Tuesday, May 10, 2011

NFL lockout's economic impact could put Cleveland in uncharted waters

The spat between football owners and players over how to split $9 billion a year threatens paychecks, cash registers and accounting ledgers in 32 NFL cities, Cleveland included.
To some, it's premature to even talk about the financial hit Cleveland and Northeast Ohio would take if all or part of the 2011 season was wiped out.
"It's a long way off between now and the beginning of training camp," said Joe Marinucci, president and chief executive officer of Downtown Cleveland Alliance, a nonprofit group focused on improving downtown.
Training camp isn't until July. The season doesn't start until September. But it's pushing two months since negotiations between the NFL and its union broke down. The union decertified. Players filed lawsuits. The league imposed a lockout. For the foreseeable future, there is no pro football.
Cleveland learned to survive without the NFL from 1996-98. Fans rediscovered Sundays. Football widows (and widowers) renewed their vows. Sports economists say fans simply spent their NFL money on other things.
What economic impact does an NFL team really have on a community? Pinning that down is like trying to pick up Jell-O with your hand.
Consider, for instance, when civic leaders floated back-to-back economic impact estimates in the mid-1990s to unsuccessfully block the Browns' move to Baltimore. The former Greater Cleveland Growth Association, now the Greater Cleveland Partnership, released a study in 1995 and two more in 1996 to support the city's fight.
In the first, the chamber of commerce estimated the Browns were worth $34.6 million a year to the local economy. A year later, that number was up to $47.9 million and, a few months after that, as NFL owners were to meet to discuss the Browns' move, the number was inflated to $79 million -- and that was just spending by fans who didn't live here.
By 1997, then-Cleveland Mayor Mike White, in a Plain Dealer "op-ed" piece about the new lakefront stadium and the expansion Browns impending return, had put the team's economic impact at $77 million.
The most recent swipe at how much Browns games pump into the local economy was in late 2007 by Positively Cleveland, the region's tourism promoter.
The estimate: $63 million. 
Tamera Brown, the agency's vice president of marketing, said the number represents actual spending by fans at the 10 preseason and regular-season games, not those who watch at local bars or buy souvenirs outside the stadium but don't go in. The figure includes tickets, souvenirs, food and beverages and, for tourists, lodging, transportation and other meals.
"Browns weekends are very good weekends downtown, there's no doubt about it," said David Gilbert, President and CEO of the Greater Cleveland Sports Commission.
"But the economic impact from sports teams and sporting events is driven by out-of-town visitors, people who come in from out of market and spend their money in market. The vast majority of fans at games are locals. So, from that standpoint, I'd say [a lockout] hurts, but is not devastating."
Even Gilbert, who also oversees Positively Cleveland, said there's really no way to hang a dollar value on it, although downtown hotel operators and restaurateurs certainly do.
Hotels closest to the lakefront stadium sell out or come close to it on weekends when the Browns are playing. Leonard Clifton is general manager of the 380-room Doubletree by Hilton Cleveland Downtown Lakeside at East 12th Street and Lakeside Avenue. He estimated a $250,000 hit if the entire season is lost, not counting the $100,000 for food and beverage sales.
"Each of those games represents about 300 additional room nights for me," he said. 

Fewer reservations means less work for employees. As a rule of thumb, about 40 cents of every dollar goes toward payroll.
"You're looking at potentially $150,000 toward staffing," Clifton said, "and that represents about 20,000 hours of labor. And I'm one hotel."
Ray Vallee, general manager of the Hampton Inn Cleveland Downtown on East 9th Street, said the extent of the economic hit depends on the home schedule. He can always count on big weekends when Pittsburgh, Cincinnati and teams from New York and New England come to town. A group of Steelers fans take 10 to 15 rooms every season.
"Business-wise, it's going to hurt," he said. "Cleveland fans are all over the country. You've got groups who come into town."
Rick Cassara, owner of John Q's Steakhouse on Public Square, said his restaurant does four to five times more sales on a Sunday when the Browns are at home, and maybe a third more sales on a Saturday night before a game.
Karl Abounader, owner of Karl's Inn of the Barristers on West Third Street, said his place goes through 500 to 600 pounds of corned beef sandwiches on a game day. He beefs up with 15 to 20 part-timers to handle the crush.
Abounader said he survived but struggled those three years without the Browns, and that was when the economy was better.
"We'll be dead without the Browns," he said.
Winking Lizard President Jim Callam said his downtown restaurant on a Sunday when the Browns are on the road is 200 mostly empty seats. When the Browns are at home, those 200 seats are filled three or four times.
Football makes his suburban locations hum throughout the season because fans who don't attend the games enjoy watching together.
"It would affect every one of our stores," Callam said. "The NFL's big business."
Then there's the non-Browns employees who work game day at the stadium. Team spokesman Neal Gulkis said there are "a few thousand" of them. About half work 10-hour days as ushers, ticket scanners, elevator operators and handle other tasks for Tenable Event Services. Wages range from about $8 an hour to union scale for off-duty police officers hired for security. 
Bruce Giberson of Lakewood has worked as a Tenable wheelchair escort for 11 seasons. He makes about $10 per hour, clearing about $80 per game. The extra money's nice, but a lockout wouldn't break him, he said.
"They're not going to repossess my house. They're not going to take away my car," said Giberson, who works full time as an AT&T truck driver. "This will mean my wife and I won't be able to go out on as many dates. The social calendar might diminish."
Tenable also uses staff from local community groups, churches, nonprofits and college sports teams and fraternities and sororities who work Browns games to raise money for their organizations.
Some are parents earning money toward private-school tuition for their children. Tenable has a program where earnings from a Browns game are given directly to the school. About a half-dozen schools are involved.
"It's going to hurt them," said CEO Pete Miragliotta.
And that doesn't count roaming vendors and people who work concession stands to raise money for their nonprofit groups.
At this point, Tenable is proceeding as if the season will be played without interruption. The company is advertising openings on its Web site as usual.
But Miragliotta said the uncertainty has crept into loan discussions with bankers who want to know the effects of a possible extended lockout on the operation.
"I've got to believe it has a devastating economic ripple effect," he said.
If so, then the ripple starts in Berea.
If the lockout eats into training camp, the 10,000 or so fans who migrate to the practice field behind Browns headquarters each summer would vanish. So would their dollars for local restaurants, coffee shops and other drop-in services, although Berea Mayor Cyril Kleem believes more training camp visitors tend to hit the strip of chain restaurants along Bagley Road, a freeway exit north in Middleburg Heights.
But an extended labor war that results in paychecks withheld from players and layoffs of coaches (only the head coach has a guaranteed contract), trainers and administrative staff would be a blow for Berea.
The Browns are Berea's biggest income-tax contributor, providing more than a quarter of the city's income-tax base. In 2010, $2.49 million in income tax was collected from 422 Browns employees, according to city Finance Director Dana Kavander.
Berea gets 100 percent of the income tax from administration and coaches. Players are paid a base salary and signing bonuses. Berea gets all the tax on player bonuses, but splits the tax on player salaries 50-50 with the city of Cleveland.
A spokeswoman for the city of Cleveland declined to provide income or admissions taxes received from the Browns, citing a law that prohibits them from doing so. She also said the city doesn't break out parking taxes for specific areas or by date, so there are no calculations for parking taxes in lots and garages near the stadium or by game days.
If much or all of that income disappears, Kleem said, the city would have to review and adjust its $14 million general fund operating budget.
"That," he said, "would be a big, big hit for us."
The sentiment within Browns central, for the moment anyway, is that the only hits will be on the football field.
Browns President Mike Holmgren assured fans through the media last week that it was business as usual and that he expected football to be played this fall. Gulkis, the team spokesman, said a lockout wouldn't diminish the Browns' charitable donations, because the team budgets for them whether games are played or not.
That may mean as much, if not more, to the region psychologically than economically.
"If you think of Cleveland as a body," Tenable's Miragliotta said, "the Browns are the heart and soul."

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