Cleveland community groups launch referendum drive to repeal Cavs’ $70m subsidy

As expected, the Cleveland community groups that were calling for Cleveland Cavaliers owner Dan Gilbert to have to put money into community development projects in exchange for getting $70 million in public money for arena upgrades are gathering signatures for a referendum to overturn the plan for him to get the money in exchange for just improving some school basketball courts:

In a news release issued Wednesday, April 26, the groups said they will work to collect 6,000 signatures to “let Cleveland voters have their say about the deeply-flawed deal for the city of Cleveland to spend $88 million of taxpayer dollars on a new glass atrium for Quicken Loans Arena.”

Members of the coalition are the Greater Cleveland Congregations, Service Employees International Union Local 1199, Cuyahoga County Progressive Caucus, AFSCME Ohio Council 8 and Amalgamated Transit Union Local 268.

Past after-the-fact referendum attempts in other cities have failed when courts ruled that there was a no-backsies provision, but it looks like things are different in Cleveland, where county bond issues are subject to referendum approval. The arena money got an “emergency” designation, though, meaning if went into effect immediately … so, we’ll see. The groups have 30 days to gather the 6,000 signatures; no date has been reported for when the actual vote would be.

Detroit’s “renaissance” has enriched its billionaire sports owners while rest of city suffers

If you want a depressing read about the impact of Dan Gilbert, the billionaire Quicken Loans baron, Cleveland Cavaliers owner, and would-be Detroit MLS owner, on his hometown of Detroit, there’s a great one by Shikha Dalmia in The Week. Among the highlights:

  • Gilbert is pushing for the state legislature to approve a super-TIF bill that would kick back property, sales, and income taxes from environmentally contaminated “brownfields” sites to help pay for the project. It would only apply to projects costing over $500 million in cities of more than 600,000, so the only eligible developer is Gilbert, who is proposing a giant project on the former site of the Hudson’s department store in downtown Detroit.
  • Gilbert got $50 million in tax breaks to move his Quicken headquarters from the suburbs to Detroit.
  • He and his partner, Pistons owner Tom Gores, are seeking $300 million in cash and land in exchange for building a new soccer complex on a half-finished jail site (and a new jail elsewhere).
  • Detroit is about to open a new $187.3 million light rail system that will link “Detroit’s downtown, dubbed Gilbertville because it houses the Quicken office and other buildings where Gilbert’s employees live, with the midtown area, where the entertainment district [built by Gilbert’s fellow sports billionaire, the late Tigers and Red Wings owner Mike Ilitch] is. Never mind that Detroit’s jobless and carless residents would have much more use for bus lines transporting them to jobs outside the city.”

Okay, maybe it’s a high price to pay, but at least Detroit is finally undergoing a long-awaited renaissance as a result, right? Well, actually:

The whole argument for pouring taxpayer dollars into this area is that its growth will spill over to the rest of the city, opening up jobs and business opportunities for all Detroiters. But research by Michigan State University’s Laura Reese and Wayne State University’s Gary Sands published earlier this year suggests that on virtually every metric, life outside the targeted zone is worse than it was even in 2010, when the alleged renaissance began.

Detroit’s overall population actually declined by 2.6 percent between 2010 and 2014. The unemployment rate among Detroiters increased by 2.4 percentage points between 2010 and 2013. This may have been because of the bankruptcy-induced layoffs of city employees, but Sands maintains that the trends don’t seem to have changed much in 2015. “About half of the neighborhoods in the periphery saw employment and payroll declines,” he notes. What’s more, although the overall number of Detroit businesses remained unchanged between 2014 and 2015, 13 of the more peripheral city zipcodes saw a decline.

In other words, far from the city core leading a comeback, it is at best siphoning — and at worst destroying — business and employment in the rest of Detroit, perhaps because smaller enterprises are having trouble competing with powerful billionaires who can dip into taxpayer pockets and divert other public resources toward their grand designs.

The whole thing is a terrific read, if you like to be depressed about how our cities are increasingly being run as engines for boosting the profits of their richest citizens. But you almost certainly do, since you read this website, so by all means go check it out.

Cavs owner promises to fix some basketball courts, Cleveland council says, “Okay, here’s $70m”

Cleveland Cavaliers owner Dan Gilbert finally blinked yesterday, offering up some long-awaited concessions in exchange for $70 million in public renovation money for his team’s arena. And what, exactly, is the billionaire mortgage tycoon offering?

  • The Cavaliers have pledged that the portion of the admission tax that goes to the city’s general fund will never fall below the portion directed toward debt service on the upgrades. If that happens, the Cavaliers will write the city a check for the difference.
  • The Cavaliers have agreed to refurbish the basketball floors in city recreation centers, more than 20 in total. After the announcement the city confirmed that the Cavs will also refurbish high school basketball courts in Cleveland public high schools, as well.
  • Additionally, the Cavaliers announced it will donate all admissions revenues from its road-game watch parties at The Q during the NBA playoffs to benefit Habitat for Humanity. Over the last two seasons, those watch parties have raised more than $1 million from admissions that was donated to several charities.

That is pretty weak tea, as the Cleveland Scene points out: The admission-tax money is already slated to go to the general fund, so this is just locking in the dollar amounts; and the road-game watch party money was already being donated to charity, so this just directs it to one specific charity. That leaves just the promise to “refurbish” 65 community and high-school basketball courts, which comes with no dollar value or specifics — as the Scene puts it, “It’s unclear if the Cavs will build new courts entirely or just, like, buff them.”

Still, that was enough to get the city council to approve the plan by a 12-5 vote just a couple of hours later. The Greater Cleveland Congregations and the Cuyahoga County Progressive Caucus, which had pushed for more substantial contributions to community programs by Gilbert, could still seek to overturn the vote via a public referendum, but there’s been no announcement of that as of yet.

If the decision stands, one of Cleveland’s richest businessmen just got $70 million in public funds to renovate his basketball team’s home arena, just a few months after he got $57 million in public funds to use for other upgrades, all for an arena built with $100 million in public funds in 1994. Turns out when you’re a rich dude, it’s not just subprime mortgages that are the gift that keeps on giving.

Dan Gilbert may actually manage to blow up his $70m Cavs arena subsidy deal after all

When last we checked in on Cleveland Cavaliers owner Dan Gilbert’s $70 million big glass wall subsidy, it looked set for passage, with a majority of the city council set to approve it and opponents mostly just demanding some kind of fund for “community benefits” to be added. Now, though, it appears to be … “falling apart” is probably overstating it, but definitely hitting a major speed bump. Detangling this informative yet slightly convoluted article from the Cleveland Scene, we get:

  • After the arena renovations bill passed the Cleveland city council 11-6 in a preliminary vote last week, it was expected to get final approval this week. Instead, city council president Kevin Kelley pulled it at the last minute, saying “some members requested more time to discuss it.”
  • One possibility is that the Cavs are concerned about getting a 12-vote supermajority, which would allow them to avoid a public referendum as well. Except that, according to the Scene, it would only allow them to avoid a referendum if the city were selling the bonds, and it’s the county, so, what the hell?
  • Gilbert is so desperate to turn more votes, for whatever reason, that he personally called Ward 2 councilmember Zack Reed to ask what he could do to win his support. Reed answered that he wanted a community benefits fund, a la what Greater Cleveland Congregations had proposed, and Gilbert presumably wouldn’t give in, because Reed remains opposed (and now publicly gripey about having to spend 40 minutes on the phone with the Cavs owner to no good end).

While it still seems likely that the arena subsidy will be passed by the council eventually, there’s a lot more grumbling from councilmembers than a couple of weeks ago, which isn’t going to help this thing win if it goes to a referendum as now appears it will. Gilbert, meanwhile, is apparently refusing to budge on the one thing that would make his opposition melt, which is to throw a few million dollars at some community groups as the price of getting $70 million in public funds. If so, that’ll be some quality grasping-defeat-from-the-jaws-of-victory stuff there — though given that this is a guy who responded to federal government charges that his loan company had lied about borrowers’ creditworthiness by countersuing the government and then having his suit immediately dismissed, playing hardball to spite your face does seem to be a bit of a Gilbert character trait.

Pacers owner demands “a lot of money” for renovations, because he has everything else already

So what do you get for the sports team owner who already got a free $183 million arena, $33 million in operating subsidies, another $160 million in operating subsidies when those ran out, a free $3.5 million roof repair, free land for a a free $50 million practice facility, and a free $2 million tunnel to connect the free practice facility with the new arena? How about a “major” renovation of your now 18-year-old arena:

“For me to sign a long-term lease, which is what I really want to do for the city, we’re going to have to plan it for the 21st century,” [Indiana Pacers owner Herb Simon] said. “Things have changed. People’s viewing habits are different with more social environments. It takes a major redo because the bones are great and we want to keep it here. We love the feel that people get, but we want to enhance the fan experience and keep us current. That’s going to take a lot of money.”

That’s not quite a move threat, you’ll notice, but it is at least a glancing non-threat threat, since Simon is saying he won’t sign a long-term lease once his current one expires in 2024 unless he gets these “major” arena renovations. (If you’re wondering why the Pacers will be on their third lease renewal just 25 years after moving into a new arena, blame Stephen Goldsmith.) He also cleverly didn’t say how much money the renovations would cost beyond “a lot,” or how much of that he’d be requesting Indiana to pay for, though “a lot” seems like a fair bet there as well.

Given that the Pacers are already up around $430 million $380 million in subsidies for an arena that cost less than $200 million to build, getting even more public money for upgrades would easily push them into “sweetheartest arena deal in history” territory. I would say that the local government’s appetite for subsidies has to wear thin someday, but this is Indiana, so apparently not. At least the city of Indianapolis didn’t have to cut funding for arts programs and close public pools to pay for all this — oh wait, never mind.

Two developers propose KeyArena redo with no public money, except for maybe some public money

As promised, the city of Seattle received two proposals for renovating KeyArena this week, and—

One of the groups interested in renovating KeyArena for NBA and NHL is prepared to spend more than $500 million on a complete overhaul of the 55-year-old facility.

The Oak View Group (OVG), based in Los Angeles, has produced a $564 million plan it says can have the arena renovated by approximately October 2020 – leaving it ready for the 2020-21 NBA or NHL season – spokesperson Steven Gottlieb said—

Hey, hey, Seattle Times, thanks for reporting what one of the developer spokespeople said, but the city of Seattle has made available the actual proposals, so let’s just go read those, shall we, and see what’s actually in them?

  • The Oak View Group (aka Tim Leiweke and friends) is proposing that $564 million redo, expanding the underground part of the arena — which is most of it — to modernize it for basketball, hockey, and concerts. (And probably change the whole seating bowl, since that’s necessary for hockey.) Oak View promises that the project “will not require any City investment,” with the developer covering all constructions, operations, and capital improvements, as well as paying $1 million a year rent; however, it does note that the city will still own the land (so presumably it will remain property-tax-free) and that “OVG will work with the City to identify a mechanism for reinvestment of new revenue streams back into the project,” which is just vague enough to be slightly ominous.
  • Seattle Partners, aka AEG and friends, aka Leiweke’s former employer, doesn’t put a dollar amount on its renovation plans, except to say that it will be “world-class.” As for funding, the only promise (in the executive summary, anyway, which is all that the city seems to have made available) is that the developers will “guarantee all financing, public and private, through revenues that would not exist but for the renovations proposed for the Seattle Coliseum,” which is usually code for tax increment financing or some similar scheme to kick back taxes that can be claimed to be due to the renovated arena, even if they’re ultimately cannibalized from spending elsewhere in the city.

Neither of these is quite a “no public money” promise, which is what the city was requesting. But they’re potentially close, which is kind of crazy, given that everything we know about arena operations is that spending half a billion or so on upgrading these buildings doesn’t usually generate a great return on investment. But this is a weird moment in the arena biz, what with AEG, Live Nation, and Madison Square Garden (who would be Leiweke’s financial backers) engaged in a nationwide war for control of the concert industry, meaning that they could be more likely to overbid in an attempt to lock their competitors out of the Seattle market. That’s an opportunity for anyone doing business with them, and Seattle is smart to be trying to play this for all it’s worth.

In short: This still needs way more analysis of the competing groups’ funding plans, and in particular of how weaselly those weasel words are about arena-related revenue streams. But it’s well worth exploring, since this might be a rare chance for a city to be in the driver’s seat when it comes to getting a new or renovated arena. Getting a team will be another story — hello, Kansas City — but cross one hardball negotiation at a time.

Seattle still debating two arena proposals, because universe has not yet grown old and died

I’ve been trying to compose a post on the latest development in the Seattle arena saga for a couple of weeks now, and have been hamstrung at every turn by the fact that despite a lot of newsprint and pixels being burned on the subject, nothing is actually happening. Here’s what I have sitting in my Instapaper queue:

  • The Seattle Design Commission approved the design of vacating a one-block stretch of Occidental Avenue for Chris Hansen’s proposed SoDo arena, which it already did once before, again sending the project to the city council, which rejected it last time because it was opposed to closing the street.
  • The Port of Seattle says the consultant it’s paying $185,000 for consulting services doesn’t have to register as a lobbyist because it’s not just lobbying on behalf of a KeyArena renovation project (which the Port of Seattle supports because it opposes the SoDo one because it might mess up its truck routes).
  • The Seattle Center, where KeyArena sits, is filing to landmark a bunch of buildings, which could complicate any arena plans there, maybe.
  • The council is studying the best option for an arena, and a local radio host doesn’t think they’re serious about the SoDo one, which is the one he likes.
  • There could be a decision by June. Or not.

Add it all up and … man, that’s a whole pile of nothing. Neither the KeyArena plan nor the SoDo plan sounds either terrible or like a slam dunk for Seattle taxpayers and residents, and given the competing lobbying factors, it’s unclear what it’s going to take to get some resolution. Which isn’t necessarily a terrible thing — neither project comes with the promise of an NBA or NHL franchise, and a new or refurbished arena alone isn’t going to change local lives much. But it does mean I’m going to have to keep reading about this (and hearing from both sides who are really really emotionally invested in this, I get it), so I for one wouldn’t mind at all if the Seattle council just threw a dart or something and got this whole mess over with.

Cavs arena subsidy demonstrators go to Detroit to demand of Gilbert: Can we get a cut, too?

Points for creativity to opponents of Cleveland Cavaliers owner Dan Gilbert’s $70 million in glass wall subsidy demands, who took buses to Detroit to stage a protest on a melting public ice rink outside Gilbert’s Quicken Loans offices:

“We’re not all in,” the crowd of more than 150 chanted…

Stacy Mathews of Cleveland said there’s no guarantee that the community would benefit from a public investment in the arena.

“I don’t have any personal feelings against Dan Gilbert,” she said. “I don’t know him personally, but I just hope with the movement and changes that he’s trying to make for his team that he would also do that for the city as well. Cleveland right now are going pretty good, but there are still areas in Cleveland that need to be addressed. There are still many poor areas … (and resources needed) in the schools and things of that nature.”

Look, here’s video!

Those aren’t necessarily the snappiest soundbites — and definitely isn’t the snappiest chant — and appears to be a bit of a pivot from “this is a stupid subsidy” to “if Gilbert is going to get $70 million in free public money, either he or the city of Cleveland should throw some money at other local needs as well.” This all appears to be heading toward a battle over a community benefits agreement, and you know my feelings about those.

Meanwhile, the Cleveland city council has introduced legislation to approve the Gilbert arena subsidy, and is expected to cast a final vote by mid-April. There may be some haggling over the details, but it looks like the plan to give a billionaire $70 million for no coherent reason at all is likely to sail through without much difficulty — and without Gilbert even having to come up with his own chants.

Kings tripling what they charge Sacramento State for graduation ceremonies, thanks to new arena

It’s Friday, so let’s celebrate the end of a long week with a sad tale of how not to write an arena lease, courtesy of the Sacramento Bee:

The Sacramento Kings more than tripled the amount they will charge Sacramento State for commencement at the new Golden 1 Center compared to their old home, according to a document obtained by The Sacramento Bee.

Last spring, the university paid $59,842 to hold seven spring graduation ceremonies at Sleep Train Arena.

Sacramento State’s new contract with the Kings Arena Limited Partnership asks the university to pay a base fee of $50,000 plus “additional charges” not listed in the contract to have graduation at Golden 1 Center. University officials estimate those charges, which include traffic management, camera operators, lighting and stagehands will add another $140,595 to the bill – for a total cost of $190,595.

This is sad and bad for the state university campus, which will now be out an additional $130,000 that it could have used for, you know, school stuff. But hey, vagaries of the market and all, so what you gonna do, right?

Except that Sacramento’s deal with the Kings was that the city could use the new arena for nine “civic events” per year — and the Sacramento State graduation, which was previously held at the Kings’ old arena, wasn’t included. (It’s expected that all nine this year will be high school graduations.) So instead, one side effect of giving the Kings $255 million in city subsidies for their new arena is that the local university has to pay more for their graduation costs, because the venue is shinier now. It’s the kind of thing that the city could easily have remedied by demanding that Sacramento State get access to the arena in exchange for throwing public money at it, but Kevin Johnson had other things on his mind at the time.

Of course, another side effect is that the city of Sacramento is now out $255 million. You can spend the next three days determining which is the insult, and which the injury — happy weekend!

Virginia Beach okays $206m arena subsidy, pats self on back for getting a new mortgage banker

Looks like Virginia Beach will be getting its new taxpayer-subsidized arena after all, as the city council met in closed session on Tuesday, as it likes to do, to approve a new version of the financing plan that it had all but killed last fall:

The council met with City Attorney Mark Stiles in closed session Tuesday night, and he told members that the financing is in line with the deal that was approved in December 2015, according to a Facebook post from John Moss. The council agreed with Stiles’ assessment, which means it would not require a new vote.

“See you at the ground breaking this fall,” Moss wrote.

The arena funding plan is hideously complicated, you may recall, with kickbacks of property taxes, business license taxes, admissions taxes, arena meals taxes, construction sales taxes, the city’s share of arena sales taxes, plus the top 1% off of the city’s 8% hotel tax, plus cash for infrastructure and land costs. It all adds up to about $206 million worth of subsidies for a $220 million arena, which, um, yeah. The main concession the city seems to have negotiated since October is that JP Morgan will now be the lender on the stadium construction costs instead of a Chinese bank, which also, um, yeah. But let’s all applaud Virginia Beach city officials for saying no to developers, everybody!

Virginia Beach will now spend the next 30 years debating whether to pay to renovate their new arena to lure an NBA or NHL team, because nobody’s going to want to play in a building opened way back in 2017, sheesh, get real.