Friday, November 22, 2013

Browns $120 million proposed capital improvements, Ordinance #1578-13: Join the conversation at the Civic Commons

This is a version of a post at the Civic Commons.  Please join in the regional conversation with your thoughts and opinions about the Browns proposed improvements as well as the stated intent of Mayor Frank G. Jackson and Browns CEO Joe Banner to renew the Cuyahoga County sin-tax in order to continue to help cover the expenses of the three pro-sport's facilities.  

See here to review the important and underlying Lease Agreement between the City of Cleveland the the Browns, as well as Ordinance # 1578-13 that will be discussed in Council this coming Monday at 9:30 am.  You can watch the hearing LIVE on-line on Cleveland Channel 20. Please also consider coming to the Cleveland City Council Meeting in our Council Chambers on Monday at 7:00 pm, where we anticipate the Council leadership will move to approve the legislation as requested by the Mayor the same evening, less than one-week after the proposed deal was announced.  Please also see the most recent coverage from the Plain Dealer that offers a good description of the deal and issues that will be discussed on monday.

Join in on the conversation at the 
POSTED BY Brian Cummins, Friday, November 22, 2013.

Thanks to the Civic Commons for getting the conversation started.  We have two days before Cleveland City Council hears Ordinance #1578-13, 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.

First off, given the information I have, if voted on today, I would vote no.

Although the underlying lease agreement between the City and the Browns is hugely, no grossly lopsided, we are nonetheless obligated under the law to abide by it.  Although I have some confidence in the Mayor's Administration in terms of the stated negotiations with the Browns, I've not received sufficient information to be confident this is the best deal we can get.

NOTE: The Ordinance and Lease Agreement can be reviewed at the link posted here.

My biggest concern today, as we head into the weekend, is that Cleveland City Council as a legislative body, will likely not take the time needed to conduct what I believe should be thorough due diligence.  Secondly, apart from due diligence on this specific legislation, there has not yet been proper due diligence and public discourse on the proposed (by the Mayor and Browns this week) renewal of the sin-tax.

It is my believe that without a full review of the total future legal and other anticipated obligations for all three pro-sports facilities, there should be no agreement for any new obligations for additional payments for any of the facilities.

Some initial questions:

1.     What is the legal case for the City entering into agreement to take on these additional repairs and improvements?

2.     What is the urgency for this to be considered and passed under emergency ordinance?  I’ll be asking Monday to delay any such vote until after the new year.  To be asked to approve within less than two weeks from when the Brown’s proposed this, and only a week before a holiday is unacceptable given the fact that it represents an additional $30 million in obligations to the City’s General Fund and other changes to the current lease.

3.     What is the make of the Brown’s current and propose jumbotron scoreboard(s)?  The current is claimed to be only several years away from being obsolete or unable to obtain replacement parts?  This is related to the above question of urgency and for some form of confirmation of the actual cost of the new replacement board – stated by the Browns to be $20 million.

4.     Why would the City concede control and direction of any future increase in admission tax as is being proposed?  This in fact begins to tinker with the existing lease, which the Mayor’s Administration stated was not to occur.

5.     Has there been any consideration or financial models developed to explore other sources of revenues such as increasing the admittance tax, increasing the City’s income, food and beverage or other such taxes or fees, trying to negotiate with the Browns a payment in leiu of taxes - they currently pay no taxes on the building and the City payed $646,922.84 in property taxes in 2012.

6.     Why is the Mayor proposing to pay the $30 million new obligation from the General Fund as opposed to some other source more appropriate for capital investment, i.e., bond or other fees or taxes. The $2 million/per year for 15-year obligation is unprecedented and too onerous to place on future administrations and Councils.

These are only the immediate questions and should help in getting the conversation started.

NOTE:  There has been some confusion as to what the deal actually represents as pertaining to the current obligations the City has and how this deal would change those obligations.

The underlying lease and therefore this deal are very complicated.  Here is an attempt to explain the deal and its implications.

The City would commit $30 million in the form of $2 million payments per year for 15 years.  Although both the Administration and Browns take pains to state the obligation is worth only $22 million, given the present value of the obligations, in fact, if paid annually, the City will be paying out $30 million.  The only way this could be spun as a $22 million dollar contribution and not $30 million is if it were paid today!

This $30 million represents payment for: $20 million jumboTRON scoreboard (check out the Houston Texans’ new $16.5 million 277-foot-long video board); $5 million new sound system; and $5 million control room.  In addition, in our briefing earlier this week the following expenditures were also discussed: field lighting $3 million, ADA improvements $3 million, and painting/carpeting $7 million.

Also, part of the deal is allowing the Browns more control of what and when $12 million is spent on capital repairs.  The City’s obligations for capital repairs, both current and the new proposed are:

The City is proposing to give the Browns more control for spending earlier (beginning in 2016) $12 million.  This $12 million is part of approximately $24 million currently available from collections of the sin-tax.

The confusion in some media reports and on-line blogs and comments sections is that some have mistakenly led people to believe that the $2 million annual payments for 15-years ($30 million), would off-set future payments of capital repairs as detailed in the remaining payments listed above in what is called the Lease Agreement’s Schedule 14(f).  Or, that the expenditure of the $12 million of the current $24 million of sin-tax proceeds would reduce the balloon payments and total amount from Schedule 14(f).  The fact is that the $30 million is in addition to the current $39,450,000 Capital Repairs that the City is obligated to pay.  This will bring our total obligations to $82,500,000.

It is correct, that by giving more control over the proposed $12 million (so that it could be spent as early as 2016) would reduce the balloon payments that start in 2021. But, it is also true that by moving these payments up the City would forgo some $1 million in interest (this is the flip side of the future value of money argument).
And, people seem to forget or not mention in these reports that the City still owes some $134 million in principal and interest on the initial $202 million in municipal bonds that were issued to pay for the $330 million stadium.

There is a lot more information and things that should be considered, not the least being how much are the obligations for debt and maintenance on all three pro-sports teams?  The obligations, both legal and anticipated that would need to be covered by a renewal of a sin-tax or to be covered by some other form of funding. In January, I began my research into this issue and the information developed is available on my blog at the following links:

·       Cleveland Browns Stadium gets new name as old sin tax expires in 2015
·       Councilman Calls On Sports Teams To Boost Investments In Cleveland
·       What to do when the sin tax for the sports facilities ends in 2015?
·       Pro Sports Player Salaries & Anticipated NFL TV/Media Revenue come 2014
·       ROLDO on pro sports teams - pay the costs themselves

I look forward to hearing other’s perspectives and opinions on these important issues, and what actions can be taken to increase public education and public discourse.

PS: in light of the request of the Browns to replace their JumboTRON with two new JumboTRONS at a cost of $20 million and the control room and kick-ass state-of-the-art stadium sound system, here is a picture of my family's 16-year television that still works and delivers excellent picture and sound of Monday Night Football and PBS NewsHour.  Some of our neighbors have asked me to put dibs in for the used Browns JumboTRON for movie nights in my Ward.  Maybe I can work that out with the Browns as part of a side-deal on Monday.  Stay tuned...

Cummins family's 16-year old TV
still in operations delivering a high
quality entertainment experience.

No comments:

Post a Comment

Please feel free to leave your comment(s) or question(s).