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The Sin Tax Q&A

The Sin Tax Q&A

By Belt Editors

What is a “sin tax”?

A sin tax is an informal term used to describe a tax that people pay when they buy cigarettes and alcohol. Sin taxes bring in money specifically earmarked for particular public projects, and they must be approved by voters.

What project is being earmarked for the sin tax on the May ballot?

The funds will be used “for the purpose of paying the costs of construction, renovating, improving, or repairing the sports facilities.”

Wait—what about the sin tax that funs Arts & Culture programs like Cuyahoga Country Arts & Culture?

That’s another program, and another 40 cents per pack of cigarettes in the county. It has nothing to do with this vote.

So I can vote no on the ballot in May and still be for funding the arts in the county?

Yes. This vote is only about funding sports facilities. It does not jeopardize financing for the arts.

Or, to break it down: if you are a non-smoking, case-of-Bud-lite-a-week beer drinker, you have contributed about $10 a year to keep Progressive Field, Quicken Loans Arena, and First Energy Stadium up and running for 19 years.

Just to confirm, then: you are saying I can vote no and still be pro-arts and pro-sports?

Yup.

Okay, phew. Now: I am wondering why I didn’t hear anything about this new ballot measure before?

Well, it’s not because you don’t pay attention to the news. It’s because it happened very suddenly. The measure was approved in late January … very, very close to the election. That’s unusual. So now people are scrambling to get the word out and explain things to voters.  

Okay, so right now we don’t pay for maintenance of sports facilities and the teams say we should start paying?

No. We already do pay for maintenance. We have been for the past 19 years. This vote is to extend paying for those facilities.

Wait: so there is already a sin tax for maintenance of sports facilities?

Yes. Voters approved a sin tax to build and maintain the three professional sports stadiums in 1990, and they approved another one in 1995. In fact, taxpayers have contributed about $1 billion in 2010 dollars to build and maintain the three facilities thus far.

Or, to break it down: if you are a non-smoking, case-of-Bud-lite-a-week beer drinker, you have contributed about $10 a year to keep Progressive Field, Quicken Loans Arena, and First Energy Stadium up and running for 19 years.

So the taxpayers have paid 1 billion dollars to build and maintain these stadiums already! And we approved this money in two previous elections?

Right.

So why are we voting on this again?

The owners and the governments that own the facilities say they need more money. You will vote on May 6 to decide if the county should keep charging you that same amount through 2034.

But it hasn’t been 20 years yet!

Good math! That’s true. The owners are asking for an extension and they are asking for it early.

Why do they need to another 20 years of my money, and to make sure they are going to get it a year early?

No one is sure. The teams have not explained what they want all the money for.  They just say they need another $260 to $300 million for “for the purpose of paying the costs of construction, renovating, improving, or repairing the sports facilities.” If the measure is approved, there is little in the way of approving how the money is spent and when. They can basically spend as they see fit.

Okay, so I should vote yes if I want the taxpayers to maintain the facilities, right?

Wrong. Because this ballot is just asking for an early extension on a tax that does not expire until 2015. The teams can put another measure on another ballot next year if this one does not pass. And we will be paying to upgrade the stadia through 2015 no matter which way the vote goes.

The Keep Cleveland Strong folks say they need scoreboard upgrades to give fans at the games better replays and information. The Coalition Against the Sin Tax says that the teams should pay for them because they are not part of maintenance—they’re just profit-makers.

What if the stadiums fall apart in the next year?

Well, the public doesn’t pay for all the maintenance. The teams usually handle repairs that cost less than $500,000. Plus, they still get a year of taxpayer money no matter how we vote.

Okay, that’s less confusing. Now: what do they want the money for again? To fix the toilets in Browns Stadium?

The teams have identified $162 million of repairs needed during the first ten years of the sin tax. No independent advisors have indicated if  any repairs are needed. There is no list, ranked in order of importance, of what the teams say they will do with this money.

So I can vote no now, assuming the stadiums will stay in good working order,  and then vote yes next year if I decide we should pay for more repairs and the teams better explain what they need the money for?  

Yes. That’s a very likely scenario if the early extension of the original sin tax is voted down. Next year the teams would ask for another ballot for the same extension.

BUT WHAT IF THE TEAMS WILL LEAVE IF I VOTE NO?! I like the Browns.

Well, it’s pretty unlikely they will leave town in the next 12 months.  Again, the more likely scenario is that they will put another ballot on another election and try again.

Also, moving a team that has a strong fan base and is profitable is usually last on the list of ways to solve disputes. And the U.S. Congress has been holding the sports league anti-trust exemption over league heads in recent years over the issue of moving teams.

But this is not to say that voting against the extension of the sin tax does not open that door just tiny a bit. Cleveland is a much smaller market than it was when these stadium deals were done, and there are still cities out there (but fewer than there once were) that will be willing to throw all sorts of cash at a sports owner to bring his team to their fair burgh. Once again, not likely.

But remember: there’s always next year… for another vote on this same issue.

Well that clears some things up. So how do I find out more to make a decision on this specific vote in May to extend our already approved measure to pay to maintain professional sports facilities in Cleveland? 

The folks who want you to vote yes are called Keep Cleveland Strong. The folks who want you to vote no are called the Coalition Against The Sin Tax.  Belt has written about this subject here

I will check those groups out. But first I have some more detailed questions. Can I ask you them?

Sure.

I heard the money going to pay for new scoreboards. Is that true?

All three teams want new scoreboards to make “the fan experience” better. The Browns have already cut a deal where the City of Cleveland will contribute $30 million to a $120 million new scoreboard (separate from the sin tax), but both the Indians and the Cavaliers want between $20 to $30 million each for their new scoreboard “systems.”

The scoreboard issue is one that really irritates the Coalition Against the Sin Tax. The teams want new scoreboards mostly for the huge increase in advertising revenues they will bring in, and because that local ad money is not shared with other teams in the league. Those scoreboards are seen as cash cows for the owners. The Keep Cleveland Strong folks say they need scoreboard upgrades to give fans at the games better replays and information. The Coalition Against the Sin Tax says that the teams should pay for them because they are not part of maintenance—they’re just profit-makers.

The Coalition Against the Sin Tax think it is oppressive and unfair to ordinary citizens to give money to billionaire professional sports team owners and millionaire linebackers that could be going to fill potholes.

Isn’t the Gateway District tons better because of the sin tax?

Maybe. Or maybe it’s just because the teams are there, not because the public pays to maintain the facilities. Or maybe it’s because the people of Cleveland helped revitalize that area. Or maybe there is still quite a bit of improvement that still could be done downtown. You cannot conclude that E. 4th Street is more fun now because of the sin tax, or that if we don’t extend the measure one year early all those businesses will close.

And what about the players who give to charity? The Keep Cleveland Strong folks are advertising that as a reason to vote yes.

Well, charity is about doing something altruistic. It is not tied to whether or not the public is paying to make the place where you work nicer. If a player thinks he should give back to the community, that’s great. But it has not relation to this ballot measure.

Does the Coalition Against the Sin Tax want the teams to leave?

No, but are some in the anti-sin tax movement who contend that any tax break or public investment in things like sports stadiums is inherently bad policy and must be stopped. But some in that group think the public should continue to pay some money towards having a team here, as long as there is a clearer, more transparent process of approving the money taxpayers give to owners of private businesses.

Why do they call the tax “regressive”?

The Coalition Against the Sin Tax think it is oppressive and unfair to ordinary citizens to give money to billionaire professional sports team owners and millionaire linebackers that could be going to fill potholes.  Plus, they argue, the tax is unfairly put on the backs of the poor: everyone pays the same amount for a beer at Walgreens, but we don’t all make the same amount of money. Why should those under the poverty level pay the same amount to upgrade the Q as those who make enough to buy a box seat?

Forget maintenance and repairs—aren’t taxpayers still  in debt for building these things? What do we owe already?

About $270 million in principal and interest is still owed on the construction, and the city and the county pay about $10 million each year toward that debt, funded with an admission tax on tickets, parking fees, and money from each general fund.  Because the facilities are technically owned by the public, the teams pay no property taxes and little in rent under the lease agreement (the Browns pay just $250,000 a year).

According to Cleveland City Councilman Brian Cummins, the City of Cleveland is obligated to pay about $70 million in upgrades and maintenance for First Energy Stadium between now and 2028.  But what makes all this confusing is that Cuyahoga County and the Gateway Economic Development Corporation handle Progressive Field and The Quicken Loans Arena financing, and it is difficult to get a sure answer about what debt is still owed for the construction and what is owed for continued maintenance.

Could the teams pay for these repairs themselves?

Yes. All three teams are profitable. They have enough profits to pay for all the repairs and maintenance they are requesting the public pay for.

But Cleveland’s deal is a bit more expensive to the taxpayer than the average.

Do the folks who oppose the sin tax have any alternative proposals?

They argue the teams could add a $3 to $4 tax per each ticket fee and use that money for repairs. That would make the people who use the facilities (the fans at the games) responsible for the upkeep, and spread the cost to fans who live in other counties like Geauga, Lake, and Medina counties.

Other ideas they propose include charging the teams higher rent and/or having improvement requests for their facilities to go through a more thorough approval process.

Do other cities have the same deals with their pro sports teams?

The Keep Cleveland Strong folks contend that the public helps finance just about every sports facility in the United States, and that is just the cost of doing business if you want those pro sports teams in your city. And when you look at cities across the country with pro sports teams, some pay a lot and others pay less, but just about all have a public/private funding operation for the sports facilities, and in most cases, the public is paying about two-thirds of the cost.

But Cleveland’s deal is a bit more expensive to the taxpayer than the average. In a study by Harvard University urban planning professor Judith Grant Long, the 51 largest U.S. metro areas were ranked in their public professional sports spending. The Cleveland metro area ranked #11 in the total public cost ($1 billion), #20 in the public share (93% when interest and other post-construction costs are added in), and #4 in the cost per capita ($517 per person). 

So Cleveland—which has been very hard hit lately—has a worse deal than, say, New York?

That is what the Coalition Against the Sin Tax folks contend. They say we have already paid plenty for these the sports facilities, and already passed two additional sin tax measures. Now, post-recession, we should focus on other priorities, like fixing potholes and police and fire protection that has been cut since we passed the first sin taxes.

Have any other cities voted down similar measure?

There is a movement across the country where active citizens groups are reassessing their public investment in sports teams. When states are cutting money for education, potholes aren’t filled, and the disparity between rich and poor seems to be growing at an exponential rate—and all while taxes are going up—well, some are saying enough is enough.

So is this vote about sports or cigarette smokers or the recession or what?

In the end, this sin tax debate is one of differences in philosophy of governance. Those who want you to vote yes believe that the public owns the facilities, and the public must pay for their upkeep. This is standard practice throughout the country, they say, and the teams contribute to the economy in many ways.

The anti-sin tax group sees it quite differently. The agreements made with the teams in the 1990s were done during a different economic era in Cleveland, and a city with declining population cannot make the same deal any longer without major changes. And because the teams are for-profit businesses, they should pay for their own scoreboards. And the fans of the teams could pay for those baubles by buying tickets to the game.

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14 Comment responses

  1. Avatar
    March 18, 2014

    I appreciate this information about the sin tax, but it seem that the editors are leaving out the major issue surrounding the city’s lease obligations with the teams.

    I am not necessarily in favor of the sin tax, but I hope that the writer makes clear (or clarifies perhaps) that even if we vote down the sin tax, the city will still be on the hook for $30 million dollars as a result of the terrible lease they negotiated way back when. As the teams, the pro sin tax folks, and the city would argue this money would end up coming out of the general fund and impacting roads, schools, police, etc. (the typical sports franchise extortion move).

    For many, the issue isn’t the sin tax itself or the greedy owners today, but rather the boondoggle they pulled in the original terms of the lease. That is, the lease was a terrible deal for the city and now we are now on the hook and have to figure out how to pay for it. The sin tax is one way to not have to raid the general fund.

    I am not saying this is all true. I am just pointing out that this is an important part of the conversation that I hear discussed repeatedly. You do your readers a disservice not to address it and undermine your credibility by not doing so. I say that even though I agree with the editors’ bias.

    Reply

  2. Avatar
    March 20, 2014

    No other business demands that the public pay for its work site as these sports teams do. We don’t know whether the money will be spent mostly on needed repairs or for elements as scoreboards, loges, billboards, restaurants, etc., that are not essential to the maintenance or safety of the facilities but to enhance the ability of the teams to gain more revenue for themselves.

    The city and county should now get out of the business of massive subsidies for sports by selling the stadiums and arena to the franchise owners at the bargain price of $1 for each facility and allow them to do as they wish with their money.

    The public’s responsibility should be over.

    Please look at how the sports teams have behaved with public money by reading entries in this site:

    http://www.clevelandleader.com/taxonomy/term/130

    Roldo Bartimole

    Reply

  3. Avatar
    March 20, 2014

    I wish I knew what financial burden each team placed on the city. I can’t help but think the football stadium is a bigger burden than the other facilities combined.

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  4. Avatar
    March 24, 2014

    Editor: Please note that the Sin Tax is due to expire September 2015. There is currently not scheduled a primary (May) election for Cuyahoga County in 2015. It would cost Cuyahoga County millions (approx $4 mil) to hold a special election for this issue – which Cuyahoga County, in a welcome move of good governance, has said they do not want to do. So there is not expected to be a chance to vote on this in 2015. That is why this is on the ballot now.

    Reply

  5. Avatar
    March 24, 2014

    Grant:

    We disagree that May was the only option. It could have been placed on the the November 2104 ballot, or even on the November 2015 ballot, just one month after the tax is due to expire. Neither of these options would cost the taxpayers additional money.

    Reply

    • Avatar
      April 24, 2014

      Anne – its not that those aren’t options; it’s that they are bad options. November 14 is an expensive electorate in which to campaign, and a crowded ballot in which to communicate – making it much less likely that voters would learn about the issue prior to Election Day. And waiting until after the tax expired by going in November 2015 would make it a new tax as opposed to a renewal, making it extremely unlikely to pass, and its also the very last possible opportunity to put the issue on the ballot; waiting until then would simply be irresponsible.

      Reply

  6. Avatar
    April 12, 2014

    This issue is the absurdity of absurdities. Let me get this straight: the purpose of the Sin Tax is to gouge those who purchase alcohol and cigarettes not because anyone is trying to discourage consumption but rather so the County can use that money to pay for sports stadiums that do not produce anything but a fleeting moment witnessing the passing of a football, the dribbling of a basketball and the throwing of a baseball so that such a minute tidbit of diversion can be enjoyed by all. The stupidity of this proposition is enough to make your head spin even though the spin doctors advocating passage of this nonsense are already doing a pretty good job of hypnotizing the voters to actually consider supporting it. At least the Robber Barons of the previous centuries provided something tangible such as oil, steel, railroads etcetera. These team owners do not even provide one tangible thing that could ever be considered with the term “value added.” Almost everyone discusses this “enterprise” as though it is the same thing as industry {which it is not}. The price of admission is essentially a voluntary tax paid by those who can afford it to pay those who don’t need it. If this isn’t a transfer of wealth I don’t know what is.

    The real outrage here is the fact that taxes on alcohol and cigarettes will not be used to aid in the reduction of addiction {hence the reference to “sin”} but rather to stuff the pockets of all three teams who could easily afford to pay for the repairs themselves. The vote was rammed through the last time {under somewhat suspicious circumstances} and hear we go again. But this time…not so fast!!! We the voters of Cuyahoga County are going to fight the proponents on this one and we don’t care if the teams up and go somewhere else {please see my views on entertainment below} because quite frankly there are simply more important things than sports and the unearned money that comes with it. Those in public office who are too stupid and lazy to find other ways to grow a major American city need to resign and leave their self-seeking political ambitions on the scrapheap of history. Don’t ever let it be said that this was time when the tide ran out on Cuyahoga County but rather was the time when the voters rose up to welcome the rising tide of change and rebuked this pathetic paradigm our previous elected leaders embraced. Let the battle be joined.

    And now to the real underlying issue at hand:

    One of the most disturbing facts about our capitalist nation is the misappropriation of funds directed to the salaries of entertainers. Everyone should agree that the value an athlete, movie star, talk-show host, team-owner, etcetera brings to the average citizen is very small. Granted, they do offer a minuscule of diversion from our daily trials and tribulations as did the jesters in the king’s court during the middle ages. But to allow these entertainers to horde such great amounts of wealth at the expense of more benevolent societal programs is unacceptable. They do not provide a product or a service so why are they rewarded as such?

    Our society is also subjected to the “profound wisdom” of these people because it equates wealth with influence. Perhaps a solution to this problem and a alternative to defeated school levies, crumbling infrastructures, as well as all the programs established to help feed, clothe and shelter those who cannot help themselves would be to tax this undeserved wealth. Entertainers could keep 1% of the gross earnings reaped from their endeavor and 99% could be deposited into the public coffers.

    The old ideas of the redistribution of wealth have failed, and it is time to adapt to modern-day preferences. People put their money into entertainment above everything else; isn’t it time to tap that wealth? Does anyone think this will reduce the quality of entertainment? It seems to me that when entertainers received less income, the quality was much higher.

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  7. Avatar
    April 24, 2014

    Anne -
    Saying that ” there is little in the way of approving how the money is spent and when. They can basically spend as they see fit” is just factually wrong, and like many of the several errors in this piece could have been avoided by simply asking someone. Every expense for repairs and updates to the facilities is initially submitted as a request; the landlords (i.e. either Gateway or Cleveland) have them verified by a neutral outside professional assessment, and then they prioritize what’s needed and when, and what’s not.

    Reply

  8. Avatar
    April 24, 2014

    Also –

    When County Council put the measure on the ballot in January, that was neither unusual nor “very, very close to the election.” This is simply wrong. Dozens of measures on the May ballot weren’t submitted to the Board of Elections until March. Moreover, the Issue 7 campaign has been communicating with voters and the media about this issue far earlier than almost any other county-wide ballot issue one could name in recent years.

    Reply

  9. Avatar
    April 24, 2014

    Lastly,

    It is inaccurate to say “We already do pay for maintenance. We have been for the past 19 years.” Actually, what we’ve paid for is to build the facilities. The teams have paid for nearly 100% of all maintenance, repairs and operations to the facilities since they were built, totaling more than $350 Million since 1994. That’s money the public DIDN’T pay. And the teams will continue to pay for maintenance and operations into the future, meaning that even when Issue 7 passes, the teams will still pay the MAJORITY of the maintenance, repair and operations costs every year.

    Reply

  10. Avatar
    April 25, 2014

    This Q & A makes it sound like it is a vote on the lease, that is if it is voted down the county will not be obligated to pay for facilities maintenance. But that is not right, if the sin tax is voted down, the county will have to figure out another way to pay for it.

    Reply

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