Cleveland Plain Dealer: Give Cavs owner $70m, because LeBron and Mickey Mouse WOOHOO!!!

The Cleveland Plain Dealer has historically not been a very good newspaper in covering stadium development issues, taking local sports team demands seriously even when they want to do things like cover their stadium with a geodesic dome, and generally giving Roldo Bartimole an entire career of shaking his head sadly at their miserable reportage.

None of that, though, prepared anyone for this editorial published on Friday, which argues that it’s totally worth Cuyahoga County giving Cavaliers owner Dan Gilbert $70 million to pay half the costs of an arena expansion because, well, let’s try to follow along:

[Do you remember] the payoff when LeBron James electrified the city and team by coming back and helping to deliver an NBA championship in a never-to-be-forgotten, come-from-behind series? A series that turned downtown Cleveland into a sea of ecstatic fans and led to a victory parade that attracted Cavs fans the world over for a glorious day of downtown pedestrian gridlock that banished our comeback doubts.

Yes, winning championships is fun. Gilbert doesn’t get to rescind that championship if his renovation isn’t approved. So, what’s your point again?

How much would it be worth to get even more economic development value from the money the public already has invested in Quicken Loans Arena — the jobs, the energy, the draw — by extending the life of the Q another dozen years or more?

An excellent question, though posed a bit strangely — the only thing threatening “the life of the Q” is the city and county’s eventual willingness to replace it, so it’s not like that decision is really hanging on a new glass exterior wall. But sure, it’s a calculation that should be conducted, ideally with studies and tax revenue projections and—

It’s certainly worth the deal on the table now in which the Cavs pay half and make other commitments to the county, city and region.

Or you could just say “You betcha!!!” Yup, that is also an option.

As part of the deal, the Cavs pony up $122 million of their own dollars (for an arena the public owns) and underwrite risk in the financing deal for the county and agree to stay in Cleveland until at least 2034.

Yeah, no, not exactly. That $122 million isn’t in cash but in increased future rent payments, which will reimburse the county for half the $140 million in renovation costs, leaving the other $70 million to be covered by ticket taxes and hotel taxes that would otherwise go into city and county coffers. Yes, the public owns the arena, but only on paper so Gilbert doesn’t have to pay property taxes. (He owns the revenue streams from the arena, which are the important part.) I have no idea what “underwrite risk” means, other than that Gilbert would over cost overruns, which, that’s all well and good, but he’d still get his $70 million in free money regardless.

The only real reason worth considering here is getting Gilbert to extend the Cavs lease to 2034, when it currently expires in … 2027. So that’s seven years of added lease time, in exchange for $70 million in renovation subsidies. We have seen worse deals, but that doesn’t necessarily make this a good one.

The Q is a city treasure that goes far beyond its use by the basketball team.

How many of the region’s children have been wowed there by Mickey Mouse on ice skates, circuses and monster truck shows? How many people have danced in the aisles to the performances of Bruce Springsteen, Paul McCartney, Jay Z, Taylor Swift, Justin Timberlake, Beyonce? We want those acts to keep coming.

Now we’re getting deep into crazy talk, and not just because Paul McCartney is going to be 92 years old in 2034. Does the PD editorial board really think that Mickey Mouse is going to refuse to lace up his skates and play Cleveland if the arena doesn’t have a new glass wall in front? Have they bothered to investigate what concert acts want out of an arena? Or is investigation one of those old-media things that fly in the face of synergy and monetization and whatever else the things that used to be called newspapers are in the business of now?

All in all, this editorial can be summed up as: Arenas are fun places, is $70 million really too much to spend on more fun? To which the answer should be: We dunno, let’s check it out. That’s what the Detroit Free Press did when Gilbert came asking for cash for an MLS stadium in that city; clearly either the billionaire has greater pull in Cleveland, or the Plain Dealer editors have forgotten Rule #1 of journalism.

No, the Cavs didn’t get their $70m glass-wall subsidy approved, headline writers are idiots

Media literacy quiz time! Back in April, Cleveland Cavaliers owner Dan Gilbert declared that he wanted $70 million in public money to help him pay for a $140 million renovation of his arena, mostly to build a giant glass wall. Yesterday, Cleveland.com ran this headline:

Quicken Loans Arena, home of LeBron and the Cavs, to get $140 million makeover

Does this mean:

  • A) The money was approved
  • B) The money passed an important hurdle, but more approvals are still necessary
  • C) Gilbert agreed to pay for the renovations himself
  • D) Nothing happened at all beyond the Cavs putting out a press release

Yep, that’d be D:

The Cleveland Cavaliers today announced a striking $140 million upgrade to the Q Arena that dramatically alters the facility’s appearance and, the team says, would make the 22-year-old arena competitive by creating more space for dining, bars and public gathering…

Cleveland City Council will hold public hearings and vote on the proposed use of the city’s admission tax to pay back part of the loans.

The rest of the article is mostly just a rehash of Cavs talking points (“without any increase in taxes”! “an up-to-date arena for sports, concerts and other entertainment”! “the proposal looks pretty good compared to other small or medium-sized sports markets”!), plus a bunch of new renderings helpfully labeled “The Q TRANSFORMATION.” Somebody in the Cavs ministry of propaganda deserves a raise today.

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?

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

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

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

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

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

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

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.