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.

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.

Cuyahoga moves $70m Cavs subsidy forward, because mumble mumble “maximize assets” something

Cleveland Cavaliers owner Dan Gilbert took another step closer to getting $70 million in arena renovation subsidies on Tuesday when a majority of the Cuyahoga County Council voted to move the funding bill out of committee. A full council vote is expected on March 28, and unless somebody unexpectedly gets cold feet, the $140 million bond issue — half of which will be repaid by Cavs rent payments, the other half by ticket taxes and hotel taxes that currently go to city and county coffers — should pass easily.

Let’s check out what some county council members had to say!

“I do not think the deal is perfect but I do think the Quicken Loans Arena is by far the most important of Cuyahoga County’s entertainment and sports facilities. It is a vital and essential part of our economy.” —Dan Miller

“This is our facility and we will take care of it.” —Michael Gallagher

“This deal is not either/or or now or never but how and when.” —Shontel Brown

Well, at least nobody cited any dumb reasons like fear that the Cavs would move without a new glass wall or that arenas create scads of jobs or anyth—

“There is a threat the Cavs might leave and it is my job to have some stability. We own this building and we need to make sure our asset is maximized.” —Sunny Simon

“We need to maintain an economic driver that will not only keep my residents employed.” —Anthony Hairston

The Greater Cleveland Congregations group, which has opposed the deal and called for Gilbert to at least put money into a community development fund in exchange, was roundly ignored by the county council. The big wild card now is the Cleveland city council, which also has to sign off on the deal, and hasn’t even scheduled hearings — as Cavaliers CEO Len Komoroski noted, the team wants to start construction this summer to be ready for hosting an All-Star Game in 2020 (other cities like Houston and Orlando are bidding for it as well, but you’ve got to be prepared, right?), so they’re going to be pushing hard for an early decision. Here’s hoping the city council at least comes up with some better cliches before casting their votes.

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.