Better Is a Relative Term
Rumor has it that later this month Major League Soccer (MLS) will announce the next cities to be blessed with professional soccer teams. St. Louis appears to be at the top of the list, and that’s great.
Proponents claim the current stadium deal, negotiated between the prospective team’s owners and city officials, is far superior to the previous proposal to lure the MLS to St. Louis. While this is true, the deal is still not all that great.
Before explaining why, let me reiterate that the current deal to bring the MLS to St. Louis is better than the 2017 effort. That effort (led by a different ownership group), which lost at the polls by a narrow margin, pushed intelligence-insulting stadium benefits, would have cost taxpayers more than $100 million, and seemed generally dishonest. Along with the St. Louis Post-Dispatch’s Dave Nicklaus, I’m glad voters rejected that effort. Moreover, I’m glad the current effort has engaged in relatively little economic pandering (save this (p. 1), and this).
So what of the new ownership group’s current proposal?
The current plan, approved by the Board of Aldermen late last year, includes the following public incentives:
· Free use of the land the stadium will be built on (the land will be purchased by the city from the Missouri Highway and Transportation Committee).
· A complete abatement of property taxes on the stadium and the land it sits on (since the property will be owned by the city).
· A 3 percent sales tax, generated by three distinct and overlapping special taxing districts, which will be levied on stadium-goers and may go toward stadium funding.
· A reduction in the city’s 5 percent amusement tax for soccer ticket sales, bringing it to 2.5 percent, and the squirreling away of that 2.5 percent for future stadium improvements.
· A complete sales tax exemption on materials used to construct the stadium.
Overall, the above incentives are valued at just shy of $40 million.
So what makes this plan better than the previous one?
First, the amount of incentives is significantly lower; the total incentives offered in the previous proposal totaled more than $120 million. Second, some of the incentives in the current proposal act like user fees, impacting only those who visit the stadium. The previous proposal would have relied on use taxes levied on city businesses, and ultimately would have been passed on to ordinary consumers, whether they visited the stadium or not. That also means we don’t need to further exhaust St. Louis’s sales tax capacity to make the deal work. (That funds are being saved for future improvements is also a plus, but how those funds may be spent will need to be hammered out in a lease agreement, which is yet to be finalized.)
Even so, I wouldn’t call this deal a good one for taxpayers.
First, there still is that $40 million. While that’s less than what city officials across the country usually cough up for a major league sports stadium, it is still $40 million. Second, since the city will purchase the land from the Missouri Highway and Transportation Committee, city taxpayers will likely bear that cost. And even though the land is currently publicly-owned, if it were sold to a private entity that would be tax liable, it could generate property taxes for local jurisdictions. Third, the city will lose out on millions from the sales tax exemption on construction materials. While the city is projected to come out on top in terms of overall sales tax revenue under the current proposal, it is no serious shot in the budget division’s arm. It’s also unclear (I have requested the analysis from the city but have yet to receive it) whether those “new revenues” will be genuinely new revenues or just diverted from other spending in the city.
Now, none of this is to say that the current deal isn’t worth it, or is a bad deal all things considered. St. Louis may very well be better off with an MLS team than with $40 million. But that doesn’t change the economic reality of the situation: government is giving very special treatment to a select, wealthy few. Even if the (30-year!) sales tax revenue projections are right, and the city makes some money on the deal, there are often more pressing needs or better investments the city could throw its limited resources at. But the decision has been made, and, not surprisingly, taxpayers are now at the behest of a major league sports entity.
(And a word for Bernie Miklasz: I live in St. Louis, and so, am very welcome to criticize St. Louis policies.)