Friday, January 18, 2013

Cleveland Browns Stadium gets new name as old sin tax expires in 2015

Call for increased private investment by sports teams to balance large public subsidies that will need to continue through 2028.

Renderings from FirstEnergy Corp. of Browns Stadium.
FirstEnergy Corp.has bought the naming rights of the stadium.

[Updated Friday 1.18.13:  to include sin tax spreadsheet published by the Plain Dealer as well as property value and tax information.]

The following is an attempt to document the funding, payment and revenue generation of Cleveland's sports facilities.  It's also a call for a larger discussion on how the lopsided public investment can be better leveraged for a fairer and increased share of private investment.

In light of the new ownership of the Cleveland Browns and the recent announcement of a multi-million dollar naming rights deal with FirstEnergy, there is a need to begin serious due diligence in assessing the City of Cleveland's remaining debt and interest obligations and schedule of payments for maintenance obligated under the lease.

This is particularly important as the two voter-approved county sin tax levies (1990 and 1995) expire in 2015.  Additionally, there have been previous reports of the Gateway sports complexes potentially needing infusions of money for additional capital repairs and improvements.

A discussion of renewing the current sin tax in Cuyahoga County will require collaboration from the City of Cleveland, all three professional sports teams, Cuyahoga County and critically the Ohio State Legislature.  The public deserves to be informed as to why a renewal/extension on the 25-year sin tax will be required and what are the investments returning to the public?

  
With the agressive new ownership of the Cleveland Browns quickly getting down to the business of selling the City's stadium naming rights, it's ripe for the City to be agressive in leading a serious and open discussion about how the funding of Cleveland's sports facilities and the resulting subsidies to the teams can leverage more benefits to the city and and county tax payers.

In particular, the Browns, under the former owner, were considering a commitment to collaborate with the City and the Port Authority in developing a mixed-use project that included plans for athletic fields and a sports-medicine/wellness facility on land north of the stadium. (Source: Laura Johnston, The Plain Dealer, 9.18.2012).

Such plans need to be re-considered by the new ownership and private investment needs to occur in relative proportion to the investment the City has and will continue to make in paying for the stadium.  Thus far the majority of the burden of payments and obligations have been shouldered by the City and most all of the direct revenues and benefits generated by the sports facilities have benefited the professional sports teams.




 Further details regarding the accounting of taxes, expenditures, reserves and forecasts of revenues needed will be added and updated as information is confirmed.

Some numbers:

FirstEnergy Stadium, Home of the Cleveland Browns
  • Approximate construction cost: $330 million.
    • Total cost estimates range from $308 - $352 million not include financing costs
      (see Plain Dealer article dated 2.24.2000).
    • Percentage of public funding: 76%.
    • Private Funding: $84.9 million
  • Total Principal Municipal Bonds Issuance: $202 million.
    • Payments made to date $67.9 million.
    • Principal balance owed: $134.1 million.
  • Browns' Stadium Lease:  $7.5 million (fixed $250,000 per year, 30 years (1999-2028)).
  • Total capital repairs obligations, City of Cleveland: $52.5 million (see Schedule 14f below).
  • Browns naming rights revenue: $102 million ($6 million x 17 years).
  • Sin Tax revenue received to-date: $116 million: $87 million for debt service; $29 million for capital repair requirements of which $5 million was advanced in 2012. 
  • Additional Revenue Sources: 8 percent tax on all parking in the city; raised the admission tax on all events by 2 per cent; and added a $2 a car rental fee. (source: Roldo Bartimole, 3.5.2012 & 5.29.2009).
  • Property Taxes: City of Cleveland pays taxes on the land value, currently $19 million value, annual taxes of $646,923.  The stadium building is valued by the County at $276.2 million. The building is exempt from taxes that are valued at $9.3 million.

The following two documents (below the excerpts) represent the lease agreement between the NFL and the City of Cleveland (4-26-96) and the assignment and assumption of that lease to the Browns from the NFL (10-23-98).

Here are two relevant sections - naming rights (for the benefit of the Browns) and maintenance requirements (required from the City).  [click on the images to view in larger format]

Section 12. g. Naming Rights for the New Stadium



Section 14. Capital Repairs  [$52.5 million Total]


Stadium Lease




Ordinance to approve Cleveland Browns Proposed $120 million capital repairs and improvements to FirstEnergy Stadium and authorize a new obligation by the City of Cleveland of $30 million.


Other Legal Documents:



“We are 32 fat-cat Republicans 
who vote socialist [on football]”
- Art Modell
Source: The NFL Machine, By Tom Lowry, Business Week, 1.27.2003 

What portion of sin tax is being collected for what purpose?
What other taxes are being paid by the public and for what purpose?

There are questions or calls for clarification from readers that the sin tax, as we generalize, is not only collected for the Browns, Cavaliers and Indians sport teams and venues but for other benefits as well.  The term "sin tax" has been used predominately to describe the funds used to pay for Gateway and the Browns Stadium.

But, in addition to what is collected to support professional sports, for the sin of smoking the government has collected an additional $100 million or so for arts and culture since passage of that additional tax in 2006.

 The Plain Dealer ran the numbers back in 2010 not just on sin taxes (alcohol and cigarettes) but all of those other pesky taxes and fees - Admission tax; tax on video game machines; bed tax for our hotels, parking taxes (which we thankfully have gotten better at collecting), and vehicle registration fees. See Taxes add up for a night on the town in Cleveland, by Laura Johnston, The Plain Dealer, 4.18.2011.  [click on the images to view the chart in larger format]


References to applicable sections of the Ohio Revised Code -- 

  • 307.673 Cooperative agreement for sales tax levy and bond issuance for construction or renovation of professional sports facilities.
  • 307.696 Agreement for sales tax levy and bond issuance to construct and operate a sports facility.
  • 307.697 Voting on question of levying liquor tax to support facility.
  • 4301.421 Tax levies to finance sports facilities.
  • 5709.081 Exempting public recreational facility used for athletic events.
  • 5743.024 County cigarette sales tax - local excise tax administrative fund.
  • 5743.323 County tax on use, consumption, or storage for consumption of cigarettes.


Relevant Media reports


EXCERPT from -



Major League Losers: The Real Cost Of Sports And Who's Paying For It,
by Mark S. Rosentraub, 1999, page 6:



Watch for updates to this post and feel free to comment and add information that could benefit the discussion of these important and timely issues.

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2 comments:

  1. Jack McJanuary 18, 2013 at 9:08 PM

    Brian, Thank you for posting information,thought and comment on the stadium and helping us reflect on a period when cities where held hostage by pro sports teams. Glad to have them but at what cost to
    the people? Great post!..John Mc

    ReplyDelete
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