The City of Cleveland is getting out of the business of running the Gateway East parking garage.
Located just next door to Progressive Field and RocketMortgage FieldHouse, the city-owned garage is a go-to parking spot on game days. But Mayor Justin Bibb’s administration says the building has proven to be a financial drain for taxpayers.
City Council on Monday approved a complicated deal that essentially sells the garage to the Guardians. The ball club is exercising an option to buy the garage that was part of its 2022 lease agreement.
The deal gives the Guardians control of the garage and much of its revenue. The team won’t have to pay property taxes on the building, either. The tax exemption is thanks to a finer point of the deal that technically makes the Port of Cleveland the owner. The port will receive about $35,000 annually, team officials said.
Here’s what Cleveland gets. The team will pay the city $26 million over 13 years, or $2 million annually. On top of that, the city receives 10% of net operating revenue from the garage above a baseline of $1.7 million.
Plus, Cleveland gets 20% of any revenue the Guardians make by selling advertising space on the garage. The ball club believes there’s good money to be made on ads, general counsel Joseph Znidarsic said.
“We feel that that particular piece of the puzzle is never going to be in doubt,” he said.
Gateway parking garage a net loser for Cleveland
Finance Director Ahmed Abonamah argued on Monday that the sale was a good deal for the city, even though a large chunk of the proceeds will go toward repairs at the ballpark.
“We’re taking something that is presently a negative on our balance sheet and turning it into a positive,” he said.
Currently, the city doesn’t make enough money off of the garage to pay its contractual repair obligations at Progressive Field.
Cleveland made $1.2 million on the garage in 2022 and $1.3 million in 2023, according to numbers Abonamah shared. But under the Guardians’ lease, the city has to pay $2 million each year from garage revenues toward repairs at Progressive Field.
That means Cleveland has to pay the rest of the ballpark costs out of the General Fund, which covers basic city services. Over the past two years, the hit to the General Fund has totaled $1.65 million, Abonamah said. By selling the garage, the city is protecting the municipal coffers, he argued.
One reason the garage has been a money-loser is that the city must set aside parking spaces, both for Guardians and Cavaliers staff and for attendees at game days and events. That cuts into the potential revenue, Abonamah said.
There’s also $2 million in deferred maintenance at the garage. Under the deal, the city will pay that amount to the Port of Cleveland. The city paid off the construction debt on the garage in 2022.
Garage revenues aren’t the only way that Cleveland contributes to the Guardians’ new lease. The city also commits half of its admission tax collections at the ballpark plus $350,000 annually from an unspecified source.
Two council members dissent from garage deal
Council Members Michael Polensek and Brian Kazy voted against the sale at a Monday afternoon Finance Committee meeting.
Polensek objected to the fact that the Guardians’ $2 million annual payment to the city won’t increase with inflation. Council’s longest-serving current member, Polensek opposed the original deal to build the ballpark and arena in the 1990s.
“Let’s face it, we’ve been hosed on this project since ’94,” he said.
Under questioning from Kazy, Abonamah acknowledged that City Hall did not have the garage appraised before cutting a deal with the Guardians. The 2022 Guardians lease deal set the sale price at $25 million.
On the open market, the garage might go for half as much, thanks to slim operating margins and the cost of property taxes, Znidarsic said. Ward 3 Council Member Kerry McCormack said that parking is just not the business it used to be before COVID-19.
“Ever since the pandemic, parking is not a cash cow in these garages,” McCormack said.
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