Cleveland, Cuyahoga County pay up for sports venue rehabs

Bloomberg News

Ohio's Cuyahoga County Council has approved the sale of $14.5 million of general obligation bond anticipation notes to pay for capital repairs to Progressive Field and Rocket Mortgage Fieldhouse, home to Major League Baseball's Cleveland Guardians and the National Basketball Association's Cleveland Cavaliers.

The County Council vote followed a 13-3 vote on Dec. 2 by the Cleveland City Council to spend $20 million on capital repairs for the two sports facilities, which are owned by Gateway Economic Development Corporation, a legally separate nonprofit corporation whose board is appointed by city and county officials.

Kelly Woodard, spokesperson for Cuyahoga County Executive Chris Ronayne, said the county will also be using money from its general fund and some restricted funds to pay Gateway.

"Cuyahoga County and the City of Cleveland provide funding for the Gateway Economic Development Corporation," she said in response to a question about why the teams can't cover more of Gateway's costs. "The county is engaged in discussions to address Gateway's lease obligations."

Woodard added that Progressive Field and Rocket Mortgage Fieldhouse "attract millions of visitors to our region."

According to the text of the original ordinance considered by the Cleveland City Council,  the Cavaliers' lease at Rocket Mortgage Fieldhouse runs through August 1, 2034 and the Guardians' lease at Progressive Field runs through Dec. 31, 2036. Gateway's board of trustees, which decides capital needs and financing obligations, determined the city should pay $20 million toward Gateway's capital obligations. Another $20 million will come from the county.

Through a spokesman, Cleveland Finance Director Paul Barrett noted the original ordinance would have used $20 million in unencumbered cash from the city's general fund, but City Council requested another funding source. 

The amended final ordinance stipulates that the city agrees to pay $5 million from a fund for projects that will be postponed for several months to a year, and $15 million from the general fund.

Spokesman Tyler Sinclair confirmed that Cleveland wound up in this position partly because sin tax proceeds have fallen short of projections while maintenance costs have outstripped expectations. He said that inflation and construction cost increases are also contributing factors. The process for identifying alternate funding sources to supplement sin tax revenues is now underway, he said.

The city's previous finance director, Ahmed Abonamah, resigned in July to work for the Cavaliers.

One of the 'no' votes in the City Council meeting came from Councilman Michael Polensek, who said he was present when Gateway was created. 

"I remember very vividly the promises and the commitments that were made by the proponents of Gateway, and it was BS, quite frankly," he told The Bond Buyer. "There was going to be the creation of 27,000 or 28,000 new jobs. It was all voodoo, that's what it was. In the whole time that we the taxpayers have funded Gateway… we've become the poorest city in the country. Number one in child poverty."

Cleveland has the highest child poverty rate of any city in the U.S. with a population of more than 300,000 people, according to Census data interpreted by Cleveland.com.

It has the second highest overall poverty rate after Detroit, according to an analysis of 2022 Census data by the Center for Community Solutions, a nonpartisan Ohio-based think tank focused on social and economic issues.

"Gateway does not communicate with us," Polensek said. "They operate like they are not accountable to those of us who hold office."

City council members also heard nothing from the sports teams prior to the vote, he said. There were no offers to partner with the city on the challenges it faces, nor offers to chip in more rent.

"I would have been more than receptive to that," Polensek said, noting that the teams don't pay property taxes to support local schools. "But nothing… If you don't want to be a true partner with us, then don't expect my vote." 

He also slammed the "propaganda" that links pro sports facilities to economic revitalization — independent economists have largely disproven such claims — and agreed with other elected representatives who have said there is a push coming from the major sports leagues to get municipalities and counties to pay for new stadiums — including from the NFL's Cleveland Browns.

"Cleveland is the test case," Polensek said. "We did it: we funded three sports complexes… and look where it got us. We have lost 50,000 residents in the last decade and we're now impoverished. … The billionaires get wealthier, and the people get poorer.

"I can't get some of the most mundane things accomplished or taken care of" as an elected representative, he added. "Yet we're supposed to have the glitz and glamor for the athletes and their fan base. Let the fan base pay. Let there be an additional add-on to the ticket price… If I want to go to a concert, I'm not asking my neighbor to pay for that." 

Polensek took particular exception to using money from the general fund to pay for capital projects at Progressive Field and Rocket Mortgage Fieldhouse. He noted the ranks of the police force are at historic lows and the majority of Cleveland residents are now renters, not homeowners.

"I'm a capitalist," he said. "What we have here in Cleveland is socialism for very wealthy people. I don't think government should be repeatedly subsidizing billionaires, who for some reason are unwilling to partner with us to turn around our neighborhoods. … They could play a major role in reimagining the city of Cleveland if they wanted to. But they choose not to."

The City Council ordinance was sponsored by Mayor Justin Bibb and Council President Blaine Griffin, who did not respond to requests for comment by press time. 

Fitch Ratings assigns a AA-minus issuer default and limited tax GO bond rating to Cleveland. The outlook is stable. Moody's Ratings in 2022 upgraded the city to Aa3 from A1. 

S&P Global Ratings rates the city's various purpose GO bonds AA-plus.