MASON, Ohio — One month after Beemok Capital announced it would keep the Western & Southern Open tennis tournament in Mason, the price of that business retention effort is coming into focus.
In addition to the $130 million in “public financial contributions” announced Oct. 10 by state and local governments, Beemok was promised favorable tax treatment and a new funding source to cover its operating, maintenance and capital expenses in the future.
These additional perks, spelled out in a memorandum of understanding approved by Warren County Commissioners last month, are intended to keep the Lindner Family Tennis Center from deteriorating in the 25-year term of the agreement.
“They’re going to take some risk operationally. But we’re going to backstop it,” said Warren County Commissioner David Young. “I think this is a good deal for them. I know it’s a good deal for Warren County.”
The additional perks are worth at least $42 million to Beemok, based on interviews with county officials and research by the WCPO 9 I-Team. But they also could also point to a funding solution for Paycor Stadium, where Hamilton County and the Cincinnati Bengals are negotiating a new lease for a building that requires nearly $500 million in basic repairs.
Warren County aims to avoid that problem by giving the tournament its own taxing district.
“It’s a pretty good deal for Beemok,” said Joe Cobbs, a sports business professor at Northern Kentucky University. “It had to be a good deal for them or they were going to go to Charlotte. In this current climate of what you have to do to keep world-class events like this, I think this was a reasonable deal for taxpayers.”
Tax breaks and budget reserves
The WCPO 9 I-Team has been trying to estimate the taxpayer tab for the tournament’s retention since Oct. 10, when Warren County and the state of Ohio pledged $50 million each to the effort – while the city of Mason doubled its proposed investment to $30 million. These upfront contributions were intended to cover 49% of a $260 million expansion that’s expected to bring up to 400,000 tennis fans per year to the Mason tournament that will roughly double in size by 2025.
But those contributions are only part of the story. Warren County’s MOU also outlines three tax incentives that could be worth tens of millions of dollars to Beemok, depending on how they’re used in the next 25 years.
Young, who helped negotiate the deal, provided insight on these MOU terms. So did Deputy County Administrator Martin Russell, who doubles as executive director of the Warren County Port Authority. Beemok did not respond to questions about the deal.
The MOU is subject to more detailed contracts now being negotiated among the parties.
But it includes a sales-tax exemption worth $6 to $10 million, according to Young. The tax break comes from the ownership structure defined by the deal. The city of Mason will purchase the roughly 90-acre sports campus and lease it to the Warren County Port Authority, which is tax-exempt. The port will provide “exemption certificates” that enable Beemok to avoid taxes on “construction materials, equipment and services,” according to the MOU.
A property-tax exemption is also promised in the MOU, although it isn’t entirely clear how that will happen. One clause says the parties will evaluate the creation of a Convention Facilities Authority “to assist in certain aspects of exemption from real property taxation,” while another says the parties will explore a change in state law.
“We were matching what Charlotte was doing, and Charlotte was doing a tax-exempt area for this facility,” Young said. “In our big picture, what are we trying to accomplish? Hundreds of thousands if not a million people coming to this facility and spending their money. It’s not collecting property tax on this facility.”
Young isn’t sure what the property tax break is worth. But the property’s current owner, Tennis for Charity Inc., paid $417,823 in real estate taxes last year, according to Warren County records. If Beemok avoided such a payment over its 25-year lease term, it would save $10.4 million. Last year’s taxes were based on a property valuation of $18.4 million. All of those numbers might increase substantially after a $260 million expansion, which might be why the MOU calls the exemption “essential to the long-term viability of the sports campus.”
A third tax incentive outlined in the MOU might be the most valuable for Beemok: It calls for the creation of a New Community Authority to fund operating expenses, long-term capital improvements and annual maintenance. A New Community Authority is a financing tool, enabled by state law, that allows developers to impose user fees to pay for the projects they build.
Warren County’s MOU says the tennis center’s New Community Authority will be governed by a seven-member board that includes two people chosen by Beemok and five chosen by the city Mason and Warren County. The fees it might collect include “user fees on sales of tickets (and) food, concessions and merchandise,” along with “hotel charges, parking fees and other user-based revenues,” according to the MOU.
Young expects those user fees will fill reserve accounts totaling $26 million that can be used and replenished over time. The MOU says a maintenance reserve account will pay for “court resurfacing, landscaping improvements, parking and shuttle infrastructure,” while a capital reserve will be used for “repairs of existing facilities or improvements to the campus.” Another reserve account will be “used as a buffer against unexpected operating expenses.”
Young said the reserve accounts could pay for new luxury suites and other amenities that keep the tournament viable by improving fan experience.
"Everything Beemok has touched is not average," said Young. "It’s top of class. They’re gonna make this an unbelievable venue."
Young also thinks the reserve accounts will prevent a problem that other stadium deals created.
“There are multiple examples of NFL stadiums that ran into the problem of, ‘The public paid for it and then 5, 10, 20 years down the line, we need upgrades,’” Young said. “NFL team owners are going back to the public and saying, ‘Oh, look at my lease. You need to pay for this.’ That did not sit well with me and I know for a fact that it does not sit well from the general public. That is 100% what we are avoiding in this MOU.”
The other 50 weeks
Beemok has proposed a $260 million expansion that includes not only a larger stadium complex, but also public amenities like a pickleball center and facilities to host concerts, NCAA tennis tournaments and other events year-round.
The MOU calls for Beemok to keep all revenue and cover all expenses in the two weeks it operates the Western & Southern Open. In 2022, the tournament made a $10.9 million profit on nearly $40 million in revenue from ticket sales, broadcast revenue and corporate sponsorships, according to financial statements from the United States Tennis Association.
For the other 50 weeks of the year, Beemok will be paid “a management fee equal to its costs (e.g. staff and materials) plus a nominal profit ($1,000 a month).” Beemok is required to cover operating losses for non-tournament weeks if the reserve funds can’t cover its management fee, subject to later reimbursement when reserve funds are available. If budget reserves meet their funding targets in future years, surplus revenue will be distributed to the city and county, according to the MOU.
“I think the other 50 weeks of the year are really what’s going to help this campus stay modern as the years progress,” said Martin Russell, deputy administrator for Warren County and executive director of its port authority.
Russell said the county has signed more than 40 letters of intent with youth sports groups and event producers to fill the 17,000 hours of available time in three grandstands that could be used for tennis, soccer, hockey and concerts.
“There’s no way it’ll ever be 100% utilized, but we’re trying to get that to about 80% utilization,” Russell said.
More visitors to the site would mean more chances for the New Community Authority to collect taxes on food, drinks, merchandise and hotel fees.
“It’s contemplated that there would actually be two hotels,” Russell said. One would be built in time for the tournament’s expansion to two weeks in 2025, while a second hotel would be added based on market demand.
Cobbs said the reserve accounts and New Community Authority give Beemok an incentive to maximize its year-round use of the site by attracting users within driving distance of the campus.
“The more people that you get into that facility in off-tournament times, the more likely those people are to come back during the tournament,” Cobbs said. “That’s a key market, those people that have the lowest barriers to coming to the tournament. There is hardly any travel cost.”
But to Young and Russell, the beauty of the deal is that it will keep the tournament from coming back to the county for additional funding in the future.
“We’re tapping out,” Young said. “Now it’s up the new owner to fund these things – and the users that are coming to this facility to fund the ongoing upkeep of this global asset.”
Could it work at Paycor Stadium?
User fees and tax districts have been part of stadium deals for decades, said Andrew Zimbalist, an economics professor at Smith College who has written several books about sports financing.
“Using special tax districts are very common for stadium-related expenses, most prominently debt service, but also for capital funds, maintenance and so on,” Zimbalist said. “It’s not a new model that’s being proposed there.”
The Columbus Crew used a New Community Authority to finance a $300 million stadium project announced in 2019. But that deal involved the issuance of $140 million in bonds that paid for construction.
Young and Cobbs are not aware of another stadium deal that uses a New Community Authority as a hedge against future stadium expenses.
“It’s an innovative idea,” Cobbs said. “Counties, cities and states are starting to get more creative in how they can do this. They’re trying to think about, ‘How do we put the burden as much as we can on the users of the facility?’ Or in this case, tennis fans.”
Young thinks the approach might work at Paycor Stadium.
“Not that they’re asking for my opinion, but downtown Cincinnati folks and Hamilton County folks maybe (should) look at a New Community Authority in The Banks region,” Young said. “People go down there. I love going down there. And if I pay an extra 1% on something, and that money was going to fund specifically the upkeep of those stadiums, I don’t see that as a bad deal.”
Hamilton County already collects user fees from Bengals fans by operating the nation’s largest contiguous parking facilities at The Banks, but its revenue is pledged to debt that funded construction of its 8,000 parking spaces. In addition, the Banks Community Authority already collects a 1% fee on restaurant tabs in the riverfront entertainment district.
Still, Cobbs said it’s worth exploring whether the Banks authority could be modified or a new district created on the Cincinnati riverfront to address the Bengals’ demands for basic repairs and future renovations.
“Every dollar counts,” Cobbs said. “To essentially tax the users a little bit more or collect fees from the users that can go towards that maintenance. That’s money that doesn’t necessarily have to be paid by the taxpayers.”
