Ohio Republican lawmakers are driving a plan to put state taxpayers on the hook for bonds to subsidize a Cleveland Browns stadium in the suburbs.
Gov. Mike DeWine, a Republican, in February called for
In April, the GOP-run Ohio House passed its budget,
"The governor prefers a solution that comes up with a new revenue source… that kind of solves the stadium issue once and for all," DeWine press secretary Dan Tierney told The Bond Buyer.
The House bill "only deals with the Browns' facility needs," he added. "It does not address other stadiums that might be coming up for renovation or replacement. We know that there are other facilities across the state… that were built in the 1990s or early 2000s. You go through the five major sports leagues, each of those franchises built their facilities in the 1990s."
Tierney pointed to the NFL's Cincinnati Bengals and Major League Baseball's Cincinnati Reds, in particular.
"(The governor's) particular issue right now is that the bond plan that's put forward is funded through… revenue being taken away from the Ohio general revenue fund," he said.
According to the
According to a March 26
Those include counting in its sales tax projections economic activities that are exempted from state sales taxes; counting as "new jobs" roughly 3,500 jobs that already exist; relying on service sector jobs that would not generate enough income tax revenue to meet debt service obligations on the bonds; "wildly overblown" construction jobs estimates; and bond plans that will not meet IRS standards for tax exemption, requiring taxable bonds that would cost the state $200 million extra.
The memo further notes that the proposed revenue structure would require a separate rating from rating agencies, and because the pledged repayment differs from existing sports facilities bonds, there's no guarantee of a rating on parity with existing bonds.
"The unprecedented $600 million in taxable bonds, backed with (general revenue fund) dollars, would be the single most expensive bond issuance in our state history with a structure that violates the prudent policy set by the Treasurer of State, BM, and the Ohio Public Facilities Commission," the memo concludes. "The total cost of this structure would exceed $1 billion. Ohio would own a sports stadium and the responsibility for maintenance, with no additional revenue. OBM does not support this proposal."
Murnieks told The Bond Buyer that OBM released the internal memo earlier this week in response to a public records request. While the memo addressed a draft amendment from March, HB 96 "includes a version of that bond-authorizing amendment," she said.
"OBM met with Haslam Sports Group several times over the past several months," Murnieks said. "The state of Ohio has a long history of supporting sports facilities projects. … We have significant needs and important requests for (general revenue fund) support — from schools to libraries, to health and mental health services, and protecting public safety — (and) these are the core government services supported by our GRF."
OBM supports the stadium funding plan in the governor's executive budget, she said: "The sports-gaming play is the clear game-winner to protect Ohio's GRF budget long-term."
Haslam Sports Group
The Haslam memo also said it expects the bonds to qualify for tax-exempt status.
Peter John-Baptiste, chief communications officer for Haslam Sports Group, pointed to the $1.2 billion commitment from the Haslam family for the stadium and the $800 million to $1 billion in private investment promised for the adjacent mixed-use development. He noted that public-private partnerships are common for stadium projects.
"They create an equation that enables a return for all invested stakeholders and encourages the type of economic impact activity that can greatly benefit a region," he said. "Many times, a tremendous amount of the value from these events accrues to the public."
The bipartisan Ohio Legislative Service Commission also
The commission said it could not verify the Haslam Sports Group's economic claims because it "was unable to obtain the full (economic impact study) report," and only the executive summary is publicly available.
"We've taken many stakeholders and even other media members through our economic impact study conducted by RCLCO, a real estate consulting firm with over 55 years of experience in the industry," John-Baptiste said.
John-Baptiste added that the organization's projections are based on historic attendance numbers, and "we've most certainly looked at similar venues and have seen a significant disparity in the number of large-scale and mid-size events dome venues have been able to attract compared to our current open-air stadium."
Antonio posed three questions: Is the language in the budget amendment constitutional? Are the bonds backed by the full faith and credit of Ohio? And what is the Legislative Budget Office's independent analysis of the numbers Haslam Sports Group provided?
The OLSC's answers were: First, it's an open question, and ultimately a judge could make that determination. Second, these would be revenue bonds, not general obligation bonds.
And third: "The HSG projections implied an outcome that would outperform other similar developments previously studied in peer-reviewed academic literature."
The Brook Park stadium is no different from the many other publicly funded stadium projects, said College of the Holy Cross economics and accounting professor Robert Baumann.
"There are hundreds of studies that have looked at stadiums, done by researchers with no direct financial interest (in those projects)," he said. "And this research has included NFL stadiums, domed and not, surrounding 'economic district' and not, in the suburbs and not, and so on. There is nothing different about this. It will not support itself via surrounding economic activity. It will cost Ohioans money."
He pointed out that the Brook Park stadium will likely shift economic activity away from Cleveland rather than generating additional activity.
"HSG is knowingly spreading misinformation in order to receive a multi-billion dollar subsidy for a stadium that the team could easily afford," he said. "The economic impact study is at best incomplete, and in all likelihood garbage."
Baumann stressed the difference between independent, peer-reviewed academic studies and the economic impact analysis the Haslam group commissioned from RCLCO. That study has not been released in full, not even to the Ohio Legislative Service Commission.
"It is not our bias — all names are removed in the peer review process," Baumann said "It's that commissioned studies are slanted and frequently flat-out wrong."
Antonio told The Bond Buyer that she has many reservations about the bonding plan as the Senate takes up the version of the budget passed by the House. For one, the amount: the state would ultimately be responsible for $1.2 billion if the Haslams defaulted, she said.
"As to the viability of the project — because they are basing everything on anticipated revenue coming back through the activities of that sports complex — and it's all speculation," she said. "No matter what kind of agreements or assistance the state provides, I do not believe it should be done through those bonds.
"The governor had a proposal that would have generated fees from sports gambling activity," she added. "I liked that idea much better. Because it was money that would come to the state from outside entities, and that would actually be new revenue being generated."
Antonio also questions the stadium's benefits to Ohio taxpayers and to the Cleveland citizens she represents.
The Haslams' project, she said, "cannibalizes resources out of the city of Cleveland, moves them to a suburb, and then what is the future in terms of that property in Cleveland?" She pointed to findings in the OLSC analysis that positions in the mixed-use district will come at the expense of jobs in Cleveland.
"I asked for the study because I believe it's important for us to do our due diligence; ultimately we are responsible to the people of the state of Ohio," she said. "What I will say is that in talking to my colleagues on both sides of the aisle in the Senate… we are not just going to take on what the House sent over."
Antonio also questioned whether using the general fund for a wealthy sports team's stadium complex showed appropriate priorities.
The OBM analysis "certainly does support (DeWine's) conclusion that we have to look at something other than the general revenue fund," Tierney said.
The governor does support the idea of "taking advantage of the significant economic investment that HSG wants to make in the community — that is a good thing," he said. And DeWine likes the idea of a domed stadium, because Ohio does not currently have one.
"We have been talking with the Senate about what they want to do," he said. "The governor is confident that we can accomplish all of these goals and do it the right way if we look at alternative revenues."
House Speaker Matt Huffman did not respond to a request for comment by press time.
