On December 13, the Cleveland Cavaliers announced an upgrade to their “Q” arena estimated cost of $140 million. Cleveland officials said the renovation will help modernize the stadium in hopes of attracting top name entertainment acts. Before we become too enthusiastic about this new endeavor, we should ask ourselves where the funding will come from. This project will be financed by issuing bonds, which will be paid through a combination of taxes levied on county residents and private payments from the Cavaliers administration. All in all, the total price paid back by 2034 will be $282 million. There’s a growing trend around the nation right now, where professional sports teams persuade the residents of a city that it’s in their best interest to fund a stadium; often stating that the new (or refurbished) stadium will be a net gain to the local economy. Let’s call this racket what it is though, a redistribution scheme.
The crux of the argument lies in them saying the project won’t cause an increase in taxes. While there may not be an introduction of new taxes, it will require an extension of existing ones. On May 8th, 1990, Cleveland’s Cuyahoga county approved an excise tax by a very thin margin. This tax was supposed to raise $150 million over the next 15 years that would go towards funding Gateway Plaza (now Progressive Field and Quicken Loans Arena). However, its “temporary” lifespan was extended by 20 years in 1995 and that extension was renewed again (for an additional 20 years) in May of 2014. As Milton Friedman said: “There isn’t anything as permanent as a temporary government program,” many of which go astray and leave the tax payer with the bill.
Take the New York Giants for example, their Meadowlands Sports Complex turned what was supposed to be a benefit into a taxpayer nightmare. The complex was built in 1976 and (much like Cleveland’s venture) was funded by issuing bonds; however, at the time of its demolition in 2010 it still had $266 million in bond payments that won’t be paid off until 2025. Residents are paying $35 million a year in taxes for what is now a parking lot. The RCA dome in Indianapolis is a similar story. Upon its demolition in 2008, it carried a debt of $61 million that taxpayers won’t pay off until 2021. Economists have found (with only a handful of exceptions) that public funding of arenas has brought a net loss to taxpayers over the past 40 years. It’s unlikely to think Cleveland will fare any better, especially considering it will require what was originally a 15-year tax to be prolonged to more than 45 years just to stay afloat.
Making the case that this is a wise investment for Cuyahoga County taxpayers requires a blatant disregard for the opportunity costs involved. Politicians wave Keynesian economics in the faces of uninformed voters to convince them that stadiums bring in new money through increased spending; while players threaten to leave if locals don’t take the bait (although neither is true). Most stadiums reallocate funds that were already spent locally on dinners, movies, or other businesses. A survey, done by Professor Bruce Johnson of Centre College, asked individuals in multiple cities how much more they would be willing to pay per year to keep their team. The results showed that each city was subsidizing the team with five times more money than the individuals were willing to pay. When you consider that the Cleveland Cavaliers annual salary cap is now over $130 million, how do they justify the requirement for public assistance? Add to that the fact that the owners have a combined net worth exceeding $5 billion; at what point does it become disgraceful to hold your hand out for a public welfare program?
It’s relevant to make note that this is the same city that has 15 of the 100 worst schools in the nation within its borders. Let’s not repeat the mistakes of Ohio’s Hamilton County; where $805 million in taxpayer money was earmarked for new football and baseball stadiums, while police and education budgets were cut, and one in seven people live below the poverty line. Cleveland was once the “best location in the nation” and they didn’t get there from free handouts and public work programs. The last thing Cleveland, or any other city needs, is to be swindled by public officials and billionaires into publicly funded boondoggles to the tune of hundreds of millions of dollars.
This post was written by Thomas J. Eckert.
The views expressed here belong to the author and do not necessarily reflect our views and opinions.
Thomas J. Eckert
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