Browns deal with Cleveland would pave way for new stadium

The Cleveland City Council will decide whether to approve a deal struck last week by Mayor Justin Bibb with Haslam Sports Group, the owners of the National Football League’s Cleveland Browns, that clears the way for the Browns to leave the city and build a new stadium in the nearby suburb of Brook Park. 

Under the terms of the deal, Haslam has promised Cleveland $100 million for lakefront development, including demolition of the current lakefront stadium, in exchange for the city dropping legal action fighting the move to Brook Park. There the team will build a new stadium, financed in part by a $600 million grant from the state.

The Browns had at first refused to finalize a settlement without public money for the new stadium from Cuyahoga County, according to the Cleveland Plain Dealer. The team had hoped for $1.2 billion total in public money, half of it from the state and half from local sources — or half the total estimated cost of the new domed stadium in Brook Park.

The exit deal with Cleveland does not hinge on county money, Bibb told the city council Monday.

“The upfront cash and demolition savings deliver immediate impact in present-day dollars,” city spokesperson Sarah Johnson said by email. “Certainty for the demolition is important for lakefront redevelopment and this investment will help to accelerate that work. This deal ensures Cleveland taxpayers won’t be saddled with the estimated $30M cost of demolition and site preparation.”

Johnson said Haslam Sports Group will pay the costs of demolition, and if costs run over, will cover the overage. The city will determine how to use the remaining funds, with approval from City Council.

Bibb “was in a tough place; I think he did the best that he could for the people of Cleveland so that we can move forward,” state Senate Minority Leader Nickie Antonio, D-Lakewood, told The Bond Buyer. “Redevelop the lakefront, stop spending millions on court cases with people who have deep pockets, and just… get some funding commitment so the city of Cleveland can move forward.”

The $600 million state contribution to the new stadium at one point was to come in the form of state-backed bonds under a plan that passed the state House. But the plan approved by the Senate, and ultimately signed by Gov. Mike DeWine, calls for a $600 million handout using the unclaimed funds of Ohio taxpayers.

The state budget enables the state to take $1.7 billion of $4.8 billion in total unclaimed funds, and sets a 10-year time limit on claims of those funds, with the state continuing to draw money from that pool on a rolling basis, according to the Ohio Capital Journal.

Beyond the $600 million for the Browns, part of that $1.7 billion will also be available for other stadium renovations and cultural activities, like art museum upgrades, said state Sen. Jerry Cirino, a Republican from Kirtland, a suburb east of Cleveland.

“The way we ended up doing it saved about $400 million in debt service,” Cirino said. 

Republicans in the legislature had objected to the governor’s plan to fund the stadium by doubling the tax on sports gambling. “Our caucus does not like raising taxes,” Cirino said.  

“Every year we have several hundred million dollars, new money, that comes into the unclaimed funds account,” he said, stressing that at that point, the organizations holding the funds have often spent years searching for the rightful owners of the money. 

“Some critics have claimed that we’re taking money from other people who won’t get what they have coming to them,” he said. “Nobody will file an application for money that is owed to them and be denied… By the time we get it, it’s highly unlikely that someone’s going to come forward.”

Bond debt and a grant with unclaimed funds are two very different financing vehicles, said Robert Baumann, an economics professor at College of the Holy Cross who has studied stadium financing. But “to an economist, nothing is free, including this unclaimed money,” he said by email.

“The main issue is that the unclaimed money could have been used for anything, e.g. schools, roads, an emergency fund after a bad storm, and so on,” Baumann said. “This is where the plan doesn’t make sense — how is building a new Browns stadium the best use of $600M of public money? You can think of this money as a subsidy to the Haslams/Browns organization, which employs a very small number of people and hosts less than a dozen events of consequence” per year. 

As Cleveland was negotiating the exit deal, state lawmakers changed the Modell law, a statute passed in 1996 and named for Art Modell, the former Browns owner who moved the original Cleveland Browns to Baltimore after the 1995 season. The law would have given locals a chance to buy the team before it could leave Cleveland. The current incarnation of the Browns began as an expansion team in 1999 in a new stadium subsidized by the city through tax-exempt bonds.

Under the change, the Browns can leave Cleveland without six months’ notice or the potential sale of the team, so long as the Browns stay in the state of Ohio.

“That was another outrage,” Antonio said. “I think this whole thing is an illustration — and I’m sorry, but it’s partisan. Republicans in the Ohio legislature chose to stand on the side of private business billionaires… They couldn’t even play by the rules to wait and see what the court would rule.”

Cirino said he is a lifelong Clevelander who remembers when the Modell law was passed. “There were a number of us who always felt that the law was not going to withstand legal scrutiny,” he said. “But at the same time, we want to protect Ohio.

“What part that (law change) played in the settlement, I can’t say,” he said. “But logic suggests that it played some role… in bringing the parties together. Who knows how long it would have taken” otherwise.

The law change undermined the city mid-negotiation, said Baumann. “The Browns are not changing their name to the Brook Park Browns,” he said. “The immediate impact on Cleveland is that it is left with a stadium that hosts nothing, so it’s an infrastructure problem there.” 

While businesses around the stadium will suffer, the city as a whole will not notice the difference, because studies consistently show that these sports franchises are not economic catalysts at the city level, he said.

“I have no idea why state politicians would do this, but it is not uncommon to see a politician (at any level) make unusual and politically-inconsistent choices when it comes to sports finance,” Baumann added. “Apparently it looks worse to speak out against the home team than to give it a generous, unnecessary, and unearned subsidy.”

Cirino said he disagrees with arguments against publicly funded stadiums that cite economic research calling into question the public benefits. 

“Nobody complained about that when the Browns built the current stadium,” he said, noting that the Brook Park stadium will be a domed, mixed-use development and will be a venue for other events besides football games. 

“Brook Park is still in the same county, which is kind of an economic dead zone right now, and it’s right next to the airport, which is also going to benefit from this,” he said.

Studies by economists have found that stadiums, even with mixed-use developments, do not improve the fiscal returns to an area, and are poor investments as economic development efforts. 

“If you take the big picture view, we’re going to be able to one day host a Super Bowl,” Cirino said. “I met with the NFL commissioner; we wanted to make sure that the NFL is behind this, and they are.”

Jimmy Haslam, the owner of the Browns, is currently worth around $8.7 billion, according to Forbes, and can afford to build the stadium himself, said state Sen. Bill DeMora, D-Columbus, who sponsored a bill that would have barred public funds from going to sports teams with losing records. It did not pass.

The Browns are 2-5 so far this season and have never hosted a home playoff game in the 26 seasons since their 1999 restart.

“Taxpayers shouldn’t foot the bill for billionaires to build new stadiums,” DeMora said. “If the owners use their own money to build a stadium, I don’t care where they build it… (But) our property taxes are through the roof; we are in the bottom tier of states for funding K-12 education and higher education; we don’t have money to give free breakfasts and lunches to schoolkids.

“Their net worth alone could bring every Ohioan out of poverty. It could fund every public school in the state,” he said. “If you have money in Ohio, and you give it to the people running the state, you get what you want.”

Regarding the state funding plan that did pass, he said, “That’s other people’s money. That’s money that they’re owed that they haven’t gotten yet.”

Antonio said she was “appalled” at the $600 million from the legislature. 

“You have to jump through a lot of hoops to get unclaimed funds,” she said. “I have phone calls from constituents telling me how hard it was to get their unclaimed funds. … In the past, Ohio has used unclaimed funds as a temporary measure to front money for a development (project) or something like that… but it was always paid back.”

Her constituents disliked “taking those funds and using them to give a handout to billionaires,” she said. “I represent a large part of the city of Cleveland. People were contacting me, saying they would never agree to this kind of way for the team to leave Cleveland.” 

Haslam Sports Group did not respond to a request for comment by press time.