The Decision to Reject the Bengals' Request for a Stadium Subsidy

Congratulations, you have been recently elected the mayor of the city of Cincinnati. Shortly after assuming your new position, you are contacted by Mike Brown, the owner of the Cincinnati Bengals. He is concerned about the aging facility of Paul Brown Stadium (PBS). The stadium is nearly 25 years old and is no longer considered state-of-the-art. This is causing him to lose revenue compared to other franchises in the league and, as he argues, preventing him from competing for NFL championships. He is requesting $250m+ in ‘stadium enhancements’ to PBS to improve amenities, luxury boxes, and the fan experience. He has significant leverage in the situation. In fact, he has threatened to re-locate the Bengals to St. Louis, where they have promised a brand new stadium.
History and context is important. Many have labeled PBS as the Worst stadium deal in history (deMause, 2011):
–The initial $280 million price tag ultimately swelled to $350 million (per Bengals) or $454 million (Hamilton County) or $555 million (Long, 2017).
–Per the lease agreement signed in 2000, Hamilton County agreed to allow the Bengals to:
1)Collect all parking revenue
2)Fund all gameday operations costs starting in 2020 ($30 million annually).
3)Fund necessary stadium upgrades to keep the stadium as ‘state-of-the-art’
–Hamilton County has faced steep debt payments. In 2010, PBS cost $34.6 million, or 16.4 of Hamilton County’s budget, causing a $30 million shortfall. As a result, the county had to slash funding for things like schools, police, youth programs, and were forced to raise taxes.
–Hamilton County used a 0.5% sales tax hike to pay for the stadium, however, tourism spending did not increase enough in the area for this revenue to cover the annual cost of the stadium debt.
–In 2015, the county, per the lease terms, paid $7.5 million for a $10 million scoreboard update.
–In 2019, the Bengals and Hamilton county re-worked the lease agreement:
1). Postpone the $250 million stadium enhancements that were due in 2020
2). Eliminate the county’s requirement for $30 million in game day operation costs
3) The county promised parking lot upgrades and the development of “The Banks” entertainment district.
The Bengals lease of PBS is set to expire in 2026. If you, the newly elected major, do not act quickly, you could lose the Bengals. You must choose one of the following options and justify your response using concepts, theories, and ideas from the course:
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a). Authorize the use of public money to subsidize major renovations to keep the Bengals in Cincinnati.
If you choose this response, you might consider addressing any of the following: how much are you willing to subsidize and why? How will you raise funds for the upgrades? Will you use taxes, debt financing, or another method and why? What are the pros and cons of your chosen payment method? How much of the stadium will you subsidize? If you choose to partially subsidize the stadium, where specifically will the public money go? What are the positive externalities from having the Bengals and what are the negative? Do the positive outweigh the negative? The tangible and intangible? What is the overall economic impact of hosting the Bengals in Cincinnati?
b). Reject the Bengals request and risk losing them to St. Louis
If you choose this response, explain why you think a public subsidy to keep the Bengals is a bad idea? What are the problems with the ways in which city's have traditionally financed publicly subsidized stadiums? What is not included in economic impact studies? What do you risk politically and why? What will be the response from the public and interest groups? How are you going to present your rationale to the public? What about the theory of public choice, are the Bengals a public good? What are the positive externalities from having the Reds and what are the negative? Do the negative outweigh the positive? The tangible and intangible? What economic impact would losing the Bengals have on the city of Cincinnati?
I will give you the criteria on next step and I think you need to cite an additional research to match the point, do not worried the part that said cite the course material. I will cover that once I have the essay.