Issue 7, Extending the Sin Tax: The Good, the Bad & the Ugly

In 1990, the voters of Cuyahoga County voted — just barely and after a lot of manipulation such as a press conference days before the election announcing that the Cavs would move downtown from Richfield if a new arena was built and the promise of 28,000 “good, permanent” jobs — to pass a so-called “sin” tax. That tax on cigarettes and alcohol provided hundreds of millions of dollar to construct a new baseball stadium and arena, now known as Progressive Field and Quicken Loans Arena.

After the relocation of the Browns to Baltimore was announced in late 1995, voters OK’d an extension of the “sin” tax to pay for the construction of a brand-new stadium for a new team, promised by the National Football League if it was gifted with a such a stadium. Not as well known, because they were not on the ballot, taxes were also added to parking and car rental fees, and the city of Cleveland’s already-high 6% admissions tax was increased to 8% to help pay for stadium costs.

In January, Cuyahoga county council voted to place an extension of the “sin” tax, which is set to expire in July 2015, on the May 6 primary ballot, saying that the money was needed for repairs and upgrades. This followed a lightning-quick approval by Cleveland city council and Mayor Frank Jackson last November of a $30 million payment to the Browns from the city of Cleveland over the next 15 years to pay for “improvements” at their stadium where the city is technically their landlord. These include a flashy new scoreboard “needed” primarily to enhance advertising revenues, which go entirely to the team.

An expensive campaign — paid for by exactly whom we don’t know yet — was organized to pass the extension under the banner of “Keep Cleveland Strong.” An ad hoc citizens group calling itself Coalition Against the Sin Tax (C.A.S.T.) is mounting grassroots opposition.

But what are we paying for and how is this going to “keep Cleveland strong”? A typical reaction I’m hearing is that Cleveland ISN’T strong, but it COULD be with the right priorities and investments. So these are key issues that must be addressed.

The strength of a city or region resides in its citizens and their well-being. A “strong” city sees population growth, job growth, income growth, and an increase in education levels, as well as declines in poverty, unemployment, crime, addiction, illness, illiteracy, and foreclosure.

If Cleveland WAS “strong” — and by the measures above, it’s not — how would having professional sports teams keep it that way? (Some of the country’s most flourishing cities had or have no major league professional sports teams or only one or two, while dying Detroit has four). And if it’s not “strong “ how would professional sports teams contribute to improving the measures above?  And what is the cost of these teams in proportion to the return i.e. the impact on the measures above?

The new tax is expected to raise in the vicinity of $260 million over the next 15 years. (An exact figure can’t be pinned down because it’s tied to the amount of alcohol and cigarette purchases, which changes over time).

It’s not “free” money, or a trivial amount that nobody will feel, and hey — it’s not a “new” tax, say the proponents, which is true. But unless more population and more jobs come to the area, it’s taken away from someplace else. Is that someplace else more valuable and more productive in improving quality of life measures, creating jobs, and recycling money through the local economy?

Appealing to the area’s fictional strength and to such unquantifiable entities as “civic pride” to extract more wealth from the region doesn’t answer these critical dollars-and-cents questions. Claiming we must at all costs keep “our” teams — which aren’t “ours” in any meaningful way since we have no control over their activities and virtually all the profits go elsewhere — seems to be an appeal to desperation and weakness, rather than strength.

 


 

 

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14 Responses to “Issue 7, Extending the Sin Tax: The Good, the Bad & the Ugly”

  1. Ken Mate

    I agree to keep subsidizing these industries does little for the city or region if they want to a capital fund to replace these facilities than place an admission tax to those who specifically use these facilities place it an escrow account . The Browns Stadium is especially disappointing it is underutilized and like Burke takes up too much prime real estate.

  2. Howard

    The absurdities of absurdities is us entertaining delusions that we would reap any tangible benefits from killing a measure that would ensure one of the most tangible components of a first-class American city.

    Does anyone really think that this low-hanging fruit would bare anything more than a brief fantasy that we are “sticking it” to the invisible tax boogymen?

    Does anyone really think that the extra few pennies we pay for a beer or pack of cigarettes would actually go back into ANYONE’S pockets other than the retailer or bar owner?

    I probably would never be able to afford a Browns game and can count on one hand how many times I’ve seen the Indians or Cavs, but I don’t doubt for a minute that the loss of these teams — which has been PROVEN reality, in case anyone’s memories goes back 20 or so years ago — would be profound in a city like Cleveland. That’s why even a city like Denver has instituted a much more regressive tax to keep its sports teams. Luckily, that’s still not the case here.

    Cleveland is a great city that is starting to realize its former glory. But if we continue to pretend a Portland-, Seattle- or Austin-type cache can be derived by way of this brand of anti-sports hipster posturing, we could easily find out the very hard (and permanent) way that it certainly won’t.

  3. Howard

    By the way, according to the latest study as reported by Cleveland.com, the Cleveland Cavaliers and Quicken Loans Arena have attracted more than $2.4 BILLION in visitor spending to downtown Cleveland since the basketball team there in 1994.

    Further notes:

    * “The money spent by visitors and the team in and around Quicken Loans Arena generated an additional $1.4 BILLION in economic activity for the region, Texas-based research firm Conventions, Sports & Leisure International concluded by employing a commonly used economic forecasting model.

    * “While only an estimate, the $3.8 BILLION in total economic activity amounts to seven times what the city of Cleveland spends each year on general operations and nearly four times what Jimmy Haslam paid last year for the Cleveland Browns.

    * “The Cavs and the arena also directly supported an average of 2,100 jobs, $110 million in personal earnings and $26 million in state and local tax revenue annually, the study found.

    Next time anyone goes to see a major concert at The Q, think about it.

  4. Alan Glazen

    Howard, thank you for regurgitating the pro sinner mantra. You have proven once again that the veiled threat of teams leaving is the underhanded mission of the Issue 7 pro sinners. The fact is that however we vote on the six tax, it will still remain til July 15,2015. All lease obligations will be honored. No team will have any cause to even discuss moving. And not a dime will come from the city’s general fund. Period.

  5. Angie Schmitt

    Howard’s a shill for the teams. First class American city? LOL! Have you seen our streets? Our housing stock? LOL! First class downtown to drive into 8 times a year is what you mean. Fancy wine cellars for sports billionaires will “keep Cleveland strong.” What a joke!

    And $3.8 BILLION?! Well, Howard, can you show that leaving that money in Cuyahoga County residents’ hands and letting it recirculate within our economy would have not have produced a larger “total economic activity?” You’re just throwing around large numbers, trying to fool people into giving money to out-of-state billionaires who really don’t need it. This money is better spent by Cuyahoga County residents on education for their children, food, clothing and shelter. That’s an increasingly difficult package for this region to provide for its citizens.

  6. Angie, do you have reading comprehension difficulties? I said “Cleveland is a great city that is starting to realize its former glory.” I said major-league teams are components of “A first-class American city.” As in ANY first-class American city. Comprende? Even so, I guess Cleveland’s prominence in the medical field, culture and culinary industry seem to elude you.

    And what bit of absurd illogic would make you think Cleveland and Cleveland residents would be all the richer if $3.8 billion in economic activity never happened in this city? Do you not understand how basic economics and taxes work?

    Again, you do not address the reality: $3.8 billion in economic activity IS $3.8 billion that goes INTO this city. It DOES result in taxes that go to pay for Cuyahoga County residents “on education for the children.” (As for paying for food, clothing and shelter, well, it does for those who need it, but I have a hunch not all Cuyahoga County residents are on welfare.)

    I’m rather dumbfounded you would say that this $3.8 billion would otherwise go directly into to some sort of welfare pot. No, it wouldn’t otherwise go into our economy at all.

    Otherwise, we are talking about a few cents per beer and a nickel for a pack of smokes. Do you really think if we discontinue the tax, the consumer will ever see that money? The loss of tax revenue from vacated major-league sports franchises is far more profound, in spite of you lack of understanding how that works.

    Your only premise seems to be that Cleveland is so bad we should do what we can to make it worse and somehow that will translate into more money on the magic welfare tree.

    If you doubt the actual study of the $3.8 billion financial windfall of having major-league teams, I am sure you have an actual counter-study to share with us. By all means do so. The floor is yours.

  7. Alan, knowing that Cleveland precarious major league teams will hang around at least another year doesn’t make me sleep any easier.

    You boast that all lease obligations will be honored and will not come from general funds (period). Uh, well, then, where WOULD they come from?

    Here’s a hint: not from anyone other than the entity that negotiated the stadium maintenence deals with the team owners in the first place.

    Look, I don’t think these kinds of enterprises are ever a “great deal”; I’m not all that much a sports enthusiast; and I don’t like taxes. But the only bit of “regurgitation” I really want to impart is, if you don’t pay, you don’t play. Period. Major League cities, especially mid-tier, DO pay; some cities, such as Denver and Cincinnati, pay even more (and more unfairly so).

    We thought we were pretty smart a few decades ago and called the Browns bluff. Didn’t work. Sports teams DO work for the city economy.

  8. Angie Schmitt

    Yes sports teams “do work for the city economy.” We have three of them, and we’re one of the poorest major cities in the country. The evidence is overwhelming. The magic money welfare free = take money out of poor people’s pockets and give it to the rich guys, they will save us. We’ve been trying that strategy for three decades. 53 percent of Cleveland children live in poverty. If only we could get 14 more sports teams though, I bet we’d be golden.

  9. So, Angie, if we shut down our sports teams and forfeit $billions of the revenue from these sports teams that would go into our economy, Cleveland would be doing gangbusters. Got it.

    That’s almost as good as you feeling we should make alcoholism and lung disease more affordable for the poor as well.

    Yep, you figured it out, all right!

    Still waiting for your counter-study.

  10. By the way, for the the math wiz wondering about how everyone would average $52 K in salaries … If someone like a an office manager makes $74K and a custodian makes $30k, that averages out to be $52K. I can only imagine how athletes salaries boost the average up.

    As for your other assertions, if you have an actual counter study to challenge the study reported in Cleveland.com, that would be interesting. But I have say, the kind of brazen oversights like you allege would have put the firm that conducted the study out of business long ago and certainly have been challenged even by the Plain Dealer staff.

  11. Robert Thomson

    Respectfully, many people seem to have read headlines; but sometimes it’s necessary to look deeper into the issues.
    a) The “studies” you refer to are bought and paid for by supporters of the sin tax.
    b) There is much independent research (performed by individuals and organizations with no horse in the Cleveland game) that have shown that a significant portion of the “billions” injected into local economies by major league sports teams are monies that are simply cannibalized from other local and regional discretionary spending alternatives. Even if the suggestion were to kick the teams out of town entirely (which it is absolutely NOT), the vast majority of that money would still be spent in NE Ohio.
    c) Again, no one is suggesting the teams go away. The opposition to Issue 7 is based on a more appropriate alignment of revenue and cost. This means that stadium cost obligations are better supported directly by the people that derive value from the stadiums and teams. If a sin tax is appropriate for anything, it would be to address the cost impact that smoking and drinking actually has on our city and society.

    Here are a few references to learn more about the different ways publicly funded stadiums have been structured nationally:
    http://www.amazon.com/Field-Schemes-Stadium-Swindle-Expanded/dp/0803260164/ref=sr_1_10?s=books&ie=UTF8&qid=1397221721&sr=1-10&keywords=sports+team+subsidies

    http://www.amazon.com/Public-Dollars-Private-Stadiums-Building/dp/0813533430/ref=pd_bxgy_b_img_y

    http://www.amazon.com/Sports-Jobs-Taxes-Economic-Stadiums/dp/0815761112/ref=pd_bxgy_b_img_z

  12. Howard,
    If it’s true that the ‘Q’ averages 110 million a year is salaries, over a 20 year that amounts to 2.2 BILLION in wages and salaries. Surely these employees would be happy to make up any shortfalls of the 260 million that the ‘sinners’ may not pay if the tax levy fails. I would certainly be happy to pay a fee to keep my 52 thousand dollar a year peanut vending job especially if my only other opportunity was a 13 thousand dollars per year McDonalds job. Keep in mind these employees are already supposedly paying 25 million a year in taxes so 260 million over 20 years would be … uhmm .. peanuts? So there is no doubt the ‘Q’ employees will pick up the cost.

    Also don’t forget the ‘Q’ employees won’t be going it alone. I’m sure the employees of the other facilities will help at least in some of the contribution to this cause. And also don’t forget the businesses reaping the 3.8 billion in revenue. Now I don’t know about you, Howard, but I could insure a 3.8 billion dollar income stream for years to come I would easily pay the measly 260 mill.

    Glad to help,
    Ed

  13. Perhaps, Ed, you could help out by paying what the city will still owe if the syntax is rescinded. The deal the city has already worked out with our teams is actually on the lighter end of what medium-size markets pay. Just check out Denver. I don’t like the system, either, but that’s the game. You either play it or forfeit the $billions going into our city’s economy and the thousands of jobs going into our workforce.

    Doubt the statistics? By all means, provide us with a genuine counter-study.

  14. If issue 7 fails, where will the money come from to maintain the 3 sports facilities ?

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