Saturday, January 26, 2013

What to do when the sin tax for the sports facilities ends in 2015?

Jason Russell of the Civic Commons, in his piece “Let he who is without sin cast the first stone”, suggests spreading the dirty deed of the sin tax and to, "extend the sin tax to all counties that touch Cuyahoga County". He points out that the facilities draw spectators from the region so why shouldn't the expense of the facilities be shared by the region?

What should we consider in terms of the 2015 expiration of the sin tax?


Currently the Browns have the best deal of the three teams.  The City’s responsible for the debt and financing for construction and capital repairs and they keep all of the revenue generated except some fees paid to the NFL and a share of NFL media revenue.

The Indians and Cavaliers renegotiated their leases with the Gateway Economic Development Corporation in 2004 so the teams cover the debt.  But, there are major capital repairs and improvements anticipated that are not covered under agreements. The City is stuck with expenses for the parking lot.

The main considerations are what are the revenues needed by the teams to be successful and what payments can the City and County, and possibly the region afford?  So what are our options?

  1. Do nothing - the City of Cleveland will be on the hook for hundreds of millions of dollars for the debt, financing cost, capital repair requirements, and property taxes associated with the stadium and property. 
         The Gateway Economic Development Corporation and Cuyahoga County will need to come up with funding for capital repairs and improvements that are being considered. 
    The debts for construction of the gateway facilities have been reported as being taken care of by rents from the teams that were renegotiated in 2004.  They include approximately $70 million for arena not including finance cost, with payments through 2023 and, a remaining $6 million in ballpark debt is anticipated to be paid-off by 2014.
  2. Ask voters to renew the sin-tax - Continue applying what is generally accepted as a regressive tax – has a greater impact on lower-income persons than higher.  The current sin taxes being levied for the sports facilities are:
      - 4.5 cents per pack of cigarettes; 
      - 6.0 cents per gallon of beer, or 3 cents per 12 ounce bottle; and,   - 12.7 cents per 740 ml bottle of wine
  3. Ask sports teams to pay more under their lease agreements – an unlikely scenario due to existing contract terms, although the Indians and Cavaliers renegotiate their lease terms in 2004.  Would the Browns be willing to do the same?  And, what about the capital expenses anticipated but not covered for the Gateway arena and ballpark?
  4. Increase the admission tax for all three sports teams – The City would have the authority to carry this out.  How much money would be needed?  The three teams and facilities have different needs in terms of the liabilities, costs and revenue requirements.  The Browns are reported to have one of the lowest seat pricings in the league.  Would they accept a higher admission tax on seats that would then limit their own ability to raise admission taxes?  And, what about premium, club seating and loge revenues?
  5. Better utilize revenue potential for City sponsored events – The City of Cleveland has the rights under the lease to use the Browns Stadium eight times per year.  What is the net-revenue potential for using all eight days, and how could the stadium be better utilized by the City?
  6. Other revenue generating resources - At the time the deals were made for the facilities there were increases to parking and rental car taxes.  The new Cleveland Convention Center and Medical Mart are being funded by a Cuyahoga County sales Tax  (.25 cents – another regressive tax).  Property taxes just took a hit in Cleveland via the CMSD (15 mill school levy).  What other sources are there?
  7. What am I missing?

Call for increased private investment by sports teams to balance large public subsidies that will need to continue through 2028.  1.18.2013

1 comment:

  1. The best answer, of course, is to tell the very, very rich sports owners and their many wealthy plays to pay the costs themselves. No more sin taxes or any other.
    The football stadium is financed by the taxes you mentioned - sin tax, 8% parking tax, $2 on every vehicle rental plus an additional 2 percent on the admission tax.

    We've paid much too much for sports in this town.

    Here are some figures from the county that were compiled for me and give somewhat of a real picture of the costs, though not all, since the city is losing huge amounts on garages, having given the teams so many free parking spots, and huge amounts on forgiven property taxes.

    Here is that list:

    Here are some figures of the tax outlay for Gateway and the Browns stadium. Not mine. Most 2012 from the current County Auditor's department:

    $240.5 Million (1st 15 years of sin tax)
    $116.0 Million (County general fund payments for Gateway bonds)
    $38.2 Million (City admission tax for Gateway Bonds)
    $8.6 Million (County Bed Taxes for Gateway Bonds)
    $8.8 Million (excess from sin taxes for Gateway Bonds)
    $21.3 Million (labeled as "other" for County Gateway Bonds)
    $3.75 Million (County to reimburse State Loan for Gateway)
    $3.75 Million (City to reimburse State Loan for Gateway)
    $5.8 Million (City advance to Browns for Capital Improvements)
    $2.0 Million (Repay loan from Cleveland Foundation for Gateway)
    $11.5 Million (County payment on Gateway overruns)

    Yeah, that much.

    Total Cost thus far: $460.2 Million. This is the most comprehensive accounting of the public cost of Cleveland's sports venues anyone has produced.

    (I wonder if the IRS ever thinks of totting all this free stuff for income tax purposes. They seem ready to do it for Jimmy Dimora.)

    Let's stop this madness.

    It's not over. Some payments continue to 2023. So it will be more than $460 million. (Note: Much more).

    The tab is even still higher. We could add $37 million from State of Ohio; $3 million RTA; $2.24 million Cleveland Sewer Dept.; $1/2 million City Water Dept. That's just for Browns stadium.

    I don't have current figures for what Clevelanders are paying on bonds for the football stadium. However, by May 2009 the city had paid $102,823,947 and still owed $160,367,109 for bonds. Payments extend to 2027.

    In addition to the sin tax money, the city - to pay for Browns stadium - added an 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. All dedicated to pay Lerner's bills. (A full discussion of the Browns funding is here:How Good it Gets for the Lerner Family

    May 29, 2009 - 7:32pm by Roldo Bartimole

    4762 reads

    Best and thanks for your work Brian,

    Roldo Bartimole


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