Soccer stadium
Graham RenzMichael Highsmith

“Game-changing” projects that require taxpayer assistance have become the norm in Saint Louis, as public subsidies are granted to wealthy developers despite opposition from local residents. The trend was set to continue for construction of a Major League Soccer (MLS) stadium until Governor Elect Eric Greitens voiced his objections.

Right now, because of reckless spending by career politicians, we can't even afford the core functions of government, let alone spend millions on soccer stadiums.

The project’s ownership group, SC STL, has taken Greitens’s words seriously and delayed a request for $40 million in tax incentives from the state. In addition to this $40 million are plans for Saint Louis City to pay $80 million, but before any public funds are awarded we should ask what return the city will see on its investment. Are there benefits to owning a stadium? Here are some claims that SC STL made in its written proposal to the state:

Claim 1: Publicly financing an MLS stadium will help make Saint Louis a “first-class city” and will “complete one of the great corridors of sports, culture, and entertainment in the nation.”

What being a “first-class” city means is ambiguous, and Saint Louis taxpayers have heard this song before. The $3 billion spent on MetroLink (thus far) was supposed to make the city first-class. Today, MetroLink trains carry less than 1% of metro-area commuters and have failed to spur significant economic development. In the 1990s, the Edward Jones Dome was pitched as a way to grow the economy and revitalize downtown; it failed on both fronts. Exactly how another professional sports team will help Saint Louis climb the urban ranks, and how that ascension justifies a massive subsidy, is unclear.

Claim 2: SC STL has made “significant effort to minimize the public financing component of the project.”

It is, at best, unclear what efforts SC STL has made to minimize the need for public subsidies. SC STL originally estimated that the expansion fee for joining MLS would be $200 million, but MLS recently announced that the fee would be only $150 million. One might expect that the $50-million cost reduction would be passed along to the city and the state, but SC STL made clear it would still ask for the full $120 million. Can SC STL really claim they have made “significant effort to minimize public financing?”

 

Claim 3: The recent departure of the NFL Rams reduced tax revenues for the city, and an MLS team would help recover some of those lost revenues.

This is a little like a doctor prescribing more of the same “medicine” that made the patient sick in the first place. Pushing for a stadium deal to help make up for revenue shortfalls caused by a previous stadium deal lies at the border of questionable and crazy. Of course, the proposed MLS stadium deal isn’t 100 percent identical to the deal city officials offered the Rams, but we won’t fix the outcomes of poor policy with more of the same bad policy.

Claim 4: Taxpayer subsidization is justified because a stadium will spur economic growth.

The Missouri Economic Research and Information Center (MERIC) conducted a study concluding that an MLS stadium would generate $24.5M in net state general revenue over 33 years, but this study deserves some scrutiny. Economists overwhelmingly agree that benefits from stadiums are overstated due to studies failing to take into account that spending is taken away from other businesses. Moreover, these studies rely on a controversial economic concept known as a “multiplier effect,” which is a measure of the overall impact of money in a local economy. In short, studies assume a multiplier effect far higher than most economists believe exists, and so, project rosy but unrealistic, outcomes. This is why, despite studies claiming stadiums will be boons for the economy, history and economics show promised economic benefits don’t pan out as projected.

The current proposal for publicly subsidizing an MLS stadium in Saint Louis is heavy on optimism, but that optimism isn’t justified by research or by past experience. Taxpayers should be wary of doubling down on a bet in hopes of paying off the debt we’re already stuck with.

About the Author

GrahamRenz.png
Graham Renz
Graham Renz is a policy researcher at the Show-Me Institute.
Mike H..png
Michael Highsmith

Michael is a policy researcher at the Show-Me Institute. A native of Saint Louis, he earned a Bachelor of Science degree in business administration with emphasis in economics at Saint Louis University. Michael is researching budget and tax policy with the Show-Me Institute.