Category Archives: Cleveland Cavs

Cavs owner wants $70m in upgrades to just-upgraded arena, county official says “arenas get old fast”

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Want to see a public official carrying water for the private sports owner trying to shake his agency down for money? Cuyahoga County Executive Armond Budish has you covered:

Budish has been discussing with the Cleveland Cavaliers how to pay for half of a $140 million project to expand the [Quicken Loans Arena]’s footprint and build a new glass exterior since taking office in January 2015.

The arena, which cost $140 million to build, opened in 1994.

“It is one of the oldest arenas in the league, which is hard for some of us to believe because it seems like it was just built,”  Budish said in an interview with cleveland.com. “But the useful life of arenas is not considered to be all that long.”

Nice use of the passive voice there, Armond! The useful life of arenas “is not considered” to be long by sports team owners, much in the same way that the useful life of Maseratis is not considered to be long by people who can afford to buy a new one every year. (Or in this case, to have someone else buy them a new one every year.) As sports economist Rod Fort told me 15 years ago when I asked him the expected shelf life of a new stadium or arena, “I don’t see anything wrong, from an owner’s perspective, with the idea of a new stadium every year.”

And neither, it’s increasingly clear, do sports team owners. And elected officials are largely buying it. Though given that the previous Cuyahoga County executive inadvertently spread a rumor that LeBron James was worth $500 million to the local economy, the bar is pretty low for that office.

Anyway, we already knew that Cavaliers owner Dan Gilbert wanted more arena upgrade money on top of the arena upgrade money he just got in 2014, but now we have a price tag on it: $70 million. At least until the next upgrade request, which at this rate should come around 2018.

LeBron James still isn’t worth $500m a year to Cleveland economy, people, get over it

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While we’re on the subject of bad journalism, let’s check in with the Guardian, which is generally one of my preferred news outlets, even if it has a reputation for occasional sloppiness. I haven’t been following the paper’s sports coverage lately, so what’s it been up to?

Oh, wow, yeah, that’s not good.

To recap for those who missed the whole “LeBron is worth $500 million a year” fiasco when it broke last year:

  • A staffer for Cuyahoga County Executive Ed FitzGerald was reported by Bloomberg News to have said that the Cleveland Cavaliers re-signing LeBron James would be worth $500 million a year to the local economy.
  • FitzGerald’s office said that Bloomberg got it wrong, and they were only claiming LeBron was worth $53 million a year in local economic activity.
  • Lots of people, including me, pointed out that even this lower number was pretty implausible, and the overall impact of LeBron’s presence was at most something on the order of a few million a year, of which maybe a few hundred thousand gets returned to the city or county as actual tax receipts.

So repeating a $500 million impact figure that even the person who conducted the study says isn’t true is not a good start. But then the Guardian doubled down by citing Convention, Sports & Leisure, a consulting group that really should come with a warning label reading “objects in studies may be less lucrative than they appear”:

Or as I replied to Waldron:

 

Commissioners gotta commissioner: Silver says “upgrades” needed for Cleveland to host NBA All-Star Game

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Hey look, everybody, a sports league commissioner has used the promise of a major sporting event as a carrot to demand arena and/or stadium upgrades! That’s surely never happened before!

NBA Commissioner Adam Silver said the only thing that would prevent the city of Cleveland from hosting an NBA All-Star game is failing to make improvements to Quicken Loans Arena.

“They’ve expressed interest in it and we’re waiting for them to get the additional work done on the building,” Silver told Northeast Ohio Media Group during Game 2 of the Eastern Conference Finals…

“It really comes down to when are the upgrades going to made to the arena,” Silver reiterated.

Cavaliers owner Dan Gilbert has been asking for public money to upgrade the team’s 21-year-old arena, because the public money he got last year at this time wasn’t enough, or something. So Silver just did him a favor by delivering a promise, or a threat, or a promise-threat, in the hopes that Cleveland officials will get all exciting about the possibility of an NBA All-Star Game without checking to see whether other host cities have actually benefitted from them one bit. Because that’s what commissioners do.

In totally unrelated news, the NFL has said that it will maybe consider holding the 2020 Super Bowl in Los Angeles, if there’s a stadium and a team in place there by then. Must be nice to be the kid with the new car everyone wants to ride in.

Cavs wait nine whole months after getting public money before asking for more public money

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If you’ve heard me talk on the radio lately, you’ve probably heard me cite University of Michigan economist Rod Fort’s long-ago quote that “I don’t see anything wrong, from an owner’s perspective, with the idea of a new stadium every year.” Rod was being tongue-in-cheek, because of course no owner would have the chutzpah to get public subsidies and then come back one year later with their hand out for more, right? Right?

Representatives of the Cleveland Cavaliers have quietly inquired whether the Cuyahoga County government would provide public money – in addition to the sin tax dollars voters approved last year – to overhaul the publicly-owned Quicken Loans Arena, Northeast Ohio Media Group has learned.

There’s no price tag on the Cavs’ latest demands, and no timeline, but I think this still qualifies as the most shameless attempt at double-dipping since … well, at least since last year when New York Gov. (for now) Andrew Cuomo announced a task force on building a new stadium for the Buffalo Bills just four months after giving them state money to fix up the old one. Cavs CEO Len Komoroski issued a statement that carefully avoided saying anything about public money, but talked about how the Cavs’ arena helps “drive the vitality of our urban core” and how “any plan to enhance The Q would include great additional private investment.” When rich guys start saying, “Don’t worry, we’ll put in our own money, too,” it’s generally a good idea to put one hand on your wallet.

Cuyahoga exec: We never said LeBron was worth $500m/year

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I was traveling much of yesterday, but in the afternoon I received an email from Richard Luchette, the press spokesperson for Cuyahoga County Executive Ed FitzGerald. Luchette said that, contrary to widespread media reports, FitzGerald’s office never meant to imply that LeBron James’ return to Cleveland would add $500 million to the local economy. Rather, he said, the estimated economic benefit of LeBron’s return will be more like $53 million, bringing the team’s total impact to $500 million.

It looks like the blame here mostly goes to some terrible reporting in the initial story by Bloomberg News, which cited FitzGerald’s economic development director Nathan Kelly as saying (in its paraphrase) that “a more robust Cavaliers with James playing increases the total economic impact to about $500 million a year with direct and indirect spending,” but in its lede interpreted this as meaning “the return of the star forward to his hometown Cleveland Cavaliers will have a $500 million a year impact on the local economy” — and doubled down on the wrong with a headline stating “LeBron James’s Return to Bring Cleveland $500 Million a Year.” Though Kelly certainly could have been clearer — I haven’t been able to find a direct quote of how he brought up the $500 million figure in Monday’s press conference — and taking two days to clarify a misstatement that was all over the Internet on Monday wasn’t great work on FitzGerald’s part either.

In any event, $500 million in total annual economic impact for the Cavs is still pretty implausible: The team currently only sells $30 million worth of tickets, remember, and much of that spending would take place elsewhere in Cuyahoga County even if the Cavs played entirely before empty seats. Even if you add in spending on concessions, LeBron souvenir jerseys, hotels for fans who travel from out of town just to see Cavs games (do such people really exist?), and a multiplier for all the money that LeBron-souvenir-jersey vendors will go out and spend at local stores, it’s hard to see getting anywhere near $500 million. I’m still hopeful that Kelly will get back to me with his calculations, though, so stay tuned.

In any event, this is a great cautionary tale about economic impact statements: You can make “economic activity” numbers say just about anything you want them to, and then the press will get it wrong anyway. But at least FitzGerald got on the telly.

Ohio official says LeBron’s return worth $500m, or $50m, or something with a “5” in it, anyway

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Early yesterday, the office of Cuyahoga County Executive (and Ohio gubernatorial candidate) Ed FitzGerald, he of the “win tax,” announced that FitzGerald would be giving an afternoon press conference on just how much money LeBron James’ return to Cleveland would mean to the local economy. FitzGerald had previously claimed that county ticket tax receipts measurably went down when LeBron left four years ago — not too much of a surprise, since people stopped going to Cavs games and presumably did something else not subject to the ticket tax — so the only question was how huge a number FitzGerald was going to come up with.

The answer: $500 million. Per year.

That certainly sounds crazy, but let’s do some rough math and figure out just how crazy. The Cavs had about $145 million in total revenue last year, about $30 million of it via gate receipts, the rest from concessions, cable fees, and so on. Let’s assume that every single Cleveland fan were to double their spending as a result of LeBron’s return — buying twice as many tickets, twice as many hot dogs, twice as many cable contracts. Let’s further assume that 100% of that money would otherwise have been spent outside of Cuyahoga County if not for LeBron, because we all know how many attractions there are in the distant Cleveland suburbs. And then let’s apply a multiplier of 2x, just for the hell of it, under the assumption that all money spent on Cavs games is recirculated in the local economy, because surely NBA players cash their paychecks and immediately spend them at the local Dave’s.

This would get us a yearly impact of $290 million. Still not half a billion.

Or to look at it another way: Last year the Cavs sold 710,000 tickets, and had 132,000 go unsold. Even if the team were, let’s say, to double ticket prices next year, each of those 132,000 new attendees would have to spend $3560 apiece on their visit to a game in order to generate $500 million in economic activity.

Fortunately — or unfortunately, depending on your perspective — it’s not clear that FitzGerald himself believes that $500 million figure. Sure, his deputy chief of staff, Nate Kelly, said it at yesterday’s press conference, but the actual figures mentioned by his staff were far lower. (I’ve requested a spreadsheet or any kind of document at all detailing the economic impact data, but I’m still awaiting a promised call back from FitzGerald’s economic development aide.) From the summary published in today’s Cleveland Plain Dealer:

  • Cuyahoga County will collect about another $3.5 million in ticket taxes this year. The ticket tax rate is 8%, so that would imply an additional $43.75 million in ticket sales, which if they jack up prices to $60 a pop and go deep into the playoffs … sure, maybe.
  • Cavs fans will spend an additional $34 million a year, and the Cavs’ overall economic output would rise by $53 million. Again, that’s not unreasonable, though at least some of this spending would be cannibalized from money that would otherwise be spent on other things in Cuyahoga County, something FitzGerald’s office didn’t attempt to account for.

And … that’s it? That’s not anything close to $500 million a year, and probably not that close to $50 million a year either. The Plain Dealer called Kelly’s half-billion-a-year claim “a much more aggressive interpretation of the data,” which is a nice way of saying “we have no clue why that came out of his mouth.”

Meanwhile, the source of these numbers is in dispute as well: The initial Bloomberg News report said they came from “calculations by the Cuyahoga County Fiscal Office,” but the Plain Dealer reports that FitzGerald said his office worked with the tourism agency Positively Cleveland, drawing on a dubious study commissioned by the team in the heat of last winter’s sin tax extension battle.

In other words, this is a big-ass mess, and there’s no reason to take any of these numbers the slightest bit seriously. Yet the headlines have been written, and you know that the next time some sports team owner is looking for cash to subsidize a new arena, or tax breaks to boost his profits at an old arena, or the purchase of a new point guard, someone will point to this and say, “Keep in mind that even a single player like LeBron James can be worth $500 million a year to a local economy.” (We already went through this with the last NBA superduperstar, don’t forget.) Zombie ideas can be a dangerous thing.

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

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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

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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

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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

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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.