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Wednesday, August 5, 2020

County to Tap Q Deal Reserves to Reimburse Indians for Club Lounge, Parking Lot, Escalators

Posted By on Wed, Aug 5, 2020 at 1:02 PM

click to enlarge PHOTOS VIA WIKIMEDIA COMMONS
  • Photos via Wikimedia Commons
Cuyahoga County Council voted Tuesday to reimburse the Cleveland Indians for roughly $3.5 million in repairs and renovations from a pot of money created during the Q Deal negotiations.

The taxpayer money will cover the costs of projects at Progressive Field largely completed in 2018 and 2019, including escalator repairs and preventative maintenance, the expansion of the player parking lot, renovations in the Club Lounge, renovations to the suites, and other work.



click to enlarge indiansrepairs.jpg

Per the conditions of the Indians lease agreement with Gateway Economic Development Corporation, the nonprofit entity that owns Progressive Field and the Rocket Mortgage FieldHouse and leases them to the pro teams, the public is on the hook for all capital repairs exceeding $500,000.

Ordinarily, the reimbursement for the work detailed above would come from the county Sin Tax on alcohol and cigarettes. But projected Sin Tax revenues for the duration of its extended life (until 2034) is virtually all accounted for, and new revenue is trickling in at a slower pace due to the coronavirus, according to Gateway Chair Ken Silliman and county fiscal officials.

Silliman noted that the reserve fund created during the Q Deal — and which was included as part of the $70 million bond issue in 2017 — was intended to give the county a "head start" in forthcoming lease negotiations with the Indians. There is an unquestioned assumption that the public will have to pony up in a big way to keep the baseball team when their lease expires in 2023. The Cavs' bilking of the public for its arena upgrades, and the joyful acquiescence of local elected leaders, guaranteed that the Indians and Browns will expect commensurate handouts, even as the public becomes less and less capable of paying.

The sports facility reserve fund currently has a balance of $5.7 million. The current Indians' reimbursement will reduce it $2.2 million.

Silliman said the Indians requested that the reserve funds be used to expedite their reimbursement because of their financial challenges due to Covid-19. Councilwoman Sunny Simon noted that the county was experiencing financial challenges of its own, and wasn't exactly in an ideal position to "float" the Indians money. Silliman responded that this should not be construed as an advance — the team is owed this money, per the lease — and that the sports facility reserve was separate from the county's general fund.

Councilman Michael Gallagher nevertheless took issue with a number of the "repairs" in question. The lease stipulates that the county pays for capital expenditures over $500,000 but "improvements" are supposed to be covered by the team. Why on earth should taxpayers be responsible for an expanded player parking lot, he wondered? Was this just so the players could park larger cars?

"Hopefully in the future we sharpen the pencil on this lease," Gallagher said, "because it is without question tilting one way [against the interests of county taxpayers]."

But these leases have been tilted against taxpayers from the jump, and county leaders have had ample opportunity to sharpen their pencils. The county's current financial position vis-a-vis the teams only grows more dire in the age of coronavirus. Last year, for example, the county borrowed $60 million in bonds as an advance on future Sin Tax revenue to pay for projects at the stadiums completed from 2015-2017. About $7 million per year now goes toward paying down principal and interest on those bonds alone. It's unclear what would happen if Sin Tax revenue declines enough that the county is unable to make timely payments on its staggering debt load. But Bob Franz, the county's financial advisor, suggested that new Sin Tax revenue should not replenish the sports facility reserve because that revenue must go toward paying down the debt on the 2019 bonds.   

More broadly, the region's public finances could soon be in serious jeopardy.  Like the rest of the country, Northeast Ohio is bracing for another housing crisis, which could shatter Cuyahoga County's tax base. The City of Cleveland, meanwhile, is hoping against hope that it'll still be allowed to collect the income taxes of employees who work for Cleveland companies but have been working from home due to the Coronavirus. Much could happen in the next six months and drastic cuts to public personnel and services may be on the horizon. But in Cleveland, the teams always get paid. God only knows which public sources leaders will sabotage to pay the Indians.

What will be left? 

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