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State and Local Government / Municipal Policy

Rams to Make Missouri Millions?

By Joseph Miller on Mar 11, 2015

At a meeting of the House Government Oversight and Accountability Committee, the Missouri economic development director argued that the state could make millions off building the Rams a new stadium to replace the Edward Jones Dome, on which the state still owes $60 million. Unfortunately, the director’s numbers do not stand up to close scrutiny.

The crux of his argument is that taxes on growing NFL salaries (starting at $10 million in 2017 and growing at 3 percent thereafter) would help raise about $300 million. However, if we assume that the total income taxes from the Rams is $10 million a year growing at a rate of 3 percent, the actual present value of 30 years of state income taxes would be less than $200 million, assuming the recently passed tax cuts take effect. Even if the economic development director’s number is accurate, $300 million is still less than the total public cost of the stadium plan ($405 million).

The economic development director likely meant that the state, as in just the political entity of the state of Missouri, could make millions on a new stadium. But only half of the cost is the state’s, with the other half coming from the Saint Louis area. Saint Louis City has an earnings tax, but, even accounting for that income tax, revenue is most likely to remain between $250 and $300 million, well under the public cost of the stadium.

Stating that the stadium plan would fall short of recovering tax subsidies and fail to promote economic growth is not an anti-Rams position, it is the opinion of most economists. As one researcher put it:

There are absolutely no publicly subsidized stadiums and arenas that generate enough direct or indirect tax increases to balance the initial (and ongoing) public outlay. . . . In fact, some research suggests that sports stadiums actually decrease economic activity and tax revenue in areas where they are built. . . . However, strategically placed stadiums and arenas can sometimes ride existing redevelopment trends, but they are never the cause of these trends.

The state of Missouri and the city of Saint Louis should be honest with residents. If we use public dollars to keep the Rams, it will be about pride, not tax revenue or development.

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Joseph Miller

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