Protect the Public’s Investment Cuyahoga County Council January 21, 2014
Presenters Joe Roman Greater Cleveland Partnership Tim Offtermatt Gateway Economic Development Corporation Ken Silliman City of Cleveland Professional Sports Teams
This is about so much more than scoreboards!
Why We Are Here • The public’s investment in the long ‐ term partnerships with Cleveland’s three teams • The community benefits we continue to enjoy from these investments • Proposal to meet our needs and obligations to protect these investments
Why This is Important • Our facilities are Downtown • 1 of only 15 cities with MLB, NFL, and NBA teams • No team is threatening to leave – they are making investments in their facilities / our community • No additional tax – extending what has been in place for nearly 25 years
Professional sports in the U.S. is a partnership between the teams on the fields and the communities that support them.
November 1928 Municipal Stadium Bond Levy For 112,448 59.36% Against 76,975 40.64% 7
Renewed Commitment May 8, 1990 November 7, 1995 For Against For Against 185,209 256,278 98,113 198,390 48.28% 72.31% 27.68% 51.72%
Small Tax on Alcohol and Tobacco Products < 5 ¢ 1 ¢ 1½ ¢ Per Per Per Glass of Wine Bottle of Beer Pack of Cigarettes
Excise Taxes Paid in Cuyahoga County Sports Facilities v. Other Excise Taxes Amounts* and Percentages 100% 90% 80% 70% 60% $1.390 $0.760 $1.690 $2.560 50% 40% 30% 20% 10% $0.320 $0.160 $0.300 $0.045 0% Cigarettes Beer Wine Liquor Cuyahoga Sports Facilities Other Excise Taxes *P/ pack, gallon of beer or wine, 1/10 gallon of liquor.
Excise Tax Analysis $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Cigarette Alcohol Beer Wine/Mix Bev Cigarette Alcohol Beer Wine/Mix Bev Total Total $103,952,679 $113,491,077 $109,056,681 $23,593,125 $350,093,557
VIDEO SLIDE
Impact Annual Ticketed Game Attendance 2006 ‐ 2013 4,000,000 3,500,000 584,006 582,230 578,672 3,000,000 526,874 551,110 569,939 2,500,000 528,933 533,058 Browns 2,000,000 2,275,916 2,169,760 Indians 1,997,995 1,840,835 1,776,904 Cavs 1,394,812 1,500,000 1,572,926 1,603,596 1,000,000 500,000 837,883 839,074 843,042 820,439 824,595 792,391 663,882 525,577 0 2006 2007 2008 2009 2010 2011 2012 2013
Return on the Public’s Investment Nearly two decades of benefits Public More than 300 events per year Amenity 75+ million visitors since 1994 Visitor >4 million visitors per year, more than half Attraction from outside Cuyahoga County Economic $4 billion in almost 20 years Activity Jobs Thousands of jobs (full ‐ time, part ‐ time, construction)
Return on the Public’s Investment Nearly two decades of benefits $900 million in local and state taxes Government Revenue >$1.6 million in property taxes in 2014 In Gateway District alone, five hotels with nearly 1,000 Development rooms, four more hotels on the way, fifteen residential buildings and >60 restaurants/eateries A major league city in a world ‐ class region Regional United Hub Image World Class Cultural Institutions
Protecting the Public’s Investment Protecting the Public’s Investment Tim Offtermatt, Gateway Economic Development Corporation January 21, 2014 16
Cuyahoga County Excise Tax As Passed and Adjusted for Inflation $3.50 An Excise Tax is a tax on purchased goods and is not a percentage tax. as a result, the value of the revenue it generates has declined over time. Revenue from an excise tax levy is $3.00 $3.00 $2.50 $2.00 $1.73 $1.50 $1.00 $0.50 $0.32 $0.32 $0.19 $0.19 $0.16 $0.09 $0.05 $0.03 $0.00 Per pack of cigarettes Per gallon of beer Per gallon of wine Per gallon of mixed beverages Per gallon of spirituous liquor As Passed Adjusted for Inflation
Uses of Excise Tax Uses of Excise Tax ‣ Restricted to: Restricted to: Original construction costs of the three facilities, their • public plazas and their infrastructure $29 million for City to meet capital repair needs under • Browns lease Any amount beyond $116 million that is collected on the • 2005-2015 levy is available to the County for us for professional sports facilities 18
Gateway Economic Development Gateway Economic Development Corporation Corporation ‣ Created by City, County and State 25 years ago ‣ Owns property and sports facilities on 28-acre site on behalf of City and County ‣ Five-member Board of Trustees ‣ Eight direct employees, plus contract employees ‣ Responsibilities: Review tenants’ obligations to maintain facilities • Provide financial accounting of Gateway activities • 20
Leases with Indians and Leases with Indians and Cavaliers Cavaliers ‣ Original lease agreements: 1991 Original lease agreements: 1991 Made it difficult for Gateway to fund its operations • Teams opted to pay for Gateway operations; Gateway • accumulated large payable amounts to teams ‣ Leases Amended in Leases Amended in 2004 2004 Fundamentally altered economics • 21
Gat Gateway no y now has tw w has two of the o of the more public-sect more public-sector friendly r friendly lease agreements in lease agreements in major league pr major league prof ofessional spor essional sports. ts. 22
Under the Current Lease Agreements Under the Current Lease Agreements ‣ All Gateway costs related to property taxes, site All Gateway costs related to property taxes, site maintenance and security are funded by team rental maintenance and security are funded by team rental payments. payments. 2014 budget: $3,765,000 • ‣ Teams are obligated to fund all Teams are obligated to fund all operating costs of the operating costs of the two facilities two facilities Estimated cost: $10-$15 million annually • 23
Original and Amended Lease Comparison Original and Amended Lease Comparison 24
Maintenance and Repair Maintenance and Repair ‣ Gateway: the public’s steward in Gateway: the public’s steward in maintaining the maintaining the quality of the Gateway facilities quality of the Gateway facilities ‣ Teams are responsible for any single individual capital Teams are responsible for any single individual capital repair costing <$500,000/$525,000 repair costing <$500,000/$525,000 Gateway is obligated to fund major capital repairs Gateway is obligated to fund major capital repairs ‣ above $500,000/$525,00. above $500,000/$525,00. Repairs must be consistent with the scope of the original • design, with some adjustment for modernization/competitiveness. 25
No tax re No tax revenue has been used nue has been used to fund Gat fund Gateway capital repair y capital repairs s since initial construction. since initial construction. 26
The Indians and Ca The Indians and Cavalier liers ha have funded nearly $50 million in capital funded nearly $50 million in capital repair repairs since 2004. s since 2004. 27
Need Need for Major Capital Repairs for Major Capital Repairs ‣ Facilities are Facilities are 20-years old and 20-years old and have hosted 75 have hosted 75 million visitors million visitors ‣ Anticipate requests for major Anticipate requests for major capital repairs: capital repairs: Air handling units Steel shoring and painting Sanitary and storm water facilities Roof and sub-roof repair and replacement Chilled water equipment Sound system Concrete repair, replacement, or sealing Water pumps Vertical transportation Ice floor and chillers Building security and automation systems Energy management systems 28
Gat Gateway Major Capital R y Major Capital Repair pairs s Process Process Approved by Gateway’s Board on June 13, 2012 Requests due on or before July 1 of the year prior to repair, unless emergency Must submit an “Annual Team Report” that includes repair costs, maintenance records and a five-year plan of Major Capital Repairs. Gateway must prepare analyses of the Annual Team Reports by August 31. Gateway Board then makes recommendations to the County and the City by October 1 29
Construction costs of maintaining Construction costs of maintaining facilities has doubled since 1993 facilities has doubled since 1993 30
Other than rent receiv Other than rent received fr ed from om teams t ams to fund other activities, fund other activities, Gat Gateway has NO REVENUE t y has NO REVENUE to fund fund major capital repair major capital repairs 31
Ex Excise T cise Tax has w x has work rked ef ed effectiv ctively ely for nearly 25 y r nearly 25 year ars t s to fund fund construction. construction. No Now re w revenue is nue is needed t needed to maintain int maintain integrity of the grity of the public’s investment public’s in stment 32
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