Quicken Loans Arena Deal One of a Few Recent Sports Projects to Fall Through Nationwide

With the collapse of the Quicken Loans Arena deal, Cleveland joined St. Louis and San Diego on the list of cities in which public sports projects have recently fallen through.

San Diego voters in November last year defeated a plan to fund a new Chargers stadium with hotel tax dollars. In April this year, a bid for a Major League Soccer stadium failed at the ballot box in St. Louis.

Now the Cavaliers say they will back out of a public-private financing deal to renovate the Q. The groundbreaking had been delayed for a voter referendum brought by Greater Cleveland Congregations and other groups. The team said the project would face higher construction costs and interest rates as a result.

The Cavaliers would have paid off half of the $140 million in bonds sold to finance the deal. Cleveland, Cuyahoga County and Destination Cleveland would have paid for the other half, with additional money flowing into reserve funds. The total public cost was roughly estimated to reach as high as $160 million over 18 years.

It’s not entirely unusual for the public to reject some stadium deals, Smith College Professor Andrew Zimbalist said. What’s different from past decades, he said, is that many cities and states are facing more difficult fiscal situations.

“There’s certainly an increased sensitivity to public financing, and there have been more and more deals that have been privately financed,” Zimbalist said. “However, the privately financed deals tend to have hidden public subsidies.”

While there may be growing public discontent with stadium deals, Stanford University Professor Roger Noll said cities don’t usually see so much pushback on proposals that cost less than building a new arena.

“That’s why it’s a bit strange that this one has fallen through,” Noll said, “because it really isn’t as much as many other teams have gotten just in the last couple of years.”

Noll also questioned whether higher construction costs in the near future would have been prohibitive for the Cavaliers. 

“Construction costs do go up on an annual basis, but they go up in the range of three to five percent,” Noll said. “So it’s hard for me to figure out why, if it’s going to cost an extra $7 million, you just say, ‘To hell with it, I’m not going to do it.’”

Noll said he believes the Cavaliers may have more to say in the near future.

“It seems to me they’re unlikely to say, ‘Oh, okay, forget about it, we’re going to play in this old facility for 20 more years,’” he said. “I doubt that that’s going to happen.”

The Q deal would have extended the end of Cavaliers’ lease from 2027 to 2034.

Cleveland would have divided admission tax collections at the Q between its general fund and debt service on the project.

Those payments would have started in 2024. With the Cavaliers’ lease now set to expire just three years later, it’s uncertain what will become of that money. City spokesman Dan Williams said it’s too early to tell.

Destination Cleveland would have pitched in $44 million over 18 years from the hotel bed tax money it receives.

“With the dissolution of the Q renovation funding packaging, the funds will continue to flow to Destination Cleveland as required by law and will be utilized for travel and tourism-related capital projects that contribute to the continued growth of the industry,” the group’s president, David Gilbert, said in a statement provided through a spokesperson.

Cuyahoga County would also have contributed money from arena sales tax collections and a fund associated with the convention center and downtown hotel.