Cleveland Cavaliers Stadium Deal No Slam Dunk to Protesters

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Alex Ebert

If Clevelanders’ tax dollars are used to refurbish King Lebron James’ throne room, protesters also want money funneled to other community needs.

That’s the gist of a petition against the deal the city of Cleveland and Cuyahoga County struck to finance Quicken Loans Arena’s $140 million renovation project. A group led by the Greater Cleveland Congregations attempted to deliver 20,000 petitions to end taxpayer funding for the arena May 22. The group’s leaders even asked to be imprisoned when the city said it couldn’t accept the petitions.

The deal was announced last month with the Cleveland City Council voting 12-5 in approval, extending the city’s funding ordinance for another 10 years and the National Basketball Association’s Cleveland Cavaliers’ contract with the city through 2034. As part of the deal, one-half of funding would be paid by the county and city and the other half paid by the Cavs.

Of the city’s portion, all of the estimated $45 million would be generated by admissions taxes, with no direct tax on any citizens. The county’s portion will be paid through a mixture of sales tax, county bed tax, and reserves that the county had previously raised for other construction.

Community Betterment

“Initially, our group was opposed to all public funding of the Q,” Tristan Rader, operations director for Cuyahoga County Progressive Caucus, told Bloomberg BNA. “But that shifted to not being opposed to funding, but wanting to be part of the process. There’s no reason to push this through so fast.”

The funding deal also comes with commitments from the Cavs toward community betterment projects, including donations to the county’s Habitat for Humanity and renovations of basketball courts at high schools and community centers. Half of the admission tax will also go toward the city’s general fund.

But demonstrators said this wasn’t sufficient and have rallied for a community betterment fund that would create community health centers in poorer neighborhoods intended to combat opioid abuse.

“We’re not opposed to the Cleveland Cavs, Quicken, or [Cavs’ owner] Dan Gilbert,” said Rader, whose group joined the petition drive started by the Greater Cleveland Congregations. “We just wanted something that would benefit the neighborhoods.”

Emergency Ordinance

The group’s repeal petitions weren’t accepted because there is no constitutional way for the city to back out of the deal, city council President Kevin Kelley told Bloomberg BNA May 24.

Normally, ordinances go through a process in which opponents have 30 days to gather signatures to defeat the proposed law. However, due to time pressures placed on the city by the construction season and the possibility of securing the 2020 NBA All Star game, the city council went the emergency ordinance route, Kelley said.

While ordinances that provide for funding to enter a contract may be repealed, there is no such exit once the city has already inked a deal with a private citizen. Thus, when Mayor Frank Jackson (D) signed the deal with the Cavs and Cuyahoga County, there was no going back, Kelley said.

The city rejected the demands of the protest groups—including one demand for $70 million in financing. In all, Kelley said, the current deal is great for the taxpayers.

“For some cities, stadium deals can be a tough call whether the deal is a net positive investment for the city. But here I don’t have to be concerned,” he said. “I look at the hard cash that’s going into our general fund and the guarantee that we get one dollar for every dollar that goes to debt servicing.”

To contact the reporter on this story: Alex Ebert in Columbus, Ohio at aebert@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

Copyright © 2017 Tax Management Inc. All Rights Reserved.

Request Daily Tax Report: State