DALLAS – The Quicken Loans Arena – home of the National Basketball Association's Cleveland Cavaliers – will receive a partially bond-financed $140 million makeover.
Cleveland and Cuyahoga County along with a local tourism promoter and the Cavs/Quicken Loans Arena organization are partnering to fund the $140 million renovation of the arena.
The Cavs/Quicken Loans Arena organization will cover half of the costs, with the rest coming from the city, county, and Destination Cleveland, a publicly funded local tourism agency. The tourism agency is contributing a portion of its share of countywide hotel tax.
The county said in a press release that it does not plan to seek new or increased taxes to fund the project. Instead it plans to issue debt repaid through a combination of admissions taxes, sales taxes, a portion of the county's destination facility reserve funds unused on another project they were earmarked for, and a percentage of the hotel tax.
In May 2014, Cuyahoga County voters approved a 20-year extension of the sin tax but that is expected to generate $260 million through 2035 to cover maintenance costs at the arena, as well as the FirstEnergy Stadium and Progressive Field, where the Cleveland Browns and Cleveland Indians play, respectively. The money cannot be used for capital improvements.
The Cavaliers have also agreed to pay for any cost overruns, said county spokeswoman Mary Louise Madigan. The Cleveland City Council and Cuyahoga County Council still must approve the deal.
The transformation is supposed to upgrade and extend the life of the 23-year old Quicken Loans Arena, as well address what are described as important structural and operational deficiencies in the facility. Backers say the upgrades avoid the need to build a new arena at an estimated cost between $500 million and $750 million.
County officials say that in 2016, the arena is expected to generate $245 million in direct spending, $44 million in tax revenue, and help create and support 4,800 jobs.
"This investment provides an innovative solution for extending the use and impact of The Q for years and years to come without the need for a much more expensive new arena," said Mayor Frank G. Jackson.
The renovations ensure the team remains in the city through 2034. As part of the deal, the Cavaliers will extend their lease by seven years. Once the project is complete, the NBA has agreed to allow Cleveland to be a host city for the NBA All-Star week in the near future. A typical All-Star week brings $100 million in economic benefits, according to officials.
"This project is another example of how a collaborative, community effort contributes to keeping the momentum going for the city of Cleveland and the surrounding communities," said Armond Budish, Cuyahoga County executive, in a press release. "This deal is crucial to continuing the great momentum the city and county are experiencing."
The county would issue bonds for the project but additional details were not immediately available. The county is rated AA-plus by Fitch Ratings and Aa1 by Moody's Investors Service. It has $243.8 million of outstanding general obligation limited tax debt, $75.5 million of lease revenue bonds secured by essential assets, $230.9 million of certificates of participation secured by non-essential assets, $17 million of appropriation guarantee debt and $383.1 million of non-tax revenue bonds outstanding.