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Who Dey Perspective: Bengals rebuttal to Wall Street Journal

Posted Jul 13, 2011

Tuesday, the Wall Street Journal published an article that blamed Hamilton County’s financial woes on the voter-approved 1996 plan for new stadiums.

The Bengals believe the Journal’s story is gravely flawed and reaches unwarranted conclusions. And while we can’t force anyone else to agree, we are confident we have the facts to convince anyone willing to review them.

The same day the Journal story appeared, the Bengals sent a rebuttal to the newspaper’s editor. Today we are sharing that with arguably our most valued audience, the readers of Bengals.com.

The issue is not one to be covered with sound bites, and the piece we provide is longer than a standard news article or opinion column. It contains the primary letter the Bengals sent to the Journal, plus several pages of addendum points (which pose challenges of error we don’t believe the Journal can answer).

But this is not a tangled legal document, not difficult to follow. We ask readers’ attention to it as a factor in determining their opinions. We believe you’ll consider it well worth your time.

--Jack Brennan, Bengals public relations director



Letter to Wall Street Journal

It is not news that the industrial Midwest has experienced economic challenges for decades. Shifting from heavy industrial manufacturing towards newer economies is never easy, and many communities have worked hard to find productive solutions. Twenty years ago, Cleveland, Ohio undertook an ambitious plan to rebrand its community and revitalize its downtown by making substantial infrastructure improvements, including new sports facilities for the Cavaliers (basketball), Indians (baseball), and Browns (football). This was the “Gateway” program widely touted around the country.

Cincinnati, Ohio followed suit, but did so only after asking its citizens if they wanted new sports facilities for its football (Bengals) and baseball (Reds) teams. Voters approved this measure in 1996, and the community opened an award-winning football stadium in 2000 and a new baseball stadium in 2003. In the 15 years since the deal was put in place, a funny thing happened on the way to the forum: the local government took money intended for the stadia and spent it on other projects. The chief financial officer in the area criticized that as “mission creep”. If municipal spending had remained limited to sports facilities (as originally planned), municipal finances would have fit within the identified tax revenues – even with a down economy, tax receipts have averaged the 2% growth needed to support the financing. Instead, local officials spent money on extra projects—like a new highway project, an urban redevelopment project, and enhanced funding for public schools—and this “mission creep” has caused real economic challenges, which the Journal wrote about Tuesday.

Unfortunately, Tuesday’s Journal article lost its way when it tried to ascribe blame for municipal finances on the stadium deals, rather than on the real cause: municipal spending on unapproved new projects that lacked funding sources. The stadium story in Cincinnati is an old one dating back decades and Tuesday’s story unfortunately misstated a good bit of that history (like misstating construction costs (which were the same here as elsewhere), misstating lease terms (which were the same here as elsewhere), ignoring that stadium funds are segregated and don’t affect municipal services, or overlooking the state of Ohio’s financial support (which reduced the local funding burden and was akin to what Ohio and Pennsylvania did on other stadium projects)).

However, there was a real story that could have been covered Tuesday – a story written about before in these pages: what is to be done when municipalities spend money they don’t have and move forward with projects voters didn’t approve? We are sorry the Journal missed the real story—despite our suggestions to the contrary—but we are confident that the Journal will better focus on the real issue next time – one that is critical for America’s future.  

Very truly yours,

Troy A. Blackburn
Vice President



Misstatements in the Wall Street Journal article

A fundamental falsehood underlies the entire article, and it has to do with what the article says are the costs of the Bengals stadium. This from the article:

In 2008 the Bengals stadium cost to taxpayers was $29.9 million, an amount equivalent to 11% of the county’s general fund. Last year it rose to $34.6 million – a sum equal to 16.4% of the county budget.  

Those numbers are not close to accurate. The County has issued several hundred million dollars worth of bonds, proceeds of which have gone to construction of the two stadiums, parking garages used by downtown parkers every day of the week, land acquisition for the Banks and the riverfront park, Fort Washington Way construction, infrastructure improvements, and the Banks project. In 2010, the County spent a total of $37 million for operating expenses on both Great American Ball Park and Paul Brown Stadium and for the debt service ($27.5 million) on all of those bonds. To suggest that 94% of that $37 million represented the cost of Paul Brown Stadium alone is preposterous.  

That same falsehood is implicit in the statement that Great American Ball Park “today is largely self-supporting.” That is not true. A substantial percentage of the $37 million in 2010 went to pay for bonds that were issued for construction of Great American Ball Park.

And similarly with the chart that accompanied the article. Effectively the number that is used as “Stadium spending” for Hamilton County represents the total costs of both stadiums, not just one. And when the Hamilton County number for two stadiums is placed in the chart as if it were one stadium and compared to Tampa, Buffalo, St. Louis and Nashville, it is a false comparison.  

The chart has another fundamental problem. The total Hamilton County budget for 2010 was $1.14 billion. The County’s general fund budget (identified as the “County budget” in the chart) is just a small part of that, and not even the part that includes the stadiums. It makes no sense to compare the stadium costs in Cincinnati as a percentage of one part of the County’s budget when the stadium costs are not even in that part of the County’s budget. Likewise the comparison with the other communities is false. It cannot be true that Hamilton County, Ohio (population 802,000) spends $212 million (the chart’s number) on the same things for which Erie County, New York (population 919,000) pays $1.3 billion (again, the chart’s number).

This latter point becomes even more significant when the article reaches out to pull in Hamilton County’s Juvenile Court, suggesting that, because of stadium costs, the Juvenile Court budget is reduced. The Juvenile Court budget is wholly unrelated to the stadium costs and to the stadium fund. They have been separately funded from the outset. That certainly is not the impression the article seeks to leave with its readers.  

State dollars. The article emphasizes in several places that other communities received state dollars, while “Hamilton County assumed $1 billion in debt … without any help from surrounding counties or the state.” Demonstrably untrue, as public records would reflect. Fifteen percent of the costs of Paul Brown Stadium and Great American Ball Park were paid by the State of Ohio.  

Who did the negotiations? The article says that “negotiations between the Bengals and the County were ultimately handled by a three-person County Board of Commissioners.” The Board of Commissioners were never involved in any negotiating sessions. Those were between Bengals representatives and the experienced outside counsel and financial advisers that the County brought to Cincinnati – Public Financial Management out of Philadelphia, one of the most experienced organizations in municipal finance of sports facilities in the country, and Peter Bynoe, a nationally recognized expert in sports facilities and partner in the Chicago office of the international law firm DLA Piper Rudnick. The article reports that “the Bengals say that the county hired expert consultants during the negotiations” of the PBS lease, implying that this might not be true and demonstrating the real bias in the article. It is, of course, true, and it is easily verifiable, through public records, by anyone interested in the truth.

Deadlines? The article says “the Bengals haggled for roughly a year with the County over the construction lease terms under a deadline imposed by the team.” The deadline was not imposed by the team at all. It was imposed by the City of Cincinnati in an agreement between it and Hamilton County – just one of the points at which conflict between the City and County added costs and challenges to the stadium project.

What was negotiated. The article says that the sticking points in Bengals-County negotiations included “who would pocket the millions in annual parking revenue (the Bengals now collect those funds) and who would pay for security costs (the County picks up the bills).” Neither of those was a sticking point.  Parking revenue for home NFL games is a revenue stream that NFL teams receive in every publicly-funded stadium deal in the country. That was true at the time the Bengals’ Lease was negotiated; it is true today. There was never any debate over whether parking revenues for their games would go to the Bengals, and all weekday parking revenue goes to the County. And exterior stadium security costs had been covered by the City of Cincinnati in the 1967 Lease for Riverfront Stadium, which was the predecessor of this Lease. Again, that was not ever a point of discussion between the County and the Team.

Construction cost overruns. The article says a 2000 PricewaterhouseCoopers report identified $4 million in construction cost overruns for which the Bengals were “responsible.” Of course, the report does not say $4 million attributable to the Bengals anywhere. That report was commissioned to help the County determine who was responsible for cost overruns. The County ended up asserting a claim against and recovering $15 million in overruns from the project architect based in part on that report.

Moreover, under the stadium lease between the County and the Bengals, if the Bengals wanted changes to the stadium construction plan the team either had to (1) pay for additional cost, or (2) reduce the scope of the project to offset the additional cost by cutting in other areas. The Bengals did both at different times. Public records show that the Bengals paid the County for additional costs in some instances, and reduced the scope of the project in other instances. The County never disputed this or came after the Bengals for more, because the Bengals lived up to their obligations.

$70 million to move the stadium west. The $70 million figure the article quotes as the cost of “location change” is, in fact, just one element of that cost – only what Hamilton County paid to acquire the land it needed to move the stadium. There were substantial other costs to that move as well, ranging from County legal fees for appropriation actions to building demolition and asbestos removal, all the way to greater costs for driving piles deeper to reach bedrock in the new location. But potentially the biggest cost of the move was what happened when the City of Cincinnati held the land “hostage” (a City Councilmember’s term) for the better part of a year to get the County to fund various City projects. That delay drove the project into the position of bidding out construction packages before design drawings were completed – the problem PriceWaterhouseCoopers identified as the fundamental cause of the cost overruns.

“Little economic benefit?” Without any support, the article reports that the stadium tax deal “return(s) little economic benefit.” That is directly contrary to numerous studies that have been conducted. It also ignores the millions of people who come to downtown Cincinnati every year to attend events at the two stadiums.

“Special elevated parking structures?” The article reports that the cost of the Bengals stadium, according to a Harvard professor, is “closer to $555 million once other expenditures, such as special elevated parking structures, are factored in.” One can look a long way to find a special elevated parking structure near Paul Brown Stadium. The only one that comes close would be the garage built underneath and to support the construction of the National Underground Railroad Freedom Center. That garage is used not only by the Freedom Center but by weekday workers, concert-goers, hockey fans, families going to the circus, Reds fans, and lots of others. Plainly not part of the Paul Brown Stadium project and certainly not solely attributable to that.  

More favorable than other NFL deals? This is a point that the article makes several different times, but again it is not accurate. As the Enquirer reported 15 years ago when the agreement was reached, it was in the middle of NFL leases for new stadiums. It is a deal that is virtually identical to the agreement that the Indianapolis Colts signed five years ago for Lucas Oil Stadium.  

The article states that the County must pay for “high-tech bells and whistles that have yet to be invented.” It then says that the Bengals lease is unique in that regard (“No team had snared such concessions”). That statement is likewise false. The Bengals Lease is typical of other stadium deals. For example, the St. Louis Rams lease provides: “The Facilities, taken as a whole, and each Component of the Facilities, respectively taken as a whole, are to be ‘First Tier’ on March 1, 2005 and March 1, 2015. To be ‘First Tier’ at those dates, the Facilities, taken as a whole, and each Component of the Facilities, respectively taken as a whole, must be among the ‘top’ twenty-five percent (25%) of all NFL football stadia and NFL football facilities, if such NFL football stadia and facilities were to be rated or ranked according to the matter sought to be measured.”

The St. Louis agreement is dramatically more favorable to the NFL team than is Cincinnati’s.

(*Note: To see archived versions of The Who Dey Perspective, click here.)

 

 

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