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The seven-year anniversary of the campaign to fund two new stadiums coincides roughly with the opening of Great American Ball Park in a few months. A festival of pagan worship might be in order, except that Mike Brown and Carl Lindner are the only two men who’ve been especially blessed by the sales tax issue’s passage.
The voters knew the transaction would open goldmines to the Bengals and the Reds but imagined a correlative benefit accruing to themselves. Well, they didn’t even imagine it. The Bengals said they needed a new stadium to be competitive, while the Reds told voters a new stadium would allow them to stay competitive.
That was the upside. The downside to refusing the tax meant Cincinnati no longer would be a major league town. The cost of staying in the big leagues? We still don’t know.
Once voters overwhelmingly approved a 1/2-percent sales tax increase to raise $544 million over 20 years, their trusted stewards in office declined to watch costs on the football stadium, leading to overruns and an almost indefinite extension of the sales tax.
The Reds, who entered negotiations tepidly, ended up signing a deal to pay their stadium costs past $280 million.
That’s the cost of staying in the big leagues, so far as we know it. The cost of being competitive in the big leagues? We don’t know that, either, but it’s definitely higher than the cost of staying in the big leagues.
And those costs probably include the installation of new football management with the Bengals and a more equitable baseball revenue sharing agreement — which are costs beyond the means of taxpayers, who thought they could secure good times at the low, low price of 1/2 percent on their purchases in Hamilton County.
Now, as James Brown once put it, “I’m Paying My Taxes, What Am I Buying?” Answer: Two stadiums. Not the joy of winning, not the dream of championships. Two stadiums.
And, to be fair, we’ve bought a major league presence. It’s a presence in the lower end of the major leagues, but a presence that’s encouraged dozens of cities to pony up for stadiums.
Building boom
Consider the area within Cincinnati’s five-hour periphery, beginning in 1990: Cleveland built new stadiums for baseball and football, plus a new arena; Pittsburgh and Detroit each have built a baseball stadium and a football stadium; Chicago has built a baseball stadium, renovated a football stadium and built an arena; Nashville has built a football stadium and an arena; Columbus has added a soccer stadium, a hockey arena and a basketball arena and expanded a football stadium; and Indianapolis has built an arena and a minor league ballpark.
Dayton is even in on the act with the construction of a minor league ballpark and the renovation of UD Arena. And Lexington, Ky. has added a minor league ballpark.
Private funds paid for many of these improvements, but the public has paid for the bulk of them.
The stadium boom across America starting with 1990 is unmatched by any period except the 1920s, when Babe Ruth and college football broke and Americans really turned on to spectator sports. When the Reds open their ballpark next spring, they’ll become the 16th of 30 major league clubs to open a stadium finished in 1990 or later. Two other baseball stadiums have been extensively renovated, and more new parks are on the way.
Of 32 NFL teams, 15 are playing in stadiums finished in the 1990s or later, with more to come. Of 29 NBA teams, 18 are playing in arenas opened in 1990 or later. Of 30 NHL teams, 23 are playing in facilities opening in 1990 or later.
So Cincinnati isn’t alone in this stadium-driven status grab. We are alone, however, in the projectable failure of these projects.
Of all the cities playing major league sports, Cincinnati is among the smallest, meaning it has one of the smallest economies, meaning its tax assessment for stadium construction takes one of the biggest bites. According to a recent study by American Business Journals, Cincinnati is the seventh most overextended American sports market of 172 markets considered.
Sadly, also, Cincinnati is alone in the barenaked disinterest in winning that’s been proven over time by the franchises we’ve supported with new stadiums.
Admittedly, on the Reds’ side, that’s a little harsh. Under Marge Schott’s ownership, the team spent for players, if nothing else. During easier economic times, she bankrolled a World Series winner in 1990, a presumptive division winner in 1994 (cut short by a players strike) and a real division winner in 1995.
With Schott forced to the margins by various suspensions, the Reds cut their player payrolls about in half, to $23 million, over the next three years. When Reds Chief Operating Officer John Allen loosed up an extra $10 million in 1999, they were back in the hunt with 96 wins. A year later, the Reds put up an extra $13 million per year for Ken Griffey Jr., bringing their player payroll up to around $46 million — about what they spent five years earlier and about what they were still spending in 2002.
Though Schott stayed out of the stadium campaign at the campaign’s request, fans knew the Reds were in real competitive trouble — and no set of arguments or data has shown otherwise. Playing in the old stadium with Major League Baseball’s second-smallest television market, the Reds were a financial weakling.
According to Forbes magazine, the Reds finished fifth from the bottom in 2001 revenues among MLB clubs, with a television market that predicted worse. Revenue sharing from other clubs helped, providing 15 percent of the Reds revenues — $13.4 million out of $86.6 million.
Even with the Reds’ revenue sharing money, however, eight clubs paid more in player salaries than the Reds earned in total revenues and 10 clubs paid 50 percent more in total expenditures than the Reds made in total revenues.
The Reds paid $45 million in player compensation according to MLB, 25th of the 30 clubs, and Forbes estimated their profit for the year at $4.27 million. If the Reds had shot the works and settled for breaking even, $4.27 million wouldn’t have made a huge difference.
As Cincinnatians voted for the tax increase in March 1996, MLB revenue sharing hadn’t progressed very far, so the Reds’ actual situation was even worse at the time. The Reds hardly needed to make their own case. Unfortunately, the central organizing principle of MLB economics — the basic agreement with the players — remained to be settled between the vote and the opening of the ballpark.
The basic agreement made in August, much like the agreement it replaced, figures revenue shares only on revenues without factoring in market size. The effect is to penalize clubs that maximize their markets, while rewarding non-maximizers for their sloth. So the Reds will earn an extra $25 million-$30 million for opening the new yard, but their climb up the revenue standings will diminish, if not eliminate, their take from revenue sharing.
Based on reports, the Reds might be able to increase player expenditures to $55 million, at the outside. That would have been 20th among the 30 clubs in 2001 and 2002.
With a new stadium to open in April, then, the Reds will be able to generate more revenue and the value of the franchise is greatly enhanced, should Lindner ever decide to sell. But the new park won’t greatly improve the Reds’ chances for winning, unless Lindner is willing to toss a bit of his own money into the cause. And he clearly isn’t, not even after taxpayers sacrificed $280 million and key players have historically left more than a hundred million on the table to help the cause by signing at hometown discounts.
Same old Bengals
Maybe Mike Brown could spend a little more on players for the Bengals, but no one is complaining about the money he spends. It’s the money Cincinnatians have spent on the Bengals, the money Brown makes and how little we the public receive in return.
By most reports, the Bengals spend about $65 million of their $70 million cap allotment on players, and history has shown the prudence of maintaining a little room under the cap.
Until this year, also, a case could have been made that the Bengals were improving, as the stadium promised. After closing the old stadium era with a 4-12 record in 1999, the Bengals duplicated it with the opening of Paul Brown Stadium in 2000 and improved to 6-10 last year. We actually thought the Bengals might move up a couple notches this season.
Infamously, that hasn’t happened. The Bengals are 1-12, utterly putrid from their very first snap of the season. Over their final three years at the old stadium, the Bengals were 14-34. Over their first three years in the new stadium, they’re 11-34.
Meanwhile, as the county pays about $40 million annually in stadium maintenance and debt service, the Bengals are striking it rich. Citing several sources, Cincinnati Business Courier estimates that the Bengals’ annual revenues have increased more than 50 percent to about $140 million since moving into the new stadium.
The publication found one analyst who expects the Bengals to realize a positive cash flow of $32 million on $139 million in revenues. That’s about four times the $8.6 million in operating revenues reported for the Bengals by the NFL in 1999. Forbes put the Bengals at $130 million in revenues and $15.5 million in operating income for 2001.
Unlike the Reds, the Bengals don’t face a money problem. They face a winning problem, the causes of which have been turned over endlessly. They’re the same problems that plagued the team’s performance throughout the 1990s.
When voters approved the stadium sales tax in March 1996, the Bengals didn’t know how to win and the Reds didn’t have enough money. The stadiums were supposed to fix that.
But after seven years and well more than $700 million in stadiums, the Reds and Bengals are right where they stood when the voters marched in their favor. We kept our teams, at whatever other cost. But we haven’t kept the teams from losing. ©
This article appears in Dec 11-17, 2002.
