Ohio Republicans largely agree that shelling out $600 million to fund a new Cleveland Browns stadium is a good idea. They just disagree on how to pay for it. Gov. Mike DeWine proposed increasing the taxes on gambling and Ohio House lawmakers favored issuing state bonds.
State senators thought way outside the box.
Every state oversees unclaimed funds — think old security deposits, uncashed checks or even bank accounts. The state acts as a custodian for that money, holding it until the rightful owner comes forward to claim it.
According to the Ohio Department of Commerce, state officials are sitting on $4.8 billion in unclaimed funds.
State senators are now eyeing that money for stadium funding.
The Ohio Senate funding plan
The Ohio Senate’s budget, approved Wednesday, would redefine all unclaimed funds that passed into state custody prior to 2016 as “abandoned.” That money would then “escheat” — a legal term for transferring ownership — to the state.
“What this does is it takes idle money and puts it to work to create jobs, to create incremental taxes, and that’s why we’re so excited about this project,” Senate budget chief Sen. Jerry Cirino, R-Kirtland, said at a press conference introducing the idea earlier this month.
Ohio officials would use a newly created fund, estimated at $1.7 billion, to put up the $600 million the Browns need while maintaining a nest egg for future sports and cultural facilities.
The Browns would pay its share back through tax revenue generated by the project. The team would also put up $100 million in case that tax revenue falls short.
Going forward, any unclaimed funds would move to the new stadium fund if no one claimed them within 10 years. Cirino emphasized that companies often spend several years attempting to return funds before money ever gets transferred to the state’s custody.
Ohio Senate President Rob McColley added, “If you look at the $600 million amount, I believe all of those are at least 18 years or older. So, they’ve been sitting in the fund for some time.”
The alternatives, Cirino argued, aren’t particularly attractive. Raising taxes, even on gambling, is a nonstarter in his caucus. And borrowing money, even if the team pays back every penny, would carry substantial costs.
Over 25 years, those bonds would carry $400 million in debt servicing, Cirino said, “and the debt service would be paid out of the general fund.”
The plan’s supporters are quick to emphasize the safeguards. Anyone whose property gets rolled over in that first sweep to the stadium fund will have a 10-year grace period, extending to Jan. 1, 2036, in which they can still claim their money.
The Senate budget also appropriates an additional $1 million annually to support more outreach to the owners of unclaimed funds.
“Any property that belongs to anybody, rightfully and legitimately, we want them to get what they have coming to them,” Cirino said in an interview. “And we’re not suggesting anything to the contrary. We’re just simply setting a time period here, that is, we think, reasonable.”
Can they do that?
In Ohio, the state Department of Commerce oversees unclaimed funds, but in many other states, that’s the state treasurer’s job. And the National Association of State Treasurers is unequivocal about how unclaimed property programs should run.
“We actually have official policy stating that we believe that state unclaimed property programs should make these funds available to their owners in perpetuity,” NAST Executive Director Shaun Snyder explained.
The group’s policy statement raises concerns about potential legal challenges and emphasizes a state taking custody of unclaimed property isn’t the same as taking ownership of it. At their heart, Snyder argued, unclaimed funds programs are built on trust.
“You get that trust by telling people, ‘Look, if you lose your property, you will be able to claim it. We will keep it for you and protect it for you,’” he explained. “When states decide to essentially add in a cut-off of some kind, that can undermine that process.”
Snyder noted there are just four states with policies that escheat unclaimed funds to the state after a specific period of time.
Two of them, Arizona and Indiana, wait much longer than Ohio proposes, only transferring funds to the state after 25 years. Hawaii and Rhode Island set the cutoff at 10 years, but only for small amounts — less than $100 in Hawaii and less than $50 in Rhode Island.
Like Snyder, the Urban Institute’s Lucy Dadayan argued that “redirecting these funds for public projects, even after a long dormancy period, risks undermining public trust and confidence in government.”
She also raised doubts about the sustainability of the idea. If the stadium funding plan raises awareness, more people could come forward with claims and reduce the amount of money flowing to the stadium fund.
“Well, it’s definitely outside-the-box,” University of Chicago Professor Justin Marlowe said of the proposal.
Marlowe heads up the school’s Center for Municipal Finance and explained he hasn’t heard of any other state using unclaimed quite like Ohio is considering.
One of the virtues of that approach, he said, is it provides the necessary upfront costs without raising taxes or borrowing a lot of money.
“I suppose that’s a tradeoff that’s worth making if you’re willing to get over the conceptual leap of using unclaimed property to this effect,” he said. “I get what they’re trying to solve for, and this is definitely a creative way to solve for that, for better or for worse.”
But Marlowe raised some notable concerns. His center runs a podcast, he said, and they’ve spoken with about 15 state treasurers. All of them have a story about reconnecting people with long-lost property.
“That’s not a 10-year arc, that’s a several-decades-long arc,” he said. “And so, it does kind of raise that question of, is 10 years the right timeframe? Because no one’s ever really done this, I don’t think there’s any right or wrong answer. That’s kind of a policy choice, but it does seem short.”
Marlowe added the systematic transfer of citizens’ property raises legal complications that aren’t easy to answer.
The Fifth Amendment of the U.S. Constitution prohibits the government from taking private property without “just compensation.”
Ohio’s Constitution carries similar requirements and puts the onus on the state to show that taking was necessary and for public use.
Additionally, the escheatment program could raise due process questions.
“I’m sure they can write the law in a way to insulate them from a lot of that, but at some level, these are not statutory questions. These are much broader, constitutional — almost philosophical — questions,” he said. “Which might be why no one has done this to date, right?”
Reactions closer to home
In testimony submitted to the Ohio Senate Finance Committee, the City of Cleveland set aside questions about the source of the money and argued that the new Browns stadium would harm their lakefront redevelopment efforts.
“Public funds — whether from the General Revenue Fund or the unclaimed property fund — should be used to strengthen cities, not undermine them,” the city argued.
Cuyahoga County Executive Chris Ronayne wasn’t bashful about criticizing the unclaimed property idea, though.
“This is not robbing Peter to pay Paul,” he argued. “This is robbing Bob and Betty Buckeye to pay (Browns owners) Jimmy and Dee Haslam.”
Cirino bristled at that characterization.
“That’s a load of garbage, OK? We’re not stealing any money from anybody,” he insisted. “I found his comments about the Senate quite insulting as a matter of fact.”
He noted lawmakers have dipped into unclaimed funds “at least a dozen times previously.”
A Legislative Service Commission memo shared with Ohio Capital Journal notes lawmakers have authorized $1.2 billion in cash transfers out of the fund and used it to capitalize the state’s mortgage insurance and housing development funds. However, that money is subject to recall if it’s needed to pay the rightful owners of unclaimed funds.
The proposal got support from the Ohio Business Roundtable. In a letter to the Senate Finance Committee, the group’s president and CEO, Pat Tiberi, argued it’s a “strategic and fiscally responsible approach” to funding venues.
“A statewide fund ensures Ohio is positioned to proactively support these capital-intensive projects as a means of regional growth and long-term economic competitiveness — not just for a single city or franchise, but for the benefit of all regions,” Tiberi wrote.
“Importantly,” he added, “the Senate’s proposal avoids placing new tax burdens on Ohioans, taking general revenue funds or increasing the state’s debt obligations.”
Like Cirino, Tiberi emphasized the plan would put “idle” resources to more productive use.
This story was originally published by the Ohio Capital Journal and republished here with permission.