HOW GOOD IT GETS FOR THE LERNER FAMILY

Submitted by Roldo on Fri, 05/29/2009 - 15:25.

Isn’t America great! If you’re rich, that is. Ask the Randy Lerner family. Happy billionaires. Our welfare burden.

 

Here’s a case where Cleveland people subsidize one of its wealthiest families. The reverse philanthropy has gone over the $100 million so far. And yet, so long a way to go.

 

I asked the City of Cleveland for an accounting of how much the city has paid to bondholders for the Browns Stadium since 1997. The total came to $102,823,948.58, according to the Finance Dept. documents.

 

The city faces financing costs of another $160,367,109.48 in bond payments to be made until November 15, 2027, according to a refinancing done in 2007.

 

The Browns Stadium – a property tax free facility - is used almost exclusively used by the team owner. That means Randy Lerner and his family. Randy – worth a billion and a half dollars - is the son of Al Lerner. Al ironically was the principal person who helped Art Modell move the team to Baltimore. Not only will the stadium never pay property taxes but the lakefront land was donated free by the city.

 

Randy Lerner also owns an English football team from Birmingham. He paid some $100 million pounds for the team. He’s got the team name, Aston Villa, tattooed on his right ankle, it has been reported.

 

Really endearing.

 

This exclusive stadium use by the billionaire Lerner family means there are maybe 10 games a year. Ten days a year when Cleveland likely makes a little money from visitors who make purchases.

 

Now who would make that kind of investment except our sports-minded public officials with the help of our civic leaders? You would have to be a sucker. Oh….

 

This represents a puny return on a huge city investment. The city says that the cost to construct the stadium was $287 million. However, many believe that the cost was well more than $300 million. There was a strong belief that Mayor Michael White used city resources to cover extra costs. White had said at the time something to the effect “Let me drive this sucker.” He drove it.

 

He didn’t pay for it however. Now we pay.

 

The taxes to pay this money come from, of course, the “sin” tax, which was extended for 10 extra years, and Cleveland taxes - an 8 percent parking tax, a 2 percent increase in admission tax for all events in the city; and a $2 fee on motor vehicle rentals. Passed by City Council in 1996.

 

The Lerner family pays $250,000 in rent for its near exclusive use of the Stadium. The minimum rent doesn’t ever increase over the 30 year lease. Thanks Fred Nance. The city has the right to use the stadium less than 10 times a year but hasn’t much taken advantage of this economic opportunity.

 

By the way, the latest financing was counseled by Squire, Sanders & Dempsey. Would you expect anyone else? Yes, the game is rigged.

 

Browns Stadium, of course, has no naming rights. Just as well. However, that means NO income for the city.

 

However, Al Lerner did a dance around that issue. He put up two huge electronic signs that freely used the MBNA signal. MBNA, his credit card company, was the base of the Lerner family fortune. The large electronic signs face east and west as Shoreway drivers see every day. Free publicity.

 

This is the way the bond document describes the original funding for construction of the stadium: “Funding for the construction of the Stadium was provided by the City, the NFL and the Browns, the State of Ohio and by in-kind contributions of the City Department of Utilities as well as the Northeast Ohio Regional Sewer District and the RTA. The City’s contribution totaled approximately $190 million (not counting interest) generated by City cash contributions together with public issuance of various obligations paid by the City and County contribution. Approximately $10 million of the above total was originally lent by the Cleveland Development Partnership and subsequently refinanced in 2004 by the City. The NFL and Browns contributed nearly $64 million to the initial construction and the State of Ohio contributed nearly $37 million.

 

The city alone pays the debt incurred for the Stadium.

 

It doesn’t stop there.

 

The city is also required to feed the capital repair fund for major repairs to the Stadium. The payment schedule is as follows: From 2008 to 2020, the city deposits $850,000 annually; in 2021, $5.9 million; 2022, $6.3 million; in 2023, $6.7 million; in 2024, $7.1 million and finally in 2025, $7.5 million.

 

Do we think the city will be able to keep this burden?

 

That’s another $44.55 million cost that the city has to pay.

 

The city ran into a little trouble when the interest rate recently jumped to 12 per cent. A number of cities, including Cleveland, had been in the auction rate bond market. Bloomberg.com reported that the “auction rate market is now backfiring on hundreds of borrowers as fallout from the collapse of the subprime mortgage market threatens credit ratings of the world’s largest bond insurers, deterring investors from even the safest bets.” It named Cleveland among those cities using these tax exempt bonds for stadiums.

 

A city representative said that the interest rate rose to 12 percent for Cleveland. However, that lasted, she said, only about two weeks as the city refinanced its debt.

 

Of course, the city doesn’t share in the revenue from tickets sold, usually 72,000 attendance, the 8,000 club seats or the loge revenue, food concessions, parking or advertising in the stadium. All that revenue goes to the needy Lerners.

 

You might notice that the Browns get a lot of media attention.

 

However, you never see Jim Donovan jumping up and down reporting about the financial aspect of the Browns, or the Cavs, or the Indians. No spastic reporting that might do us some civic good.

 

The Plain Dealer seems to be able to devote lots of space to our sports teams. Front page? We’ll give you it all. But neither the news section nor the business section ever seems to touch upon the financial aspects of the teams. When it comes to the financial burden on citizens, especially for an impoverished city as Cleveland, there’s a news blackout. Silence.

 

It’s out of bounds. Foul ball. Yes, foul. But in another way.

 

  

 

( categories: )

I am not a sports fan,

I am not a sports fan, never have been, but I see many around me. Materialism and wealth it’s inherited often. Being wealthy too wealthy to realize how wealthy they are. The emperor built the coliseums for who? The PD caters to the audience and that audience likes the competitive sports, many just pick up the paper for the sports. To them the facilities are worth it, I think they live vicariously through it.

If karma brings about joy then how much did these facilities bring and to so many? Seriously I could care less about the sports but many actually live for the game. The fans in England are crazy, they have gangs that kill each other over the games. It's who and what we are mate! I’m just blowing bubbles, tiny bubbles.  

Were do bonds reside, and what do they provide?  The auto industry bonds that got discounted, did they smash somebodies cookies and whose?   Will there be a ripple effect into pension funds? 

What should we say, that we cannot afford it, or that Lerner should get less out of it? I like the concept except your article’s very much like looking at a income statement that went through a censor, it is missing allot, it has holes were numbers should be!

The city get nothing from the facilities? Nothing at all? They just keep writing big fat checks?

Should we really hate “King James” for his salary, is it that we are just to brainwashed to know it?

Did I say the rent was

Did I say the rent was $250,000 a year, never to rise for 30 years.

The holes you are looking for aren't in the story. Look elsewhere.

Guess we should only vote

Guess we should only vote for people that can produce the financial statements and then detail them and connect all the dots? They should also be able to offer better alternatives and why. Since we now have a network to communicate…what’s the hold up?