GATEWAY'S $3.2-MILLION BUDGET BARGAIN FOR TEAMS IN 2010

Submitted by Roldo on Sat, 02/06/2010 - 18:02.

The Gateway Economic Development Corp., the non-profit entity that operates Progressive Field and Quicken Arena, has set a budget of $3,275,873 for 2010.

 

As a result of Gateway’s near bankruptcy a few years ago the two team owners decided to “save” Gateway from bankruptcy by agreeing to pay operating costs. They now are multi-millionaires Larry Dolan of the Indians and Dan Gilbert of the Cavaliers.

 

In exchange, the team owners got the entitlement to income from naming rights. It now looks as if the team owners again got the best of the bargain. By far.

 

Naming rights revenues now easily exceed the operating costs, as we shall see.

 

Just how good a deal this was can be seen by the naming rights cost at the former Jacobs Field, now Progressive Field. The naming rights bring Larry Dolan $3.6 million a year. (As Jacobs Field in the final years the rate was some $900,000 a year.) See the $3.6 million deal here: http://cleveland.indians.mlb.com/news/article.jsp?ymd=20080111&content_id=2343558&vkey=news_cle&fext=.jsp&c_id=cle

 

Dolan’s share of the 2010 proposed budget is $1,890,548, according to Gateway. That sounds like less than $3.6 million a year the naming rights produces. Maybe half?

 

Quicken Loans – also owned Gilbert – uses the naming rights on the former Gund Arena, which at the end of its life was paying some $900,000 a year. Obviously, the naming rights are far more valuable now but not recorded for publication. In essence, Gilbert is paying himself, however he works it for tax purposes.

 

Team naming rights here originally were to last until 2013 and would total about $14 million at each facility during that period. This revenue would have gone directly to the Gateway Economic Development Corp.

 

The rescue deal called for each team to pay a portion of the costs of operation. The major cost is property taxes. (As anyone who reads me knows Gateway is tax exempt. But that only applies to the structures. Land continues to be taxed.)

 

This year the property tax is set for $1,052,271 with $761,851 for the stadium and $290,420 for the arena.

 

The next highest cost is security for the two sites with $413,974 for the stadium and $401,761 for the arena. Maintenance is another high cost: $326,398 for the stadium; $356,676 for the arena.

 

The total operating costs of $3.2 million will be shared by the two teams as follows: Cleveland Indians, $1,890,548 and Cleveland Cavaliers, $1,385,325.

 

So Gateway – and the taxpayers – got the short end again. Or is it still?

 

Gilbert, owner of Quicken Loans, enjoys a very lucrative deal for the use of the arena. Data show that Cavs fans spend a game average of $317 for tickets, food and trinkets, according to a site that deals with these sporting teams. The fan index cost is for a family of four.

 

That suggests that Gilbert has gross revenue of some $65 million from the Cavs’ games alone. (Attendance was some 820,000 last year.) He also enjoys the proceeds of all other events at the taxpayer built arena.

Data can be found here:  http://basketball.ballparks.com/NBA/ClevelandCavaliers/index.htm  

 

The Cleveland Indians had revenues of some $181 million last year. They spent a little more than half on players. See here:  

http://www.forbes.com/lists/2009/33/baseball-values-09_Cleveland-Indians_333426.html

 

The cost of building the two facilities was some $154-million for the arena and $181-million for the stadium. Another some $40 million went for land and other costs. Some figure that close to 90 percent was tax subsidized.

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