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There are innumerable instances where a city’s expenditures far exceed the tax revenues brought in by a publicly funded stadium (the Edwards Jones Dome in St Louis and Yankee Stadium in New York to name a few). It makes no sense (or cents) to promote the financing of a stadium for tax revenues when spending exceeds income.

Not only does public funding of a stadium severely hamstring city government, but a quick analysis reveals that the gains promised to the city’s economy rarely materialize. According to a 2008 study conducted by professors at Holy Cross, professional sports facilities, and even teams themselves “have little or no significant positive impacts, or even negative impacts on the local economy.” Why? Because the vast majority of fans who attend these stadium events are area residents who would likely be spending their money in the city regardless of the existence or location of the stadium. The same idea holds true for job creation. The thousands of jobs required to build a stadium are only temporary and often just taken from other projects occurring around the city.

This is not to say that professional sports franchises and their stadiums offer no benefit to cities. Sports teams promote civic pride and can unify city residents. If the Royals want to build a downtown stadium with their own resources, that’s fine. But the idea that a publicly-financed stadium will pay for itself by catalyzing economic growth is a tired, disproven argument.

In fact, Kansas City should have already learned this lesson. Almost two years ago, Patrick Tuohey detailed concerns about Wyandotte County funding a similar project for the semi-professional Kansas City T-Bones. Taxpayer subsidies could not overcome a lack of demand. The T-Bones’ failure continued and the owners are looking to sell. When it comes to subsidizing stadiums, policymakers should heed Breaking Bad’s Gustavo Fring and never make the same mistake twice.

The post New Downtown Royals Stadium Would Cost City a King’s Ransom appeared first on Show-Me Institute.

Let’s start with some uncontroversial data.

• The hospitality industry constitutes a small fraction of the Saint Louis economy. Less than 4% of the city’s payroll comes from the hotel and restaurant industry.
• Nearly all convention business in Saint Louis could be accommodated by existing hotel and event space. In 2015, only 9 conventions had more than 10,000 attendees. In 2016 that figure rose, modestly, to 11. For 2017, Saint Louis is currently slated to host only 10 events with 10,000 or more guests.
• The Saint Louis Visitors Commission, which runs the convention center, loses some $16 million a year.

Now let’s review convention center history.

• The Saint Louis convention center opened in 1977, underwent a $150 million expansion in the late 1980s, and was flanked by the $280 million Edward Jones Dome in 1995. The expansion and dome were promised to boost hotel “room nights”—a measure used to assess convention center success—to more than 800,000 annually. But in 1999, convention business generated barely over 200,000 room nights. In 2014, annual room nights were just over 425,000.
• Nationally, nearly every convention center expansion or renovation has dramatically underperformed. Washington D.C.’s convention center saw roughly 36% of the room nights that were projected when renovation was undertaken. Austin’s saw 47%; and Portland’s saw 44%.
• While the America’s Center and dome were supposed to be profitable ventures for the city over the long term, the public still owes some $100 million on them, and won’t pay off that debt for at least 5 or so more years.  

In short, empirical evidence suggests that the financial prospects for a major overhaul of the convention center are bleak. Perhaps that’s why no private developers are interested in funding the project. But if the private market indicates that the investment isn’t worthwhile, should taxpayers be saddled with the risk?

Convention-center boosters will object, insisting that a renovation will help the local economy, especially because a high percentage of convention spending comes from out-of-towners. This objection misses the mark in several ways. For one, demand for convention center space has remained flat over the last few decades. Is investing hundreds of millions of public dollars in a buyer’s market the best way to get windfall returns? Secondly, the tax revenue that would pay for a renovation could be used in myriad other ways that would have a much greater impact on the economy, regardless of whether that revenue came from outsiders. If we’re really interested in economic growth, why not spend the money on meaningful infrastructure or use it to provide tax relief to city residents and businesses?

The driving force behind massively expensive convention center renovations—much like sports stadiums, light rail expansions, and other “transformative projects”—appears to be a desire to rebuild the downtown core. But like most transformative projects dangled in front of taxpayers, the prospects for success are low and the costs dispersed; a small and well-connected few are given a sweetheart deal while taxpayers are left on the hook.

For what it’s worth, the economist Heywood Sanders, in his 2014 book, Convention Center Follies, devotes an entire 78-page chapter to the failures of Saint Louis’s convention center. Perhaps that, if anything, is an indication that we should be skeptical of proposals to reinvent the convention center with taxpayer dollars.

The post Convention Center Renovations: Picking Winners and Losers with Taxpayers’ Money appeared first on Show-Me Institute.

Right now, because of reckless spending by career politicians, we can't even afford the core functions of government, let alone spend millions on soccer stadiums.

The project’s ownership group, SC STL, has taken Greitens’s words seriously and delayed a request for $40 million in tax incentives from the state. In addition to this $40 million are plans for Saint Louis City to pay $80 million, but before any public funds are awarded we should ask what return the city will see on its investment. Are there benefits to owning a stadium? Here are some claims that SC STL made in its written proposal to the state:

Claim 1: Publicly financing an MLS stadium will help make Saint Louis a “first-class city” and will “complete one of the great corridors of sports, culture, and entertainment in the nation.”

What being a “first-class” city means is ambiguous, and Saint Louis taxpayers have heard this song before. The $3 billion spent on MetroLink (thus far) was supposed to make the city first-class. Today, MetroLink trains carry less than 1% of metro-area commuters and have failed to spur significant economic development. In the 1990s, the Edward Jones Dome was pitched as a way to grow the economy and revitalize downtown; it failed on both fronts. Exactly how another professional sports team will help Saint Louis climb the urban ranks, and how that ascension justifies a massive subsidy, is unclear.

Claim 2: SC STL has made “significant effort to minimize the public financing component of the project.”

It is, at best, unclear what efforts SC STL has made to minimize the need for public subsidies. SC STL originally estimated that the expansion fee for joining MLS would be $200 million, but MLS recently announced that the fee would be only $150 million. One might expect that the $50-million cost reduction would be passed along to the city and the state, but SC STL made clear it would still ask for the full $120 million. Can SC STL really claim they have made “significant effort to minimize public financing?”

Claim 3: The recent departure of the NFL Rams reduced tax revenues for the city, and an MLS team would help recover some of those lost revenues.

This is a little like a doctor prescribing more of the same “medicine” that made the patient sick in the first place. Pushing for a stadium deal to help make up for revenue shortfalls caused by a previous stadium deal lies at the border of questionable and crazy. Of course, the proposed MLS stadium deal isn’t 100 percent identical to the deal city officials offered the Rams, but we won’t fix the outcomes of poor policy with more of the same bad policy.

Claim 4: Taxpayer subsidization is justified because a stadium will spur economic growth.

The Missouri Economic Research and Information Center (MERIC) conducted a study concluding that an MLS stadium would generate $24.5M in net state general revenue over 33 years, but this study deserves some scrutiny. Economists overwhelmingly agree that benefits from stadiums are overstated due to studies failing to take into account that spending is taken away from other businesses. Moreover, these studies rely on a controversial economic concept known as a “multiplier effect,” which is a measure of the overall impact of money in a local economy. In short, studies assume a multiplier effect far higher than most economists believe exists, and so, project rosy but unrealistic, outcomes. This is why, despite studies claiming stadiums will be boons for the economy, history and economics show promised economic benefits don’t pan out as projected.

The current proposal for publicly subsidizing an MLS stadium in Saint Louis is heavy on optimism, but that optimism isn’t justified by research or by past experience. Taxpayers should be wary of doubling down on a bet in hopes of paying off the debt we’re already stuck with.

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Sadly, the humiliation is not over yet. The St. Louis Regional Convention and Sports Complex Authority (RSA), the public authority that handled the leasing of the Edward Jones Dome, also owns the Ram’s former practice facilities in Earth City. They leased those facilities to the team for $25,000 a year. While it’s tempting, this blog will not discuss why the Rams were allowed to pay rent equivalent to that of a two-bedroom apartment for a complex valued at $19 million. Because that’s not the worst part. Apparently, the RSA signed a deal with the Rams giving them an option to buy this complex (again, valued at $19 million) for one dollar in 2024.

The RSA does not believe that the deal with Rams holds following the team’s departure. The authority is looking to sell the land to help cover the costs of the failed bid to keep the Rams. The dispute will now go to court, and residents can hope for a favorable outcome. But whichever way a judge rules, Saint Louis residents should be wary of the pitfalls of government deal-making.  

The post Even after Departure, Saint Louis’s Deal with Rams Gets Worse appeared first on Show-Me Institute.

But now that future might not include the Dome. It seems that some members of the CVC think  the Dome is more of a liability than an asset, and demolishing it may be the best option moving forward.

Readers of this blog will not be surprised at the sudden reversal in attitude toward the now-empty Dome. Just last week, we noted:

In 2015, only nine conventions had more than 10,000 participants (accounting for 80,000 room nights). The CVC often blames the NFL schedule for holding down the number of conventions the city can compete for, but in the six months when no games were held at the Dome, nine large conventions was a far cry from busy.

Some members of the CVC are apparently coming around to our position on the ability of Dome to attract many new conventions. They point out that the Dome is outdated compared to new competition from other regional convention centers in Denver and Nashville. The most poignant criticism was from the president of the CVC, who the Post-Dispatch reports as saying, “The Dome itself is too high—it feels like a stadium, not convention space.”

The idea of demolishing part or the entire Dome may prove politically or financially unfeasible. However, it’s becoming clear that the Dome is not much better at attracting large conventions that it has been at attracting Stan Kroenke. Twenty years after that stadium opened as a stadium/convention center, it is functionally obsolete for both purposes.

When Dome advocates pushed for state funding more than 20 years ago, they told the state legislature that we couldn’t afford not to build the stadium. Now, it seems like we really could have. 

The post Jones Dome Headed for Demolition? appeared first on Show-Me Institute.

The idea of building new soccer venues in Saint Louis County is not a new one. Multiple projects were in the works during Charlie Dooley’s term as County Executive. But there’s always been the question, which has yet to be satisfactorily answered, of whether Saint Louis County ought to be getting into the soccer business. The new agreement with the city will allow some of the hotel/motel tax revenue the county uses to support the convention center and stadiums downtown to fund soccer fields in the County. Officials claim this will allow the County to get the fields without using any “new” taxes.

For anyone who reads this blog, alarm bells should be going off with any mention of the hotel/motel tax. The fact is, the hotel/motel tax revenue stream drives the most expensive shell game in the Saint Louis region. These taxes supposedly support the America Center, the Edward Jones Dome, the Convention Center Hotel, and Busch Stadium, among others. But the yearly revenue stream from both the city and county’s hotel taxes (less than $20 million) is nowhere near enough to cover annual cost of all these projects (more than $30 million). And that’s before considering the estimated costs of rehabbing the Dome, renovating the convention center, and improving the Scottrade Center. Restaurant tax and general revenue in the city, along with sizable state subsidies, cover the funding gap.

So why would the Saint Louis Visitors and Convention Commission (CVC), which coordinates these expenditures, allow money it does not have to go toward new fields in the County? According to the Post-Dispatch, this may be part of a larger deal. About half of the County’s hotel taxes currently go to pay debt on the Dome. Both that debt and the tax that supports it are set to retire in the next few years. The idea is that promising money for something the County government wants may induce County officials to keep the hotel tax in place—and its revenue flowing to the CVC. In essence, spending money on soccer fields is about being able to spend more money on convention centers.

While the idea of the County going all in on soccer and convention center gambits is unappetizing enough, it gets worse. According to the manager of a similar set of soccer fields in Kansas City, the County’s $14 million cost estimate is much too low, and the plan is “a drag-a-long, tag-a-long boondoggle that will end with county taxpayers funding the difference between the projected and real cost.” Not like we haven’t seen that before.

The post Soccer Mania Strikes Saint Louis County appeared first on Show-Me Institute.

A new soccer stadium could cost anywhere from $40 million to more than $300 million, depending on the design. One might hope the lower price tag, especially compared with the NFL and other major sports leagues, would prompt MLS owners to pay for these stadiums without public support. Unfortunately, that has not been the case. Only two MLS stadiums, the Stubhub Center in Los Angeles and the Columbus Crew Stadium in Columbus, Ohio, were built without any public support in the last fifteen years. And for anyone who hoped that a new Saint Louis team could play in the now-vacant Edward Jones Dome, no dice. Soccer-only stadiums are in vogue, and an MLS team has not located to a stadium not built specifically for soccer since 2002.

As with other pro sports ventures, many hope that increased tax revenue will justify public subsidies for an MLS team. But there is no good evidence for that. In fact, there is the counter-example of Toyota Park (IL), the home of the Chicago Fire, which is quickly bankrupting the small suburb of Bridgeview.

While professional soccer would be a welcome addition to Saint Louis, there is no reason residents should have to pay for a stadium with tax revenue, especially in light of the big asks the city is already getting for the Scottrade Center and the Convention Center.  Let’s leave the construction of soccer stadiums to league owners and soccer fans. 

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Civic leaders claim conventions support tens of thousands of jobs and bring more than a billion dollars into the local economy. Therefore, if the city can spend another $200 million to upgrade the convention center and renovate the Dome, the region might see an even greater benefit. Unfortunately, the Dome and the Convention Center are underperforming, and the businesses conventions they support are not even close to being the main breadwinners in Saint Louis’s economy.

The city upgraded the convention center in the 1990s, adding the Edward Jones Dome and funding the completion of the Renaissance Center. The convention center itself does not directly make any money, but the argument is (and was) that it brings in tourists who spend money (mainly at hotels), which translates into a tax benefit for the city. When the Dome was built, city leaders expected “hotel nights” from conventions would rise to 800,000 annually. But it didn’t happen. Saint Louis convention business growth has been low ever since. 

Even in 2014, total convention-related hotel nights remained at 425,411. Worse yet, about 60% of those hotel nights are accounted for by convention groups with fewer than 2,000 participants, who certainly don’t require a venue as large as the 60,000+ seat Dome. In 2015, only nine conventions had more than 10,000 participants (accounting for 80,000 room nights). The CVC often blames the NFL schedule for holding down the number of conventions the city can compete for, but in the six months when no games were held at the Dome, nine large conventions was a far cry from busy.

What of the convention center’s huge impact on the Saint Louis economy? City leaders can throw numbers around all day, but according to the Census, less than 1 percent of Saint Louis City’s business payroll came from the hotel industry in recent years. That’s less than a third of the city’s total law-firm payroll. Even if we combine all the restaurants, all the entertainment venues, and all the hotels in the city (many of which are mainly supported through non-convention business), we’re talking about 7 percent of the city’s payroll. That’s less than city’s manufacturing payroll and about half the city’s healthcare industry payroll. 

Despite these realities, the city is not $400 million in debt for infrastructure improvements to lure manufacturing companies. It is not planning to spend more than $200 million on hospitals or legal offices. How has it come to be that the city’s focus (both financially and politically) has become so tied up in entertainment and tourism when that is clearly not the city’s competitive advantage?

The post Conventions, Saint Louis, and the Future of the Edward Jones Dome appeared first on Show-Me Institute.

According to the Saint Louis Convention and Visitors Commission (CVC), the Scottrade Center, the America Center, and the Edward Jones Dome are in need of expensive renovations. The suggestion is that the Scottrade Center requires $100 million in upgrades, the America Center needs $120 million to remain competitive, and as for Dome, the head of CVC didn’t even have estimate. If the Post-Dispatch is to be believed, the Dome will need $64 million just to maintain its current condition. The price tag for any major changes is likely to be much higher. Altogether, the cost of renovations to just these three facilities would come to more than $280 million.

So who will pay for these renovations? With the convention center and dome, it will almost certainly come from the public, and probably from Saint Louis City. The Scottrade Center was mainly a privately funded enterprise, but there is no guarantee that renovations would be handled in the same manner.

If the city is forced to shoulder the burden of these upgrades, it could be backbreaking. The city’s outstanding debt on the convention center, dome, and Scottrade Center is about $420 million already, requiring more than $20 million in annual debt service. The city also spends an additional $5.7 million on conventions and tourism, most of which goes to convention center operations. These costs far outstrip the total revenue of the city’s hotel and restaurant taxes ($13.5 million in 2014), which were set up to support the convention center.  If the city were to take on the debt necessary to fund the renovations above, its yearly convention/stadium spending would increase to about $46 million per year. For comparison, in 2014 the city spent $49 million on health and welfare and $70 million on streets. 

Spending hundreds of millions of public dollars and tying up the city in debt for decades to compete in the increasingly cutthroat convention center arms race is questionable policy. But what should be galling to city residents is the fact that, whatever had happened with the Rams, these upgrades would still be thought necessary. They would still cost hundreds of millions of dollars and still be public liabilities. If the Rams had been forced to remain in Saint Louis, city residents would have been committed to spending $150 million on a new stadium, only to be told that the city’s old stadiums needed $300 million themselves.

Sound policy would be to make sure we can afford what we have before we try to build something new. Regional leadership is taking the opposite approach. 

The post With Riverfront Stadium Dead, City Leaders Back Other Expensive Projects appeared first on Show-Me Institute.

First, after the Regional Convention and Sports Complex Authority (RSA) got a judge to throw out the city’s ordinance requiring a vote before public money could go to a stadium, the mayor’s office promised that city officials and the Board of Aldermen would craft a new, legally defensible ordinance in the same spirit. The mayor’s office claimed this couldn’t be done for the riverfront stadium, because time was of the essence. Now the Rams are moving, and there would appear to be plenty of time for ordinance-writing.

Second, at the state level, most legislators were indignant that the governor and the RSA would extend bonds without their approval. Senate leadership threatened to withhold bond payments for a new stadium. They claimed that the RSA was not created with the intent of becoming a permanent stadium-building authority. Now the state legislature has time to close that loophole, assuming that their opposition was more than grandstanding.

Finally, just about every public official and the leadership of the governor’s stadium task force told the public that if there is no commitment from an NFL team, there will not be a stadium. Last time Saint Louis lost a team, the city built a stadium on spec. After failing to land an expansion team, the city and state scrambled to lure an existing team—which turned out to be the Rams—to Saint Louis. To lure them, the region signed the terrible lease that is the cause of our present troubles. Let’s not repeat past mistakes. The RSA has already spent more than $16 million of public money (equivalent to about two years of maintenance on the Dome) planning a stadium (and suing the city) for a Rams organization that was not interested in staying here. It’s not time for the regional leaders to try to buy another football team or build a soccer stadium. It’s time to stop.

The criticism being leveled at the NFL and Stan Kroenke at this moment is understandable. But it is worth remembering that Mr. Kroenke did not attempt to extort money from Saint Louis. He did not ask for a publicly funded stadium. He did not ignore state legislators, cut the county out of the funding scheme, threaten to use eminent domain, or throw out the city’s vote. He did not ask us to grovel. We did it to ourselves. Now it’s time for policymakers to follow through on their promises and make sure this does not happen again. 

The post Regional Leaders Should Keep Their Word over Stadium Plan appeared first on Show-Me Institute.

The Edward Jones Dome in downtown Saint Louis is another story. Praised as state-of-the-art when it opened in 1995, the 100 percent publicly financed dome is on the verge of abandonment several months shy of its 21st birthday.

The future of the St. Louis Rams – the dome’s current occupants – will be decided in the next couple of days as the NFL owners club considers two competing plans for new stadiums in the Los Angeles area – one of them put forward by Stan Kroenke, the owner of the Rams, who wants out of Saint Louis.

Whatever happens, the Saint Louis dome’s playing days as a football stadium are probably over. It stands as a monument to wishful thinking – a telling example of the fallacy that public officials can accelerate a city’s growth or reverse its decline by “investing” large sums of money in a giant sports complex.

When the dome was first proposed and developed, its backers – including two Saint Louis mayors, business and civic leaders from the city and county, Missouri legislators, and the editorial board of the St. Louis Post-Dispatch – described the project as a much-needed shot in the arm for downtown Saint Louis. They claimed it would create thousands of jobs, generate hundreds of millions of dollars in new business activity, and more than pay for itself through the additional tax revenues it would create for St. Louis City and County and the state of Missouri.

In a 1993 editorial, the Post predicted a “downtown resurgence” and only worried that the riverfront might become “a gridlock of automobiles overlooked by a garish strip replete with pulsating electric signs and the amplified voices of barkers luring people aboard (casino) boats.”

Today the St. Louis riverfront is emptier than ever.  Over the last two decades, the city has continued to lose both population and jobs, while St. Louis County and the state as a whole have also experienced subpar economic growth. There is no sign of any dome-centered economic growth.

The Edward Jones Dome was desperation’s child.  In 1988, after the St. Louis Football Cardinals took flight for Phoenix, Arizona, leading figures in the city became serious about building the new stadium that the departing owner Bill Bidwill (not wanting to share space with the baseball Cardinals) had craved.  Enlisting the help of Saint Louis County and the state of Missouri as partners, they gambled on building a stadium entirely on spec – not knowing when, or even if, they would be able to attract another NFL franchise to replace the Cardinals.

Surely, the thinking went, a metro area of our size (two and half million people) and with our willingness to open the public purse strings, should have no trouble attracting one of two NFL expansion franchises then coming up for grabs.

That was a big mistake. In late 1993, the NFL awarded the new franchises to Charlotte, North Carolina (with the now #1 seeded Panthers in this year’s NFL playoff), and to Jacksonville, Florida.

Thus, there was great joy in Mudville when Georgia Frontiere, the widow of longtime L.A. Rams owner Carroll Rosenbloom, elected to move the Rams franchise from an aging stadium in Anaheim to a new one in her old hometown of St. Louis.  As the dome was nearing completion, she saved political and civic leaders from the embarrassment of having a football stadium but no team.

Corralling the Rams was hailed as a great victory for the city and state – but was it a good deal for taxpayers?

Plainly it was not.  The Rams shared no part of the cost of building the dome, yet they have paid an annual rent of $250,000, or just 1 percent of the $24 million that the city, county, and state have paid to service the debt on its construction . . . and will continue to pay ($12 million from the state and $6 million each from the city and county) for another five years. That means taxpayers are still on the hook for another $120 million – money that would otherwise be available for public services ranging from fire and police protection to education, roads, and infrastructure.

In addition, the lease agreement allowed the freeloading tenant to demand major improvements at public expense, and gave the team the right to opt out of the lease ten years early – in 2015 – if the city and state failed in their contractual duty to keep the dome in the top tier of NFL stadiums.

That is the option that Mr. Kroenke deployed at the beginning of last year when he announced his intention of moving to Los Angeles.  For a while, the response from city and state officials was déjà vu all over again.  St. Louis Mayor Francis Slay and Missouri Gov. Jay Nixon joined forces in trying to raise some $400 million in public assistance to go toward the building of a new $1 billion-plus riverfront stadium to keep the Rams in St. Louis.

But now it seems the air has gone out of that spheroid. There seems to be a growing realization (even in St. Louis) that if a team thinks it can make a whole lot more money in one city – with no subsidies – than it can in another – even with copious subsidies – it probably makes sense for all concerned to let the team go where it wants.

The post Deflate-gate in Saint Louis: Air goes out of a plan for a new subsidized football stadium appeared first on Show-Me Institute.

As part of a recent overhaul of the stadium financing package, which includes giving the NFL all the naming rights proceeds for “National Car Rental Field,” the total cost of the stadium went up about $10 million dollars. With NFL uninterested in paying anything (much less more), and state legislators in near revolt over the governor’s plan to unilaterally extend bonds for the stadium, the city is left holding the bag. Its total payments will increase from an estimate $150 million to $160 million:

Ten million dollars is not a small amount for Saint Louis City. That’s the equivalent of the annual salaries of 190 teachers or the cost of 20 brand new buses. It should not be treated like a rounding error.

Worse than the cost escalation is the reaction of stadium backers to the funding reconfiguration. I sat in hearings where city representatives said, in contradiction to dozens of academic studies, that the stadium would be an economic boon for Saint Louis. I heard how the city was supposedly shifting risk to the NFL by using naming rights dollars to pay for the stadium and paying the NFL back with future tax revenue. I heard how the stadium plan would supposedly be a tax benefit to the city.

Now that the naming rights are going to the NFL and the cost of the stadium has gone up, has this prompted stadium backers to rethink their support? Unfortunately, no. Now they simply argue that keeping the tax revenue and giving away the naming rights proceeds was always better for the city all along. And what’s ten million when the Chamber of Commerce thinks the stadium will generate more than $100 million in new taxes?

With this type of non-response to a worsening deal, what reaction can we expect when we find out who will pay for maintenance? Or when someone has to pay to refurbish the Edward Jones Dome? Or if there are cost overruns? Will stadium backers still claim the plan makes financial sense, or that it is too late to turn back?

The post Riverfront Stadium Costs Change, Backers Push Ahead appeared first on Show-Me Institute.

People on both sides booed, cheered, and tried to shout each other down. The following is a list of impressions that I took away from the meeting:

1.       Stadium supporters are still delusional about the benefits of a riverfront stadium.

We’ve talked about this before, but it was very clear that many aldermen and stadium supporters in the public believe, despite decades of studies from economists (and the experience with the Edward Jones Dome), that a stadium will make the city money. The people who already believe that a stadium is a great idea quickly latched on to dubious revenue projections from the mayor’s office and the Saint Louis Regional Chamber. They continue to ignore what is the consensus among economists: NFL stadiums do not create growth, spur development, or greatly increase tax revenue.

2.       Many city residents are against the plan, and especially want a vote.

The vast majority of city residents who spoke were skeptical of the stadium plan. But what city residents heavily criticized, again and again, was the idea that Board of Aldermen might approve the stadium funding plan without a public vote.

3.       The city-county divide was on display.

The first speaker in favor of the stadium plan was from Saint Louis County, and some in the audience tried to shout him down because he didn't live in the city. The committee chair appropriately defended the right of those not from Saint Louis City to speak, but over the course of the session a pattern established itself. Most of those speaking in favor of the stadium plan lived in the county (or Illinois), and most of those opposing the plan were city residents.

4.       The session became more rally than public hearing.

At any normal public hearing, the Board of Aldermen meets in a hearing room or auditorium. Aldermen ask questions of speakers, and anyone who disrupts the meeting is escorted out of the room. For whatever reason, the Board of Aldermen decided to hold the public meeting outdoors, where the proposed stadium would be built. As a result, speakers constantly faced harassment from the audience for their views. One speaker pointed out that, in order to speak, she had to publicly declare herself as pro or con, something she would not have to do if she had the privacy of the voting booth. I would add that she wouldn’t have had to brave the jeers of Rams’ superfans either.

To see our take on the city’s plan, read our testimony here.

The post What I Saw at the Stadium Hearing appeared first on Show-Me Institute.

After attending a hearing at the Saint Louis Board of Alderman regarding a plan to spend $152 million on a new NFL stadium, I don’t have to speculate anymore. Decades of objective research has shown that stadiums, and especially NFL stadiums, do not generate economic growth, spur revitalization, or greatly increase tax revenue. Saint Louis has direct experience of this with the Edward Jones Dome, which demonstrably did not bring in new tax revenues or revitalize any neighboring areas. What’s more, there are plenty of warning signs and gaps in the latest funding plan that should give residents pause.

And yet . . .

Stadium proponents pretended that a solid body of research and the city’s own experience do not exist. They argued, again and again, that the stadium will create jobs, redevelop the North side, and increase the city’s tax revenue. It’s like the last 20 years and all those studies on stadium projects never happened.

What about concerns over maintenance at the stadium or construction costs overrun? Don’t worry, say proponents, someone else will have to pay. Dave Peacock, head of the stadium task force, even suggested that the state government might handle cost overruns. With some members of legislature threatening to withhold bond payments to the stadium project without a vote of the legislature, asking the legislature to approve more funding for cost overruns is optimistic to say the least.

The bottom line for city aldermen on the current stadium plan is this:

1.       The city would pay around $152 million to construct a new stadium, and likely more down the road in maintenance and operating costs.

2.       Tax revenue from the project is exceedingly unlikely to approach the costs the stadium, which means that the money would be better spent elsewhere.

3.       The new stadium and the presence of the NFL will probably have little effect on downtown development (unless you count bulldozing the North riverfront as redevelopment).

In other words, if we are basing this stadium plan on tangible economic merits, this should be an open-and-shut case. The fact that the plan is likely headed for approval is troubling. If city leaders can convince themselves that, despite all the evidence to contrary, this deal makes economic sense, what can’t they be convinced of? At this point, I don’t think I’d be surprised if the city approved a Jurassic Park and stuck it in the middle of downtown. I’d only be surprised if they decided not to subsidize it. 

The post City Delusional Over Stadium Economic Benefits appeared first on Show-Me Institute.

Proponents of a new $311 million hotel claim that the project will create construction jobs. At a recent hearing before the City Council, developer Mike Burke said [begins at 46:35], 

Let me talk a little bit about jobs. During the course of construction, which is about 27 months, there are about 1,300 jobs on the site.

Let's be clear about this: there won't be 1,300 jobs for 27 months. If someone were to ask Mr. Burke about this directly, he would probably walk it back immediately. Some jobs, such as heavy digging and foundation, may exist for a few months at the start. Those will transition to other, different jobs once the structure is being raised, and then finally there will be the finishing jobs once the hotel is ready for its final touches. 

Moreover, even the time spent building the hotel won't result in new jobs. The hotel will be just be a new project for those workers who already have jobs. This is why the economic impact statistics for projects such as hotels, stadiums, and airports are so suspect. Proponents want to pretend that without the project in question, people wouldnt be working or traveling or staying in hotels. As my colleague Joe Miller wrote last month regarding a proposed riverfront stadium in St. Louis:

In fact, a paper from an economist at the University of Missouri studied the impact of the Edwards Jones Dome and the Kiel Center (now the Scottrade Center) in Saint Louis specifically. The author found:

By econometrically modeling construction employment during the 1970’s, 1980’s and 1990’s, it was found that there was no more nor no less construction employment within the St. Louis MSA during the time the Kiel Center and the Trans World Dome [Edward Jones Dome] were being constructed…

…instead of creating new construction jobs, jobs were shifted from projects that would otherwise have been undertaken, resulting in no net new job creation in the construction industry.

The author concluded:

These results, coupled with the more extensive analysis given in the article on construction employment, suggest that the net impact of stadium construction on construction employment and worker incomes is zero.

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                Before diving into the numbers, it is important to note once again that the proposal before city leadership is not the end result of a negotiation with the Rams or Stan Kroenke. The Rams organization has remained completely silent on what, if anything, the city can do to keep the team in Saint Louis. The NFL, which could possibly block a move, has also failed to make firm commitments to the city. With the caveat that nothing is final, if the stadium funding plan goes through the city will likely be financially worse off than it is now, for the following reasons:

1.       It will cost the city more than last time. In building the Dome, the city agreed to make $6 million a year in bond payments for 30 years. For the new stadium, Saint Louis will add remaining Dome debt to new stadium debt, to make payments that start at $4.5 million and escalate to $9 million over the course of 36 years. That does not include the millions that city residents have paid already through sub-municipal governmental bodies.

2.       It has hidden, unaccounted-for costs. Stadiums cost millions of dollars every year to maintain and operate, little or none of which is covered by NFL teams. The current plan does not account for these costs, aside from proposing adding new taxing districts. But if the future stadium costs and Ram’s tax revenue is anything like it is now, those districts will be wholly unable to cover costs. And speaking of revenue…

3.       It means less tax revenue than before. The city plans to give the vast majority of taxes (sales and otherwise) collected at the new stadium, which the city would normally collect, back to the Rams. Saint Louis City only collects about $4.2 million in total from the Rams right now, and this plan would likely mean the city gets even less in the future.

4.       It diverts needed money from the Dome. For the Edward Jones Dome to operate into the future, it reportedly needs about $100 million in capital improvements and continued maintenance. The revenue stream that currently funds the Dome would be diverted to pay for a new stadium, with nothing to take its place.

The bottom line for the city is that with this deal, to which the Rams have not agreed, the city is likely to pay more and earn less than it has for the last 20 years. Worse yet, maintenance for the new stadium and on the Dome are not accounted for, virtually guaranteeing that someone (not the Rams) will need to pay more later on. Is football so important to Saint Louis residents that they would mortgage their city’s future to give millions of dollars to an uninterested billionaire?

Unfortunately, the government sued itself to prevent a public vote, so we have no way of knowing the answer to that question.

The post Riverfront Stadium Deal May Be Worse for City than Dome Lease appeared first on Show-Me Institute.

In reading reports of Tuesday’s NFL “hearing” at the Peabody Opera House, I was reminded of that old nursery song, which is really a parable about scarce resources.

In the nursery song, there are four woolly sheep of different colors (black, white, grey, and brown), plus a fifth sheep that has already been fleeced. Beginning with the black sheep, the four sheep all give “three bags full” of wool for others to use:

One for the master,
one for the dame,
and one for the little boy
who lives down the lane.

But then, of course, you come to the last sheep, and there’s the problem:

Baa, baa, bare sheep,
have you any wool?
No sir, no sir, no bags full.
None for the master,
none for the dame,
and none for the little boy
who lives down the lane.

Alternately rowdy and tearful, some 1,000 Saint Louis Rams fans showed up to plead with NFL officials to keep the team in Saint Louis. The passionate fans who wore NFL jerseys featuring the names of their favorite players see themselves in the role of the sheep that has been fleeced – or are about to be – assuming the owner Stan Kroenke succeeds in moving the team to the Los Angeles area. That is an understandable reaction to the disappointment of losing a favorite team.

However, from an economic viewpoint, it is really the taxpayers in the state of Missouri who were fleeced once – and are about to be fleeced again – if the plan to build a new $1 billion public/private downtown stadium along with the riverfront goes ahead – with the expenditure of some $400 million in public money through issuance of bonds, state tax credits, and infrastructure grants.

The Edward Jones Dome (or TWA Dome, as it was formerly called) was a 100 percent publicly financed project. The Rams pay an annual rent of just $240,000, which is just 1 percent of the $24 million annual cost that taxpayers have paid (and will continue to pay until 2022) to service the debt on its construction.

There is no legitimate reason to subsidize professional football, which is a hugely profitable business in its own right. Saint Louis and the state of Missouri shouldn’t have to sweeten the pot at public expense to keep the Rams in the St. Louis. It would be better to let them go.

The post Keeping the Rams – Lessons from a Nursery Song appeared first on Show-Me Institute.

This post will not discuss the timing of the proposed ordinance. We can only note that the city could have scheduled a vote on public funding for a new stadium months ago. If the city had actually sought public approval, instead of trying to make an end run around democracy, timing would not be an issue.

However, in its effort to justify opposition to a public vote, the mayor’s representatives have again made claims about the stadium’s impact that fly in the face of economic evidence. According to city representatives, the stadium project will create an amazing 3,000 new construction jobs. But academic economists have studied the impact of stadium projects on the construction industry, and found that they have little or no positive effect.

In fact, a paper from an economist at the University of Missouri studied the impact of the Edwards Jones Dome and the Kiel Center (now the Scottrade Center) in Saint Louis specifically. The author found:

“By econometrically modeling construction employment during the 1970’s, 1980’s and 1990’s, it was found that there was no more nor no less construction employment within the St. Louis MSA during the time the Kiel Center and the Trans World Dome [Edward Jones Dome] were being constructed…”

This perhaps counter-intuitive result happened because:

“…instead of creating new construction jobs, jobs were shifted from projects that would otherwise have been undertaken, resulting in no net new job creation in the construction industry.”

The author concluded:

“These results, coupled with the more extensive analysis given in the article on construction employment, suggest that the net impact of stadium construction on construction employment and worker incomes is zero.”

This finding is in line with the bulk of the economic literature: stadiums do not boost economic growth, greatly increase tax revenue, or spur revitalization. A new football stadium is an expensive want, not a need, in Saint Louis City. With its lack of economic merits, civic leaders should reject the public funding for the stadium. If they cannot bring themselves to do so, they should at least allow residents to accept or reject a plan to use public funds for football.     

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