Should the Indians receive taxpayer funding for stadium renovations?
Cleveland’s baseball franchise is set to collect millions of dollars in state and local subsidies for upgrades to Progressive Field.
The Cleveland Indians would receive $30 million in state taxpayer funds for stadium renovations under a 15-year lease agreement announced August 5, on top of $117 million from the city and $138 million in county contributions. Gov. Mike DeWine joined Indians owner Paul Dolan, Cleveland Mayor Frank Jackson, Cuyahoga County Executive Armond Budish, and County Council President Pernel Jones Jr. on August 5 to announce the deal, which must still be approved by the City Council and the County Council, and likely the Ohio legislature as well.
Overall, about two-thirds of the cost of the renovations will be publicly funded by the state and local governments, with the team contributing the remaining third.
The Indians, one of Ohio’s two MLB franchises, had been rumored to be considering a move from Cleveland when their current stadium lease expires in 2023, although team officials denied this speculation. But DeWine said he was “very optimistic” the team would stay at Progressive Field, the downtown Cleveland ballpark owned by Cuyahoga County that has been the Indians’ home for nearly three decades. DeWine’s prediction soon proved correct. The new lease agreement lasts for 15 years, with two optional five-year extensions to be exercised by the city of Cleveland.
The Dolan family, who own the Indians franchise, “are absolutely committed to Cleveland,” DeWine said. “I’m going to do everything I can to see that the state puts money in this, and … helps to make it happen.” In part because the Indians are a small-market team, DeWine worries that a future change in ownership could result in the team leaving Cleveland.
“It’s critical we extend the lease,” said Budish. “That’s the way we keep the team in Cleveland.”
DeWine plans to engage in negotiations with legislators regarding the state portion of the funding. According to DeWine, Budish and Jackson requested state assistance to keep the Indians in Cleveland months ago. During negotiations, DeWine described the state’s role in the project as “not necessarily a big one” in comparison to the city and county role.
Throughout the negotiations, DeWine made it clear that no state taxpayer dollars would go toward the Progressive Field renovations unless the Indians made a rock-solid, long-term commitment to Cleveland – potentially as long as 25 years (a 15-year lease with two five-year extensions available at the city’s discretion). DeWine said he personally pushed to lengthen the lease from 15 years to what is, in effect, 25. “They were talking about a shorter lease, a 15-year lease,” DeWine said. “What I said is, look, I think we can be helpful but I would like to see a longer lease.”
Under the current arrangement, even though Progressive Field is formally owned by the county, profits from the ballpark go to the Indians. For instance, the franchise controls the naming rights to the stadium. When the Indians sold naming rights to Progressive in 2008, the team received $58 million – none of which they shared with the county (though the Indians do pay several million dollars a year in rent to the county). In effect, the Indians (like many other teams around America) want to socialize stadium costs while privatizing most of the profits.
Public financing of stadiums is common in the U.S., but whether it makes financial sense is questionable. A similar scenario to the proposed Progressive Field renovations played out in Chicago in the early 2000s, when the Chicago Bears requested public funding for renovations to Soldier Field, their home stadium owned by the Chicago Park District. About two-thirds of the $660 million renovation, completed in 2003, was financed by public money. That investment continues to have negative consequences for Illinois taxpayers, who will be on the hook for millions in long-term debt. And the Bears – less than two decades after the expensive renovations – are already openly musing about a move to the Chicago suburbs.
Ohio’s experience with Paul Brown Stadium is also instructive. The county-owned stadium opened in Cincinnati in 2000 as the home of the Bengals football team. When sales tax receipts fell short of projections during the 2009 recession, Cincinnati was forced to cut basic services and dip into a bond reserve fund. “Anyone looking at this objectively knows it’s a train wreck,” Hamilton County auditor Dusty Rhodes said at the time. “I told them they were making a big mistake, but they didn’t want to hear me.” Later, in 2011, Hamilton County was forced to hike property taxes.
Most publicly-financed stadium projects do not result in such dire consequences. But, in general, scholars agree sports venues do not provide net economic benefits to their cities.
As one 2008 article explained, “large and growing peer-reviewed economics literature on the economic impacts of stadiums, arenas, sports franchises, and sport mega-events has consistently found no substantial evidence of increased jobs, incomes, or tax revenues for a community.” An analysis in 2000 revealed one reason for this is the “substitution effect” whereby most money spent at sports venues would otherwise be spent somewhere else in the same city. For example, if a person could not attend a baseball game, he or she would likely attend a museum, go to a movie theater, eat at a restaurant, or do some other activity in the city. A county unquestionably benefits when fans from elsewhere attend sporting events in the county, but “there is considerable evidence that out-of-state fans at most sporting events do not come to town because of the game.” Rather, they have come for other reasons like business or to see family, and would have spent roughly the same amount of money on other local entertainment in the absence of the team.
A wide-ranging 2017 survey of economists found that, when weighted by each expert’s confidence in their response, 83% of the panelists agreed that “[p]roviding state and local subsidies to build stadiums for professional sports teams is likely to cost the relevant taxpayers more than any local economic benefits that are generated.” Only 4% disagreed (with 11% uncertain).
“It’s a common claim that just because people went to the game that it’s doing something for the community,” said Nola Agha, an associate professor at the University of San Francisco who co-authored a study last year on the economic impacts of sports venues. “But if those were people who lived in the community and, you know, instead of going out to dinner and having some great wings that night, they went to the ballpark, there’s no increase in economic activity. It’s not bringing people to the community. It’s just shifting money around.”
On the other hand, some studies have found that the construction of a sports stadium increases property values of homes located in the surrounding neighborhood. However, this phenomenon may not be entirely beneficial, since it can result inmany residents (particularly renters) surrounding the stadium being priced out of the neighborhood. Ultimately, most professional sports facilities generate “no tangible city-wide economic benefits,” and their local effect in revitalizing the nearby area is mixed.
To the extent subsidies can be justified at all, they must be justified as promoting “public consumption benefits” – like the joy of having a hometown team to root for – rather than catalyzing economic growth. Contrary to popular opinion, publicly financed stadiums do not pay for themselves through higher tax revenues. Teams often commission economic impact studies that claim to show economic benefits from public subsidization of stadiums, but economists view these studies as “fraught with methodological errors.”
While the Indians will remain in Cleveland, the franchise is still going through a time of change. In December 2020, the team announced it planned to drop the name “Indians,” which critics have alleged is racist, and replace it with “a new, non-Native American based name.” A year prior, the team had ditched its longtime logo, Chief Wahoo, a caricatured Native American that many found offensive. On July 23 of this year, in a video narrated by actor Tom Hanks, the Indians announced their new choice of name: They will become the Cleveland Guardians at the end of the 2021 MLB season.
Because sports franchises can threaten to relocate, they will always hold substantial leverage in negotiations with the government. Billionaire team owners – who could pay for the stadiums themselves – use their monopoly power to extort benefits from cities desperate to keep their favorite teams.
Any deal to provide public money for Progressive Field renovations risk saddling Ohio taxpayers with a long-term debt burden or significant future tax hikes – without providing an economic benefit to the city.
In order to protect taxpayers, Ohio state and local governments should get out of the sports industry altogether – and put private businesses on a level playing field to compete for customers.