• The Cavs Want $140 Million From Taxpayers But These Facts Should Sound The Alarm

    by  • March 2, 2017 • Uncategorized

    I spoke at the most recent County Council meeting about my concerns regarding the Q renovation project. I wanted to follow up my comments to clarify the points I spoke to so there is a written record that every County Council member was made aware of this factual information so it can’t be dismissed.

    I began my public comments addressing the absurdity of the belief that the Q is comparatively old and outdated and at 23 years old is at tail end of the life expectancy of an arena.  This is illogical and ridiculous when you realize that the Q is one of 16 arenas in the NBA built in the 1990s, in addition to 20 NHL arenas built that decade. Besides a rare outlier, all of them expect to have a useful life of 50 years or more.

    I then pointed out that almost all of these arenas built in the 1990s have recently or are in the planning stages of an extensive upgrade/renovation similar to the proposed Q renovation plan. However, the main purpose of my comments was to dispel this myth that the public contribution/financing aspect of this plan is a much better for the City and County taxpayers compared to the deals other cities have given their sports teams to renovate similarly aged arenas.  This will show this is simply not true and in fact the opposite.

    From the questions asked by Council Members, it seems the prevailing attitude is most don’t like that this renovation plan calls requires at least $121m in public funds on top of the $23m that was given to the Cavs in 2014 as part of the Sin Tax extension.  However, it seemed that many on Council are resigned to support it because they haven’t questioned two of the following premises they have been told to believe…

    1. This level of public subsidy is the price all cities pay to have the benefits of an NBA or NHL team and we should be thankful because the Q renovation deal currently in front of Council is a much more public friendly deal than most cities agree to for renovating similar aged arenas.
    2. Without this renovation the Q cannot compete against newer arenas to land events costing us job, spending and tax revenue  and if we don’t agree to this deal we risk the Cavs moving just like the Browns did in 1995.

    Both of these statements are untrue, misleading and are easily discredited with the slightest of scrutiny, a little research and a few tough questions.  This will provide objective facts and data to dispel “statement A” and a follow up in the next few days will dispel “statement B”.   Once these two statements are dispelled and discredited, if anyone on Council still believes this plan deserves his vote and support I hope he has the courage to explain in writing to the public why he thinks  this deal is in the best interests of the constituents.

    Dispelling statement A

    In an attempt to convince Council to approve this deal and justify its high dollar cost, all of you have been told that this level of public subsidy is the price all cities pay to have the benefits of an NBA or NHL team and we should be thankful because the Q renovation deal currently in front of Council is a much more public friendly deal than most cities agree to for renovating similar aged arenas. The following 7 examples show that this is simply not true. 

    1. The United Center in Chicago opened in 1994 which is the same year the Q opened.  In the next few months they will complete a $100m six story 190,000 square foot addition adding new office space for both the Bulls and Blackhawks, a team shop and 15 bars and restaurants (Click here to read about this project). On top of that they are also spending another $100m to build a Bulls practice facility across the street and around the corner, a practice facilities for the Blackhawks with two ice rinks and will be used by the public 91% of the time (Click here to read about this project). Inside the arena area itself, they have made massive upgrades this decade with the addition and creation of the “300 level” which is a “renovated concourse with 144 flat screen televisions, new food and beverage stations above select seating sections and two new bars that open up to panoramic views of the arena”.  All of these renovations, additions, upgrades and new practice facilities add up to an investment over $300m that has been completely privately funded by the team owners.  This compares to the $144m in public subsidies provided to the Cavs if you add the $23m given to them in 2014 as part of the sin tax extension to the current deal requiring $121m in public funding.
    • When asked why there are many examples recently were a new arena or renovation went forward with little or no public funding, Cavs CEO Len Komoroski  said that this only happens in larger markets and smaller markets require public funding for these projects.  The following 6 examples show this is simply not true.
    1. The NBA arena in Salt Lake City Utah opened in 1991 three year before the Q.  Just a few months ago the owners of the Utah Jazz unveiled their $125m massive renovation which will begin at the end of this season.  Click here to see the plans for this massive renovation.  This renovation will provide a new glass exterior,  larger entrances shield from weather, and larger concourses with more dining options like the proposed Q renovation.  However, if you look at the plans you will see that this renovation provides much more including a massive outdoor large screen and stage for watch parties and concerts, completely renovating the private suites enlarging them by 30%, solar panels on the roof and a new $15m jumbotron.
    1. The New Orleans Pelicans of the NBA play in the Smoothie King Center which opened in 1999 and is owned by the State of Louisiana.  Click here to read about the extensive renovation which was unveiled in 2014 which was funded with $54m of public funds.  Then in 2015, the owner of the Pelicans who also owns the NFL Saints, announced $39.5m in renovations to upgrade the scoreboards and video monitors in both the Smoothie King Center and the Superdome.  Click here to read about this $39.5m investment, and only $6m is coming from public funds.  I
    • In total, $60m in public funds were provided for pay for the major upgrades to this arena in New Orleans. This compares to the $144m in public subsidies provided to the Cavs if you add the $23m given to them in 2014 as part of the sin tax extension to the current deal requiring $121m in public funding.
    • New Orleans is the 51st largest media market in the US compared to Cleveland which ranks at 18th.  Once again this seems to go against Mr. Komoroski’s statement that smaller market professional sports teams require more public subsidies in order to compete.
    1. In Portland, the Moda Center where the Trail Blazers play opened in 1995.  Click here to read about the multi year multi million dollar upgrade unveiled in 1994 funded 100% privately.
    • It is important to note that this arena  was originally owned by a public entity similar to Gateway but that entity went into bankruptcy in 2004.  In 2007, the owner of the Portland Trailblazers eventually bought the arena out of bankruptcy in 2007 and has privately funded all upgrades, renovations and operation costs.  This compares to the $144m in public subsidies provided to the Cavs if you add the $23m given to them in 2014 as part of the sin tax extension to the current deal requiring $121m in public funding.
    • Portland is a smaller market than Cleveland so once again, this seems to go against Mr. Komoroski’s statement that smaller market professional sports teams require more public subsidies in order to compete.
    1. The Amalie Arena in Tampa opened in 1996 and is where the Tampa Bay Lightning play.  Click here to read a 2015 article talks about how the team has spent $60m in the past four years on upgrades and renovations and secured $12.5m to pay half of the $25m needed to complete this renovation.
    • Since 2011 only $12.5m of $85m in arena upgrades came from public subsidies.  This compares to the $144m in public subsidies provided to the Cavs if you add the $23m given to them in 2014 as part of the sin tax extension to the current deal requiring $121m in public funding.
    1. In Nashville, the Bridgestone Arena opened in 1996 and is home to the Nashville Predators of the NHL.  Click here to read about how in in 2012, Bridgestone Arena instituted a $2 per ticket surcharge to form a capital improvements fund.  Sean Henry, CEO of the Nashville Predators, said the Bridgestone Arena has received approximately $60 million in upgrades over the past six years, around $20 million of which came from the ticket surcharge.
    • Of the $60m in upgrades to Bridgestone Arena only $8m came from public subsidies.  This compares to the $144m in public subsidies provided to the Cavs if you add the $23m given to them in 2014 as part of the sin tax extension to the current deal requiring $121m in public funding.
    • Nashville is the 29th largest media market in the US compared to Cleveland which ranks at 18th.   Once again this seems to go against Mr. Komoroski’s statement that smaller market professional sports teams require more public subsidies in order to compete.
    1. The Anaheim Ducks of the NHL play in the Honda Center which opened in 1993.  Click here to read an article about how despite losing money every year, the owners have invested over $100m in the last decade for constant renovations including the recent purchase of a $10m new jumbotron.  In 2011 Anaheim City Council approved $75m in 10 year bonds for upgrades and renovations but the ownership group was responsible for paying back 100% of the principal and interest.  This compares to the $144m in public subsidies provided to the Cavs if you add the $23m given to them in 2014 as part of the sin tax extension to the current deal requiring $121m in public funding.

    The only city committing near the amount of public subsidy to an arena renovation as the Cavs are asking for is the $142.5m Atlanta area taxpayers are providing the Atlanta Hawks to renovate Phillips Arena which opened in 1999. This compares to the $144m in public subsidies provided to the Cavs if you add the $23m given to them in 2014 as part of the sin tax extension to the current deal requiring $121m in public funding.

    While I believe this is a terrible deal for the City of Atlanta, at least as part of the deal they negotiated an 18 year extension of the lease prohibiting the team from leaving Atlanta until 2046 vs the 7 year lease extension of the Cavs to 2034 in the current terms of the plan.  Also, $110m of the $142m of public funds comes from an extension of a rental car tax and the rest is slated to come from the sale of Turner Field and no money comes from the general fund or a tax increase.

    Everyone on Council has been told how public friendly the terms of this deal is compared to other City’s deals to help renovate an arena.  These examples show this just isn’t true.  However, in these public meetings you have been told that County Exec Budish, Mayor Jackson and Fred Nance spent months vigorously negotiating with the Cavs and their shrewd negotiations looking out for the public’s best interest yielded many large concessions and savings for the public from the Cavs.

    Call me a skeptic but I have hard time believing that anyone was negotiating in the public’s interest when two years ago on February 26, 2015, Andrew Tobias posted an article with basically the exact same deal terms that are in the current deal, a spokeswoman for County Executive Armond Budish, said: “We are aware of a proposal from the Cavaliers organization, but it is only conceptual at this point. There have been no negotiations or decisions.”  How can they claim they negotiated hard and how much are we paying Mr. Nance an hour to negotiate on our behalf when the result is no changes to the terms from two years ago before any negotiations began?

    Dan Gilbert is a very smart guy, great businessman and a good owner.  I am sure he is well aware of every public subsidies every NBA team has ever received for a renovation and knows the current terms are laughable compared to others.   Like any good businessman he probably intentionally include some absurd terms at the negotiation starting point so that there will be a bunch of built in painless concessions he can easily agree to during negotiations.  I can only imagine his disbelief when he realized there was no pushback.

    We can also use objective facts and examples to dispel the myth you have been sold that without this renovation the Q cannot compete against newer arenas to land events and if we don’t agree to this deal we risk the Cavs moving just like the Browns did in 1995.

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