December 25, 2009
Stadium Boom Deepens Municipal Woes
By KEN BELSON
CINCINNATI — Years after a wave of construction brought publicly financed stadiums costing billions of dollars to cities across the country, taxpayers are once again being asked to reach into their pockets.
From New Jersey to Ohio to Arizona, the stadiums were sold as a key to redevelopment and as the only way to retain sports franchises. But the deals that were used to persuade taxpayers to finance their construction have in many cases backfired, the result of overly optimistic revenue assumptions and the recession.
Nowhere is the problem more acute than in Cincinnati. In 1996, voters in Hamilton County approved an increase of half of one percent in the sales tax that promised to build and maintain stadiums for the Bengals
and the Reds, pay Cincinnati’s public schools and give homeowners an annual property tax rebate. The stadiums were supposed to spur development of the city’s dilapidated riverfront.
But sales tax receipts have fallen so fast in the last year that the county is now scrambling to bridge a $14 million deficit in its sales tax fund. The public schools, which deferred taking their share for years, want their money.
The teams have not volunteered to rewrite their leases. So in the coming weeks, the county plans to cut basic services, lower its legal bills and drain a bond reserve fund with no plan for paying it back.
“Anyone looking at this objectively knows it’s a train wreck,” said Dusty Rhodes, the county auditor. “I told them they were making a big mistake, but they didn’t want to hear me.”
Cincinnati is hardly alone. In Indianapolis, the Capital Improvement Board spent 2009 trying to find $32 million
to run the Lucas Oil Stadium and convention center. In Milwaukee, a drop in sales tax receipts may delay by several years the date for paying off the bonds issued to build Miller Park, the home of the Brewers.
Columbus, Ohio, is considering using public money to keep the Blue Jackets
in town. Glendale, Ariz., has fought to hold the Phoenix Coyotes
to their long-term lease. In New Jersey, a ticket surcharge
may be added to help resolve a tenant-landlord dispute between the Devils
Mark Rosentraub, the author of the book “Major League Losers
,” said that many of the stadium deals included “revenue bombs,” with financial traps like balloon payments on debt in later years and sweeteners like the Hamilton County property tax rebate to win public support.
In many cases, the architects of the deals are long gone by the time the bill comes due.
“This is one of the effects of the economic tsunami sweeping through,” Rosentraub said of the deficits.
The 1996 proposal to build stadiums for the Bengals and the Reds had plenty of proponents. The economy was growing, Riverfront Stadium was outdated and the Bengals were hinting that they would move, as the Browns had done.
The plan went awry almost from the start. The football stadium exceeded its budget by $50 million, forcing the county to issue more bonds. Forecasts for growth in the sales tax turned out to be too rosy. The teams received sweetheart leases. In 2000, voters threw out the county commissioners who cut the deal.
That year the sales tax grew 1.8 percent, the first of many years below the 3 percent forecast. Both stadiums were originally expected to cost $500 million combined. Yet Paul Brown Stadium alone cost $455 million and the Great American Ballpark, the Reds’ home a few hundred yards down the Ohio River, cost $337 million by the time it opened in 2003.
The generous deal for the Bengals has been a sore spot. The team had to pay rent only through 2009 on its 26-year lease, and has to cover the cost of running the stadium only for game days. Starting in 2017, the county will reimburse the team for these costs, too. The county will pay $8.5 million this year to keep the stadium going.
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