Me, about seven weeks ago:
The city of Cleveland, Cuyahoga County, and state of Ohio have agreed to spend $285 million on upgrades to the Indians (soon to be the Guardians) stadium in exchange for the team owner Paul Dolan signing a 15-year lease extension. … According to the Cleveland Plain Dealer, “all public funding would come from existing revenue sources.” This presumably means an extension of the cigarette and alcohol “sin taxes” that funded the stadium in the first place, as has been previously floated, but it’s hard to say for sure until the actual agreement is released.
On Friday, the actual agreement was released! And I’ve gotten around to reading it, and here are the highlights:
the public financial contributions set forth below are confined to the repair, upkeep, and appropriate modernizations needed to protect and preserve a valuable publicly owned asset.
The Guardians’ stadium — I’ve honestly lost track of its corporate name by now and no one’s paying me to check, though I know it’s not that auto insurance company any more [CORRECTION: I was wrong! Now let’s all forget the corporate name again] — is owned by the city and county, because the team’s previous owners suckered them into building it, in a story that you can read about in Chapter 1 of Field of Schemes the book. Apparently this commits the public to keep upgrading it forever, or at least justifies calling any future upgrade demands preservation of “a valuable publicly owned asset.”
with the public providing 2/3 of the contributions toward an improvementfund solely dedicated to the modernization of the Ballpark
It’s actually $285 million public, $150 million from the team owners the Dolans, so slightly under two-thirds, but close enough.
The County will cause these approximate one-time revenues to be deposited into the Ballpark Improvement Fund with final amounts determined at the time of deposit:
- $5,250,000 from County’s General Fund;
- $1,060,000 from 2020 County Bed Tax Collections (60% of 1.0% Bed Tax);
- $2,250,000 from County Account of Sports Facility Reserve;
- $1,050,000 from 2021 County Bed Tax Collections (60% of 1.0% Bed Tax); and
- $2,000,000 Payment to County from Development Parcel proceeds
That’s all a bunch of money left over from various reserve funds from the last renovation five years ago, and is relative chump change.
The County will issue Bonds for the difference between $135 million and the total of the above amounts, paid by the City, County and State of Ohio funding sources listed below…
Now we’re getting into some real money. As expected, it’s a mix of a whole pile of different public pots of cash: city parking revenue, city ticket tax revenue, county hotel taxes, county cigarette and alcohol taxes, and straight-up general fund money. Add it up and it’s a little over $18 million a year, which along with the other sundry funds is just about right for paying off $285 million in bonds.
The Lease will contain one five-year vesting option to Gateway to extend the Lease subject to the conditions herein. The five-year vesting option will vest at the City’s and County’s option upon Gateway and the City and County demonstrating to the Team, on or before December 31, 2030, adequate and sufficient funding sources to account for an estimated $9 million in annual Capital Repairs during years 16 through 20 of the option period and an additional $67.5 million in Ballpark Improvement Funds to be contributed to the Ballpark Improvement Fund within one year of the public entities exercising the vesting option.
The Dolans are only agreeing to a 15-year lease extension, through the 2036 season, in exchange for the $285 million in public cash — which as noted previously would be the second-largest per-year cost in sports history, after the Indiana Pacers. But if Cleveland and Cuyahoga County want, they can extend it through the 2041 season by spending an additional $112.5 million, which would raise the total public cost to $397.5 million.
Gateway agrees to convey or cause to be conveyed, the Gateway Development Parcel to the Team in exchange for a $2 million purchase price. Gateway or its transferee will then convey its entire share of the sale proceeds into the Ballpark Improvement Fund.
Depending on how much the Gateway Development Parcel is actually worth — nowhere in the proposed agreement does it actually say what it consists of or even how many acres — that’s potentially an additional public cost, in terms of land being provided at below market price.
Anyway, no huge surprises here, though the term sheet is perfunctory enough that there will no doubt be a ton of fine print to wade through if and when this thing gets enacted. One hopes that this will all get revealed once the city and county councils take up the legislation this week, but one doesn’t hope too hard, it’s best to keep expectations low on these things.
The tough part from a hater’s perspective is that the ballpark really does drive economic activity to bars and restaurants nearby, especially when the team is good.
(I will stipulate that many econ profs who call themselves economists [EPWCTE, for short] believe in the substitution effect, despite a hundred-plus years of supply side economics proving that it’s minimal for popular live entertainment.)
If there really is “a hundred years plus” of examples proving your point, you shouldn’t have any trouble posting a dozen or so examples/links that show that proof rather than just claiming it exists.
Worth remembering that in the 1950s and 1960s many MLB owners chose to leave their longtime homes because the neighborhoods around the stadium were “crumbling” (i.e. Philadelphia As, New York Giants, Brooklyn Dodgers, etc.). So the cities that didn’t lose their teams built multipurpose stadiums downtown to keep the teams…but that didn’t lead to the right “fan experience” so teams started building expensive old fashioned stadiums to replicate what they had lost in the 1950s.
So who has been right more often: the economists, or the sportwriter/owner cabal that can never seem to get the economic development piece exactly right?
Strikes me that at least the O’Malleys of the world were at least honest–they wanted a new stadium because it was good for them, not inventing stories about how Google would move in because the Reds would visit 3 times a year.
Every time a team within driving distance goes to Cleveland (Chicago, Toronto, Detroit, etc) there are thousands of visitors. Also, not all the “substitute” spending would occur in Cleveland. Lots of suburbanites would just stay in the suburb and the downtown core would continue to hollow out.
But during road games wouldn’t a similar number of Cleveland residents take their money and spend it in Toronto, Detroit and Chicago?
It may or may not be an equivalent/similar number, but it certainly happens. It’s really no different than the ‘tourist taxes will pay for the stadium’ trap.
Sure, you can impose levies on hotel rooms and rental cars. Just as other communities can do the same.
So “they” pay for your stadium while “you” pay for theirs.
You mean the 8,589 tickets sold for the Cubs @ Cleveland game on May 12, 2021 – that’s a lot of Cubs fans ;)
Or maybe these fans would come if the stadium was not improved at all or not improved with public money
It is a real problem, but it seems that these stadiums don’t really do much to change the narrative. Cities like Cleveland have bigger problems that aren’t going to be solved by a museum or a stadium. Maybe good roads, public safety, and fun events to anchor shopping and stadiums are a better way?
Plus, as teams deliberately shoot for SMALLER crowds with higher ticket prices, should cities continue to invest as they did for the fan experience of the mid 1990s?