The Hamilton County Board of County Commissioners is poised to approve spending almost $300,000 on an insurance policy to help cover the stadium bonds — a move they say will protect the property tax rollback while giving them more time to work on a long-term solution. Critics say the commissioners are again putting off any meaningful decisions for another year while they pray for the economy to improve.
“There is no solution. There is no long-term solution,” says Hamilton County Auditor Dusty Rhodes. “All they’re doing is patching together year to year with duct tape and baling wire. And some time the merry go round is going to stop, and God help them.”
When voters first approved the half-cent stadium sales tax in 1996, the county issued $1 billion in bonds to help build Cincinnati’s two sports stadiums. Insurance was included with those bonds to pay off investors in case the county couldn’t make good on its obligations. The company providing that insurance went under in 2011.
Hamilton County needs roughly $26 million to insure those bonds, but it only has about $9 million in cash on hand. If approved by the board — all three commissioners say they are in favor, and Commission President Greg Hartmann said a vote could come as soon as September — nearly $300,000 in taxpayer money would go toward the $9.4 million policy that would help cover the county for one year.
If Hamilton County isn’t able to pay the bondholders, the insurance company will swoop in with cash. But if they are — and the insurance company is betting they are — the insurer keeps the $300,000 and the county has to figure out how to come up with that money next year.
“The only other way we could have raised that $9 million was to raise the property tax,” Hartmann said. All three commissioners told CityBeat they oppose eliminating the property tax rollback, which is equivalent to 30 percent of what the stadium sales tax raises in any given year.
The property tax rollback was enacted when voters approved the new stadiums as a way to make the half-cent sales tax more palatable. Last year it amounted to about $70 for every $100,000 of a property’s value. A November 2011 analysis by The Enquirer of the 2010 property tax payout found that the stadium tax rollback favors wealthy Cincinnatians. The analysis showed that owners of high-end homes got back more from the rebate than they paid to fund the stadium in the form of the sales tax.
Commissioners have reduced the amount of the property tax rollback before in order to make up for what would become annual deficits in the stadium fund once the recession hit and the sales tax failed to bring in as much as analysts initially projected. In addition to that, the stadium fund was raided by previous county commissions for projects such as The Banks.
In 2011 the county paid only $4.7 million back in property tax rebates in order to make up for the shortfall, where in 2010 they paid back $17.4 million. When they ran into the same problem the next year, commissioners sold their stake in the Drake Hospital for $15 million. The sale was controversial — Auditor Rhodes characterized it as a “fire sale” — because the property was last appraised at $45 million. However, the board’s sole Democrat, Commissioner Todd Portune, said that $45 million appraisal included dozens of acres and four buildings that the county did not own.
The stadium fund will again face a projected $13.8 million deficit next year, which is expected to grow to $46 million by 2016. Some say eliminating the property tax rollback — which brought in $19.4 million last year — could bring in the revenue to eliminate that deficit, at least in the near-term.
But that would be a profoundly unpopular decision, especially among the wealthy and influential property owners in Cincinnati.
“(It’s an election year), that’s another good reason to kick the can down the road,” says Neil deMause, a journalist who has chronicled his 15-year investigation of stadium deals in his book, Field of Schemes.
Both Hartmann and Portune are up for reelection this year and each is running without a major-party opponent.
According to deMause, there’s really no easy way out for Hamilton County at this point, especially considering that the county negotiated “a terrible deal” with the Bengals and Reds.
“So far they’ve dealt with it a year at a time and hoped that somehow tax revenue will rescue them in the future,” he says. “There’s no easy way out of it. Either you bite the bullet now and say we have a massive hole we need to fill somehow, or you do what they’re doing.”
All board members have said that they are hopeful Cincinnati’s casino, which is scheduled to open next spring, will provide an infusion of much-needed new revenue. Hartmann said he thinks the type of insurance the county is poised to vote on could be part of a long-term solution, because it frees up cash to be used on other things.
Other than that, commissioners are negotiating with the sports teams and hoping the county can bring in more revenue.
Portune sent CityBeat a draft of a resolution to provide a long-term plan for funding the stadiums. It includes prioritizing the county’s obligations and paying what it can now, while making good on other obligations when funding becomes available.
Portune said voters only approved three things when the new stadiums were proposed — construction and infrastructure for the arenas, annual contributions to Cincinnati Public Schools’ building and renovation program and the property tax rollback.
Under his proposal, those things would be fully funded through the stadium fund, and other things — including items included in the terms of the leases like capital improvements (which Portune says were not in place when voters approved the sales tax) — would be paid with what cash was left with the balance being paid down as funds became available.
Portune said his resolution was proposed earlier this year and remains pending. ©
CONTACT ANDY BROWNFIELD: [email protected]