Sunday, March 21, 2004
'We want a lease that's fair'
By Cindi Andrews
The Cincinnati Enquirer
The two Hamilton County commissioners pursuing a lawsuit against the Cincinnati Bengals say they aren't trying to soak the team - despite asking for up to $600 million in damages.
Todd Portune and Phil Heimlich say all they really want is to force the team to renegotiate what they see as a one-sided lease for the use of Paul Brown Stadium.
Interest payments and stadium operating costs combined will cost the county almost $1.15 billion over the next 28 years. Most of that comes from a half-cent sales tax approved in 1996 that's been taking in less than hoped.
"It puts us in an ever-tightening noose," Heimlich said. "We want a lease that's fair. If they refuse to (renegotiate), we don't have any choice but to seek damages."
The Bengals are skeptical of a renegotiation but won't rule it out.
"The first thing we'd like to do is find out what issues they have in mind," said Troy Blackburn, the team's director of business development. "I don't want to say we're going to do it if they've got a demand list the length of your arm."
Portune and Heimlich won't specify what they'd like to see changed in the lease. But more than a year ago Portune wrote to NFL Commissioner Paul Tagliabue and demanded $80 million from an NFL stadium construction fund and $124 million worth of lease modifications. Tagliabue rejected the demands.
This time, Portune is leading the county's involvement with a taxpayer lawsuit that alleges the Bengals and the National Football League illegally used their monopoly power to pressure the county into building the stadium, which opened in August 2000.
The county jumped into the case after U.S. District Judge S. Arthur Spiegel refused in February to dismiss the lawsuit, which was brought by Carrie Davis of Groesbeck.
"No one has any desire to take this to the mat," Portune said. "We want to do what's right and what's fair and what's reasonable. What's been missing from the equation has been any willingness from the team or the league to do the same."
County was generous
The lease is considered one of the most generous to a team in the NFL.
The county pays all maintenance costs except game-day expenses; most other stadiums built about the same time do not. Staffing, utilities, insurance, administrative overhead and other costs added up to about $8.4 million in 2003.
The county also pays for any new technology the Bengals want once 14 other NFL stadiums get it, or seven obtain it with public funding. The Bengals will likely be able to exercise this clause in the next couple of years to be reimbursed for the new-generation artificial turf they're installing this year. The cost is expected to be around $1 million.
Heimlich has also complained that the team gets half the revenue from all events at the stadium, but such revenue-sharing is not uncommon in the NFL. The Bengals' total rent of $11.7 millionis also comparable to other teams.
Stadium operations, including staffing, maintenance and payments to the Bengals, will add up to $430 million between 2005 and 2032. That's after factoring in the county's share of revenue and its ticket surcharge, according to county administration projections.
The intent of building Paul Brown Stadium was to enable the team to make more money on extras such as club seats and luxury suites so they could acquire quality players. And that's where the team has spent its money, Blackburn said: players' salaries will run more than $100 million this year.
The Paul Brown Stadium project is among the most expensive taxpayer-funded football stadiums, at $455 million. The team's contribution was the $24.5 million it collected in seat-license fees. The county's total payments on $379.2 million in construction bonds through 2032 will total $719.8 million.
Several newer stadiums have gotten money from an NFL construction fund created after Paul Brown Stadium was under way. The Bengals tried to get that money retroactively, Blackburn said, but were turned down by the NFL.
A sales-tax slump
Sales-tax receipts to cover Paul Brown Stadium debt and expenses have come in lower than expected for the past three years. Last year's revenue totaled $60.4 million, 30 percent of which is used to reduce property taxes for homeowners. An additional $11 million is taken out for Cincinnati Public Schools. The sales tax also pays for the $290 million Great American Ball Park first used by the Reds last year.
If sales-tax revenue doesn't take a dramatic upswing soon, the combined fund for Paul Brown Stadium, Great American and riverfront parking projects could fall short by at least $7 million a year starting in 2007 or 2008, according to county projections.
That would force commissioners into a tough choice: tap into their $258 million annual general fund or reduce the property tax rollback voters were promised in exchange for approving the sales tax. The fund is already stretched thin paying for the sheriff's department, the court system, county administration, building inspections and other county functions.
There are two other big financial question marks:
The county and the Bengals are united in opposing efforts by the Internal Revenue Service to tax $24.5 million in seat license fees. The Bengals' 2003 and 2004 rent - a total of $2.7 million - is being held in escrow until the matter is settled.
The county has also paid an Indianapolis law firm more than $1 million to recover about $50 million in stadium construction overruns from companies who worked on the project. A cash settlement of those claims would help pay debt and expenses, Assistant County Administrator Eric Stuckey said.
The blame game
Blackburn said the county's financial troubles aren't the Bengals' fault. He said the team offered to manage construction, but the county wanted to do it. The team also notes that Cincinnati city officials added more than $100 million to the bottom line of the project by requiring the purchase of more privately owned land than first planned.
Hamilton County and the Bengals signed the lease May 29, 1997, and it has been amended several times since.
Among the provisions:
The lease runs through 2026, with an option for the Bengals to extend it for up to 10 more years.
The team gets all income from concessions and advertising in the stadium.
The team can refuse to let the stadium be used for events it feels could damage the field.
The team pays game-day expenses only; the county pays all other maintenance costs.
The team pays $1.7 million in rent in 2000 - an amount that drops by $100,000 each year until 2009, when it drops to zero.
The county gets exclusive use of a private suite.
Development of county-owned land around Paul Brown Stadium is restricted based on height, appearance and other factors. For instance, the lease forbids an auditorium seating 3,000 or more people from being built just east of the stadium.
The team and the county split the revenue from all non-Bengals-related events 50-50.
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