Category: Cincinnati Bengals

When last we left off with the great Cleveland Browns stadium shakedown, Ohio Gov. Mike DeWine had had his plan to spend $600 million in new sports gambling taxes on a stadium shot down by the state legislature, which instead wanted to spend $600 million in existing sales, income, and other taxes on a stadium, but DeWine was still considering whether to veto that. Can’t we all just get along?

At last, a compromise solution of sorts seems to be in the works, courtesy of several Republican state senators, who say they’re preparing a kind of hybrid of the two plans: State Sen. Lou Blessing has introduced a bill to create a permanent fund for stadium projects and youth sports using increased gambling taxes, but maybe with the omni-TIF stadium district still in place, too? It’s all very muddled, even before you get to this:

While [state Sen. Lou] Blessing said he wasn’t sure whether either of his budget amendments would be accepted, he said he believes that his fellow senators are “amenable” to the governor’s assertion that they need to find a long-term solution to funding stadium projects in Ohio.

Otherwise, he said, if the Browns and/or Bengals get state assistance, it will open the floodgates for other pro sports teams in the state to come asking for help with their own stadium projects.

Right, can’t have every team owner in the state demanding their own public stadium funding, better head that off by, uh, creating permanent stadium funding that any team owner can tap into, wait, not sure we thought this through all the way…

From the sound of things, state senators are still trying to figure out exactly what they’ll support, which undoubtedly will rely on what the governor will support, which in turn will likely rely on what the governor can get the legislature to approve. It’s all a big tangled mess of political gamesmanship, but when all the elected officials in the state want to give money to the local sports billionaire but just can’t agree on which pot of money to use, there’s generally a compromise close at hand. Still not sure what would then happen with the $600 million that Cuyahoga County and the city of Brook Park would be expected to come up with, given that one seems uninterested in helping the team move out of Cleveland proper and the other has a tax base the size of a thimble, but plenty of time to cross those bridges once they come to them.

Ohio Gov. Mike DeWine has come out against the Cleveland Browns owners’ proposal to funnel $600 million in state taxes (and $600 million in city and county taxes) to a new stadium in Brook Park, saying it’s too expensive. But wait, I hear you ask, didn’t DeWine just propose his own massive sports subsidy fund that could be worth $2 billion or more? The governor has an explanation, kinda:

“That bond that would generate $600 million will cost over $900 million. Every penny of that will come out of general fund dollars in the future to pay the bond down,” DeWine said. “That is a ton of money to be taking out of our budget that we need, to spend money on schools, that we need to spend money on mental health challenges. We have a lot of things that we need to focus on in this state.”

First things first: Saying $600 million in bonds will cost $900 million to pay off is technically accurate — same as a $500,000 mortgage could cost you $1.2 million in payments over time — but not all that helpful, given that you’re getting to make a bunch of those payments in the future, as a tradeoff for not coming up with all of the money now. So that extra $300 million is a financing cost, not a construction cost; the cost in present dollars of raising $600 million through future payments including interest is still $600 million. Using nominal dollars instead of present value can be a great way to make a project that relies on borrowing sound more expensive — 900 is bigger than 600! — but it’s really fiscal sleight of hand.

That said, DeWine is correct that the Browns plan would still mean taking more than $30 million a year out of the state budget. But what about his $2 billion stadium fund, to be paid for by raising sports gambling taxes to bring in an extra $130-180 million a year? It wouldn’t use existing taxes, but it would still use tax money — and that tax money would no longer be available to the state if it wanted to raise gambling taxes for some other reason down the road. Other states have used increased gambling taxes to help out their general funds, while Ohio until now has dedicated gambling tax money for K-12 schools; needless to say, at some point there’s a point of diminishing returns where if you start raising gambling taxes too high, gambling companies start leaving the state and your tax revenue will stop going up, so this is money you only get to spend once.

The best way to think about dedicated taxes like these is as two separate decisions: 1) Do we want to raise taxes? and 2) What should we do with the proceeds? Whether raising gambling taxes in Ohio is a good idea is one thing; deciding to spend the resulting $2 billion on sports venues vs. something else is very much another. DeWine is, notably, also looking to raise cigarette taxes by $1.50 to fund a $1,000 child tax credit and cannabis taxes from 10% to 20% to fund things like a suicide hotline and drivers’ ed programs, but he has not explained why the gambling taxes couldn’t go for those things instead of pro sports.

In any event, Ohio now has two competing stadium bills, one to spend $600 million for the Browns, the other to raise $2 billion and figure out which teams to spend it on later. Those are not likely to be the two best options for Ohioans, so if the compromise ends up being “let’s meet somewhere in the middle,” you might want to hold on to your wallets.

Signal Cleveland has read Ohio Gov. Mike DeWine’s stadium slush fund plan so you don’t have to, and even I don’t have to. (Which is appreciated, because the first two sentences of the bill are doozies.) Here’s highlights of what they found:

• Doubling the online sports gambling tax from 20% to 40% would generate an estimated $130-180 million a year, which is a lot, and would easily cover a couple of billion dollars for Cleveland Browns and Cincinnati Bengals stadiums, for starters. Signal Cleveland does not report how that estimated figure was estimated — presumably at some level of increased taxation, people would stop using online sports gambling altogether and the revenue would drop to zero — so we’ll just have to take the governor’s word on this one for now.
• Any resulting windfall of money would be available for either: major-league stadium renovations costing at least $100 million or new stadiums costing at least $1 billion; mixed-use developments around stadiums that are funded at least 60% by non-state sources; or minor-league stadium renovations costing at least $10 million or new stadiums costing at least $50 million. This would cover pretty much anything, though possibly an MLS team might have to appeal to be considered “minor league” if it couldn’t come up with $1 billion worth of crap to stuff into a stadium.
• The newly-created Ohio Advisory Committee for Sports Facility Construction and Youth Sports Education (that’s the OACSFCYSE to you and me) would be required to “prioritize funding facilities or programs that promote economic development, support youth sports education and encourage training in team or individual sports” and “helping communities in the state attract major sporting events or create tax credits to promote youth sports education,” which, yet again, would appear to allow pretty much any pro sports uses.

DeWine, meanwhile, says all this would be great for the state, because it would mean taxpayers wouldn’t have to worry about paying off any nasty bondses:

“We should pay for this with cash,” DeWine said. “We should not bond it with the state.”

That’s … dumb? I’m going to go with dumb. (Collecting even $180 million a year also wouldn’t work to pay off $2 billion in Browns and Bengals costs up front, but maybe DeWine means to pay those off with separate bonds, which, yeah.) As anyone who has taken out a mortgage knows, paying with cash isn’t necessarily better than borrowing the money and paying it off later, especially if you can get a good interest rate — and states have access to significantly lower interest rates than normal humans. Whether borrowing stadium money or paying for a project up front works out better for taxpayers is a financing question, not a public policy question; which is to say that the most efficient way to get a good return on $180 million a year in stadium spending is not to spend $180 million a year on private sports stadiums.

All this still needs to be approved by the Ohio state legislature, where Signal notes “Republican leadership has publicly expressed skepticism,” but there’s still lots of budget haggling yet to go. Hopefully once budget hearings actually start, someone will remember to bring a calculator.

Ever since the Cleveland Browns owners let slip that they were looking for $1.2 billion in public money to help pay for a $2.4 billion domed stadium in suburban Brook Park, there’s been speculation about whether and how Ohio Gov. Mike DeWine would propose to come up with a pile of state cash. Yesterday, DeWine dropped one hell of an other shoe, proposing a new Sports Facilities Construction and Sports Education Fund that would collect between $130 million and $180 million per year to be used for stadium construction, specifically naming the Browns and Cincinnati Bengals owners as beneficiaries:

DeWine on Monday proposed creating a new stadium and youth sports education fund with money generated by doubling the state’s tax on sports gambling from 20% to 40%…

DeWine said the gambling revenues would be controlled by a newly created Sports Facilities Construction and Sports Education Fund, whose members would be appointed by the governor’s office and the legislature. He said fund proceeds could be used either on stadiums used by major or minor-league professional sports teams, or sports education. To illustrate what he meant by youth sports education, DeWine offered the example of helping needy families afford sports-related expenses that might otherwise prevent them from participating.

Oh, isn’t that nice, needy families, I’m glad they’re getting something ’cause they have a hell of a time! DeWine did not specify how the fund’s DeWine-appointed managers would determine how much to spend on each of its two disparate missions, though it’s hard to see the state of Ohio finding $180 million a year worth of family sports-related expenses to cover.

It’s still a bit uncertain how much money could be raised by doubling the state’s sports gambling tax, since no one knows how much sports gambling will take place in the future, especially once it’s saddled with a 40% tax. But if DeWine’s estimate of $130-180 million a year in tax revenues is correct, that would be enough to cover debt service on between $2 billion and $2.8 billion of stadium expenses — and potentially more than that if tax revenues rise over time. That would be enough to cover the public funding asks of both the Browns and Bengals owners, and likely leave room for more largesse in the future to other Ohio sports teams, who you know would be lining up once they heard about the DeWine handouts. [UPDATE ALREADY: The Columbus Blue Jackets have entered the chat.]

The governor focused his announcement on all the reasons why hiking the sports gambling tax is a good idea — “These sports gaming companies … they’re getting Ohioans to lose massive amounts of money every year” — while skipping past the bit about who he’s hoping to give the proceeds to. In fact, DeWine portrayed a proposal to dedicate more than $2 billion in tax money to pro sports team owners as a way to save taxpayers money:

“This proposal that I have outlined has the added benefit of no longer will we have to, at any time in the future, go to the people of the state of Ohio and say, your tax dollars will go for this stadium or that stadium,” DeWine said.

I’m sorry, that is incorrect, but we have some lovely parting gifts. Or rather, DeWine is part right: He would no longer have to go to the people of Ohio to say “we want your tax dollars to go for this or that stadium,” but only because he would have created his own slush fund so he would no longer have to ask.

In any dedicated tax funding scheme like this one, it’s important to remember that there are actually two decisions at work: One on which taxes to tap for the money, and the other on where to spend the proceeds. There’s nothing stopping the Ohio legislature right now from doubling the sports gambling tax and spending it on education, or spending it on roads, or just putting it in the general fund and letting future legislators decide what the state most needs at the time. Once the 20% gambling tax hike is dedicated to stadiums, though, that money is gone and can’t be tapped for any other public needs. And that’s assuming the gambling tax revenue even comes in at the rate you hope for: As Minnesota found out to its chagrin with its Vikings stadium funding deal, sometimes the gamblers don’t show up right away, and you have to tap other state funds to cover your budget hole.

All this is merely a proposal at this point, and has to be approved by the Ohio state legislature, some of whose members represent Cleveland and will be none too pleased to hear about the governor hoping to use state tax money to help Jimmy and Dee Haslam move the Browns outside city limits. (Though they’re Democrats and the state legislature is Republican-controlled, so that may not matter so much.) While we wait on word of state legislators’ response, we do have a reply from Browns COO Dave Jenkins, which comes down to thanks, but we like our tax kickback scheme better:

“We appreciate Governor DeWine’s commitment to looking at creative ways to solve sports facilities development while positively impacting youth sports throughout Ohio. … At the same time, we continue to work with the appropriate stakeholders and other experienced experts to develop alternative funding mechanisms for an enclosed Huntington Bank Field in Brook Park, knowing the importance of not tapping into existing taxpayer funds that go to other pressing community needs. The model we’ve proposed on the state level would leverage only the incremental tax revenues from within the development itself to enable the project.”

Everybody’s tax kickback scheme is really a way to save taxpayers money, apparently! Funny how that happens.