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Wednesday, October 31, 2018

Budish: If Indians Ask for Big Bucks as Condition of Lease Extension, We Should Aim for Arrangement as Sweet as Q Deal

Posted By on Wed, Oct 31, 2018 at 1:47 PM

click to enlarge Armond Budish, speaking at City Club debate, (10/30/18). - YOUTUBE.COM/IDEASTREAM
  • Armond Budish, speaking at City Club debate, (10/30/18).
Tuesday, Cuyahoga County Executive Armond Budish debated his Republican challenger Peter Corrigan at the City Club of Cleveland. Ideastream's Nick Castele moderated, asking several good and pointed questions throughout.

His final question, before the audience Q&A, concerned the Cleveland Indians. He noted, as we did this summer, that Sin Tax dollars are drying up extremely quickly. And he asked, in the event that the Indians come to the county asking for public investment for stadium renovations over and above the Sin Tax, should they get it? And if so, how should it be paid for?

Peter Corrigan responded first. After lamenting earlier in the debate that the county simply could not take on any more debt, (in the context of the justice center), he said that he'd be in support of a Progressive Field renovation deal if there was persuasive evidence of a positive return on investment.

"But we'd have to make sure that those numbers are very well ironed out," he said.

Corrigan's implication was that the Q Deal's numbers likely aren't as rock solid as everyone initially swore. "The original plan looked pretty good," Corrigan said. "I don't know if that's really still the case... In fairness to everybody, including Budish, making that decision was really a function of what those numbers looked like at the time."

Up next, Budish dusted off his favorite Q Deal talking points and ticked them off one by one for Corrigan. The deal, he said, "locked in" the Cavs for an additional seven years; it "stabilized and ensured the future" of the Q until 2034; furthermore, the public costs of the renovations would be paid for "almost entirely" from tax income directly tied to the lease extension.

"You might say, with the Cavs changing and LeBron not being here, [we] might not be able to meet [our] requirements," Budish said. "The fact is, [the Cavs] guaranteed it. So the county has no risk there. If revenues come down, taxes come down, the county is protected. That's the kind of deal that the county will look to make with the Indians." 

This is incorrect. Budish is describing a "shortfall," a situation in which actual tax revenue comes in lower than projected tax revenue. And as we noted throughout the Q Deal proceedings, initial reports that the Cavs would be covering all shortfalls were bogus, notwithstanding gratitude from Budish and other elected officials.

The Cavs will only "cover" shortfalls in the sense that they will advance the county the necessary funds after all money in one of two designated reserves has been exhausted. The Cavs' payment will be in the form of what is called "contingent rent." When the reserve of public revenue is sufficiently replenished, the Cavs will be fully reimbursed. 

Budish did note, correctly, that some of the public funding built into the Q Deal will be set aside in an additional reserve fund in anticipation of an Indians' ask. "We have $30-40 million dollars within the Q Deal, so we're already ahead of the game," he said. 

As Cavs tickets are selling in the neighborhood of $2 on secondary markets, it's looking increasingly like revenue projections will be extremely low. Though remember that Q admissions taxes won't start paying for the renovations until mid-2023. Until then, we'll still be paying off the original construction of the Gund Arena. Nevertheless, Budish continues to sing the praises of the deal. During the debate, there was no other topic he spoke about with greater fervor and pride.  

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