The Fallacy of Tailgate Economics

Posted on by Joseph Miller

News flash: Saint Louis is in danger of losing its football team. City and state officials are working feverishly on plans for a new publicly financed state-of-the-art stadium, but it may be too late. The owner sees greener pastures out west, and after years of subpar play on the field, fan support is tepid. Taxpayers may rebel against the use of public dollars to finance a new domed stadium.

That’s right, this story is not about the Rams; it’s about the St. Louis Football Cardinals circa 1988. Then, as now, NFL teams still would prefer that the public subsidize new stadiums, with the possibility of leaving town as the not-so-veiled threat. Saint Louis and Missouri officials hope to oblige, presenting a plan to spend more than $400 million on a new stadium for the Rams.

Saint Louis is a great sports city with enthusiastic support for professional teams (especially the baseball Cardinals), and many local leaders and residents take pride in being an NFL city. However, government officials here and around the country argue that pro sports franchises boost regional economies and spur urban regeneration.

Unfortunately, it just isn’t so. Cities have been funding stadiums for decades. The vast majority of economic research shows little evidence that these subsidies have yielded any economic benefits or growth in tax revenue. Speaking about the plan to subsidize a new stadium for the Rams, one University of Chicago economist said, “. . . building a football stadium is probably one of the worst expenditures of taxpayer dollars there is.” As for urban regeneration, while stadiums can ride a revitalization trend, there is no evidence that they create them. The issue with stadiums is that they tend to divert entertainment dollars that were already being spent in the metro area. Unless the teams draw in many tourists, which is not the case with most teams (including the Rams), NFL stadiums do not have a significant impact on the regional economy.

In the case of Saint Louis, officials do not even need to read up on the economic literature, they can simply look at the results of the Edward Jones Dome, Saint Louis’ current stadium. Originally conceived as an effort to keep the Football Cardinals (now playing in Arizona), the Edward Jones Dome was entirely publicly financed. When it opened in 1995, it was considered state-of-the-art.

Only 20 years later, the Edward Jones Dome, on which the city still owes money, is maligned as outmoded. The arrival of the Rams had no noticeable effect on tax revenue, aside from a small increase in income tax receipts. As for urban regeneration, the area immediately north of the stadium, known as the Bottle District, is an empty lot. There has been no dome-centered growth.

Nevertheless, public officials and representatives still talk as if a new riverfront stadium will cause urban regeneration and generate hundreds of millions of dollars of new state tax revenue. If regeneration means parking lots (which will surround the stadium), then they may have a point.

Even assuming the best case—that Saint Louis is blessed with a football team that holds home-field advantage through two playoff games leading up to the Super Bowl—does anyone really believe that having 10 great tailgate parties a year outside a new riverfront stadium is the key to Saint Louis’, or any other city’s, economic revitalization?

Common sense tells us “no.” So too does past experience, along with an abundance of economic literature.

 

SEMO May Embrace All-You-Can-Eat Education

Posted on by Brittany Wagner

Funnyman Owen Wilson describes the University of Phoenix as “the Harvard of Internet colleges” during an interview with Google in the film, The Internship.

“That reputation hasn’t made it out here,” responds the Google executive.

While online universities haven’t exactly obtained an “Ivy league” status, they certainly are impacting the education market.

Massive Open Online Courses (MOOC), such as Udacity and edX, provide free access to lectures, readings, and coursework. Participants can receive a certification or credit, which may be used for educational or professional purposes. In January, San Jose State announced a partnership with Udacity to offer remedial courses to incoming freshmen.

Last week, Southeast Missouri State University (SEMO) announced it would explore another type of online model, competency-based education. The model is based on Western Governors University (WGU), which is basically “all-you-can-eat.” Students pay one flat rate per term. This allows students to skip ahead by testing out of modules. It would be possible to earn a degree in one year for under $6,000.

wgu

While the quality of these programs and the acceptance by employers is debatable, MOOCs and competency-based programs are competition for state universities like SEMO and San Jose, who have had to adapt to attract students looking for a flexible, low-cost college experience.

Tax Foundation: Missouri’s Sales Taxes Still Well Above Average

Posted on by Patrick Ishmael

Last year, I wrote in Forbes about whether Missouri is a “low tax state.” (It isn’t.) I explored how Missouri compared to other states on a variety of taxes. At the time, by the Tax Foundation’s metrics, Missouri’s combined state and local sales taxes ranked 14th highest in the country.

This finding probably surprised a few Missourians, but it shouldn’t. Missouri’s state sales tax may be relatively low at 4.225 percent, but locally imposed sales taxes nearly double the average sales tax paid in Missouri stores. This includes extra sales taxes in special taxing districts like Kansas City’s Power & Light District, which can pump the sales taxes actually paid by consumers to well over 10 percent. These sales taxes are, of course, in addition to the state’s income and property taxes, which aren’t exactly low either. This is why Missouri isn’t a “low tax state.”

The Tax Foundation released its 2015 sales tax rankings, and . . . well . . . Missouri still ranks 14th at a rate of 7.81 percent, well ahead of 29th-ranked Florida (6.65 percent), which, of course, doesn’t have an income tax. The Tax Foundation’s report makes special mention of the failure of Missouri’s transportation sales tax last year, which would have added another three-quarters of a percent to the state’s already-high sales tax. Had Amendment 7 passed and bumped the state’s average sales tax to over 8.5 percent, chances are very good that Missouri would have jumped into the top 10 of high sales tax states, ahead of states like California (8.44 percent) and New York (8.48 percent). Missouri’s sales taxes are already bad; this year it is cold comfort to know that they could have been worse.

Missouri needs substantive, across-the-board tax relief. There’s still time for the legislature to act this year—at least on the income tax—but the clock is ticking.

Kansas City Builds by Digging Itself into Holes

Posted on by Patrick Tuohey

We’ve written extensively about the money that Kansas City has been handing out to downtown developers. Every dollar they give away is one less for infrastructure and basic services. Proponents claim that this is all worth it because of the revitalization of downtown. (Other observers, such as the Kansas City Business Journal, seem more cautious.) If the handouts of the past have been so successful, we should be able to sit back and watch all the private economic development dollars roll in. Yet despite claims of success, Kansas City is still giving away money.

  • Cordish, the company that brought us the Power & Light District then sued to lower their county property taxes, says that the downtown investment has been a success! But apparently the success wasn’t great enough to forgo further subsidies for two more residential buildings.

  • The Port Authority in Kansas City recently announced that they will be using public dollars to subsidize the construction of luxury residential condominiums along Kansas City’s riverfront. There is great demand they say, but apparently not enough to avoid the use of public underwriting.

  • A Crossroads hotel has received TIF subsidies, and an apartment building in the same area is receiving a property tax abatement and a $1 million exemption in sales taxes.

When will the public subsidies end? How do we know when we’re done? Is there any incentive for developers to say they do not need public subsidies? (The answer to that last question is no.) This is important because every subsidy means less money for city and county services; every abatement means less money for schools, less money for libraries. Right now, at least $93 million of city revenue is redirected each year to these developers. That doesn’t include the new projects for Cordish, Burns & McDonnell, and Cerner. Developers shouldn’t be encouraged to build skyscrapers while digging taxpayers into a hole.

Second Chances

Posted on by Brittany Wagner

 

As K'Von Williams illustrates, DeLaSalle Education Center transforms young lives. Unfortunately, Missouri uses a one-size-fits-all accountability model to evaluate public schools. Because DeLaSalle serves only dropouts and at-risk students, it cannot so easily mask its students' performance like other alternative high schools across the state, which count their students' scores with the overall district. Missouri should reform its public school accountability system so that more students like K'Von get a second chance at receiving a quality education.

Stadium Planners Move to Block City Vote

Posted on by Joseph Miller

Last week, the Regional Convention and Sports Complex Authority (RSA) brought suit against Saint Louis City over an ordinance that requires a vote on city dollars going to a new stadium. The lawsuit’s proponents argue that the city’s ordinance is broad and vague, prevents the city from participating in planning and site preparation, and contradicts state statutes. In fact, the ordinance is doing precisely what it is designed to do: prevent the city from using every trick in the book to fund a new stadium without a vote.

The ordinance in question is Chapter 3.91 of the Revised Code of the City, which requires a vote on any public assistance for a professional sports stadium. Assistance is defined as:

. . . any City assistance of value, direct or indirect, whether or not channeled through an intermediary entity, including, but not limited to, tax reduction, exemption, credit, or guarantee against or deferral of increase; dedication of tax or other revenues; tax increment financing; issuance, authorization, or guarantee of bonds; purchase or procurement of land or site preparation; loans or loan guarantees; sale or donation or loan of any City resource or service; deferral, payment, assumption or guarantee of obligations, and all other forms of assistance of value.

Banning both direct and indirect assistance may seem broad, but cities too often spend large amounts of public dollars planning, and then publicizing, controversial projects. For example, Kansas City spent almost $2 million planning a streetcar expansion that was ultimately defeated at the ballot box.

Far from being vague and overly cautious, the ordinance’s language seems prescient, as the RSA plans to use just about everything the ordinance describes as assistance, including:

  1. Extension of the $6 million annual bonds that currently fund the Edward Jones Dome. How the dome, which is in need of expensive rehab regardless of what happens with the Rams, will be funded is anyone’s guess.

  2. Providing land, which presumably would be bought with public dollars. This would include the Bottle District, which is currently owned by Paul McKee’s Northside Redevelopment Project, to be redeveloped as a parking lot.

  3. Transportation Development Districts and Community Improvement Districts. These districts, of indeterminate size, would levy additional sales or property taxes. The larger the size of the district, the greater the revenue.

  4. Tax Increment Financing. Sales taxes, earnings taxes, and utility taxes that would otherwise have gone back to the city to fund regular services would instead pay for the new stadium.

It seems obvious the situation here is not that of a badly written ordinance restricting reasonable city planning, but rather an ordinance that blocks, and was designed to block, exactly what the RSA is trying to do: get city dollars for a stadium, no matter the source, without a public vote.

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