November 30, 2011
Hamilton County to sell hospital to feed stadiums
The Hamilton County Commission has finally agreed on a plan that would allow them to keep paying off the Cincinnati Reds and Bengals stadiums while still handing out the property tax break that was agreed to as part of the stadium deal (and which is so important to county taxpayers, especially if they're really rich). Under the new plan, the county will sell Drake Hospital to a private corporation for $15 million, helping to close next year's $14 million stadium budget gap.
It's still not clear whether the gambit would be legal — earlier reports suggested that any proceeds from hospital sales are legally required to go to health care — but that's the kind of thing that can be worried about later. Sort of like how the county is going to pay the following year's stadium budget gap, assuming the economy doesn't pick up by then and start generating bucketloads of sales taxes. But surely we don't have to worry about that, right?
November 28, 2011
Sales taxes are still regressive, 49ers and Kings still spinning wheels, and other non-news
With Thanksgiving making for an epically slow news weekend — aside from for those reporters lucky enough to cover Black Friday pepper-spray incidents — we were instead treated to a smorgasbord of stadium non-news stories this weekend:
- Rich people pay more property taxes while the poor and middle class pay more sales taxes, reports Cincinnati.com. This is considered newsworthy because the deal to cut property taxes following a sales-tax hike to pay for new Bengals and Reds stadium will mean not just a massive transfer of funds from taxpayers to the sports team, but also from the hoi polloi to the hoity toity: "The half-cent stadium sales tax paid by homeowners is estimated by the county to be a maximum $192 annually, while owners of the county's highest-value homes get rollback rebates of $1,175 or more — netting them nearly $1,000 apiece under the current structure."
- The NBA lockout looks to be over, and everybody in Sacramento is back to saying what they were saying before about a new Kings arena. "Our position from day one is that this has never been about building a facility to benefit a professional sports team," said Mayor Kevin Johnson, who two years ago kicked off his arena campaign by declaring that without one the Kings "very may well look elsewhere." The apparent end of the lockout "is good for the efforts to keep the Kings in Sacramento," said Michael Ault of the Downtown Sacramento Partnership, which is working on efforts to keep the Kings in Sacramento. And a local economic consultant and a woman who runs a restaurant said they hoped the end of the lockout would help the economy. This is considered newsworthy because it's the same thing the Sacramento Bee runs every other day, and the announced resumption of the NBA season gave them an excuse to run it on page one.
- The San Francisco 49ers are winning, but don't have a new stadium yet, writes the San Francisco Chronicle. And they're not especially talking to San Francisco about one, while continuing to pursue one in Santa Clara. This is considered newsworthy because ... okay, I'm stumped on this one. Maybe the reporter was originally assigned to cover Black Friday, but came away empty-handed when no shoppers thought to bring pepper spray?
November 22, 2011
Hamilton County set to drain stadium fund for property-tax cut
The long-simmering Cincinnati Bengals and Reds lease controversies could be about to boil over, as the Hamilton County Commission appears set to approve a property-tax cut that was promised as part of the stadium deals, but which there's now no money for:
If Republican Chris Monzel and Democrat Todd Portune do that — and both of their plans have been deemed not practical by the county administrator — the stadium fund will be bankrupt by March.
That will leave Hamilton County Auditor Dusty Rhodes without the cash to meet all the obligations in the sales tax fund.
"It would be the height of irresponsibly to commit funds they knew were not there," Rhodes said. "I've long criticized various governments for living in dream world.
"This takes it to a whole new level," Rhodes said.
Backing up a bit: What happened here is that when Hamilton County raised sales taxes by 0.5% in 1996 to pay for new stadiums, it designated 30% of the proceeds to rolling back property taxes. Unfortunately, this happened, which meant that sales tax proceeds fell short of what was needed to pay off both the stadiums and the property tax cut.
Monzel and Portune have different ideas about what to do next: The Republican wants to sell a hospital to raise $13 million, but any proceeds there might need to be reserved for medical care. Portune, meanwhile, wants to raise money by hosting more events at the stadiums, getting the teams to pay up-front costs of repairs, and other lease concessions, something he's tried before to no avail. More likely is that the county has to dip into its general fund reserve, which could affect the city's bond rating or even, according to Hamilton County Administrator Christian Sigman, prompt a state takeover of the county's finances.
It seems clear that somebody is going to have to blink — just don't bet on it being the Reds or the Bengals, since neither of them has any incentive to, thanks to having those sweetheart lease deals in their back pockets.
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."
July 13, 2011
Bengals stadium: Worst. Deal. Ever?
Good, long article in yesterday's Wall Street Journal on the financial woes of the Cincinnati Bengals' Paul Brown Stadium — or rather, the financial woes of Hamilton County, which built the place in 2000 and within four years was suing on the grounds it had been hoodwinked into a sweetheart deal. Among the article's highlights:
- The initial $280 million price tag ultimately swelled to $350 million (if you believe the Bengals), or $454 million (according to the county), or $555 million (according to Harvard stadium expert Judith Grant Long, whose long-awaited book Full Count, I am assured, really is due out any month now). This last figure would set a record for public subsidies for an NFL stadium.
- As a result, the county has been facing steep debt payments: $34.6 million in 2010, equal to 16.4% of the county budget. As a result, the county has been slashing funding for things like schools, the sheriff's department, and youth programs, and is now set to repeal the property tax reduction that was the carrot to get county residents to approve the Bengals stadium (and an accompanying Reds stadium) in the first place.
- Hamilton County hamstrung its own finances by agreeing to let the Bengals collect all parking revenues at the new stadium, while the public picked up all security costs. The team put pressure on the county by saying it would move to Baltimore without a sweetheart deal — but documents from the time indicate that Baltimore's offer was capped at $200 million in public funds, and would not cover operating costs.
- Even on the field, the new stadium has underperformed: "The Bengals had said that with a new stadium, the team's revenue would increase, allowing it to sign better players, win more games and attract more fans to the area. In 2000, the new stadium's first year, the Bengals had the same record they'd had the previous year, 4-12. Since then, the team has managed just two winning seasons in the new facility. Its attendance levels have actually dropped."
The problem, it seems, is that unlike in other municipalities, Hamilton County footed the entire stadium bill itself — and counted on a 0.5% sales tax hike to make the bond payments. When sales tax revenues didn't grow at the rate the county had hoped, it was left with a budget hole that's grown progressively larger.
(The Bengals have since responded with a two-page letter that asserts that it's the county's fault for making a lousy deal, and anyway the real problem is the county took part of the sales-tax proceeds and wasted it on things like roads and public schools.)
One hopes this will be a cautionary tale for other local governments negotiating leases, but it probably won't be, for reasons already discussed here. In case any local elected officials with lease talks on their agenda are reading this, though, here's a handy crib sheet of quotes from the WSJ report on the Bengals fiasco to reference in your hearing testimony:
"The Cincinnati deal combined taking on a gargantuan responsibility with setting new records for optimistic forecasting," says Roger Noll, a professor of economics at Stanford University who has written about the deal. "It takes both to put you in a deep hole, and that's a pretty deep hole."
"It's the monster that ate the public sector," says Mark Reed, Hamilton County's juvenile court administrator.
Tom Luken, a former Cincinnati mayor and councilman, actively campaigned against the deal. "Anybody with half a brain can figure that this is a bad deal," he says. "As it turned out, it was even worse than they painted it."
And finally, the punchline: Hamilton County commissioners are set to vote today on spending another $307,000 on the stadium, to upgrade its instant-replay system from analog to digital — stadium upgrades being the county's responsibility as part of that lease that taxpayers arm-twisted the Bengals into accepting. Next step: holography!
January 30, 2011
Bengals want $43.6m more in stadium upgrades
Remember how, after offering up $7.4 million in additional rent to help out Hamilton County's empty stadium fund, the Cincinnati Bengals demanded $30 million in lease breaks and a new scoreboard? Well, now it turns out they also want a total of $43.6 million in stadium upgrades, according to records obtained by the Cincinnati Enquirer.
Hamilton County officials say they can't afford it; the Bengals retort that this is just normal maintenance. Though their arguments don't exactly back up that contention:
Dornette added the scoreboard isn't a team want — it's a need. The Bengals scoreboard, for example, is not high definition. The Bengals are stuck with the equivalent of an analog TV in a digital age, they say.
Other stadiums, including the rival Steelers, for example, feature high definition scoreboards.
The Bengals are, of course, the team that famously included "holographic replay systems" among the items that the state-of-the-art clause in their lease requires them to get once other teams have them. So at least they can argue that they've established "Because all the other kids have them!" as a precedent.
January 07, 2011
Bengals on lease concessions: Ha ha, we had our fingers crossed!
No yay after all. It turns out when the Cincinnati Bengals agreed to pay $7.4 million in extra rent last month in exchange for naming rights on their stadium — in order to help the county close a $130 million funding gap — they neglected to mention they also wanted a new scoreboard, $30 million in future lease breaks, and a 20-year lease extension with the county agreeing to pay for upkeep. But these, Bengals officials say, are mere details:
In a statement Friday morning, the Bengals said: "The facts show that the Bengals and the County reached an agreement on December 1, and the Bengals submitted a document to the county entirely consistent with that agreement. The Club stands ready to affirm its pledge to Hamilton County and continues to be willing to provide the County with $8 million to help stabilize the stadium fund."
Hamilton County Commissioner Todd Portune, who once sued the Bengals for defrauding taxpayers with their original stadium lease, was having none of it, saying, "We're seeing what happens with these 11th-hour agreements. Even though I didn't like the original deal, the fact is the Bengals need to do what they originally agreed to do and stop trying to beat up their favorite opponent." Wait... isn't that what they're paid to do?
December 01, 2010
Bengals, Reds, agree to trade $10m in rent for naming rights and ticket taxes
Stop the presses! Hamilton County has actually gotten the Cincinnati Bengals and Reds to agree to kick in some money to help fill the county stadium fund's $130 million gap:
The Bengals agree to pay additional rent of $8.1 million and to pay for a new field if needed within five years. In return, the team gets a $750,000 credit from the county, and the county gives up long-term naming rights.
The Reds will pay additional rent of $2.2 million and, in return, will get more from the county surtax of 25 cents per ticket once 2 million tickets are sold.
Okay, so it's not exactly a lot of money. And if the Reds do well and sell more tickets, or the value of the Bengals stadium naming rights soars, then the county could actually be worse off under the new deal. And the county will still need to eliminate three-quarters of the countywide property-tax reduction that it handed out in 1996, in exchange for voters approving the sales tax hike that funded the teams' new stadiums. Still, it's a concession by the teams. Kinda. Sorta. Yay?
November 26, 2010
Bengals reject ticket surcharges to repay public stadium debt
The never-ending quest to bail out the Hamilton County stadium fund has circled back around to ticket surcharges again: Hamilton County Administrator Patrick Thompson has proposed an additional ticket tax of between 1.8 percent and 3.9 percent on Bengals and Reds tickets, plus property tax hikes to help fill an expected $130 million shortfall over the next five years.
Only one problem: The Bengals say they won't go along with a ticket tax, rightly understanding that it would cut into their ability to jack up ticket prices as high as the market would otherwise bear. And both teams have the right to veto any ticket surcharges under their godawful stadium leases, so don't hold your breath waiting for this one to happen.
June 16, 2010
Ohio pol: Fund stadiums by cutting health care for poor
Public stadium spending always has a cost — public anything spending always has a cost, as it's money that can't be used elsewhere — but it's seldom made as explicit as in last week's proposal by Hamilton County commissioner Greg Hartmann to pay for shortfalls in Cincinnati's stadium funds by cutting health care spending on the poor.
Hartmann's plan has drawn tons of criticism since, with his fellow commissioner (and longtime stadium critic) Todd Portune saying it proposed paying for “sports palaces on the backs of the sick, the injured, the destitute and the poor," while the Cincinnati Enquirer called it "outrageous" and "simply wrong on several levels." The Cincinnati city council chimed in on Monday, passing a resolution to oppose the plan, with the resolution's sponsor saying Hartmann's scheme "basically takes from the poor, you might say, basically to give to the rich."
All of which is true, but it's worth noting that the original stadium-funding plan — a half-cent sales tax hike, which is currently running shortfalls thanks to the broken economy — was no less so: Not only do sales taxes hit the poor much harder than the rich, but that's a revenue stream that now can't be used for other public benefits (including hospital funding for the poor).
The real problem was giving to the rich in the first place — the only thing left to battle over now is whether to take from the poor (via health care cuts) or the middle class (via property tax hikes, the elephant in the room that the county commission is desperately trying to avoid). Nobody's proposing trying to get the money back from the teams themselves — though I guess Portune tried that with his antitrust suit, only to be tripped up by that pesky statute of limitations.
February 01, 2010
Bengals offer lease concessions — in exchange for lease concessions
Well, check this out: The Cincinnati Bengals have actually offered to cough up lease concessions in order to help bail Hamilton County's stadium fund out of its $13 million a year in losses. The offer by Bengals VP Troy Blackburn — which was actually made last October, but only released yesterday following a series of public-records requests — was estimated by the team to be worth $40 million, but the math is, shall we say, a bit funny:
- The Bengals would pay $1 million in rent each year from 2010 to 2014. That's $5 million cumulative, though more like $4.3 million in present value, since some of the money wouldn't come until years down the road.
- The team would pay for $2 million in stadium capital repairs by the end of the 2011 season.
- Waiving a requirement that the county pay the team about $2.6 million a year to play at Paul Brown Stadium — that's right, according to their lease, the Bengals pay negative rent — from 2018 through 2026. That's $23.4 million in cumulative dollars, but since so much of the payments are far in the future, it's only worth about $12.5 million in 2010 dollars.
- Staff reductions at the stadium, which the team controls but the county funds, estimated at $2 million in savings over 15 years.
Even as the Bengals count, that's only about $32 million, and in real numbers it's more like $21 million. Still, at least they're offering something, right?
However, the Bengals are also making demands in exchange: The county would have to give up its stadium luxury box, as well as revenue from non-NFL events, and — these are potentially biggies — hand over any naming-rights revenue and agree never to impose ticket taxes. Also, while the Bengals deny it, there are indications that the team might be granted an out clause in its lease ten years before they could otherwise leave. Little wonder, then, that county commissioner (and longtime Bengals nemesis) Todd Portune called it a lousy deal, saying, "If the offer didn't come with strings it would be a very generous offer. It's a start but there's a long way to go." That's what they said about the Treaty of Greenville.
December 25, 2009
The Times fumbles the season of stadium giving
It's Christmas, so with little else to report — aside from something about some bill the Senate passed — newspapers turn to burning off stories they haven't found room for on newsier days. For the New York Times, that's a long piece by Ken Belson on how cities that built stadiums years ago are seeing fiscal woes now. Belson's lede: "Years after a wave of construction brought publicly financed stadiums costing billions of dollars to cities across the country, taxpayers are once again being asked to reach into their pockets."
It's certainly nice to see the Paper of Record giving this topic attention, even on a day when nobody's going to read it. Unfortunately, though, the actual article is a muddled mix of differing anecdotes. Most of it is devoted to the Cincinnati Bengals situation, where, as reported back in August, reduced sales-tax receipts have left Hamilton County with a $14 million a year shortfall in its stadium payments, with local school systems already having given up funding to help fill the gap. That's certainly dire, but it's not actually taxpayers "again being asked to reach into their pockets" to pay for stadiums — any more than it'd be correct to say your car payments went up just because you lost your job and had to dip into your savings to pay them. Either way it's the same public expense; it's just a matter of which pocket the money is coming from.
The other examples cited, meanwhile, aren't all the best parallels to the Bengals fiasco: Indianapolis and Milwaukee seeing shortfalls in stadium bond funds are similar "dip into savings" deals, but Columbus being asked for increased subsidies for the Blue Jackets is genuinely new expense, as is Glendale considering lease concessions for the Phoenix Coyotes. And New Jersey's mulled ticket surcharge for the Devils is, as discussed here previously, potentially a way to get the team to give the taxpayers money, not the other way around.
The most enlightening part of the article, meanwhile, is probably this snippet buried deep on the jump page:
Compared with the lucrative deals for teams in Baltimore, St. Louis and elsewhere, the Bengals won a particularly lopsided lease.
Bob Bedinghaus, the commissioner who spearheaded the stadium project, said as much in 2000.
"They're an organization that's run by lawyers, and they look for every penny around every corner," he told The Cincinnati Enquirer. "It's going to be a difficult relationship going forward for the next 30 years."
Bedinghaus lost his re-election bid soon after. He now works as the Bengals' director of stadium development.
You know, it might actually be time to do something about that.
August 25, 2009
Cincy stadium fund running $13m a year in red
Hamilton County, Ohio, is now projecting that its stadium fund will run a $13.2 million deficit for the year 2010 if tax revenues dip by a mere two percent, an amount that might be conservative in light of hard times. Commissioners are hoping to get concessions from the Cincinnati Reds and Bengals [ed. note: Good luck with that], and/or cuts from the Cincinnati Public Schools to close the gap.
Long before Bernie Madoff, Hamilton County Commissioners and insiders in the Cincinnati area knew that a day of reckoning would come as bills for the two stadiums came due. In 2004, County Commissioner Phil Heimlich called the stadium debt a "fiscal time bomb," suggesting service cuts may be needed in the future.
Since schools have a tougher time threatening to relocate, the smart money on who will make the most concessions might be placed on education. The county could roll back property tax relief, but the commissioners argue that would be "the last option they will consider."
One possible way to close the gap might be to offer naming rights to someone for the Bengals' stadium, something that Bengals owner Mike Brown bypassed so that he could put his Dad's name on the new facility. Betting that the taxpayers of Hamilton County will be able to benefit from naming rights revenue might be as unwise as betting on Cincinnati Reds games if you were a local legend.
August 11, 2009
The New Jersey Nets revealed a few weeks ago that they'll be dropping "New Jersey" from their road uniforms this season, as part of their never-ending plans to move to Brooklyn one of these years. And apparently New Jersey state senator Kevin O'Toole just noticed, because he's hopping mad:
"New Jersey's professional sports teams, the Nets, Jets and Giants, have no problem feeding at the taxpayer funded trough, yet seem to forget who their benefactors are when they order the teams' uniforms," O'Toole said. "The taxpayers of this state have poured hundreds of millions of dollars into infrastructure upgrades in the Meadowlands where all the teams play their home games. Is it too much to ask that professional sports teams that benefit from the support of the New Jersey taxpayer recognize the state on their uniforms?"
Actually, given the going rate for uniform advertising, you could argue that for "hundreds of millions of dollars" the Nets should have the outline of the state shaved into their hair, too.
Meanwhile, in Cincinnati, Hamilton County Auditor Dusty Rhodes is calling on the county to sell its luxury suites that it got as part of the deal to build the Reds' and Bengals' new stadiums, or at least get "something else of value" in exchange for giving them back to the teams: "At a time when county employees are losing their jobs ... it is simply irresponsible and wrong to be giving away for free these assets."
In the county's defense, at least the suites are available to non-profit groups and by lottery to county residents, which is a public benefit of some kind, albeit only to a lucky few members of the public. That's better than some other deals I could name.
January 16, 2009
County to Bengals: How about a bailout for us?
Now here's a pleasant change of pace: Hamilton County Commission President David Pepper says he's considering asking the NFL or the Cincinnati Bengals for a bailout on the team's lease at Paul Brown Stadium, which is set to start costing the county millions of dollars a year in coming years. "It may be a Don Quixote mission, but it's worth raising," Pepper told the Cincinnati Enquirer.
Pleasant, that is, until you read why Pepper needs the bailout: According to the Bengals' lease at the nine-year-old, publicly bought-and-paid-for stadium, the team stops paying rent to the county this year. Starting in 2018, the county pays the team for "any and all expenses of any nature whatsoever incurred by the Team relating to the Stadium Complex." (This is the same lease clause that requires the public to pay for any stadium upgrades that half of other NFL teams have, including but not limited to "holographic replay systems.")
Bengals owner Mike Brown says the lease was front-loaded at the county's request: "We're paying no rent now because we already paid the rent." Though given that the Bengals only agreed to pay $11.7 million total over nine years for use of a $455 million stadium - and still haven't paid some of what the county says they owe - it's hard to argue that the team couldn't afford to cough up a bit more to bail out the local school system.