? An example of walking the fine line between stupid and clever? On the upside, if part of the value of a sports team to taxpayers is getting to jump up and down when your team wins, then creating an incentive for your team to win — other than the normal incentive of, you know, winning — makes a kind of sense. On the other hand, I have no idea how they’d write this into law — subsidy dollars based on winning percentage? bonuses for making the playoffs? — so right now it seems a bit like pandering to sports fans unhappy with their favorite teams’ owners getting money when the teams all suck. Tune in this afternoon for more details, maybe.

Voters approve $260m in new sin tax money for Cavs, Indians, Browns

The extension of Cuyahoga County’s “sin tax” on alcohol and cigarettes passed yesterday by a 56-44% margin (with 97% of precincts reporting), providing an estimated $260 million over the next 20 years to fund venue improvements — including in at least one case a new scoreboard — for the Cleveland Cavs, Indians, and Browns. If the tax had failed, the teams had threatened to … well, we’ll never know what they were threatening to do now, will we?

With the votes counted, the next challenge is to figure out whether this ballot lives up to the 100-to-1 rule, where stadium funding is only approved in public votes if the proponents outspend opponents by more than that margin. At first glance this rule still holds — the three teams spent “at least $1.8 million” on the pro-sin-tax effort through early May, according to the Cleveland Plain Dealer, while opponents reported raising only $6,500 — but another group spent $125,000 on last-second TV ads opposing the plan, which would make the spending ratio more like 13:1. Unless the teams had a last-second spending splurge of their own, which is always possible. We’ll just have to wait for the final box score.

Cleveland votes on sin tax as teams lobby heavily for measure they say isn’t to benefit them, heaven forfend

It’s Cleveland sin tax vote day today, with opponents decrying what they say is a $260 million giveaway to the city’s sports teams (more like $160-200 million in present value), and proponents saying the city will give the money to the teams anyway, so the sin tax extension is just a way to pay the public’s already-accrued bills.

If the latter is true, though, you have to wonder why those teams that would get the money regardless are working so damn hard to get this ballot measure to pass:

The three teams are fighting to ensure that sin tax money will help assuage those costs—of the $1.4 million raised by Keep Cleveland Strong, the pro-sin-tax PAC, more than $1 million has come from the Browns, Cavs, and Indians. The opposing PAC, Coalition Against the Sin Tax, has raised a mere $6,500.

Teams aren’t just tossing in cash to make sure taxpayers help foot the bill for new scoreboards. The Indians instructed ushers to wear pro-sin-tax stickers on Opening Day, according to an employee instruction sheet a former usher gave to Cleveland.com. While the Indians had told reporters that the stickers were purely voluntary, the handout reads, “An Issue 7 Keep Cleveland Strong sticker is part of your uniform. Place it chest high on your outermost layer.” The former usher, Edward Loomis, said he was fired by the team after refusing to wear the sticker.

Even as Cuyahoga County voters cast their ballots, they still don’t have an answer to the question: What happens if the sin tax extension fails? Depending on how things go today at the polls, we could have an answer starting tomorrow.

Cleveland council prez says ad that calls giving tax money to teams a gift is “far from honest”

The Cuyahoga County vote on a sin tax extension to fund venue improvements for the Cleveland Indians, Cavs, and Browns isn’t until next Tuesday, but we already have supporters of the measure accusing opponents of dirty pool:

The Coalition for Greater Cleveland’s Future says in a complaint filed Wednesday with the Ohio Elections Commission that an ad paid for by the Citizens Against Unfair Taxes (CAUT) makes several false claims about the proposed countywide tax on alcohol and tobacco sales. Among them is the assertion that Issue 7 will give the owners of Cleveland’s professional sports teams “$260 million more.”…

“CAUT has been caught misleading the public,” Cleveland City Council President Kevin Kelley, the chief spokesman for the coalition, said in a statement. “Their commercial inaccurately gives the impression that money from extending the tax on alcohol and cigarettes would go to the team owners. That is false. Honest argument is always welcome. This is far from honest.”

The rhetorical pin head that everyone is dancing on here is this: The sin tax will raise an estimated $260 million over 20 years, which would be used to pay renovation and upgrade costs of the teams at their publicly owned buildings. But according to Kelley, the county would have to pay those costs anyway, according to the crappy leases that public officials agreed to with the teams. So it’s not that “money from extending the tax on alcohol and cigarettes would go to the team owners,” it’s that money from extending the tax on alcohol on cigarettes would go to replenish the county’s general fund, and that would be given to the team owners.

Kelley has made this kind of “we have to spend it either way, so we might as well have a way to pay for it” assertion before, but to my knowledge has never actually come out and said that if the sin tax extension is defeated, he and the council will just allocate the money anyway and take it out of other county spending. For that matter, the team owners have never said what they’ll do if the county just up and refuses to pay for venue improvements, even when asked point blank. These issues — as well as whether funding mechanisms that would hit the teams’ bottom line instead of the public’s, such as ticket taxes, are allowable under the lease — would seem to be worthy of discussion in the days leading up to the sin tax vote, but instead we just get each side trying to bash each other public. Ah, democracy.

Crain’s Cleveland editors dis ticket taxes, reveal they don’t understand how ticket taxes work

This Cleveland Scene article about the stadium sin tax debate is a week old, but I just noticed something in it that really needs to be commented on:

Crain’s Cleveland Business published an editorial this week officially endorsing the sin tax as well. They insisted their stance had nothing to do with their connections to the business community; nor was the endorsement a snap decision. “It came after thorough consideration of the legal, practical and economic ramifications.”

Crain’s thinks an admissions tax is “not a smart” option because it would “dampen demand, which would defeat the purpose of using the buildings as magnets to attract people downtown.”

Let’s think this one through for a second. The argument that Crain’s is making (here’s the original editorial) is that tacking on an admission tax would raise ticket prices, making it less likely for people to go to games. And because going to games is the raison d’être of sports facilities — and publications like Crain’s pretend that people who don’t go to games just sit on their money and don’t spend it, but we’ll leave that aside for the moment — that would be a bad thing for the city.

Except that’s not how ticket prices work. Because the marginal cost of selling an extra ticket is pretty close to nil (you might have to hire a couple of additional ushers or hot dog vendors if more people are showing up to the game, but that’s a trivial cost per ticket), team owners are pretty much just setting prices based on what the market will bear — in other words, what people are willing to pay to go to a game instead of doing something else that night. So if Cuyahoga County were to apply a $2 per ticket surcharge, say, then the most likely scenario is that the Indians and Browns and Cavs would all cut ticket prices by around $2 to keep maximizing the amount of revenue they get from ticket sales. (Or, more likely, since teams hate to actually cut prices, they’d just hold off on ticket price hikes they otherwise would have implemented.)

It’s this pricing dynamic that is why virtually all economists count ticket taxes as part of a team owner’s contribution to a stadium project, even though it’s technically public tax money: It ultimately comes out of the owner’s pocket. If admission taxes are a legal possibility (some sports leases prohibit them), they’d actually be a great way for Cuyahoga County to live up to its lease commitment to fund upgrades to Cleveland’s sports facilities without hitting up local taxpayers too badly. Yet another important topic we didn’t have time for during the Octoboxathon.