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.

Cleveland sin tax smackdown: Nobody wins

It’s all over but the shouting mutely because your Skype mic isn’t on, and the upshot of the Great Cleveland City Club Stadium Sin Tax Debate is that … people disagree, I guess?

  • That’s how WKYC-TV summed things up, certainly, recapping the panel discussion featuring Cleveland city council president Kevin Kelley, Cleveland Cavaliers president Len Komoroski, Coalition Against the Sin Tax organizer Peter Pattakos, and yours truly as “a two-on-two verbal showdown” — or as it’s better known, a debate.
  • Cleveland.com’s “five takeaways” from the event were that the Cavs exec and council president were “polished,” that they didn’t answer questions directly, that the anti-sin-tax organizer and myself were “populist,” and “Are there alternatives to the sin tax?” and “What would Cleveland look like without Gateway?” which are actually questions, not takeaways.
  • WCPN radio was the only outlet to note that almost all the audience members in the room were pro-sin tax (helping to explain the one-sided Q&A at the end), while counterposing a quote from Kelley touting the economic impact of sports facilities with a quote from me saying they mostly just move money around from one part of town to another.

If I had to pick one takeaway of my own, it would be: Cable-news-style panel discussions suck. The topic may be well thought-out, the moderator may try to probe for deeper truths (yesterday’s City Club moderator did press Komoroski on what the Cavs would do if the tax extension was defeated, something he ducked entirely, leading to that “didn’t answer questions” takeaway above), but still everyone knows that there are no penalties for unresponsive answers, so everyone just recites their own talking points without really responding to each other. It makes for a decent quote harvest, but doesn’t really enlighten anybody much at all, beyond leaving everyone with the warm squishy feeling that we’re all big enough people to sit together in a room (or appear via holographic projection) and agree to disagree, regardless of things like “evidence” and “facts,” and isn’t that what democracy is all about?

I would far rather have spent an hour having an actual journalist or three interrogate me and my panelmates on why we believe what we believe, possibly even referring to their own independent research on the matter. Instead, we get a situation where there’s no reason not to claim that the War of 1812 started in 1945 — especially when you know that the other guy is likely doing it, too.

Cleveland sin tax smackdown! Live at 12:30 pm ET!

I’m going to be taking part (via Skype) in a live debate today with Cleveland city council president Kevin Kelley, Cavs president Len Komoroski, and Peter Pattakos of the Coalition Against the Sin Tax about the plan to extend the city’s alcohol and cigarette taxes for 20 years and give the proceeds to local sports teams for building upgrades. Supposedly this is going to be webcast live at wkyc.com; tune in between 12:30pm and 1:30pm Eastern and see!

(UPDATE: This looks to be the preferred webcast link: http://learn.uakron.edu/video/cityclub/.)

Cleveland residents could vote in May on $160m in new tax subsidies to Indians, Cavs, Browns

One of the drawbacks of the Googlocene is that everything hangs on keywords; and so, because it didn’t come up in my various searches on “stadium” and “arena,” I completely missed Tuesday’s raucous Cuyahoga County council hearing about putting a measure on the May ballot to extend alcohol and cigarette taxes for 20 years and give the proceeds to local sports teams.

As a refresher: Back in the 1990s, Cuyahoga County built a passel of sports venues for the Browns, Indians, and Cavaliers, funding them primarily with tax surcharges on cigarettes, beer, and wine. (Upside: Drinkers and smokers don’t have organized lobbying groups. Downside: “Sin taxes” hit the poor far harder than the rich, who can only drink so many snifters of cognac.) Those taxes are set to expire next year, and the local sports teams see this as a great opportunity to get even more public money for upgrades to their facilities — everything from new water heaters to “replace obsolete scoreboard system,” which I guess fails to meet modern standards of humongosity — without “raising taxes,” since extending taxes that were set to expire doesn’t get counted as raising taxes for some reason.

Under the new plan, the sin tax would be extended for 20 years, raising about $13 million a year that would be directed to the teams. The Cavs and Indians are looking to go roughly 50-50 with that money, though the Browns are expected to demand something as well, albeit a lesser amount given that the Browns are already getting $2 million a year in added city subsidies for their own stadium renovations. The total present value would be about $160 million if the sin tax keeps bringing in the same revenue as it does at present, possibly more like $200 million if inflation causes it to rise.

The original leases on the three venues require the county-owned Gateway Corp. to pay for maintenance on the buildings, and Gateway officials insist that if the sin tax extension isn’t passed, the county would need to either raise the funds some other way, or risk having the teams break their leases and potentiall move elsewhere. That seems a pretty minor risk — there aren’t any open baseball or basketball markets close to Cleveland’s size (#18 in the Nielsen rankings), and while NFL teams don’t care as much about media markets, the Browns just got their own boodle to keep them happy — but it’s apparently the main justification for throwing a couple hundred million dollars in new money at Cleveland’s sports team owners.

The council is set to vote on holding a public ballot measure by the first week in February; if it’s approved as expected, then we should have quite the fun next three months talking about all the economic and ethical ramifications of this. Or just about the power of yes.

Cleveland council approves losing $8m a year on Browns stadium lease instead of $6m a year

The Cleveland city council voted yesterday to approve giving the Browns $2 million a year for the next 15 years to help pay off $120 million in planned stadium renovations. (The measure needed a 12-vote supermajority to win, and snuck by with 13 votes on the 19-member council.) Since the Cleveland Plain Dealer reported over the weekend that the city is currently losing $6 million and change per year on the Browns stadium lease, this will push Cleveland’s losses over the $8 million per year mark.

The anti-funding side may have lost, but at least it prompted a four-hour debate that I’m now sorry I didn’t try to find a webcast of:

At one point, Councilman Tony Brancatelli pulled a red flag from his pocket and threw it on the table, calling out Banner on his comments about how favorable the deal is for the city, compared to what other cities have paid into their athletics facilities. The truth is, Brancatelli said, all of those cities have been held hostage by their contracts with NFL teams.

“We’ve afforded the Browns a lot of luxuries that many businesses who come to this table don’t have,” Brancatelli said.

Much of the debate appears to be about whether the Browns’ renovation requests were for “repairs” (which the city is obligated to pay for) or “capital improvements” (which the city already provides a fund for, but the Browns will now be getting $2 million a year on top of). Which led to exchanges like this one:

“There’s a common sense part of this that if you’re four years past something’s useful life it’s time to replace the scoreboard,” [mayoral chief of staff Ken] Silliman said.

[Councilmember Jeffrey] Johnson snapped back: “Well, I’ve got a common sense approach, too, and it says that we’re about to spend $2 million of my community’s money, and I need you to prove to me me that the scoreboard needs to be fixed today. … Respect me enough to bring me something that proves it. Don’t play me for a dummy.”

From the sound of it, the Cleveland council just punted and said fine, let them have their damn money. Next up, in all likelihood: the Indians!

Cleveland running $6m-plus annual loss on lease with Browns

The Cleveland Plain Dealer ran a great piece on Saturday (where almost nobody would see it, but let’s not be picky) running down the details of the Cleveland Browns lease, which some local officials see as a giveaway, but which Browns officials say is actually pretty generous to the public. Here’s what Cleveland rakes in each year, it turns out:

  • $250,000 in rent
  • $570,000 in revenues from three city-owned parking lots
  • $3.5-4 million in ticket taxes on Browns tickets

The Browns keep everything else: ticket sales, ad revenue, concession sales, and the $6 million a year from naming rights to the city-owned building. The city, meanwhile, needs to pay for police overtime to patrol Browns games (cost not given), plus $850,000 a year in capital improvements to the stadium, a figure that will rise to $5 million a year in 2023. Plus, if the latest Browns renovation plan goes through, an additional $2 million a year for more stadium improvements.

The city, meanwhile, is paying for the entire $296.3 million construction cost of the stadium that opened in 1999. And I need to correct myself: I’d written that the stadium will have been paid off by 2015, when the city’s “sin tax” on cigarettes and alcohol that was passed to cover stadium costs expires — but no, it turns out the city has only paid off $68 million of that debt, and is going to have around $200 million left to go when the sin tax expires. So either Cleveland will need to dip into its general fund to the tune of about $10 million a year, or it will need to extend the sin tax — and which point the Browns, Indians, and Cavaliers have promised to seek even more money for stadium improvements. It really is the gift that keeps on giving.

Cleveland to give Browns $22m for renovations just because

The city of Cleveland and the Browns owners have reached an agreement on how the $120 million worth of stadium renovations announced last week will be paid for, and it’s not as awful as it could have been: The city would kick in $22 million, paid off $2 million at a time over the next 15 years (part of that would go toward interest), and the team would cover the rest.

That’s getting off relatively cheap compared to some stadium reno deals, but then, the city is getting nothing back for its money: The Browns aren’t even agreeing to extend their lease at their 17-year-old stadium. Plus, the city already pays into a “capital improvement fund” under the team’s lease, but these more extensive renovations — which include a new scoreboard and new seating and concourses — would come on top of that.

The Cleveland city council is set to hold a hearing on the plan next Monday, and some councilmembers are already getting all gripey:

“I’ve got residents calling me, saying, ‘Please don’t support the stadium,’” said Councilman Kevin Conwell. “That stadium is modern enough right now, in my opinion. They’ve got to break out budgets to show me that putting up that money toward improvements won’t affect city services.”

Right now the $2 million a year is set to come out of the general fund, but if this proposal goes through, it’s almost certain to heat up talk of extending the cigarette and alcohol taxes that paid for the stadium in the first place, and splitting the proceeds among subsidies for upgrades for the Browns, Cavaliers, and Indians, the last of whom have been talking about getting city funding for major renovations for a couple of years now, though clearly they’re waiting for the Browns to go first. Following on the Atlanta Bravesnew stadium plans and the Carolina Pantherssuccessful renovation subsidy campaign, what Cleveland does is going to do a lot to set the tone of how cities with pre-millennial stadiums handle team demands for upgrades, so this is worth watching closely.

Browns announce $120m in stadium upgrades, won’t say who’ll pay for them

Okay, it’s definitely Announce Stadium Plans But Refuse To Say How They’ll Be Paid For Week: First the Atlanta Braves, then the Virginia Beach mystery arena, and now the Cleveland Browns have announced $120 million in renovations to their stadium, with money coming from we’re-not-gonna-tell-you:

 The Cleveland Browns announced Wednesday a two-year plan to deliver $120 million in upgrades to the “fan experience” at the city-owned FirstEnergy Stadium –- including a new scoreboard, audio equipment and physical changes that would allow fans to move about more freely…

Browns CEO Joe Banner declined to discuss financing during a news conference Wednesday afternoon, revealing only that the organization has acquired what amounts to a loan from the NFL that could cover about half of the expense.

In a written statement, Mayor Frank Jackson said that he supports the improvements and that the plan “meets structural requirements and will enhance the fan experience here in Cleveland.” Details for financing the project, however, are still in discussion, Jackson wrote.

Talk of extending the “sin tax” on alcohol and cigarettes (seriously, that’s all the sins that Cleveland could come up with to tax?), which paid for new stadiums for the Browns and Indians and is set to expire in 2015, to fund upgrades for both teams has been kicking around for a while now, but there’s been no formal proposal as of yet. And from the sound of it, there may be considerable resistance on the Cleveland city council:

“The sin tax went toward establishing the infrastructure and keeping it safe and secure,” [city councilmember Jeffrey] Johnson said. “This is different. This is about who can have the biggest scoreboard and bragging rights. And the ownership is just trying to create a stadium that they can show off and enhance their reputation without really enhancing the benefit to the average citizen.”

Councilman Michael Polensek agreed and said he would vote against the city chipping in to pay for the renovation. He pointed out that $120 million could hire more than 1,000 police officers or ameliorate the city’s entire abandoned housing problem.

“I’m weighing the glitz and glamor and the hype associated with sports teams against the reality of life,” Polensek said. “The majority of my citizens can’t even afford to go to a game. And you want me to go back and ask them to dig into their pockets and ante up for the Cleveland Browns? I’m looking to Jimmy Haslam and his folks to have a civic soul. Corporate leadership must try to understand our plight, and so often they fail to do that.”

“I’m looking to the local sports team owner to have a soul.” I guess people have hoped for crazier things.

Cleveland columnist threatens Indians move without more public subsidies

I missed it at the time (thanks to Roldo Bartimole of the Cleveland Leader for pointing it out), but the Cleveland Plain Dealer’s Brent Larkin wrote a column last week worrying about the Indians‘ crappy attendance despite being in a wild-card race, and hinted that the team could move if it doesn’t improve:

If this is the new normal, then another crisis over the Indians future here is inevitable.

It won’t happen soon. The team’s lease at Progressive Field doesn’t expire for a decade (though 1995 taught us that stadium leases can be worthless). And it will never happen while the Dolans own the team.

But if attendance remains in the tank, eventually it’ll happen.

Just as it happened here throughout the 1960s, when Seattle, New Orleans and Tampa all tried — and at times came perilously close — to steal the team. And just as it happened in 1990, when baseball’s commissioner came to town and all but guaranteed that if voters rejected the “sin tax” to build Gateway, the Indians eventually would move.

Larkin contrasted the Indians’ lousy attendance (28th in the league, ahead of only the two Florida teams) with that of the Minnesota Twins, who are terrible this year but play in a new sta — hey, wait a minute, don’t the Indians play in a nearly new stadium, too? One that was lauded for having turned the team (and the city) around when the Indians sold out 455 straight games from 1995 to 2001?

Larkin doesn’t actually say that the Indians need a new stadium (again), just that they need to be more “profitable” somehow. And as Bartimole notes, Cuyahoga County residents could soon be asked to extend the sin tax that paid for the Indians’ stadium — and use it for future major improvements for the Indians, Browns, and Cavaliers. Or maybe it would be simpler just to tax beer drinkers and give the money straight to the Indians owners to boost their profits and keep them happy — all the other kids are doing it.

Today in new crap they’re putting in NFL stadiums

A couple of reports on new technology that NFL teams are installing to get people off their damn sofas and into football stadiums:

If you don’t go to NFL games (or don’t drink beer — which, come to think of it, probably implies the former), you should probably still care about this stuff because it ups the ante for teams with state-of-the-art clauses that say their public landlords have to provide them with anything that enough other teams get. I don’t think any city councils have yet been presented with a bill for pneumatic beer tubes, but it’s probably only a matter of time.