Ohio Gov. Mike DeWine has come out against the Cleveland Browns owners’ proposal to funnel $600 million in state taxes (and $600 million in city and county taxes) to a new stadium in Brook Park, saying it’s too expensive. But wait, I hear you ask, didn’t DeWine just propose his own massive sports subsidy fund that could be worth $2 billion or more? The governor has an explanation, kinda:
“That bond that would generate $600 million will cost over $900 million. Every penny of that will come out of general fund dollars in the future to pay the bond down,” DeWine said. “That is a ton of money to be taking out of our budget that we need, to spend money on schools, that we need to spend money on mental health challenges. We have a lot of things that we need to focus on in this state.”
First things first: Saying $600 million in bonds will cost $900 million to pay off is technically accurate — same as a $500,000 mortgage could cost you $1.2 million in payments over time — but not all that helpful, given that you’re getting to make a bunch of those payments in the future, as a tradeoff for not coming up with all of the money now. So that extra $300 million is a financing cost, not a construction cost; the cost in present dollars of raising $600 million through future payments including interest is still $600 million. Using nominal dollars instead of present value can be a great way to make a project that relies on borrowing sound more expensive — 900 is bigger than 600! — but it’s really fiscal sleight of hand.
That said, DeWine is correct that the Browns plan would still mean taking more than $30 million a year out of the state budget. But what about his $2 billion stadium fund, to be paid for by raising sports gambling taxes to bring in an extra $130-180 million a year? It wouldn’t use existing taxes, but it would still use tax money — and that tax money would no longer be available to the state if it wanted to raise gambling taxes for some other reason down the road. Other states have used increased gambling taxes to help out their general funds, while Ohio until now has dedicated gambling tax money for K-12 schools; needless to say, at some point there’s a point of diminishing returns where if you start raising gambling taxes too high, gambling companies start leaving the state and your tax revenue will stop going up, so this is money you only get to spend once.
The best way to think about dedicated taxes like these is as two separate decisions: 1) Do we want to raise taxes? and 2) What should we do with the proceeds? Whether raising gambling taxes in Ohio is a good idea is one thing; deciding to spend the resulting $2 billion on sports venues vs. something else is very much another. DeWine is, notably, also looking to raise cigarette taxes by $1.50 to fund a $1,000 child tax credit and cannabis taxes from 10% to 20% to fund things like a suicide hotline and drivers’ ed programs, but he has not explained why the gambling taxes couldn’t go for those things instead of pro sports.
In any event, Ohio now has two competing stadium bills, one to spend $600 million for the Browns, the other to raise $2 billion and figure out which teams to spend it on later. Those are not likely to be the two best options for Ohioans, so if the compromise ends up being “let’s meet somewhere in the middle,” you might want to hold on to your wallets.
I don’t know whether this idea is good or bad public policy. But I like the symmetry of taxes on the gambling industry and gamblers paying for the venues of the games on which the gambling occurs. It’s kind of like using taxes on gasoline and vehicle sales to fund road maintenance.
Haslam’s proposal relies on diverting funds from existing taxes that flow into the general fund whereas DeWine’s proposal is creating a different pool that would be diverted.
Now you are right you could have that pool flow into the general fund anyway. But since the sports gambling industry relies on interest in sports it makes sense that they are ones that prop up sports teams.
It’s like an isoceles triangle!
its just an easier sell that they would be creating a pool from people who are more likely to be using the facilities (those betting on the games) than the general public. What the general public pays and uses would be untouched.
How much does a state run suicide hotline cost? If you thought you needed it, couldn’t you pull a million bucks from somewhere in the general fund? I just find that baffling.