Posts Tagged taxpayer subsidies
Progressive Field Will Get a Facelift of Some Kind
Posted by Roldo Bartimole in Economic Development on May 11th, 2010
May 11, 2010… You who are paying close attention may have noticed that in my last posting here I said that a Gateway official told me that – despite a contrary mention in a New York Times article – Progressive Field was NOT getting a re-do.
Well, apparently that’s not true. Sorry about that.
Crain’s Cleveland Business this week reports that the Cleveland baseball team will soon announce an agreement to make “significant changes to the ballpark.” As I said in the original post, who knew? Apparently, not us, the owners and taxpayers.
Apparently, the ball park owner, Gateway Development Corp., which you and I heavily helped pay to build, didn’t know either. Gateway said today it has not been advised of the changes. Crain’s knows but the owners don’t. Is that the way it’s supposed to go?
Bill Reidy, retired partner of PriceWaterhouseCoopers and a former city law director, is chairman of the Gateway board. Cuyahoga County and the City of Cleveland have representatives on the board.
I guess the Cleveland Indians and owner Larry Dolan make the decisions without much consultation with the owners – essentially us – the taxpayers of Cuyahoga County.
Gateway top two officials – Todd Greathouse and Brian Kelly – assured me that Gateway – even if the Indians made capital improvements – would not pay for them.
I kinda find that hard to believe if major changes are in the cards. I’m waiting for the other shoe to drop.
Here’s the Crain’s story, which doesn’t say anything about the cost possibilities or who will pay for them:
http://www.crainscleveland.com/apps/pbcs.dll/article?AID=/20100510/SUB1/100509860
To a question of how much Gateway has in any capital fund, the pair assured me it has none. Further, capital improvements WOULD be paid by the team. Each year an operating and capital fund is established with the team meeting the costs.
However, if these are to be major changes unlike normal capital improvements, the public needs to be assured that the team will cover the costs. Especially when it appears that Dolan is making the decisions without even consulting with Gateway’s board.
The public should hear directly from Gateway board as an assurance that no more public money will be plowed into the stadium for the revenue enhancement of the team owners.
The team now pays both operating and capital funding. This resolution came about after a long fight over stadium and arena costs. Without this agreement a few years back Gateway was faced with the possibility of bankruptcy. The team owners, among others, would have been embarrassed by such an occurrence.
Progressive Field, first known as Jacobs Field, was built in the early 1990s primarily from revenue from the County’s sin taxes, which raised some $266 million for the stadium and arena. It opened in 1994. The County had to add revenues to the project because of cost overruns. In addition to the “sin” taxes each year the County has had to pay some $10 million on bonds let by Cuyahoga County to cover additional costs. These payments have cost taxpayers more than $100 million thus far and they continue to be paid. The stadium alone cost $176 million to build. It now has a seat capacity of 45,199.
The team is worth, according to a Forbes magazine compilation of MLB teams worth, $391 million. Dolan paid Jacobs $323 million for the team in 2000. Forbes says gross revenues of the team last year were $170 million. The team is 21st of the 30 teams in gross revenues. Gate receipts were $37 million, according to this listing.
The Gateway board meets only about four times a year. Coverage of the board meetings by the news media has been infrequent to none in recent years. Maybe it needs to be on the assignment list again.
Stimulus Money to Save County Money on Medical Mart
Posted by Roldo Bartimole in Economic Development on April 30th, 2010
April 30, 2010… Cuyahoga County could save up to $1 to $2 million a year in interest for the Medical Mart/Convention Center by using bond borrowings allowed by federal stimulus subsidies. The subsidy would decrease the cost of borrowing.
The savings would depend upon interest rates at the time bonds are issued, likely this year.
Federal stimulus programs allow the County to reduce interest costs on some $94.1 million in borrowing, according to County officials.
I questioned whether the subsidies could be used for other County projects. According to Matt Rubino, County director of Budget and Management, this subsidy could not have been used for other County projects.
However, Rubino said, other County General Obligation bonds – some $43 million – had been used already via the stimulus funding to help support the County’s new Juvenile Justice Center cost.
Tim Offtermatt, senior vice president of Stifel Nicolaus & Co., said that bonds for the project could be issued as early as September of this year. He is handling some financial aspects of the bonds. Squire, Sanders & Dempsey also will participate in the bond issuance.
The stimulus money gives the County the ability to borrow at a lower cost. It is not a grant but allows the cost of borrowing to be lowered as the feds subsidize some of the cost. The federal subsidy will apply to some 45 percent of the interest on $94 million in bonds, according to Rubino.
Cuyahoga County was able to increase the amount of bonding to be covered by the special funding because other counties in the state did not use the total allocated for Ohio. Money from the unused state allocation was then shifted to Cuyahoga County at its request.
The complicated allocation of subsidy allows the County to use some $20 million of borrowings on public aspects of the project. For example, the cost of new sidewalks, grass and reconstruction over the rebuilt underground convention center and new street reconstruction would be eligible for the subsidy.
The federal subsidy would lower the interest costs even below the cost that would apply to tax-exempt bonding for public purposes. Because of the private aspects of this development by MMPI of Chicago, bonds would not have necessarily been at tax-exempt rates.
Bonds that were not tax exempt would have cost the County project more dearly.
The County has collected more than $91 million in sale taxes on the quarter percent sales tax voted by the County Commissioners for this project. The tax has a 20-year term. It took effect January 2008. It will likely raise some $800 million over 20 years. The project’s estimated cost – without the cost of borrowing – is some $425 million.
I had questioned whether the County could have used this special subsidy to enable it to do other projects, for example, redevelopment of the Ameritrust property at E. 9th and Euclid Avenue.
According to Offtermatt, the Medical Mart/Convention Center project is the only one ready to go, a stipulation for the use of the special stimulus program funds via the state allocation.
County officials said that this should insure the project would come in within budget. We’ll see.