Don’t Hate the Players, Hate the Game
The Post-Dispatch has an excellent article that illustrates one reason why government tax incentives for private development almost always fall short. To summarize: Government officials usually fail to make sure that private companies deliver on the promises they make in exchange for taxpayer dollars.
In this case, the city of Saint Louis entered into an agreement with the Cardinals baseball team about eight years ago, when the team decided to build a new stadium. In exchange for tax incentives from the city worth $145 million, the Cardinals agreed to a few obligations, including at least 100,000 free tickets and 486,000 discounted tickets each year. And, if the owners sold the team, the agreement specified that the city would receive a portion of the sales profit.
It appears that city officials did not even attempt to make sure that the team upheld its side of the bargain.
The team’s 2002 agreement with the city did not require proof that the team was giving away 100,000 tickets a year, or making 486,000 inexpensive seats available to the public, or giving $100,000 to city recreation programs.[City officials] said they never asked the Cardinals for documentation, until the Post-Dispatch called recently.
Fortunately, it seems that the team had worked to meet most of its contractual obligations. After the Post-Dispatch inquiry, the team sent the newspaper a spreadsheet showing that it had exceeded the benchmarks.
However, there is some dispute about the profit-sharing clause. In January, as reporter David Hunn recounts, one of the team’s owners sold 13 percent of the team. The Cardinals’ attorney said that the owner did not make a profit on the sale, meaning that no money is owed to the city.
Of course, no city official has bothered to investigate the matter. As Hunn writes, “They trust the Cardinals.”
If city officials aren’t bothering to monitor this agreement, what else aren’t they checking up on? There are certainly many tax incentive deals in both Saint Louis and elsewhere in the state. Governments hand out millions upon millions of targeted tax incentives all the time.
Not only are those handouts bad policy from an economic standpoint, there is the possibility, as in Saint Louis city, that government officials won’t even bother to try to make sure that tax incentive agreements are followed. Not that you needed another one, but this is one more reason we should let free competition, not government favoritism, determine profits.