Here’s how a 1/4 percent sales tax can pay for new stadiums, airport and more for Northeast Ohio (2024)

CLEVELAND, Ohio – Envision a future where Cleveland’s sports teams play in top-notch stadiums, and the city’s airport becomes a premier hub with minimal costs for airlines.

Cleveland.com and The Plain Dealer have proposed a groundbreaking way to fund these crucial facilities through a regional quarter-percent sales tax and manage them with a special commission. This plan would aim to generate $20.1 billion over 40 years, securing new stadiums for the Browns, Guardians and Cavaliers, relieving minor league teams of debt and building a state-of-the-art airport.

While it’s an ambitious and politically challenging idea, our analysis shows it’s financially viable and could finally bring regionalism to Northeast Ohio in a meaningful way.

You’ll find the proposal here. And for a deeper dive into our methodology and calculations, keep reading.

Sales tax

We used sales tax for this analysis for two main reasons: It grows with inflation, and it’s mathematically straightforward. Ohio Department of Taxation records show a quarter percent sales tax would have raised $165.5 million in 2023. We then inflation-adjusted going forward, based on historical trends for rising sales tax collections. But at the end of 40 years, there is money to spare, if sales tax trends don’t hold.

To make all this happen, we would need legislation at the state level to permit the creation of such a district, which would include the nine core counties in the Cleveland-Akron sports/airport market – Ashtabula, Cuyahoga, Geauga, Lake, Lorain, Medina, Portage, Stark and Summit. And if the Legislature required a vote of the new district’s residents, that would have to be a simple yes or no vote regionwide – not county by county.

A regional effort makes sense if Cleveland – and the region – is going to continue supporting teams in three major sports. Cleveland happens to be the smallest U.S. city to enjoy such a status, and with the city’s stagnant population growth, it risks losing at least one of its teams without a way to provide state-of-the-art facilities.

Interest rate

We assumed the Facilities Commission would receive a 5% interest rate on the bonds needed to finance its projects, based on the recommendation of Michael Sudsina of the Ohio Association of Public Treasurers, and on other projects now in the works. For example:

- Cleveland Metropolitan School District is projecting a 5% interest rate on a proposed $295 million bond it is hoping voters will approve in November.

- Last September, Cleveland got a $63 million bond at a 5% interest rate.

- In 2022, Cleveland got a 5% interest rate on a $46 million bond.

Other government bonds have received lower interest rates in recent years. One example is Cuyahoga County’s 4% interest rate on a $123 million Ballpark Improvement Project loan from 2022. However, 4% is also an old number that’s lower than 30-year, A-rated municipal bond interest rates that were available in late May, when we did our research.

Inflation

For all future inflation projections used in this analysis, we assumed a 2.5% rate of inflation, near the 10-year average. We did not apply inflation to the cost of the proposed Browns stadium in Brook Park, since that is the amount being discussed for the stadium today.

Future stadium costs

We budgeted for each professional sports team to get one new stadium and one major upgrade over the next 40 years. The only exception would be the women’s professional soccer team, which would receive a new 12,500-seat stadium at a cost of $150 million – half of which would be covered by the new tax, paid with 40-year bonds. But our model does not include a mid-life renovation for that facility. That’s because the team does not yet exist, but building the stadium is critical to persuading the National Women’s Soccer League to establish a team here. Should Cleveland win the bid, this model could be amended to include future stadium renovations and reconstructions.

Moving on to the Browns. Owners Jimmy and Dee Haslam are seeking a $2.4 billion dome in Brook Park, and we assumed that price was valid. As with the other major sports stadiums, we assumed a 50-50 split between the facility commission and each team, or in the Browns’ case, $1.2 billion for each.

To figure out the cost of hypothetical future facility improvements, we wanted to know how the stadium’s last major facelift compared to its construction cost.

The Browns Stadium, which opened in 1999, cost $283 million to build, and its last, major renovation in 2014 cost $120 million. Based on that ratio, and for a $2.4 billion new stadium, we budgeted just over $1 billion for a full renovation of the new facility down the line.

We repeated this process for the Cavaliers and Guardians, calculating build/upgrade ratios for each team.

For the Guardians, we felt $1.3 billion was a likely stadium cost in today’s dollars. The Tampa Bay Rays are planning a $1.3 billion stadium; the Oakland A’s are planning a $1.5 billion stadium in Las Vegas and when Utah sought an MLB stadium, it projected spending at least $900 million. Given the high cost of these other stadiums, $1.3 billion for a facility in Cleveland sounds likely for a future project.

However, the Guardians’ lease lasts until 2036, and construction materials, labor, etc. will be more expensive in the future. Assuming 2.5% inflation per year, a $1.3 billion stadium in 2024 would cost $1.9 billion in 2040, the assumed first year the stadium would be used.

And, again using the ratio of the cost of building the existing stadium to the cost of its first major renovation, we set aside $2.2 billion to eventually upgrade the yet-to-be-built home of the Guardians – leaving the public share at about $1.1 billion.

For the Cavaliers, we projected a new arena construction cost of $1.5 billion for a 2040 opening. We based that figure on the construction cost of Little Caesar’s Arena, home to the Detroit Pistons and Red Wings that opened in 2017 for $863 million, and we factored in inflation since then. Detroit’s was neither the most, nor the least expensive stadium construction project in the past 10 years.

In total, the three stadiums would cost $11 billion for initial construction and mid-life full renovations. Given our assumption that taxpayers would foot 50% of the bill, this means the commission would need $9.3 billion to cover the bond payments over 40 years for its 50% share of construction costs, and the 50% of renovations paid separately.

Minor league costs

We assumed the facilities commission would absorb the full cost of running, improving and paying debt on the three minor league stadiums in the area: Canal Park, home of the Akron RubberDucks, Classic Auto Group Park, home of the Lake County Captains, and Crushers Stadium, home of the Lake Erie Crushers.

To figure out how much this would cost, we calculated the current cost of operating the stadiums, by year, using financial documents from Akron, Eastlake and Avon. During the most recent available five-year period, Eastlake spent a total of $11,078,232 on Classic Auto Group Park; Akron spent $10,306,673 and Avon spent $1,125,575, not including debt service. We adjusted these totals for inflation and applied annually going forward.

Cleveland-Hopkins International Airport terminal costs

Airports are traditionally supported by revenue generated by the airport itself, and that includes a variety of fees charged to airlines and often passed on to customers. Our model approaches funding for airport construction and operations differently, because our aim is to alleviate that cost burden and make Hopkins more competitive and an attractive place for airlines to do business, while also giving the region a voice in how its major transportation hub is managed.

We acknowledge that the logistics and feasibility of what we’re suggesting is fodder for debate – and that’s the point.

With a total operating budget of about $130 million, Hopkins is currently owned by the city of Cleveland, and it is managed as one of the city’s enterprise funds. That means it’s self-sufficient, relying on about $35 million a year from airlines for aviation-related costs for passenger flights -- which includes landing fees, arrival fees, rents, utilities, federal inspection fees, terminal area apron charges and tiedowns. The airport also relies on non-aviation related revenue, such as concessions, parking and federal money. The “enterprise fund” designation also means the city is not permitted to make money on the airport, and its revenue can never co-mingle with the city’s general fund.

That said, City Hall views the airport as one of Cleveland’s great assets. For our model to work, the city would have to relinquish control of that asset to the new facilities commission. We recognize that would be a tough sell to city leaders. But in exchange, the city could also relinquish the headache of negotiating with airlines to fund major projects, like building a new terminal.

As cleveland.com reported in November, a Cleveland Hopkins terminal rebuild is expected to happen in the coming years in two phases, totaling $2.9 billion. The first phase would be $1.1 billion.

Under cleveland.com’s proposal, however, those costs – and the cost of airport maintenance -- would not land on the airlines, but rather, would be covered by the new sales tax and the airport’s other non-aviation related revenue streams.

The analysis also assumes the tax district would absorb $1 million per year, plus inflation, that Akron-Canton Airport now charges airlines, like landing and arrival fees, adjusted for inflation based on projections.

Existing sin tax

We did not factor into this model any money from the existing sin tax, originally established to build the Gateway sports complex in Cleveland. That money could go to demolishing Browns Stadium and the other existing facilities, as they are replaced, or it could be used to help the team owners with their maintenance responsibilities for the facilities.

Share your thoughts by sending an email to special@cleveland.com.