OPINION: FC Cincinnati's coming West End stadium isn't a great deal — for residents or taxpayers

The city — facing a looming budget shortfall and the objections of many residents in a historically mistreated neighborhood — will spend millions on infrastructure for a stadium despite little evidence it will boost economic growth

click to enlarge Cincinnati's West End - Nick Swartsell
Nick Swartsell
Cincinnati's West End

Last night, it seemed like the entire city was riding on the high of Major League Soccer Commissioner Don Garber’s announcement that FC Cincinnati will join MLS as an expansion franchise.

It’s an incredible story: a 3-year-old team advances into one of the country’s biggest soccer leagues on the strength of its devoted fan base and committed, powerful ownership comprised of members of some of Cincinnati's wealthiest business leaders. The team's rise proved irresistible to a number of Cincinnati’s elected officials, including Mayor John Cranley and most of Cincinnati City Council.

Let’s hope the intense buzz of those post-announcement parties was worth it: Our elected officials, and in turn, taxpayers, are about to wake up to multiple hangovers.

The community benefits agreement and payments in lieu of taxes to Cincinnati Public Schools in order to build the new FC Cincinnati stadium on the site of the district's Stargel Stadium in the West End sound great. But the city will be on the hook for much more as it builds out infrastructure for the stadium — with no likelihood of future large-scale economic benefits in evidence. Meanwhile, there is evidence that the stadium could further disadvantage low-income residents of the West End.

On top of it all, sometime between now and the end of June, the city will need to figure out how to bridge its yawning $32 million budget deficit.

On its face, the city has committed $34 million to build infrastructure for FC Cincinnati’s stadium in the West End. But it will likely be much more.

The city will pull about $2.5 million of that money directly from the city’s capital budget to build the stadium despite the coming deficits, even as sections of Cincinnati city streets look like the surface of the moon months after an especially rough winter. It's worth noting that almost $9 million of the money the city will spend soon is coming from unrestricted sources, including a rainy day fund for capital projects comprised of money the city made from the sale of the Blue Ash Airport in 2014.

The city doesn’t have all the money on hand it will use to provide infrastructure, though: $17 million will be borrowed against the future proceeds of the city’s take of Hamilton County’s hotel tax to the tune of up to $1.5 million a year. And taxpayers will foot the bill for as much as $45 million over the life of that portion of the deal. Total cost to city taxpayers? As high as $62 million. And let’s not forget another $15 million from Hamilton County and $4 million from the state.

Voters may get a chance to stop the hotel tax bit of that spending via a ballot initiative introduced yesterday by opponents of the stadium, including several West End residents and former Cincinnati City Council candidate Michelle Dillingham. Stadium opponents need 6,000 signatures to get it on the November ballot.

Stadium boosters will say that every private project gets infrastructure help from the city, and that you have to spend money to make money. But not every project is an enormous, $175 million stadium. The costs the city will foot are much higher than those for an office building or an apartment complex.

And most economists would find that second point especially dubious. The research literature is clear on the economic benefits of stadiums either publicly or privately financed, as FCC’s is. They are simply not very big, if they exist at all.

“If you ever had a consensus in economics, this would be it," Michael Leeds, a sports economist at Temple University, told Marketplace in 2015.  "There is no impact."

Economist after economist echoes that sentiment.

Sure, the local economy will see a few more jobs from stadium construction, and FC Cincinnati has agreed to pay at least $15 an hour for those jobs. But they are temporary. Afterward, you’re looking at a small number of seasonal jobs during the club’s roughly 20 home games. Even at a living wage, the impact is paltry.

But oh, the spending a stadium will bring! In truth, any new fans drawn to FC Cincinnati will likely be shuffling their money from other entertainment venues. And those going to games at Nippert Stadium are already spending their money here anyway. Some visitors may come from other cities, but very likely not enough to create the massive economic impact claimed by stadium supporters. 

Well, didn't the city do it to increase its tax base? No. The stadium will be owned by the Greater Cincinnati Redevelopment Authority, exempting FC Cincinnati from millions in property taxes over the life of the facility and from sales taxes on construction materials for it.

In addition to infrastructure funds, the city is also offering a 15-year Job Retention Tax Credit worth 50 percent of the city income tax withholdings for FCC employees. That means the team’s employees will still pay those taxes, but half of them will go back to the team, not to the city’s coffers.

Sure, Cincinnati Public Schools will get roughly $25 million from the deal over the next three decades — though the team first tried to get away with paying just $70,000 a year. And FC Cincinnati will pay community groups roughly $6 million under a community benefits agreement over the course of the next 30 years.

Both of those are very positive things, especially taken in isolation. But let’s be clear: that money represents much less than the $81 million in local, county and state taxes we will likely end up paying for infrastructure and interest. And it’s just a tiny fraction of the $175-$200 million the team will spend on its stadium and the $150 million franchise fee it will pay to Major League Soccer, as well as the many millions team owners stand to make as beneficiaries of the lucrative TV contracts controlled by the league.

And with the most pivotal part of the CBA — "affordable, mixed-income, market rate" housing on 60 plots of land owned by Cincinnati Metropolitan Housing — still very much up in the air, those gifts likely won’t mitigate the impact of the stadium in the neighborhood. Enter even more money from taxpayers.

The West End has a median household income of roughly $15,000 a year. Roughly 3,000 of its residents need sub-market rents. With just 1,000 units currently locked into required affordability in the neighborhood, more low-income housing is needed.

Don’t expect that to get better on its own with the stadium coming. There are studies showing that the facility could bring one kind of economic impact: increased property values in the neighborhood around it.

One 2012 study by economic researchers the University of Alberta and the College of William and Mary considered every major-league sports stadium in the country and found that in nearly all cases, stadium construction correlated strongly with a significant rise in surrounding property values.

Sounds great, right? It is for those who own the buildings, but probably not for the 84 percent of West End residents who rent. Many in the predominantly black neighborhood have been denied the opportunity to own homes for decades by various policies and socioeconomic forces — black home ownership across the country lags a staggering 30 percentage points behind white home  ownership and is at the same level today it was at in 1968. Those renters are likely to suffer as their landlords pass on higher property taxes in the form of rent hikes or take those higher land valuations as a cue to cash in by selling to developers keen on higher-end apartments and condos.

Even if vastly more affordable housing comes to the West End to mitigate the accelerated development, it will almost certainly be at taxpayers' expense in the form of Low Income Housing Tax Credits, Section 8 vouchers or other subsidies. That’s not a bad thing, but taxpayers should be aware that they, not the team, will be paying for it.

There’s another point beyond taxes, and that’s the disregard for the people opposed to the stadium who live in the West End — a predominantly African-American neighborhood that has been scarred by generations of racist policies, poverty and the wrecking ball of urban renewal. In the end, their voices were ignored.

Many spoke out at the myriad public input sessions held by Cincinnati Public Schools, Cincinnati City Council and the team itself, almost always outnumbering stadium supporters in the neighborhood. The West End Community Council’s general body voted decisively against a stadium in the neighborhood. FC Cincinnati officials promised that if residents didn’t want the stadium, it wouldn’t come. They said they didn’t want it in the most official venue available. The stadium is coming anyway.

Yet headlines in some major media outlets chose to accentuate the supporters over the skeptics. Some outlets have used the presence of a few outside organizers to denigrate stadium opponents concerned about their neighborhoods as grifters “extorting” FC Cincinnati.

When media outlets did those things, they failed residents of the West End genuinely concerned about their neighborhood, and yet again disregarded the voices of a community very often silenced when big decisions are made.

Meanwhile, Cincinnati City Council participated in a situation in which neighborhood representatives felt pushed to attend last-minute negotiation sessions or lose any say in the community benefits agreement. If those negotiators, some of whom voted against the stadium in the first place, had not come to the table, council was poised to vote on an agreement signed by WECC President Keith Blake — whom the general body of the council moved to impeach.

After a vote in March, one council member told me they believed well more than half of West End residents were opposed to the project. They confided in me that they would try to move it forward anyway — for the good of the city.

But with the above calculus, I’m left wondering what that good actually is. And I admit — I don’t know. Perhaps the stadium will build equity in the neighborhood, bring dividends to taxpayers and noticeably increase the city's stature in a way that materially benefits residents somehow. But given all the facts above, and the incredibly vague upsides touted by city and team officials — better positioning of Cincinnati on the world’s radar, etc. — I’m wary. Being on the world’s radar for soccer alone doesn’t bridge budget gaps or stop people from suffering because their housing is unaffordable.

Back in March, at the Cincinnati Neighborhood Summit, there was a panel discussion on Kenyon Barr — the municipally-coined name for the southern section of the West End that was demolished to make Queensgate, displacing roughly 25,000 mostly black residents. During the discussion, an older man stood up and confronted panelists. He was a city planner at the time of Kenyon Barr, he said. He and other planners — and much of the city outside the neighborhood — absolutely thought they were doing the right thing by tearing down a huge swath of the West End.

Today, few people would agree.

It’s a different time and a very different project, to be sure. Many think the stadium will be the right thing for the West End, despite some considerable objective evidence to the contrary. But I wonder how many will stand to support it decades from now.

It won’t take that long to see how things start to shake out. Our next big city elections are coming up in 2021, and several key players in the stadium deal are up for reelection or are likely to seek higher offices. Voters — from fiscally-watchful conservatives to equity-minded progressives — should hold them accountable for the decisions they've made.

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