FIRSTENER GY STADIUM AND THE PROPOSED SIN TAX EXTENSION . 1 ..: 1 PRESENTATION TO CUYAHOGA COUNTY COUNCIL TUESDAY, JANUARY 21, 2014 Ken Silliman, Chief of Staff to Mayor Frank C. Jackson Age of Cleveland is Sports This year Progressive Field and Quicken Loans Arena will turn 20 years old, and First Energy Stadium will turn 15 years old. Although one study estimated the useful economic life of a sports stadium to be 30 years} a lot of cities with stadiums practice the Scarlett O'Hara approach to stadium investment -- "I'll think about that tomorrow." Cities that fail to make midterm stadium investments usually end up building new (today's costs are approaching a billion dollars) or losing their teams. Cleveland's downtown is unique due to the care we have taken in restoring and preserving historic structures. When the respective ages of our three sports facilities approach 80 years over the next decade, there is no reason why we cannot continue this tradition3 in Vest today to avoid a much more costly future investment. Remember that the public--not the these facilities. Location of Cleveland 19 Sports Fac1']1't1'es A 2000 survey found that about half of the 113 major sports franchises were located downtowni specifically, of the 113 major sports franchises that existed in 1997, 58 were built downtown, 26 in a central city, and 29 in a suburban areas? Yet in Cleveland, all three of our major sports facilities are compactly located downtown within easy walking distance of the downtown office market and adjacent to two of Cleveland's most popular entertainment districtsi East 4th Street for the Indians and Cavaliers, and the Warehouse District for the Browns. F1'na12c1'ng History of'F1'1'stE11 ergy Stadium irstEnergy Stadium was dedicated in August, 1999 at an estimated $300 million construction cost. The major funding sources for the construction of the football stadium, and for the funding of the stadium's capital repair fund, were passed by the City of Cleveland and Cuyahoga County in 1995. They include a 10% parking tax, a 2% increase in the admissions tax, rental car taxes, and a ten'year extension (2005-2015) of the countywide sin tax. The City of Cleveland receives these tax proceeds every year and makes its annual debt service payments with the benefit of these proceeds. From 2005 through 2012, the City was able to make most or all of its annual payments from sin tax proceeds. That's because the stadium closing documents stated that the first $87 million of 1 "Siegfried and Zimbalist (2000) point out that the effective useful economic life of a sports stadium appears to be about 30 years, a figure consistent with the average age of the stadiums replaced in the past six years." Dennis Coates and Brad R. Humphreys, ''Professional Sports Facilities, Franchises and Urban Economic Development," UMBC Economics Department Working Paper 03-103, 2003. 2 See Tracy H. Newsome and Jonathan C. Comer, "Changing Intra'Urban Location Patterns of Major League Sports Facilities," THE PROFESSIONAL GEOGRAPHER, February 2000, Volume 52, Issue 1, pages 105-120. sin tax proceeds were to be applied to stadium debt service. Since the sin tax brings in about $13 million per year, that provision gave the City a little less than seven years to use the sin tax for debt service. After the first $87 million of the sin tax proceeds were allocated to stadium debt service, the stadium closing documents stated that the remaining proceeds are to be allocated as followsi The next $29 million to the City of Cleveland to be applied toward stadium capital repairs; and 0 The remaining proceeds to Cuyahoga County. Since 2012, the City has had to fall back on the other stadium funding sources--the parking tax, admissions tax increase, and rental car make the annual debt service payments. Cleveland Bro Wns'Pl2ase I Capital Repairs and lmprovemen ts-' 70 in 2014 In 2013--a year before the halfway point of the City of Cleveland's 30-year lease of the football stadium to the Cleveland Browns proposed to make $120 million of capital repairs and improvements to the stadium. In return, the City made certain commitments summarized below. Cleveland City Council passed authorizing legislation on November 25, 2013. While this significant project will go a long way toward extending the useful life of the stadium, it does not resolve all repair work needed over the remainder of the lease term. The most significant 2014 Browns repairs and improvements, in rank order of their cost estimates, are the scoreboards and related audio/control rooms ($30 million), end zone improvements ($28 million), lower bowl improvements including American Disabilities Act changes million), and escalators million). Cleveland BroWns'P11ase II Capital Repairs and Improvemen ts-' $50 in 2015 The most significant 2015 Browns repairs and improvements, in rank order of their cost estimates, are club seating repairs and improvements including painting and carpeting ($13 million), suite repairs and improvements including painting and carpeting ($10 million), concessions million), concourse and surface lighting million), increased hospitality million), new south side entry million), field lighting million), infrastructure million), and back of house sound million). City of Cleveland Ann ual Payments to Cleveland Bro Wns-' Years 2014 to 2028 Subject to annual appropriations by Cleveland City Council, the City will pay the Browns $2 million per year for fifteen years. Though the total payments are $30 million, the present Value oftlie total payments is $22 m1'll1'0n. The Stadium Capital Audit Cleveland City Council authorized a $400,000 stadium audit contract with URS. The report was completed in December, 2013. We asked URS to prepare a summary of major findings and that summary is attached as Exhibit A. Browns Project Versus URS Material Capital Repairs 2014 to 2024. URS projected $23,705,614 of material capital repairs that will accrue in the next ten years. Of that total, the following table depicts those repairs that We have determined will be performed by the Browns as part of their $120 million project. ITEM PROJECT YEAR 35 AMOUNT Architectural (ADA) 1 103,467 Architectural (ADA) 2 2,7 80, 70 1 Architectural (including painting and carpeting) 6'10 6,150,059 TOTAL 9,034,227 Browns Project Versus URS Capital Repairs Improvements 2014 to 2024. URS projected $56,248,703 of capital repairs and improvements that will accrue in the next ten years. Of that total, the following table depicts those items that we have determined will be performed by the Browns as part of their $120 million project. ITEM PROJECT YEAR '35 AMOUNT Telecommunications (scoreboard) 1 19,036,988 Electrical (field lighting) 3'5 4,694,684 TOTAL 23,731,672 Remaining Capital Repair Needs Once the Browns Improvements Are Completed. After the capital repairs and improvements funded by the Browns are completed in 2015, the following table depicts the remaining needed improvements identified in the URS capital audit and the proposed funding sources for those items. USES OF FUNDS FOR URS REPAIRS SOURCES OF FUNDS FOR URS REPAIRS ITEM AMOUNT ITEM AMOUNT Remaining Material Capital 14,671,387 Existing Sin Tax Proceeds That 24,000,000 Repairs 2014 to 2024 Expire in 2015 Remaining Capital Repairs 32,517,031 Proposed Extended Sin Tax 23,188,418 Improvements 2014 to 2024 Proceeds 2015-2035 TOTAL 47,188,418 TOTAL 47,188,418 Comm unity Benefits on the $64 Phase I oft./1e Bro WIIS Improvements 0 Project subcontracts will be on hard construction cost only3 $54 million; 0 Goal Waiver Request Form for specialty worki $22 million; 0 The subcontracting plan will be on $32.2 million of work; 0 The following percentages will apply to that portion of the Phase I projecti MBE 10%, FBE CSB 14%, for a total of 31% participation. Cleveland Resident Employmenti 20% The project will pay prevailing wage. Browns will promote green building initiatives. Browns will increase annual contribution to the Muni Football League (28 organizations, 82 teams). 0 Browns will continue to provide tickets to the Recreation Department for Browns Football games. 0 Browns make an annual contribution to the Case Western Reserve University National Youth Program. Stadium Debt Service As of November 15, 2013, the City owed $128,245,000 on the stadium debt. The debt service schedule for remaining payments is3 PERIOD ENDING 12/31 DEBT SERVICE PAYMENT 2013 15,015,743.76 2014 11,917,168.76 2015 11,920,731.26 2016 11,920,231.26 2017 11,917,731.26 2018 11,919,812.50 2019 11,915,493.76 2020 11,912,650.00 2021 10,132,000.00 2022 10,130,950.00 2023 10,127,700.00 2024 10,132,100.00 2025 10,128,700.00 2026 10,127,500.00 2027 10,128,200.00 2028 8,600,500.00 EXHIBIT A URS CAPITAL AUDIT SUMMARY of PROJECTED MATERIAL CAPITAL REPAIRS for Years 2014 to 2024 November 22, 2013 Revised Row Labels ARCHITECTURAL ELECTRICAL FIRE PROTECTION STRUCTURAL TELECOMMUNICATIONS Grand Total Row Labels ARCHITECTURAL ELECTRICAL FIRE PROTECTION STRUCTURAL TELECOMMUNICATIONS Grand Total Row Labels ARCHITECTURAL ELECTRICAL FIRE PROTECTION STRUCTURAL TELECOMMUNICATIONS Grand Total Row Labels ARCHITECTURAL ELECTRICAL FIRE PROTECTION STRUCTURAL TELECOMMUNICATIONS Grand Total Total Sum of (0) Total Project Year 1 $103,467 $564,748 $613,165 $490 $110,809 $38,665 $28,966 $1,460,309 Sum of (1) Total Project Year 2 $2,780,701 $1,666,617 $44,304 $39,054 $313,867 $28,746 $109,590 $4,982,879 Sum of (2) Total Project Years 3-5 $2,178,341 $1,338,707 $13,683 $72,072 $91,580 $1,871,323 $0 $5,565,707 Sum of (3) Total Project Years 6-10 $6,150,059 $10,366 $4,961,666 $2,880 $86,386 $485,361 $0 $11,696,718 $23,705,614 SUMMARY of PROJECTED CAPITAL REPAIRS AND IMPROVEMENTS 2014 to 2024 November 22, 2013 Revised Row Labels ARCHITECTURAL ELECTRICAL FIRE PROTECTION STRUCTURAL TELECOMMUNICATIONS Grand Total Row Labels ARCHITECTURAL ELECTRICAL FIRE PROTECTION STRUCTURAL TELECOMMUNICATIONS Grand Total Row Labels ARCHITECTURAL ELECTRICAL FIRE PROTECTION STRUCTURAL TELECOMMUNICATIONS Grand Total Row Labels ARCHITECTURAL ELECTRICAL FIRE PROTECTION STRUCTURAL TELECOMMUNICATIONS Grand Total Total Sum of Opt (4) Total Project Year 1 $0 $0 $0 $0 $0 $303,303 $18,733,686 $19,036,988 Sum of Opt (5) Total Project Years 2 $0 $641,431 $0 $162,231 $0 $0 $0 $803,663 Sum of Opt (6) Total Project Years 3-5 $11,290,943 $4,694,684 $0 $94,154 $0 $0 $18,382,572 $34,462,353 Sum of Opt (7) Total Project Years 6-10 $737,162 $0 $0 $1,208,536 $0 $0 $0 $1,945,698 $56,248,703 First Energy Stadium Capital Audit UR5 SUMMARY of PROJECTED MATERIAL CAPITAL REPAIRS for Years 2014 to 2024 November 22, 2013, Revised; data added Material Capital Repairs Sum of (0) Total Project Year 1 major cost items ARCHITECTURAL $103,467 ELECTRICAL $564,748 FIRE PROTECTION $613,165 Replace heads misc repairs $613,165 $490 $110,809 STRUCTURAL $38,665 TELECOMMUNICATIONS $28,966 Grand Total $1,460,309 Material Capital Repairs Sum of (1) Total Project Year 2 major cost items ARCHITECTURAL $2,780,701 ADA compliance $742,524 Finishes (carpet, walls, clgs, etc) $810,212 Control expansion joints, concrete repair $878,756 ELECTRICAL $1,666,617 Replace existg under bowl and wall wash fixtures $1,443,877 FIRE PROTECTION $44,304 $39,054 $313,867 STRUCTURAL $28,746 TELECOMMUNICATIONS $109,590 Grand Total $4,982,879 Nov 22, 2013 3 0f6 2013 11 21 -- Issues List from PCS sb review2K:\Projects\C\City of lnfo\2013 11 21 - Issues List from PCS sb reviewz First Energy Stadium Capital Audit Material Capital Repairs ARCHITECTURAL Finishes (clgs, walls, doors/frames, floors) Replace game day lockers Exterior envelope, sealants, misc exterior ELECTRICAL Relamp field lighting Replace main concourse lights FIRE PROTECTION STRUCTURAL Rusting metal deck under ramp Misc concrete ramp and concourse repairs Spot paintng of rsuted framing TELECOMMUNICATIONS Grand Total Material Capital Repairs ARCHITECTURAL Replacement of finishes Carpet Paint Ceilings ELECTRICAL FIRE PROTECTION Replacement of Dry Pipe System STRUCTURAL TELECOMMUNICATIONS Grand Total Total Projected Material Capital Repairs Nov22,2013 2013 11 21 -- Issues List from PCS sb review2K:\Projects\C\City of |nfo\2013 11 21 - Issues List from PCS sb review2 Sum of (2) Total Project Years 3-5 $2,178,341 $1,338,707 $13,683 $72,072 $91,580 $1,871,323 $0 $5,565,707 Sum of (3) Total Project Years 6-10 $6,150,059 $10,366 $4,961,666 $2,880 $86,386 $485,361 $0 $11,696,718 $23,705,614 major cost items $1,638,490 $183,520 $229,400 $481,025 $857,683 $1,428,589 $166,315 $238,576 $1,359,144 $1,241,931 $1,600,155 $4,961,666 URS 4of6 First Energy Stadium Capital Audit SUMMARY of PROJECTED CAPITAL REPAIRS AND IMPROVEMENTS 2014 to 2024 November 22, 2013, Revised; data added Capital Repairs and Improvements ARCHITECTURAL ELECTRICAL FIRE PROTECTION STRUCTURAL Renovation for broadcast areas TELECOMMUNICATIONS New HD cameras for scoreboard Upgrade existing cameras Scoreboard Grand Total Capital Repairs and Improvements ARCHITECTURAL ELECTRICAL FIRE PROTECTION STRUCTURAL TELECOMMUNICATIONS Grand Total Capital Repairs and Improvements ARCHITECTURAL Traffic coating on ramps Seating refurbishing ELECTRICAL Replace all field lighting FIRE PROTECTION STRUCTURAL TELECOMMUNICATIONS Sum of Opt (4) Total Project Year 1 $0 $0 $0 $0 $0 $303,303 $18,733,686 $19,036,988 Sum of Opt (5) Total Project Years 2 $0 $641,431 $0 $162,231 $0 $0 $0 $803,663 Sum of Opt (6) Total Project Years 3-5 $11,290,943 $4,694,684 so $94,154 So so $18,382,572 Broad Video Surveillance Upgrades Fiber optic backbone upgrade IPTV Implementation 802.11 WiFi Implementation Grand Total Nov22,2013 2013 11 21 - Issues List from PCS sb review2K:\Projects\C\City of |nfo\2013 11 21 - Issues List from PCS sb review2 $34,462,353 major cost items $303,303 $417,778 $2,785,185 $14,867,775 major cost items $1,544,832 $9,168,577 $4,694,684 $650,187 $841,092 $4,878,335 $12,012,958 URS 5of6 First Energy Stadium Capital Audit Capital Repairs and Improvements ARCHITECTURAL Seating refurbishing ELECTRICAL FIRE PROTECTION Chiller, cooling system upgrades STRUCTURAL TELECOMMUNICATIONS Grand Total Total Projected Capital Repairs and Improvements Nov 22, 2013 2013 11 21 - Issues List from PCS sb review2K:\Projects\C\City of |nfo\2013 11 21 - Issues List from PCS sb review2 Sum of Opt (7) Total Project Years 6-10 $737,162 $0 $0 $1,208,536 so so so $1,945,698 $56,248,703 major cost items $737,162 $1,167,941 URS 6of6