Cleveland okays taking money from minority business program to give to Cavs, Guardians

The Cleveland city council voted 13-3 last night to provide $20 million in extra funding to the Gateway Economic Development Corporation for upgrades to the Guardians stadium and Cavaliers arena. Council president Blaine Griffin said that the cash will come from projects “in which we have already borrowed and do not need the money this year” — and if your ears perked up at that “this year,” you’re not alone. The money, which will be used for such things as upgrading elevators and broadcast equipment, replacing seats, and upgrading HVAC and video systems, will come from three sources:

  • $5 million in federal American Rescue Plan Act funding that was slated for a minority business program but not allocated yet.
  • $10 million from other bond proceeds that was intended for other projects that the council didn’t specify.
  • $5 million from Cleveland’s general fund, which one would think the city could have found something to spend it on.

The new spending is needed because the city of Cleveland and Cuyahoga County agreed in 2017 to give Cavs owner Dan Gilbert $70 million for arena upgrades and in 2021 to give Guardians owners Larry and Paul Dolan $285 million for stadium upgrades, both in exchange for lease extensions. While the money is coming from a ton of different sources, one slice is from the extension of cigarette and alcohol taxes (aka “sin taxes”) that were used to build the venues in the first place, and sin tax revenues are falling while construction costs are rising, resulting in a budget gap for Gateway that the city and county are left to fill.

Going by news coverage, it’s been unclear for some time now what exactly the team leases require the public to pay for — I’m digging around for the exact language and will report back here once I’ve located it. Crain’s Cleveland Business previously reported that if Gateway runs out of money and stops paying for required upgrades, however those are defined, “the teams could stop paying the $2 million in annual rent to Gateway or sue the city for breach of contract,” according to Gateway’s lawyer. (Again, it would help to see the actual lease language.) Griffin called the added $20 million in city spending approved last night “responsible” in order to avoid “having to pony up for expensive litigation” and ending up “with a stadium and trying to figure out an end user,” implying that the teams could leave if Gateway defaulted — though given the current Oakland A’s and Tampa Bay Rays situations, “leave for where?” is a worthy question.

The Cuyahoga County Council is set to vote today on more than $17 million of new spending of its own on Guardians and Cavs capital expenses. And this isn’t likely to be the end of it: There’s another ask for another $30 million in potential Gateway spending around the corner, and unless construction costs come down (ha!) or Clevelanders start smoking more, likely more budget gaps to fill beyond that.

City councilmember Jenny Spencer, one of the three “no” votes last night, put it this way at the council’s previous meeting last week:

“From the residents’ perspective, it always seems that when it comes to stadium funding, money just comes like a magic rabbit out of a hat. It just appears magically. Magically, we have $20 million in general funds available. But when it comes to other things the residents need, we don’t have the money.”

To which Griffin replied:

“Somehow, several years ago, this city made a commitment that they wanted teams as part of the economic engine in the central business district. There are some legal obligations that this city has with this lease.”

That “somehow” is doing a lot of work, huh? Griffin has been on the council since 2017, so presumably he knows at least a little something about how this sausage got made; instead, he’s staying focused on how Cleveland taxpayers will have to choke it down.

Share this post:

Friday roundup: More Rays scuttlebutt, Sixers arena advances, nobody’s buying pricey Bills PSLs

It’s been three whole days since we checked in on the Tampa Bay Rays stadium situation! Do you feel bereft? Do Rays execs and Tampa Bay–area elected officials feel bereft? If a press statement falls in a forest and there’s no one around to aggregate it, does it make a sound?

None of this, and more, will be answered in this week’s news roundup:

  • The Tampa Bay Times sports desk has certainly been chiming in on the Rays situation, with columnist John Romano, who first reported on Rays owner Stu Sternberg’s threats to move the team if he didn’t get stadium bonds approved ASAP, declaring that what is needed is “a hero” or “a savior” or “a fairy-tale knight” to “step up and purchase a large hunk of the franchise and pay for a stadium, or at least provide a stadium financing plan that does not involve more than a half-billion in public dollars.” Why a half-billion? Who knows! Where does Romano think Sternberg will go if no buyer steps in? Dunno, though he predicts the team will “be on the move, at least temporarily, when 2026 rolls around and Tropicana is still not fixed and the Rays do not want to be stuck in an 11,000-seat spring training stadium.” (The number of cities that could have significantly larger stadiums ready to go by 2026 is zero, or maybe one if neither the Athletics nor San Francisco Giants have territorial rights to Oakland.) The most logical short-term solution is for Sternberg and local electeds to get together and agree to pay the $55 million it would cost to repair Tropicana Field for the short term, with Sternberg agreeing to extend his lease a few years in exchange; it would take a lot of pride-swallowing, especially on Sternberg’s part, so it probably won’t happen, but the alternative looks like it’ll be a whole lot of baseball seasons in minor-league parks somewhere.
  • The group that wants to bring an MLB team to Orlando — formerly led by former Magic executive Pat Williams before his death this summer — also chimed in, saying that while they would never interfere in the business of St. Petersburg, if the Rays did want to move to Orlando, they’re confident that Orange County political leaders “can provide an attractive public/private partnership stadium financing structure that benefits all stakeholders involved.” The last time they brought this up, the “public” part involved $975 million in hotel tax money, one of the same revenue sources that St. Petersburg had been looking to use on its new Rays stadium. (Though it’s often said that Florida counties can spend this on tourism promotion and building things like stadiums and convention centers, it can also use some of it for zoos and beaches and river cleanup and even transportation and sewer infrastructure, something lots of Floridians would like to see counties do.) The Orange County Commission has passed on this idea in the past; we’ll see if it goes over any better with the Rays as a potential target.
  • The Philadelphia city council voted 10-3 to approve creating a tax-kickback district for a new 76ers arena and a new “arena district” to manage neighborhood impacts, which are expected to be extensive. More arena votes are scheduled for the next council meeting on Tuesday.
  • Cleveland and Cuyahoga County are each being asked for $20 million for Guardians and Cavaliers stadium and arena repairs, with another $30 million ask on the table right behind that. If there’s a small silver lining, it’s that this is money the city and county already agreed to spend, it’s just that the cigarette and alcohol taxes that were supposed to fund it are coming up short, so now taxpayers will have to dig into another public pocket.
  • How are those super-pricey Buffalo Bills PSLs selling? Extremely poorly: Only 10% have sold so far, and the rate of purchases is slowing. If they don’t sell out, the Bills owners are on the hook for coming up with the money elsewhere, at least, so at least it won’t be an additional public disaster like the 1990s Oakland Raiders PSLs were.
  • The Chicago Bears owners and Arlington Heights have finally agreed on a property tax valuation for the land the team wants to build a stadium on in that Chicago suburb, but also they say they still really want to build a stadium in Chicago, raising the question, as the Chicago Sun-Times puts it, of “whether the Bears’ latest announcement is [just] a push for leverage in stadium negotiations that have now stretched over three years.”
Share this post:

Friday roundup: Rays stadium deal falls apart more completely than their roof, San Antonio considers massive tax subsidy for new Spurs arena

Sorry that this has turned into Tampa Bay Rays week here, but stuff keeps happening. And last night, perhaps the most happeningest stuff happened, with the St. Petersburg city council meeting and 1) voting 4-3 to approve spending $23 million toward repair of the Tropicana Field roof; 2) voting 5-2 to put off selling $450 million in bonds for a new stadium and surrounding infrastructure; then 3) voting 7-0 to undo the vote to spend on fixing the roof, after Rays co-president Brian Auld declared “our agreement effectively died” with Tuesday’s county commission vote to delay issuing bonds and “I don’t believe we can make the economics around this arrangement work any more.”

A new council vote on the city bonds is now possible for January 9, assuming the county re-votes to approve its own bonds on Dceember 17. But even in the unlikely event that that happens, two new anti-stadium city councilmembers will have taken office by then, making city approval unlikely. Plus there’s increasing expectation that Rays owner Stu Sternberg will officially cancel the stadium plan anyway in the interim; Auld said that he didn’t even care about the roof repair vote, saying wasn’t confident repairs could be completed by 2026 he would “have more certainty” working out a settlement with the city instead. (Auld also apologized for “the tone” in which team execs’ letter before Tuesday’s county vote declaring the stadium deal “suspended” was received, saying it wasn’t meant to be a threat — whatever it was, it clearly backfired.)

This is crazytown, especially when you consider that this whole thing was set off by the four county commissioners who joined two prior stadium deal opponents in voting to delay the stadium bond sale in October, in order to be all respectful of the losses to Hurricane Milton and everything, apparently without considering that they might lose their pro-stadium majority on election day before their next meeting. As unlikely as it may have seemed at the time, it looks like unless Sternberg and his cronies can find a way to flip one county commissioner by December 17 — and threatening to move the team sure didn’t do the trick — everything is going back to square one now, with Sternberg shaking trees to see if anyone else wants to give him $1 billion for a stadium somewhere, while MLB has to go back to sitting on its hands waiting for this mess to be resolved before discussing expansion. Not to mention that without a repaired Trop, the Rays could be playing indefinitely in a minor-league stadium in Tampa, even as the Oakland A’s are playing indefinitely in a minor-league stadium in Sacramento. Cutting off your nose to spite your face comes at you fast.

Meanwhile, that wasn’t even the only big city council meeting about sports venues yesterday: In San Antonio, the city council held hearings on using tax money to help fund a potentially $4 billion redevelopment including a new Spurs arena. I didn’t watch the meeting, but fortunately University of Colorado Denver sports economist Geoff Propheter did and liveposted about it on Bluesky, so let’s just revisit some of his highlights:

Leading finance mechanism for the district will be a hotel tax and sales tax TIF that will span 3 mi from the district center. The zone can capture all of the 6% hotel tax and 6% sales tax. Holy sh*t that's a lot of money that can be captured. Doesn't mean they will use the full amount.

Geoffrey Propheter (@gpropheter.bsky.social) 2024-11-21T17:02:39.800Z

Without evidence, the assistant city manager says that most people that went to a Bad Bunny concert at the Alamodome weren't from Bexar County. Did they survey every attendee and double check their addresses against IRS or DMV records?

Geoffrey Propheter (@gpropheter.bsky.social) 2024-11-21T17:12:25.690Z

"locals bring visitors because of the authenticity"…I don't understand what this means.

Geoffrey Propheter (@gpropheter.bsky.social) 2024-11-21T17:17:22.930Z

Showing potential funding sources…and as usual, tax expenditures aren't on the list. When you give tax breaks, you are spending money. We know the team and others will end up with tax breaks. Those should always be part of funding discussion.

Geoffrey Propheter (@gpropheter.bsky.social) 2024-11-21T17:18:51.102Z

courage: how does more tourists lead to better homelessness solutions? better housing solutions? better paying jobs–not just low wage ushers or retail workers? How many residents will be able to attend a spurs game compared to today or stay at a hotel in the district? great questions.

Geoffrey Propheter (@gpropheter.bsky.social) 2024-11-21T18:30:35.069Z

courage strikes me also as cautiously optimistic, which puts the council tally at 8-3 if a vote were held today is my guess. I'm assuming the mayor would support.

Geoffrey Propheter (@gpropheter.bsky.social) 2024-11-21T18:33:16.645Z

and the special session is over. Overall thoughts: lots of ideas, nothing concrete, and a lot of silly reasoning. A sport entertainment district is not a novel idea despite some members believing so. Members seem to believe that diverted tax dollars to the project don't hurt existing services.

Geoffrey Propheter (@gpropheter.bsky.social) 2024-11-21T18:38:41.620Z

 

After all that, do we still have the stamina for the week’s bullet points? Let’s try a couple, at least:

  • Athletics owner John Fisher pulling out of his stadium deal with Oakland to instead move to Las Vegas (maybe) might have blown up his plans to get discounted land in Santa Clara for a San Jose Earthquakes practice facility as well, with the city board of supervisors slamming the brakes on the deal after retiring supervisor Joe Simitian said he’s “not convinced [the Earthquakes] would be a good-faith partner” and warned that the sweetheart land deal represented “essentially a $100 million giveaway to a private enterprise.”
  • Speaking of Oakland, the city finance department issued a warning last Friday that the city is on the brink of bankruptcy and can’t count on money from the on-hold sale of the Oakland Coliseum to bail it out — then reversed course and quietly replaced that report on the city’s website with a new, less apocalyptic one.
  • This week was so nuts that a piece of the Dallas Cowboys roof falling off barely even makes the small print. Team owner Jerry Jones doesn’t want a new stadium, at least, or else we know where this would be headed.
  • And we haven’t even gotten to voters in Forsyth County, Georgia approving a TIF district to kick back tax revenues to pay for $225 million in bonds toward an NHL arena, assuming Forsyth County, which is 30 miles north of downtown Atlanta, can land an NHL team. We will revisit this if an Atlanta expansion team gets past the dreaming stage, or if this firehose of Rays stadium news ever stops, whichever comes first.
Share this post:

Friday roundup: Everyone’s building soccer stadiums, no one’s sure how to pay for them

This was a rough week for anyone in the U.S. who is an immigrant or looks like they might be, is trans, might ever need an abortion, is Palestinian, is a federal government employee, is a local government employee, is an employee of anything that depends on international trade, lives near sea level or in places that get hot or are at risk of hurricanes, likes democracy, or cares about a relative, friend, or neighbor who does. Not that it would have been an amazing week for most of those people if the presidential election results had gone another way, but a whole lot of folks are somewhere on the spectrum from anxious to terrified right now, so if you need to check in with each other right now before getting back to life as we know it, that’s not only reasonable, it’s a fine tradition.

And now, whenever you’re ready, back to sports stadium and arena life as we know it:

  • The owners of Sacramento Republic F.C., who now include the Wilton Rancheria Native American tribe by are still led by minority owner Kevin Nagle, announced plans for a new stadium, and almost none of the news coverage bothered to provide details of how it would be paid for, even those that reported on how it was announced to the tune of “Don’t Stop Believin’.” Finally, way at the bottom of a KCRA-TV report, we learn that the city of Sacramento is expected to put up $92 million in infrastructure money from property taxes on 220 acres surrounding the stadium, plus provide free police, fire, EMS, traffic, and other services for the next ten years. The city council is set to vote on the plan Tuesday, so that leaves three whole days to gather feedback, two of which are weekend days and the third is a holiday when city offices are closed, this is fine.
  • Bridgeport is considering a minor-league soccer stadium that would cost at least $75 million and which would likely include public funds, and Baltimore is considering a minor-league soccer stadium with no known price tag or details on how to pay for it, and Fort Wayne is considering a minor-league soccer stadium that is promised will be “100% privately financed” but we’ve heard that before.
  • Cleveland and Cuyahogo County are continuing to look for ways to fill their budget gap for paying for future upgrades for the Guardians and Cavaliers, and county executive Chris Ronayne says options are “not yet concrete” because “it’s a conversation that’s probably also going to have to include the public.” Signal Cleveland speculates that this could include going back to voters to approve another tax increase, unless Clevelanders go back to drinking and smoking at their old rates, which might not be as likely as you would think.
  • Nearly 95% of campaign donations by U.S. sports team owners went to Republican candidates or causes, according to a Guardian review of donor filings, which, duh, Charles Barkley could have told you that.
  • How are Inglewood business owners around the Los Angeles Rams‘ new stadium and Los Angeles Clippers‘ new arena loving all the new foot traffic? Not so much! “One of my lowest sales days was on Super Bowl Sunday” because of street closures, said a local bakery owner at a press conference this week. “I literally made under $600 for the day. I had to send employees home, and you’re just looking around like, ‘What in the world?'” Checks out!
  • Did a major news site just run an item reporting wild economic impact projections for a proposed Buffalo soccer stadium without saying who conducted the study, while the byline partly credits a City Hall press release? Sure did! Please give to support your independent nonprofit or collectively owned news media, we might just be needing them the next year or four.
Share this post:

Friday roundup: A’s exec says Fisher really does have Vegas stadium money (no, you can’t see it)

Before we get to the bullet points, and I know how much you all love the bullet points, there is pressing news we have to discuss first, which is that Athletics owner John Fisher has the billion-dollars-plus he needs to build a stadium in Las Vegas. Sort of. Maybe. According to a guy:

Athletics owner John Fisher and his family will invest $1 billion into the construction of a stadium in Las Vegas and U.S. Bank and Goldman Sachs will offer a $300 million loan, club executive Sandy Dean said Thursday.

Dean made his remarks to a special meeting of the Las Vegas Stadium Authority board.

Dean said four letters will be presented at the Dec. 5 authority meeting asserting construction details and financing will be in place. Final approvals are expected to be made at that meeting to allow construction of the $1.5 billion, 30,000-seat domed ballpark with a capacity for up to 33,000 fans.

So it’s official: Fisher has financing in place for his Vegas stadium … well, no, he will have financing in place by December … or he’ll have a letter (or four) stating that financing is in place?

[One] letter, Dean said, asserts the Fisher and his family have the ability to meet their financial commitment. Dean said [another] letter from U.S. Bank will show that through a review of the owner’s finances that it “concludes the Fisher family has more than sufficient resources to fund the equity investment that’s required to build the stadium.”

Except! Here’s video of Dean saying that one of the letters will be “from John Fisher indicating that his family will invest a billion dollars in support of the project here in Las Vegas.” So which is it: Is the Fisher family committing to spend $1 billion on a Vegas stadium, or just avowing that it  is worth $1 billion? We already knew the latter — Vegas convention center authority chief and unregistered A’s lobbyist Steve Hill keeps saying it, among other things — but that’s not the same as actually figuring out what the family would liquidate to pay for the stadium: the San Jose Earthquakes? The Gap?.

(Dean also said Fisher is still looking to sell minority shares of the team at inflated prices because “it would be good coming to Las Vegas to have outside partners from Las Vegas,” but not because he needs the money, oh no: “The ability to finance the stadium is independent of that.”)

The question all this keeps coming back to isn’t “Where can a billionaire find a billion dollars?” but rather “Is the Fisher family ready to throw a billion dollars of its own money down a stadium hole?” The number of stadiums that can cover their own construction costs is slim; the number that have done so that are in their leagues’ smallest market and include a pricey dome is zero. Which is why people are eager to see Fisher put actual money on the table; promises of a letter next month that will maybe describe actual money on the table is not quite the same thing.

Sorry if all that was anticlimactic. And now, this week’s bullet points:

  • Ohio Attorney General Dave Yost wants to intervene in the Cleveland Brownslawsuit against the city of Cleveland seeking to block the use of the Art Modell Law to block the team from moving to a new stadium in Brook Park. Yost says the team’s claim that the law, which requires that teams be offered up for sale to local owners before being relocated from their current home city, is “unconstitutionally vague” is “wrong,” and since Browns owners Jimmy and Dee Haslam only sued the city, he needed to file a motion to intervene on behalf of the state. Feel the excitement!
  • Philadelphia councilmember Mark Squilla may have come down in favor of letting the 76ers owners build an arena next door to Chinatown, but he has an idea for ensuring that the neighborhood isn’t disrupted: a zoning overlay to “require affordable housing, restrictions on types of businesses, and limits on the size of new storefronts to discourage chain restaurants from crowding out traditional Chinatown retail,” in the words of the Philadelphia Inquirer. Adds the Inquirer: “The precise language mandating how any of this would work has yet to be added to the bill.” This is on top of proposing a tax increment financing district to kick taxes collected in Chinatown back to local businesses to offset any rise in rents as the result of increased property values — pretty sure that would only risk encouraging landlords to increase rents more knowing businesses would be getting subsidies to help pay them, need to go back and check my Intro to Economics textbook chapter on microeconomics.
  • The World Series is over and I didn’t get around to discussing the New York City Economic Development Corporation’s claim that each Yankees and Mets home playoff game generated $20-25 million in economic activity, but suffice to say I talked to an EDC spokesperson who told me (on background, so I’m not supposed to quote them directly so I’m not) that the analysis was based off a previous model from 2022 that puts together assumptions from the city tourism board plus assumptions from the Yankees and then applies a multiplier. Also, they look at “anonymized cell phone data”? No, you and I are not allowed to see the actual model, so no further details about WTF this means will be available.
  • Spotlight on America has a piece on how Tempe, Arizona said no to funding an Arizona Coyotes arena and how other cities could follow its lead, which is all well and good until it concludes by lauding late Seattle Seahawks owner Paul Allen for his commitment to Seattle, when Allen actually paid the city to hold a referendum so he could get $300 million in public money for a football stadium, then refused to open his books like he promised in exchange for the money, seriously, what?
  • Perhaps you would prefer a deep dive into the toilets at the Los Angeles Clippers‘ new arena? Perhaps you would prefer I hadn’t phrased it that way? Sorry, you’re getting both!

 

Share this post:

Guardians, Cavs owners ask for $40m in added public cash for upgrades, because Clevelanders aren’t smoking enough

When Cuyahoga County voters in 2014 approved extending a cigarette and alcohol surcharge for 20 years to provide $13 million a year to the Cleveland Guardians, Cavaliers, and Browns for stadium and arena repairs and upgrades, they were told it was necessary to keep the teams from breaking their leases and moving elsewhere. (They were also told it would “Keep Cleveland Strong,” via stickers that Guardians stadium ushers had to wear on their uniforms under penalty of firing.)

Unfortunately, Cleveland area residents aren’t sinning like they were projected to, and earlier this year it was reported that Cavs owner Dan Gilbert had been fronting money to pay for such “repairs” as upgraded elevators and escalators and a film on the arena’s new glass wall to keep birds from flying into it, while waiting for tax proceeds to come in. And now the Guardians and Cavs owners and the Gateway Economic Development Corp., the quasi-public agency that owns the sports venues, have asked the city of Cleveland and Cuyahoga County for an extra $40 million to fill in for the missing tax money:

Cleveland’s share of the money would come from the general fund, which covers basic services. The city can afford to pay the $20 million thanks to numerous unfilled vacancies, Finance Director Jim Hartley said.

Share this post:

Friday roundup: Browns owners sue to block Modell Law, still no Vegas stadium finance plan from Fisher

We have a lot to cover today, but first I would like to encourage you to donate to Matthew Sweet’s GoFundMe for stroke recovery if you’re a fan of his music and haven’t yet — he sounds like he’s in a bad way, he couldn’t afford health insurance on a musician’s income (especially being off the road for much of the last four years thanks to the pandemic), and needing to have health insurance is still a thing in the U.S. for some reason. Here’s hoping that the money raised will help allow him to make a significant recovery, and that someday even people without hit songs will be able to afford medical care and the Pentagon will need to hold a bake sale.

But enough about the unfairness of the modern American economic system, on to … well, you know:

  • With the city of Cleveland considering whether to file suit under the Art Modell Law to force Cleveland Browns owners Jimmy and Dee Haslam to offer the team for sale to local buyers before decamping to suburban Brook Park, the Haslams have taken the preemptive step of suing to block the Modell law on the grounds it violates the U.S. Constitution’s Commerce Clause and is too vague and probably a bunch of other things, the typography on the PDF is really hard to read. “Today’s action for declaratory judgment was filed to take this matter out of the political domain and ensure we can move this transformative project forward to make a new domed Huntington Bank Field in Brook Park a reality,” said Browns COO Dave Jenkins, which is a nice way of saying, “These damn ‘laws’ and ‘democratic procedures’ were getting in the way of our stadium plans, that could not be allowed.”
  • Speaking of things getting in the way of the Browns’ Brook Park dome plans, Cuyahoga County executive Chris Ronayne has reiterated that he doesn’t want Ohio taxpayers footing $1.2 billion of the stadium bill, saying, “We have looked at the facts, and the facts are that, and I said it before, that the Brook Park play just doesn’t work. It doesn’t work from a financial standpoint, and it’s frankly very detrimental to our future.” Added Cleveland city law director Mark Griffin: “I want to say this to our state legislature … and to this court system: If you make moves to try to gut this city of one of our key corporate partners and money maker, all of us will remember. You will be up for reelection. You would have to deal with the city of Cleveland in some way, shape, form, or fashion, and none of us will ever forget it.”
  • John Fisher will not be presenting any financial details of his Las Vegas Athletics stadium plan at the Las Vegas Stadium Authority’s October 31 meeting, I’m sure you’re all shocked to hear. The authority will discuss his proposed lease agreement for the stadium, but the actual language doesn’t appear to have been posted yet on the authority’s website, guess it’ll be a surprise! Marc Normandin has more on the Vegas clown show at Baseball Prospectus.
  • The Green Bay Packers have agreed to future rent increases at Lambeau Field after previously demanding a rent freeze so it could instead put the rent savings into paying for stadium upgrades. The Green Bay council unanimously rejected that proposal, and Packers execs agreed to annual 2.75% rent increases worth about $30 million in total present value — turns out sometimes pro sports franchise owners do take “no” for an answer, though obviously the Packers are a bit of a special case in terms of franchise ownership.
  • WTOP-TV quotes University of Maryland business professor Michael Faulkender as saying a renovated Washington Capitals and Wizards arena could benefit the surrounding Chinatown because “Generally when people come down for an event, they’re not just going to go straight to the event. They’re also going to, perhaps, come in early, go to restaurants, maybe stay afterward, go to bars,” which 1) they really don’t that much, 2) those that do are already there, since the arena is already in place. Faulkender added, “It may, on the margin, attract people to live closer to it, if they’re regular fans of one of those teams,” and attracting new residents to displace existing ones is exactly why people say the arena has been bad for D.C.’s Chinatown, Faulkender can just stop now, I think.
  • If you were wondering what former Arizona Coyotes owner Alex Meruelo was up to and had your money on asking for tax kickbacks for a proposed $1 billion minor-league and college hockey arena in Reno, Nevada, you’re a winner!
  • New York Gov. Kathy Hochul says her $1 billion Buffalo Bills stadium subsidy was necessary because five other cities were trying to steal the Bills otherwise. She didn’t name any of the cities, of course, but we know what one of them must have been.
  • I wrote a long explainer for Defector this week on where the proposed Philadelphia 76ers arena deal falls on the bad-to-awful spectrum, if you’ve been wanting a long explainer on that. And I did an interview with ABC Tampa about where the Tampa Bay Rays might play next year with their stadium roof in tatters, if you want to hear me expound on that, or just missed seeing what I have on my living room walls.
Share this post:

DC arena lease-back deal isn’t as bad as it first looked, at least

An email from Anu Rangappa, senior VP for communications for Ted Leonsis’ Monumental Sports & Entertainment, rolled in this morning, claiming a bunch of inaccuracies in yesterday’s post about the proposed arena sale and lease-back deal between Washington, D.C. and the Wizards and Capitals. Some of his objections were correct, some were not, and some are in between, so let’s address them one by one (all of the italic quotes below were provided by Rangappa and cited to Monica Dixon, President of External Affairs & Chief Administrative Officer for Monumental Sports):

DC mayor’s lease-back plan could add $110m in public costs to Caps/Wizards arena

Inaccurate: this is not additional funding on top of the $515M. That $515M was split across 3 payments: Year 1 = $117.8M, Year 2 = $171.8M and Year 3 = $171.3M. Upon approval by Council, $87.5M would be counted as funds to pay for the sale, and added to that is the remainder $84.3M ($171.8M total), which is the Year 1 disbursement amount.

After going back and forth with Rangappa and reading over the proposed sale legislation, which he kindly sent over, I can confirm: He’s right, the $87.5 million sale price would be part of the $515 million already approved by the city council, not on top of it. This is explained in the legislation in the most obscure way possible:

It is understood and agreed between DCALP and the District that, except as set forth below, the Project is being funded pari passu by the District Contribution and the Minimum Developer Contribution in accordance with the Project Budget (up to the respective limits of each), and the District shall have no obligation to disburse any amount of the District Contribution until a corresponding amount of the Minimum Developer Contribution has been spent by DCALP for Costs of the Project.

In other words, the district will indeed pay $87.5 million to Monumental — but not until Monumental first pays $87.5 million (“a corresponding amount”) back to the district as a “Minimum Developer Contribution.” That term “Minimum Developer Contribution” doesn’t actually appear to be defined anywhere in the legislation, but Monumental has confirmed that this is the upshot of what would be happening.

Obviously, removing that $87.5 million as an added cost makes this deal a lot less detrimental to D.C. Whether it’s actually good, let’s wait until we’ve reviewed some of the other pieces:

Economist Geoffrey Propheter, the guru of all things sports and property tax, notes that by a previous agreement, all of the arena’s real property (the building itself) is already exempt from property tax. What would be exempted would be personal property (all the stuff in the arena), which Propheter estimates would make the new tax break worth about $1-1.5 million a year, or $18-27 million in present value.

Inaccurate: Geoffrey Propheter assumes that tangible personal property is included in the possessory interest exemption under the lease. A tangible personal property exemption is part of neither the Existing Lease nor the A&R Lease’s real estate tax exemption. Transferring ownership of the personal property to the District will not reduce MSE’s liability under the tax since it applies to leasehold property.

Propheter replies: “Finally I get an answer to this question??” As he said to me in his original email — and I should have made clearer above, which was my bad — he was speculating about what the personal property tax exemption would amount to if there was one, which multiple people with knowledge of the deal hadn’t been able to provide him with an answer about. Monumental has now confirmed that it won’t be leasing back any personal property (the stuff in the arena), so there’s no additional tax break here.

Propheter further notes that Leonsis would get rights to an alleyway and a strip of street frontage as part of the deal, plus arena air rights. Total value: “chump change but still non-zero.”

Inaccurate: This is not free. MSE is paying additional rent. The strip of street frontage is the only new air rights being granted to MSE. The lease always included air rights to the extent on the Arena land.

Nobody said it was free. Both the existing air rights and the new strip of street frontage would be provided to Monumental in exchange for no increased rent, so the subsidy here is indeed “chump change but still non-zero.”

Also, though the teams’ rent would go up under the new deal, it would go up slightly more under the old deal, costing the city about $5 million in present value.

Inaccurate: The math is wrong. From 2024 through 2047 (the end of the Existing Lease term including renewals), the total Rent is $37.2M. From 2024 through 2047 under the A&R Lease, total Rent is $43.6M.

Propheter says this is apples and oranges: The $5 million discount in the new lease is because the lease term is reduced by five years, so the city gets less money overall. Whether that’s a benefit or not depends on whether you think the teams are likely to sign a deal that’s better for taxpayers for years 46-50, or an even worse one.

There’s also the issue of how much of a sweetheart lease Leonsis’s teams were set to get in their existing deal — Propheter estimates they’re getting about a $22-74 million discount in present value dollars over the course of the lease compared to other comparable teams. Most of that, though, Leonsis would be getting under either the new sweetheart deal or the old one; the main difference is that the teams would be getting more square footage now for roughly the same money.

Add it all up, and you’re probably only talking a few million additional dollars that Monumental would gain from D.C. as part of this latest deal. So that’s certainly not terrible, but it still may be WTF: The district has now approved $515 million in taxpayer renovation spending on Leonsis’ private arena — plus around another $50 million in rent breaks —in exchange for a new lease deal that at best is no better for city taxpayers than the one it replaced. Verdict: Mayor Muriel Bowser isn’t throwing good money after bad, but she does appear to be doubling down on making sure the bad money stays bad.

Share this post:

DC mayor’s lease-back plan could add $110m (UPDATE: or not!) in public costs to Caps/Wizards arena

Six months after the Washington, D.C. council approved spending $515 million on upgrades to the Capitals and Wizards arena, Mayor Muriel Bowser has finally come up with a proposal for that last step — and it involves a lease-back deal where the city would buy the arena for $87.5 million and lease it back to owner Ted Leonsis for between $1.5 million and $2.3 million a year in rent.

“The deal was always written, if we left, the city was going to get the building,” Leonsis said. “This was a way for us to, I think, cement the partnership. … This is a way to say if we’re going to spend $800 million, we want all of the dollars going into it.”

There’s a lot going on here, so let’s recap:

  • The city already owns the land under the arena, which is the whole reason for needing a lease to begin with. It also means Leonsis does not currently pay property taxes on the land itself — just $1.3 million a year in rent.
  • By buying the arena itself from Leonsis, Bowser would not only give the team owner $87.5 million, she would remove the building from the tax rolls as well.

[UPDATE 10/23/24 1 pm ET: After emailing with a team representative and Propheter and going through the proposed arena purchase legislation, I’m now satisfied that the $87.5 million purchase price would actually come out of the $515 million already approved by the council, not on top of it. (The wording of both the legislation and the media coverage is super-convoluted, but the Leonsis rep confirmed that this is correct.) I’m putting together an update post to run either later today or tomorrow morning — I’ll post a link here once that’s live. (FURTHER UPDATE: It’s up.)]

  • Economist Geoffrey Propheter, the guru of all things sports and property tax, notes that by a previous agreement, all of the arena’s real property (the building itself) is already exempt from property tax. What would be exempted would be personal property (all the stuff in the arena), which Propheter estimates would make the new tax break worth about $1-1.5 million a year, or $18-27 million in present value.

[NOTE: That was assuming the sale of personal property, which Monumental has finally confirmed is not happening.]

  • Propheter further notes that Leonsis would get rights to an alleyway and a strip of street frontage as part of the deal, plus arena air rights. Total value: “chump change but still non-zero.”
  • Also, though the teams’ rent would go up under the new deal, it would go up slightly more under the old deal, costing the city about $5 million in present value.
  • That bit Leonsis said about “if we left, the city was going to get the building” refers to a clause the city got in exchange for previous publicly funded renovations in 2007, which guaranteed that if the teams moved or their existing lease expired, D.C. would be able to take possession of the arena for free. So spending $87.5 million to get Leonsis to sign a new lease that costs the city at least $23 million worth of lost taxes and rent is awfully WTF.

[NOTE: As noted above, it’s not really $87.5 million in new spending if it’s coming from the money the council already approved. As for the value of the lost taxes and rent, see the followup post.]

(D.C. deputy mayor Nina Albert also said, in the Washington Post’s paraphrase, that “the sale-leaseback model is good for the District because it ensures the money planned for the project will be used as intended and not subject to taxes.” That doesn’t make any sense — taxes are good for the District, since it collects them — nor does the Post’s claim that “the company would have to pay hundreds of millions of taxes back to the District on the renovation money it would receive” without the new lease — as noted above, there’s only about $18-27 million worth of taxes owed now — but an Important Person and an Important Newspaper said it, so I’m passing it along.)

Bowser’s plan still has to go through the D.C. council, so there’s at least the possibility someone will raise some questions here. But right now it looks like the mayor is looking to pile an additional $110 million of public money on top of the $515 million that was already approved. Which, yes, is a way of guaranteeing Leonsis gets “all of the dollars going into” the deal, but one would think a mayor’s priority would be to get some of the dollars for her constituents, too.

Share this post:

Ex-Salt Lake mayor drops referendum bid against Jazz arena sales-tax hike

If you were getting all excited about former Salt Lake City Mayor Rocky Anderson saying he planned to stage a public referendum on the city’s plans to sell $900 million worth of Utah Jazz arena renovation bonds and pay for them with a sales tax hike — for new readers, yes, this is the kind of thing people can get excited about here, don’t say you weren’t warned — you can stand down, as Anderson said late Friday that he’s not actually gonna do that:

We know many are disappointed that the issue of a new sales tax was never put to public vote. We share in that frustration. However, efforts to pursue a referendum will distract time, effort, energy, and resources from the important work of addressing essential issues facing our city, and undermine the opportunities for working together with SEG on matters of mutual passion and concern. Also, there is no certainty about the prospect of meeting the requirements for the sales tax increase to appear on the ballot for a vote. Therefore, to achieve a cooperative alliance that allows us to work together from this day forward for the benefit of the entire community, we will not pursue a referendum.

That’s a lot of words (and a lot of nosism) that comes down to two things: 1) I’d rather work with Jazz owner Ryan Smith than agin’ him, and 2) that whole referendum thing might not have worked anyway. Door #1 sounds more like a cover story for #2 than the other way around, and FoS commenter Ian noted last week that the referendum felt dodgy from the start: Utah referenda can’t be used to overturn legislative decisions that passed by a two-thirds supermajority in both the state house and senate, and the sales tax hike for the arena easily cleared that threshold. So it looks as if Anderson may have been talking before his ass had had a chance to talk to its lawyers, and now that he’s heard back he’s decided to pivot to “Can’t we all just get along?”

The Jazz/Utah Hockey Club (man, is that going to get old to type by the end of this season) arena deal still isn’t finalized, mind you, since Smith and the city still need to agree next year sometime to a lease extension on the renovated arena and the planned surrounding development. With city and state legislators both overwhelmingly in favor of the deal — even if Utahns as a whole are not — it doesn’t seem real likely that this will be a major roadblock, but stranger things have happened, occasionally. If you’re a local (or ex-mayor) with hopes of changing this sales tax subsidy, you know which clouds to yell at.

Share this post: