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September 27, 2011

Cincinnati stadium debt options: Rock, or hard place

The Cincinnati Enquirer ran a long article on Sunday looking at Hamilton County's lease woes with the Cincinnati Reds and Bengals, and looking at how other cities solved similar revenue shortfalls. The findings:

  • Indianapolis raised sales and hotel taxes, plus redirected tax revenue from the stadium area to pay off construction bonds on the Colts' stadium.
  • Cleveland sold off naming rights to Jacobs Field (now Progressive Field) and Gund Arena (now Quicken Arena), which had formerly been named for the Indians' and Cavaliers' owners.
  • Orlando has scrapped a planned performing arts center* and cut back on police, fire, and road services to fill funding shortfalls on the Magic's new arena.

In other words, options for Hamilton County include raising taxes, cutting spending, or selling off anything that isn't nailed down — sound familiar? Other already rejected options include declaring bankruptcy (would destroy the county's reputation), selling the stadiums (no one will buy them), raising ticket taxes (the leases prohibit it, though it's possible a voter referendum could get around this), default on the agreement to pay into Cincinnati's public schools fund to make up for lost property taxes on the stadiums (school bondholders could sue), refinance the bonds (won't save much money), buy the Bengals (too expensive), or end a riverfront development project (very little of that funding comes from the stadium tax fund).

The problem is that the damage was done when Hamilton County agreed to build the stadiums and agreed to those godawful leases; now, as I told the Enquirer, "The teams say, 'You made a deal and if you got the short end of the stick, that's not our problem." At this point, barring a ticket-tax end run, the county seems like it's going to have to pay off its stadium debt out of taxpayer pockets one way or another — unless they can find a way to retroactively revise the leases using time-traveling neutrinos.

*UPDATE: The Orlando performing arts center informs me that construction is underway for phase one of the project, with a groundbreaking having taken place in June. It's phase two that's currently not scheduled, according to the center, "due to construction timing."


Ooooo, but now Cincinnati is a world-class city. How can you put a price on that? Tourists flock from around the world to see these sports facilities; I bet they'll bring in $7B over 30 years, in addition to jobs, jobs, jobs!


Posted by MikeM on September 27, 2011 12:00 PM

Cincy's had the answer right in front of their faces for over a year, now:

"Hamilton County Commissioner Greg Hartmann's plan for plugging a shortfall in the cash needed to pay for the Cincinnati sports stadiums: cut health care to the needy.

The Republican commissioner's plan, provided to the Enquirer Friday, drew immediate criticism from The Republican commissioner's plan, provided to the Enquirer Friday, drew immediate criticism from University Hospital and at least one other commissioner.

But Hartmann argues his is the only fix that won't raise taxes.

He proposed Friday erasing a portion of the county's property tax rollback beginning in 2012. In exchange, beginning that year he wants to reduce the indigent health care levy by 45 percent - cutting $22 million the levy funnels to University Hospital every year..."

Problem solved - Eh, Stadium Boosters?

The article above appeared in the Cincinnati Enquirer in the first week of last June - mere days before residents of my city, Santa Clara, CA, dug a similar money hole here by voting to subsidize the San Francisco 49ers.

We then learned on the one year anniversary of *that* vote that the 49ers' own share of that stadium is dropping from a little over 50% of its cost to 25% or less.

We'll learn shortly, as Cincinnati has learned, what a colossal waste of public money NFL stadiums truly are.

Bill Bailey, Treasurer,


Posted by Bill Bailey on September 28, 2011 12:05 AM

Mr. deMause,

Could either team reduce the funding gap by cutting their payrolls? I checked on Forbes and saw this year's financial statement for the Reds. While ESPN said that their operating payroll was about 76 million this year, it didn't take into account built in bonuses that pushed it up to about 90 million. They could simply trade players on the roster that the team isn't obligated to with down the road payments and replace them with cheaper alternatives that don't go into arbitration for several years.

If either team wouldn't be willing to do that because it would eat into their profit margins, how likely is it that a ticket tax would solve the problem since, by the size of the market that Cincinnati is in, it would cause prices to go up to their market limits and might actually cause a drop in overall attendance?

Posted by AlexC on September 28, 2011 09:25 AM

Depressing, isn't it? The should tax tickets- only those going to the stadiums should pay for it. Can they put a tax on team merchandise?

Posted by Tom on September 28, 2011 11:35 AM

Hey come on now!

What do you want? Poor people getting sick and needing help on your back (afterall I'm sure if they were disciplined enough to empower themselves with healthier life choices they wouldn't be in the situation they're in) or NFL/MLB entertainment?

Posted by santa clara jay on September 28, 2011 12:46 PM

The teams could likely close the funding gap, but why would they? It's not their problem, it's the public's.

Privatize the profit, socialize the risk.

Posted by Anderson on September 28, 2011 01:01 PM

AlexC: The problem with cutting payroll is the same as with a ticket tax: If the teams suck, people stop coming to games, and then revenues go down. The assumption is that owners are spending money on players who they think will make them money in return (though I've done some research making me doubt that). In any case, the teams are refusing to put any more money into the stadiums, saying the leases say they don't have to - in the end, whether they pay for that by cutting payroll or raising ticket prices or selling off their yachts on eBay would be their problem.

Tom: A team merchandise tax has been proposed in Minnesota, but may be unconstitutional. If that plan moves forward, maybe we can get a court ruling.

Posted by Neil deMause on September 28, 2011 01:18 PM

Tom -

The City of Chicago charges Amusement Tax on sporting, theater, musical or live events, ranging from 5% to 9%. Making already expensive tickets even higher.

Also heavily Democratic Chicago & Cook County loves to tax everything, including gasoline, which has a Chicago tax, a Cook County tax, state sales and federal fuel taxes. You keep taxing enough, it will drive people away.

Posted by Mark on September 29, 2011 11:34 AM

Mark- True. Although crappy infrastructure, poor schools, inadequate police, and filthy environments drive away people as well.

What we can agree on is that luxurious, tax payer funded stadiums only attract people for an evening.

Posted by Tom on September 30, 2011 04:00 PM

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