Property Taxes Will Not Save the Saint Louis Stadium Plan

Recently, the Post-Dispatch reported on a study done by Harvard Business School graduates (one of whom is from Chesterfield) on the returns from a new stadium plan. Contra virtually every study performed by academic economists, the students claim that the stadium would be a good investment for at least some part of Saint Louis City.

There are numerous criticisms one could make of their study. The authors assume that Saint Louis will get an MLS team and numerous other non-NFL events (that aren’t simply being drawn away from other Saint Louis venues). They only count the cost and benefits to a narrow section of Saint Louis City, and leave out the costs borne by state residents, which is around $300 million. There is also a lack of accounting for substitution effects, which will greatly reduce the NFL’s impact of city sales tax revenue and employment.

However, this post focuses on the key section of their analysis, namely their assumption that growing property tax receipts will exceed the costs of the new stadium for the city of Saint Louis. The authors claim that there is evidence that property values increase around stadiums, with effects diminishing the further away one is. They assumed that the central city’s property value would increase by 6% (excluding the stadium area and the street grid), which the city would tax at the full rate. This assumption accounts for the vast majority of the positive return the authors claim the stadium will create.

Unfortunately, as readers of this blog know, the city’s real property tax base has been hollowed out, especially downtown. Government bodies and tax exempt organizations own a sizable chunk of the city’s core, and much of what’s left receives tax abatements or lies in TIF districts. For these properties, an increase in real property value will have little or no effect on the city’s tax receipts. And we’re not talking about some negligible number of parcels. If we look at the area within a mile of the proposed stadium site, about 60% of real property (by assessed value) either is not subject to real property taxes, receive tax breaks, or is in a TIF district:

Even worse, the article the authors’ cite as a primary basis for their claim that stadiums increase property tax values only looks at residential property. While that article’s claim is in fact disputed, it expressly does not analyze commercial property value. As the map above shows, among what little is left of the unadulterated real property tax base near the proposed stadium, very little is residential.

In light of these facts, the students’ assumption of how much new property taxes the stadium will generate requires a massive downward correction, probably at least 60%. This is not a small problem for their study’s conclusions; property taxes make up about three-quarters of their tangible stadium-created benefits.

To be fair, this was simply a side project done by former business school students, not trained economists. This is only news because the Post-Dispatch ran an entire article on it. Can we now expect similar write-ups on each of the dozens and dozens of economic studies showing no positive impact from stadiums? Will they write an article on how prominent Washington University faculty members acknowledge that a riverfront stadium is not a good investment for taxpayers?

We’re waiting.