Super Bowls and the Super Rich: A Tale of Two Cities

Posted on by Andrew B. Wilson

As first appearing in The American Spectator:

In ancient Athens, the birthplace of democracy and human freedom, the richest citizens often paid for roads, bridges, theaters, and gymnasiums. They picked up the bill for athletic games and other public amusements. In times of peril, they built war ships and donated them to the city.

This voluntary giving of both time and money maximized freedom, reduced the need for government, and reinforced a powerful sense of Athenian exceptionalism. In his famous funeral oration in 431 BC, Pericles spoke of how the freedom and openness of their city did not weaken but only served to redouble the valor, resourcefulness, and generosity of the citizenry, enabling Athens to exceed all its neighbors in dedication to the common good, both in war and peace.

Charles W. Adams, author of the classic book For Good and Evil: The Impact of Taxes on the Course of Civilization, called this system of giving “the Greeks’ brilliant alternative” to government ownership and control. He described it as “private enterprise for public good.”

In our own time, sports-minded cities across the United States have stood this ancient ideal on its head. In trying to attract or to hold onto sports franchises, most U.S. cities have followed the model of public assistance for private gain, or what is also known as crony capitalism.

Political leaders in our cities and states have been all too willing to grovel at the feet of the wealthy owners of professional sports teams, saying, in effect: If you pick our stadium over competing venues, we will do everything in our power to use the public purse to swell your bottom line and multiply the value of your franchise.

Consider the astounding concessions that the city of Saint Louis made to get the then Los Angeles Rams to move to Saint Louis in 1995—and how the city has now landed in a situation in which it will have to agree to another roughly $400 million in taxpayer assistance to have any hope of holding onto the team.

Neil deMause, co-author of Field of Schemes: How the Great Stadium Swindle Turns Public Money into Private Profit, calls the original deal that the city of Saint Louis struck with the Rams “the worst lease ever”—meaning the most one-sided in enriching the team’s owners at the expense of taxpayers . . . while doing far more to please deep-pocketed corporate clients than to control ticket prices or provide better seating for ordinary fans.

The Rams paid no part of the $480 million in construction costs in building the Edward Jones Dome, and they have paid almost nothing in rent (just $250,000 a year). They received all luxury box and concession revenues, took 75 percent of advertising and name rights, and pocketed a $46 million relocation fee.

Still more, political and civic leaders signed on to a deal that gave the team the right to opt out of a 30-year lease after 20 years—if the stadium no longer ranked in the “top tier” of NFL stadiums. As a result, the Rams may move as soon as 2016, but Saint Louis City and County and the state of Missouri are still on the hook for $120 million in remaining bond payments falling due between 2016 and 2021.

According to Forbes, the St. Louis Rams football team is now worth about $930 million. Experts say that the value of the franchise will jump to between $2.5 billion and $3.5 billion if the team moves to Los Angeles. Any such increase in value would more than offset the cost of building a new stadium in Los Angeles. Rams owner Stan Kroenke—a billionaire developer and the husband of Ann Walton Kroenke, daughter of Wal-Mart co-founder Bud Walton—has acquired a prime site in the city’s Inglewood neighborhood.

The city of Saint Louis and the state of Missouri are considering a brand-new publicly owned riverfront stadium, with still more luxury suites, high-priced club seats, scoreboard, and other amenities, aimed at meeting the most exacting NFL specs. It would cost close to a billion dollars, with local and state taxpayers picking up about 40 percent of the bill through publicly financed debt, state tax credits, and other means that would deplete local and state treasuries and leave less money for police, roads, schools, and other public needs.

However, there seems to be little public or political support for the project. A recent poll commissioned by the Missouri Alliance for Freedom shows that 70 percent of Missouri voters are opposed to public funding for the stadium.

In waving good-bye to the Rams, many Saint Louisans (this writer included) are therefore inclined to say “thanks for the memories.” We had “the greatest show on turf” for three years—with the 1999 Super Bowl champion, a playoff contender in 2000, and losing only in the final seconds of another thrilling Super Bowl in 2001.

Thirteen out of 32 NFL teams have never won the ultimate prize, and four have never made a Super Bowl appearance.

But as for public funding of a new stadium built mainly for the benefit of a billionaire owner and wealthy patrons, enough is enough.

Andrew B. Wilson is resident fellow and senior writer at the Show-Me Institute.

Two Thumbs Down on Taxpayer Help for New Downtown Stadium

Posted on by Andrew B. Wilson

As first appearing in the Columbia Daily Tribune:

Talk about pouring taxpayer money down a rat hole. How about having to pay out $120 million in retiring the debt on a domed and doomed stadium – whose principal tenant has flown the coup for a new home in a faraway city?

That will happen if the St. Louis Rams decide to move to new digs in Los Angeles in 2016 – taking full advantage of the escape clause open to the team through the original lease agreement.

By the end of this calendar year, Saint Louis City and County and the state of Missouri will have paid off $360 million out of the $480 million in bonds that financed the construction of the Edward Jones Dome, which opened in 1995.

That still leaves another $120 million in bond payments due between 2016 and 2021 ($60 million from the state and $30 million each from the city and county).

Neil deMause, co-author of Field of Schemes: How the Great Stadium Swindle Turns Public Money into Private Profit, has examined dozens of cases in recent decades of cities that have ponied up hundreds of millions of dollars for the construction of new stadiums for professional sports teams. He calls the deal that the city of Saint Louis struck with the Rams “the worst lease ever” – meaning the most one-sided in enriching the team’s owners at the expense of taxpayers . . . and in opting to please deep-pocketed corporate clients (conducting partially tax-deductible “business entertainment” in their luxury suites) more than to control ticket prices or provide better seating for ordinary fans.

The Edward Jones Dome (formerly the TWA Dome) was a 100 percent publicly financed project. The Rams paid no part of the construction costs, and they have paid almost nothing in rent (just $250,000 a year) while receiving all luxury-box and concession revenues, claiming 75 percent of advertising and naming rights, and pocketing a $46 million relocation fee.

Still more, political and civic leaders signed on to a deal that gave the team the right to opt out of the original arrangement 10 years early – in 2015 – if the stadium did not rank in “the top 25 percent of NFL stadiums” – even if that meant having to build a whole new stadium, once again at taxpayer expense.

Jim Nagourney, an ad marketer for Anaheim Stadium who was hired away by the then L.A. Rams as a consultant on their relocation plans, made this comment as quoted in a recent article by San Diego Union-Tribune columnist Tim Sullivan:

I went to a meeting in Los Angeles one morning. We had a whiteboard, and we’re putting stuff down (to demand from cities). I couldn’t believe some of the stuff. I said, “Guys, some of this is crazy.” And John Shaw, who was president of the Rams at the time – brilliant, brilliant guy – said, “They can always say no; let’s ask for it.”

Twenty some years ago, local and state official made a big mistake in not saying no. Are today’s officials about to repeat the same mistake all over again?

Now the call has gone out for building a new open-air stadium in downtown Saint Louis at a cost of almost a billion dollars, with taxpayers bearing about half the cost – through new publicly financed debt, state tax credits, and other means that will deplete local and state treasuries and leave less money for other public needs, such as police, roads, and schools.

Some people say that Saint Louis needs a world-class stadium in order to be a world-class city. But that is an emotional argument, not an economic argument. Despite the rosy claims of local chambers of commerce, there is broad agreement among academic economists that the proliferation of new publicly financed stadiums over the past few decades has done little or nothing to underpin economic growth or employment in their host cities. In some cases, stadium projects may actually undermine growth – by diverting scarce resources to less productive use.

In the Coliseum in ancient Rome, the crowds signaled with a thumbs up for sparing the life of a game’s losing contestant or a thumbs down for showing no mercy.

We have seen that publicly financed stadiums are a misuse of public funds. It is time to turn two thumbs down on a bad idea of no redeeming merit.

Andrew B. Wilson is resident fellow and senior writer at the Show-Me Institute.

Transit of the Future; You Read It Here First

Posted on by Patrick Tuohey

“Futurist” Zack Kanter wrote for Business Insider that the coming autonomous, or self-driving, cars will reshape the U.S. economy. While the whole column is compelling, the main point is here:

A Columbia University study suggested that with a fleet of just 9,000 autonomous cars, Uber could replace every taxi cab in New York City—passengers would wait an average of 36 seconds for a ride that costs about $0.50 per mile. Such convenience and low cost will make car ownership inconceivable, and autonomous, on-demand taxis—the “transportation cloud”—will quickly become dominant form of transportation—displacing far more than just car ownership, it will take the majority of users away from public transportation as well. With their $41 billion valuation, replacing all 171,000 taxis in the United States is well within the realm of feasibility—at a cost of $25,000 per car, the rollout would cost a mere $4.3 billion.

Back in November 2013, we observed largely the same thing without the benefit of the Columbia study:

In contrast to light rail, the rapidly progressing leaps in driverless car and cycling technology are allowing people more freedom and choices in how they get from point A to B. Indeed, the future of transportation is in flexibility, not inflexibility. Google driverless cars allow for cheap and easy transit while respecting individual freedom. In several places, state legislatures have altered their traffic laws to allow for such cars.

Sadly, Kansas City is still bent on building what the people do not want, 19th-century fixed rail. Meanwhile, it fights innovation from Uber and Lyft. Our conclusion then remains true today:

The fixed rail they will be installing downtown offers none of that flexibility or popular appeal. Rails do not take passengers where they want to go; rail takes people where city planners want or need them to go (not to mention a car ride to the stations in most cases).

To add insult to injury, the rail system that is being built likely will be abandoned by the hip urbanite core that it is meant to attract as soon as something sexier comes along … like a Google car.

n-DRIVERLESS-CAR-large570

The Myth of the Urban Millennial

Posted on by Patrick Tuohey

140502-millennials-mn-1050_360088ebbf3a5feb2b25c6f6d91dbe5a

The debate over what millennials want continues to rage in Kansas City and elsewhere. City leaders are spending gobs of taxpayer money on entertainment districts, streetcars, and subsidized housing in hopes that the so-called creative class will flock there. But the evidence to support such efforts is weak and growing weaker with time.

The New York Times published a column recently about where young college-educated people are choosing to live. The author wrote:

[A]s young people continue to spurn the suburbs for urban living, more of them are moving to the very heart of cities — even in economically troubled places like Buffalo and Cleveland. The number of college-educated people age 25 to 34 living within three miles of city centers has surged, up 37 percent since 2000, even as the total population of these neighborhoods has slightly shrunk.

Yet a Wall Street Journal piece, published just last week, reports:

A survey released Wednesday by the National Association of Home Builders, a trade group, suggested otherwise. The survey, based on responses from 1,506 people born since 1977, found that most want to live in single-family homes outside of the urban center, even if they now reside in the city.

A recent article in Business Insider suggests that the era of young professionals living in urban areas has peaked:

But a decade from now, the landscape will look very different. Millennials will pair up and have kids and want space. Cities, particularly the megacities like New York and Chicago, aren’t likely to become more affordable.

Demographics are destiny. That big bulge of younger millennials visible in the population pyramid is going to be hitting the prime age range for marriage and having kids in the next few years, and it’s likely that many of those new families will move out to the ‘burbs (or further!).

The true cost of revitalizing downtown may be more than the city can bear. Kansas City cannot afford to operate its own fountains and is cutting funds to public safety services. It cannot cover bad investments without taking money from the airport, it neglects the real urban core, and it relies on charity to meet basic city services. Kansas City needs to have a debate on these economic development assumptions, especially because there is so little money left to give away.

The Good and Not-So-Good News from Missouri’s Labor Market

Posted on by Rik W. Hafer

The Bureau of Labor Statistics (BLS) recently released its report on state employment (see Table 5) allowing us to see how Missouri’s labor markets have fared.

The good news is that between December 2013 and December 2014, seasonally adjusted nonfarm employment in Missouri increased by 44,700 jobs to a preliminary estimate of 2,795,000 jobs. This amounts to a 1.62 percent increase. Compared with our neighboring states, in terms of percentage increases, in 2014 Missouri did better at creating jobs compared to Kentucky, Iowa, Kansas, Illinois, and Nebraska. Missouri’s rate of job growth lagged that in Tennessee, Arkansas, and Oklahoma.

Although Missouri did relatively well when comparing percentage growth rates for 2014, the not-so-good news is that the state’s economy has not been generating jobs at a pace that would return employment to levels seen at the onset of the Great Recession.

The table below ranks Missouri and its neighboring states by their ability to create jobs over the past six years. The first column of numbers reports the most recent estimate of nonfarm jobs (seasonally adjusted) in each state in December 2014. The second number column includes the peak number of jobs and the date of the peak. The final column reports the difference between the peak employment number and that for December 2014. Based on this comparison, Missouri has lagged neighboring states in job production over the past six years. The current number of jobs in five states (Kentucky, Nebraska, Tennessee, Iowa, and Oklahoma) is above their previous peak, while Arkansas and Kansas are relatively close to their peak. Missouri shows a substantial lag of 15,700 jobs. The silver lining? It isn’t as bad as Illinois.

Trying to explain the differences in job creation would require more space than we have here. Still, possible candidates are the mix of industries in each state; the migration of companies (and people) to better economic climates; and the states’ taxes and spending policies. Whatever the reasons, the Missouri economy is still looking for the answer.

Basic RGB

Don’t Ban Tesla, Let It Compete

Posted on by Joseph Miller

We wrote last year about the attempt of Missouri Car Dealers and their lobbyists to prohibit Tesla from directly selling its vehicles to consumers. The Missouri Department of Revenue granted Tesla a dealership license in 2013, and the company now has stores in University City and Kansas City. But according to the Missouri Auto Dealers Association (MADA), Tesla is breaking Missouri’s Motor Vehicle Franchise Law and creating unfair competition through its manufacturer-direct sales. Legislative action to shut down Tesla failed last year, so MADA has sued the Department of Revenue.

However, MADA’s claims hold little merit. The Motor Vehicle Franchise Law bans manufacturer-direct sales for franchisors (meaning those with franchises in the state). Tesla does not use the franchise model to sell its cars, and hence is not banned from direct sales. And this is not a loophole. The Franchise Law was designed as a series of protections to prevent large car companies from undercutting their own franchisees. It was not written to enshrine the independent car dealerships as the only method to sell cars in the state.

That is an important distinction, because whether or not Missourians believe car companies need to be legally prohibited from cannibalizing their own marketing and sales outlets, there is no economic justification banning a manufacturer-direct car sales model. As I wrote in a recent op-ed:

. . . vehicle distribution through dealerships can be costly to the consumer. The 2009 Department of Justice paper “Economic Effects of State Bans on Direct Manufacturer Sales to Car Buyers” reported that as much as 30 percent of the cost of a new car is due to auto distribution. Enshrining the car dealership model in law has limited the ability of car manufacturers to both reduce inventory costs and increase customization, practices common in other markets. In Brazil, where GM can engage in direct sales, cost savings from order to delivery averaged 8.6 percent through direct sales.

Car buyers . . . might prefer directly buying from manufacturers for lower prices, customization, or simply to avoid bargaining at a dealership. A J.D. Power and Associates poll found that half of Americans profess a desire to buy manufacturer-direct, even if the prices are equivalent.

While that does not mean the dealership model would or should disappear, the government should not stop Tesla or any other car company from trying something different. That freedom to innovate is essential for a competitive market.

Union Cronyism and the Board of Aldermen

Posted on by John Wright

108696481_construction_worker_holding_hard_hat_articleI was driving home from work the other day and listening to “Back Stabbers” by the O’Jays on 88.1. At the end of the song, the DJ gave some commentary, “The back stabbers. They smile in your face. It could be the milk man, it could be one of your friends, or it could be the St. Louis Board of Aldermen.”

I didn’t catch why my DJ was upset with the Board of Aldermen, but one reason Saint Louisans are upset with the board right now is their decision to consider a bill that purportedly limits minority businesses from bidding on county government contracts.

The bill mimics regrettable legislation passed by the county in 2012 that requires bidders on construction contracts of $25,000 or more to maintain their own Department of Labor-approved apprentice program. The catch is that union contractors are often the only bidders who can meet this requirement.

When the county council adopted its bill in 2012, my colleague David Stokes wrote,

While some non-union companies do participate in apprentice programs through industry organizations, union-affiliated companies still have a decided advantage in meeting the requirements of this new bill. This is a blatant ploy to guarantee that union companies will win all county bids. . . .

Using the council’s authority to prevent non-union contractors from even attempting to participate in county projects is an egregious misuse of power. It is bad enough that this will increase costs to taxpayers, but the use of government for political favoritism is simply indefensible and immoral.

Just as it was two years ago, this type of legislation still appears to be a naked attempt by elected officials to please a powerful special interest.

Law should facilitate open access, such that access to public institutions is not contingent on personal relationships and political connections. Law should be structured to apply to everyone equally. By favoring unionized contractors over non-unionized contractors, this bill fails in providing a neutral rule. It reeks of cronyism, and it is the sort of thing Saint Louisans are right to be upset about.

Support Us

The work of the Show-Me Institute would not be possible without the generous support of people who are inspired by the vision of liberty and free enterprise. We hope you will join our efforts and become a Show-Me Institute sponsor.

Donate
Man on Horse Charging