Rams Park: A Case Study of Professional-Sports Welfare in Saint Louis
As we discussed last week, Saint Louis may be forced to turn over a $19 million practice facility to the Rams for one dollar, despite the fact that the team decamped for Los Angeles. That’s because the city agreed, as part of an ill-conceived deal to get the football team to move to Saint Louis in 1995, to give the Rams a purchase option on the practice facilities known as Rams Park (located in Earth City). The angle of a callous NFL team extracting a parting real estate gift from a jilted city is compelling, and most news reports stopped there. But the full story of the how Rams Park got built is even worse for Saint Louis, and illuminates why cities often fail to reap hoped-for tax benefits from pro sports.
During the negotiations to lure the Rams to Saint Louis in the 1990s, Saint Louis agreed to spend $15 million on practice facilities for the Rams. As part of the agreement, the St Louis Regional Convention and Sports Complex Authority (RSA) would retain ownership, allowing the Rams to avoid any property taxes, but would lease the property back to Rams at a low rate ($25,000 per year).
When time came to build the practice facilities, the city did not have the wherewithal (or perhaps the stomach) to fund the entire project. The city agreed to pay $5 million, Saint Louis County paid another $5 million, and a private organization called Fans Inc. put up $2.5 million. The Rams covered the rest. The city’s $5 million contribution came from diverted amusement tax revenue, while the county’s support came from hotel/motel taxes.
One might think that the city came out ahead in the final deal, avoiding paying everything it initially said it would and pushing at least some cost off on the Rams. But it didn’t work out that way. The Rams organization claimed the city owed it money for not covering the entire cost of the practice facility. That charge, along with a penalty for failing to finish the (entirely publicly funded) Dome on time, totaled $13 million. The Rams agreed that they would drop their claim if the city took on the task of suing the NFL over the $29 million relocation fee the NFL had charged the Rams for leaving Los Angeles. If the city won, it would have had to split the proceeds with the Rams 50/50 (despite the fact that Saint Louis, and not the Rams, had covered the relocation fee). The city lost the case.
To sum up the story of Rams Park: the city and county paid $10 million up front, and agreed to pursue (and pay for) a losing court case against the NFL. They then leased Rams Park, likely at a loss, to the Rams for twenty years. All of this money came from local tax revenue—revenue that was supposed to offset the costs of other parts of this sweetheart deal. The Rams, despite paying little/nothing for its fields and getting shielded from as many taxes as possible, may now get Rams Park (valued at $19 million) for one dollar.
When the city hall discusses what pro football cost Saint Louis and what tax dollars it generated, Rams Park rarely figures. But it should be a lesson for local residents, because side deals like these make sports franchises more expensive than people realize, and make less tax gains less lucrative than backers hope.