CLEVELAND, OH – The $435 million lease agreement officials claim is necessary to keep the Cleveland Guardians in their home city passed its first hurdle this week, but reservations remain about whether asking the public to pick up 65% of the tab is a good deal.
Cuyahoga County Council on Tuesday approved funding its portion of the total $285 million sought from public coffers to renovate Progressive Field and cover capital repairs over the next 15 years, but not all members felt good about it and Cleveland City Council has already warned that it will need further convincing that the cost-benefit ratio tips in favor of residents.
Not only have members of both councils wrestled over the sticker price when Cleveland remains one of the poorest cities in the nation, but they also seem to resent feeling hostage to the team’s demands.
Though the Guardians’ owner, Paul Dolan, has never explicitly threatened to move the team if Cleveland doesn’t agree to pay two-thirds of his proposed ballpark renovations and all capital repairs, County Executive Armond Budish and the ballpark’s landlord, Gateway Economic Development Corp., keep hinting at the possibility. They repeatedly point to examples where other professional sports teams have been lured away by greener wallets.
In a recent committee meeting before County Council, Gateway Chair Ken Silliman put it bluntly:
“The fact is that, under the present legal environment, the leverage of cities and counties is minimal, unless you’re willing to lose your team,” he said.
That hasn’t sat well with all of council, some of whom have taken to criticizing the national model that seems to give billion-dollar sports teams all the power in negotiating higher and higher public subsidies.
“(Gateway) negotiated away everything in what I believe is a bad deal,” County Councilman Michael Gallagher told cleveland.com after casting the lone dissenting vote against the funding.
And if given the choice, Gallagher believes the public would do the same.
“You put this on the ballot, this loses big time,” he said. “Nobody has any money.”
In a mid-size city also supporting two other professional sports team, the current power dynamic isn’t sustainable, fellow Councilman Dale Miller agreed. But renovations, he decided, are a “reasonable commitment” compared with other professional sports teams that are seeking new, billion-dollar stadiums.
Silliman has repeatedly declined to give specifics about concessions made on both sides during Gateway’s two-year negotiation with the team.
But in an interview with cleveland.com, he acknowledged again that, despite the fan bases and media contracts that cities can use to entice teams, “the professional sports leagues have significant leverage, and they use it.”
“There’s nothing new in this truth,” he said. Especially not for Cleveland.
Leaving, if demands aren’t met, is a real and credible threat in a city that once denied its professional football team a new stadium and lost the Cleveland Browns to Baltimore, only to build that stadium three years later to seat a new team.
One month after the relocation was announced, then-Mayor Michael R. White called a meeting with mayors from other major cities to discuss how to deal with NFL owners who want to move their teams. At the time, the region had just invested more than $200 million dollars in Jacobs Field (now Progressive Field) and the Quicken Loans Arena (now Rocket Mortgage Fieldhouse), and he worried what could happen if the city were to lose its baseball, basketball, or hockey teams, too.
What officials took away from the meeting is unclear. But White went to great lengths in his bid to keep the team.
In the end, Cleveland ponied up $280 million for a new football stadium and got its team back.
The city has also kept its other professional teams, though the bitter fight in 2017 over the then-$140 million Q-Deal to renovate what is now the Rocket Mortgage Fieldhouse temporarily put the Cavaliers’ future on shaky ground.
Ultimately, the deal passed, but not before the team bore 62% of the final cost, while also paying to install new basketball courts in every community center and Cleveland Public Schools gym.
“That was a good deal,” Gallagher praised. “I thought we set a precedent.”
What one team owner negotiates, however, is not a template for future deals, Gateway argues.
Neil Weiss, the team’s vice president and CIO of Technology and Ballpark Operations, recently told cleveland.com that moving the Guardians out of Cleveland is something “nobody wants to do or would ever want to do.” During negotiations, in fact, the Dolans never brought it up, he said.
But other teams have moved to new cities hungry for professional teams and willing to pay a premium to get them.
Los Angeles lured the Rams away from St. Louis in 2016 with a $2 billion stadium. San Diego lost the Chargers to Los Angeles and its $5 billion stadium in 2017. That same year, the Raiders decided to leave Oakland for Las Vegas and its $1.84 billion stadium.
Fewer examples exist in Major League Baseball. The most recent of them came in 2005, when poor attendance and the promise of a $693 million ballpark led the Montreal Expos to move to Washington, D.C., where they were renamed the Nationals.
Those examples show that as competition grows, the leverage of the home cities dwindles, Brad Humphreys, an economics professor specializing in professional sports financing at West Virginia University, said during a recent Cuyahoga County Progressive Caucus meeting. The political organization opposes the deal, with members arguing the money could be better spent on safety nets for residents.
Money isn’t the only leverage, either, Humphreys said. Team owners also have a psychological advantage: Locals want to root, root, root for the home team.
“Owners know that fans have deep emotional attachments to teams,” Humphreys said. “They exploit that in order to extract larger subsidies out of local governments than they would otherwise.”
The cost to play
That doesn’t mean the Progressive Field deal is unreasonable, Humphreys said.
Most professional teams demand new stadiums that cost billions. He’s aware of only 16 renovation deals since 1970.
On a recent tour of the 27-year-old ballpark, Weiss said the team felt it irresponsible to pursue a new ballpark and instead compromised with some key improvements they believe will drive fan attendance and “preserve and modernize” the existing facility.
They seek to overhaul the Terrace Club, replacing the glass and fine dining with open space and a beer hall, to provide fans a more immersive experience. They also want to improve the upper deck and dugout fan area to make the park more traversable.
Gone are the days of staying seated nine innings — “We want you to go anywhere,” Weiss said.
To stay attractive and “competitive” to the players needed to win games and compete in the World Series, the team is also seeking to renovate the clubhouse and service level where players work out, train and eat. The kitchen, with water-stained ceilings and seating for only 12, is a particularly sore point, receiving failing grades from the MLB each year.
In all, the improvements add up to a “conservative” $202.5 million, meaning it’s actually expected to cost less, Weiss said. The Guardians would cover any cost overrun.
“You’ve got to maintain the asset that you own,” Weiss argued, noting the team is renting the space from the public. “We think it’s fair for both sides.”
City and county officials do not deny their duty to help maintain facilities that fall under Gateway’s care, but they do debate the private-to-public funding ratio and the reliability of its sources over the lifetime of the contract.
Documents show Cleveland’s $8 million in annual funding will be comprised of $3.2 million from the sports facility improvement fund, $2 million in parking garage revenues, $2.6 million in admission tax proceeds from baseball games, $333,000 in garage naming rights, and about $350,000 in unspecified sources.
But the sports facility fund, created as part of the Q deal to renovate the basketball arena, is set to expire in 2035, one year shy of the new lease, and the garage naming rights sunset in 2024, with the end of the Guardians’ original contract.
Cuyahoga’s funding sources are even less certain, relying on annual revenues of $3 million from the bed tax, $2.5 million from the sin tax on alcohol and cigarettes, $2.5 million from the general fund, and about $300,000 from unspecified sources. The county’s also paying $11.6 million in one-time payments upfront.
But again, the sin tax is set to expire in 2034, and revenues from the bed tax have underperformed since the start of the pandemic.
The county also has the added risk of bonding the renovations in full, including the portions to be paid back by the city and the team.
That debt could affect the county’s bond capacity at a time when it’s also considering dual $500-million-projects to rebuild the county jail and courthouse, financial advisor Bob Franz told council. In the same breath, he assured there remained “ample” capacity, even with the loan.
Regardless what the future brings, the city and county would be obligated to make up any shortfalls or risk Gateway defaulting on the lease, Silliman said. It’s why they could only secure a 15-year lease, with two optional 5-year extensions if funding is renewed or new sources identified, he said.
“I can tell you that we’ve been very conservative in our projections and hopeful that those kinds of scenarios do not develop, but I would be misleading you if I said you are protected or you are secure,” Silliman told County Council during an Oct. 19 hearing. “There is a risk factor there, hopefully one that we’ve minimized, but there’s a risk factor at the County Council and at the City Council if these various sources don’t track out.”
The benefit to stay
The cost of losing the team, however, would be even greater, proponents have argued.
The ballpark is projected to generate $3.22 billion in visitor spending over the next 15 years, $21 million annually in state and local taxes, and support nearly 5,000 jobs that “but for the Indians, wouldn’t be here,” Weiss said.
Numerous business owners operating in and around the Gateway District say their employees also rely on the 1.7 million people the Guardians bring downtown on game days (only about half of the visitors it could draw if the stadium reached its 35,000 capacity each game). Because fans don’t just visit the ballpark, they eat in the restaurants and sleep in area hotels.
Gateway is an “economic driver,” bringing people downtown for baseball, basketball, hockey, concerts, or other entertainment nearly 365 days a year, proponents say. Without the Guardians, that model falls apart, they argue.
“Do it for the hotdog vendors, the beer sellers, and the servers in our local bars and restaurants and hotels,” County Executive Armond Budish implored County Council.
Humphreys places little stock in that argument. His research found there is no net positive economic benefit associated with hosting a sports team.
While they do concentrate economic activity in and around stadiums on game days, “that’s not new economic benefit to the community,” he said. “That’s just consumer spending that would have been spent somewhere else in Cleveland at some other bar or restaurant or some other entertainment activity at some other time.”
Tom Yablonsky, executive director of the Historic Gateway District Neighborhood Corporation, a separate entity from the ballpark’s landlord, calls that argument “nonsense.” Building the ballpark and arena saved downtown Cleveland, he said.
Prior to their existence, he counted only six restaurants, no housing and no hotels the Gateway District. Today, there are 29 housing developments, 88 downtown addresses, seven hotels and 60 restaurants.
“The change was so dramatic that it’s not disputable,” Yablonsky said. “Why would you stop doing what’s been successful?”
Officials reviewing the deal have been quick to celebrate the ballpark’s role in revitalizing downtown, and say they want to see that work continue. Councilman Martin Sweeney recently went as far as to call the Progressive Field negotiations the “prototype on how deals like this are done,” believing it will generate more revenue for the county in the long run.
Opponents continue to challenge whether tax dollars should cover the largest portion of a bill to renovate and maintain a ballpark that, experts like Humphreys argue, largely operates as a private facility.
The question now falls to City Council: Is it worth it?
“Yes,” Silliman said, “if you believe that neighborhood redevelopment is an appropriate public activity.”