Rams seeking at least $100m in L.A. tax breaks; St. Louis offers $400m-plus in mystery money

The city of Inglewood still hasn’t posted details of St. Louis Rams owner Stan Kroenke’s proposed stadium deal to its website, though there is a statement from Mayor James Butts promising that “no tax dollars have been requested or will be used for this project if approved.” The Associated Press, however, reports this morning that this isn’t true at all: Kroenke would be looking for at least $100 million in kickbacks of property taxes, ticket taxes, and other city revenues:

By the developers’ estimate, in its first 25 years the project will produce more than $1 billion in local taxes — on property, tickets, parking, utilities and other sources. The first $25 million each year would be guaranteed for Inglewood, and once developers are reimbursed for eligible costs, any surplus would stay with the city.

“Eligible costs,” according to AP, would include “sidewalks and road work, landscaping, water mains and utility lines,” as well as “costs on event days for police, emergency medical crews and shuttle bus services from off-site parking.” Kroenke’s proposal estimates that these would total about $100 million and would be paid back within five years, at which point the city would presumably get to keep all of its tax revenue. (Though police, EMTs and shuttle buses sound more like ongoing expenses, which if carried forward over 30 years would boost the tax subsidy to $300 million over time, or about $180 million in present value.)

Meanwhile, more information is coming out about St. Louis’s stadium offer as well, which was announced to the world on Friday afternoon. As the St. Louis Post-Dispatch described it:

Peacock and Blitz outlined funding sources, including $200 million from the National Football League’s loan program, most of which would likely be paid back by the team; as much as $250 million from Rams owner Stan Kroenke; and as much as $55 million in state tax credits.

The funding includes two streams of money from the region’s residents:

• About $130 million in the sale of personal seat licenses, which reserve specific seats for fans and are often necessary to buy season tickets.

• As much as $350 million from the extension of the bonds at the Edward Jones Dome, where the Rams now play.

That $350 million is the big piece, obviously, but what exactly “extension of the Jones Dome bonds” means remains a bit of a mystery. The Post-Dispatch describes it as like refinancing your house: You go to the bank, take out a new loan, use it to pay off the old one, and sink whatever’s left over into a new project. (For you, maybe new cabinets for your kitchen; for St. Louis, a whole new stadium.)

The new loan still has to be paid off, though, which makes the claim by Gov. Jay Nixon’s stadium negotiator, David Peacock, that “the new stadium will impose no new tax burden on taxpayers in the local region and the state of Missouri” a bit of an untruth. Either the hotel taxes that fund the Dome would have to be extended longer than otherwise, or the money would have to be taken out of the Jones Dome fund and replenished by some other new taxes, each of which would mean a new tax burden. (Unless you don’t count taxes paid by hotel visitors as a local tax burden, in which case you’re crazy: Not only are many hotel stays by in-state residents, but money is fungible, so hotel tax revenue could be used to pay for other services or reduce other taxes if not used on a stadium.) The P-D estimates that it would cost $24 million a year to pay off the remaining Jones Dome debt while also paying $300 million toward a new stadium, and the Jones Dome bonds currently run $18 million a year — so in all likelihood this would require both extending existing taxes for another 20 years and adding $6 million a year in new ones.

That’s all an awful lot of who-the-hell-knows, in both St. Louis and L.A., but then, that’s the stage of the stadium game that we’re in: Announce the pretty pictures, and let the bothersome financing facts fall where they may later.

Another wild card in the Rams situation remains the NFL’s position — has the league okayed a Rams move, as some rumors have it, or is it seeking to block him because all his fellow owners hate him, as others have suggested? There’s an interesting tea leaf to read here in the position of NFL stadium consultant Marc Ganis, who invariably pushes the league line, and who is suddenly all over the press reports talking up the St. Louis plan (if it’s sweetened further) and bad-mouthing Inglewood’s:

Chicago-based sports finance consultant Marc Ganis said claiming no tax money would be used in the [Inglewood] project is “hyper-spin” and could damage the project’s credibility. “It’s not an outright lie … but there will be people who think it is,” Ganis said. “They might be prospective tax dollars, and it might make sense for Inglewood to contribute them to the project, but they are tax dollars.”

And:

Ganis said St. Louis has a leg up. Leaders have done this before, when the Rams first arrived two decades ago from Los Angeles. And the region has “an outsized number of corporate headquarters relative to its size of market,” he said. Besides, he said, it’s a myth that the owners of big-market teams make far more money than those in smaller markets. “An NFL team can be very well supported in Green Bay, Wis., which has far fewer corporations and economic activity than St. Louis,” Ganis said. “The beauty of the NFL is the large markets end up subsidizing the small markets.”

And:

“I see [the St. Louis proposal] as a plan that should be discussed. It’s not such a no-brainer that it should be accepted yesterday,” said Marc Ganis, a stadium consultant who sat on the negotiating teams that brought the Rams to St. Louis and sent the Raiders back to Oakland. “It’s a reasonable starting point for meaningful discussion.”

That sure sounds like “NFL to St. Louis: Put your money on the table, and we’ll see what we can do for you.” But at this point, there’s such a huge pile of known unknowns (the St. Louis stadium would require knocking down a good chunk of a warehouse district that may be protected by historic designation) that it’s tough to see very far into the future. Except that one way or another, Stan Kroenke is likely to be getting a nine-figure check from somebody’s public treasury


12 comments on “Rams seeking at least $100m in L.A. tax breaks; St. Louis offers $400m-plus in mystery money

  1. Yes, technically, it is tax dollars going back to the developers. But those tax dollars only go back to the developers “after” Inglewood receives its guaranteed $25 million annually! That’s an extra $25 mil the city of Inglewood isn’t receiving right now! Correct me if I’m wrong, but it sounds like a no-brainer to me……. It reminds me of the time joel wachs(then a los angeles city councilman) was against doing something similar for the Staples Center developers. And we all know how that turned out……..

  2. It’s an opportunity cost: Without the stadium part of the deal, would Inglewood get to keep all the property taxes, even those over $25m/year? It’s a mini-TIF, really, and is prone to the same false logic as all TIFs — like me telling the IRS, “Hey, if I chose not to work this year, you wouldn’t get any income tax from me, so how about you let me not pay any? It’s not like it’s costing you anything!”

    I’m pretty sure the Staples Center itself didn’t get tax increment financing, though the development around it did. I don’t actually know how that turned out (except that it led to one of the first community benefits agreements, one that was by all accounts pretty well-done but has not worked out nearly as well for other cities). But either way, you need to compare the tax impact not just to doing nothing with the land, but to doing something else that doesn’t require the tax subsidies.

  3. On the subject of “requiring” tax subsidies… I’d like to see some evidence that this (or any partially/fully tax dollar funded) development can not and will not be done without the subsidy.

    In most cases involving major professional sports, these subsidies just make it a more profitable development for the club/developer in question (as would certainly be the case here). The same is often not true for legitimate minor league sports or alternate types of entertainment (pure concert venues, art galleries, public recreation facilities etc).

    The next step of course is people weighing in on whether increasing the profitability of a sports franchise has the same sort of ‘cultural, recreational or educational” merit as arts, education or other taxpayer funded endeavours do.

    For those of us who have done land development before, the cost for infrastructure like curbs, gutters, sidewalks, service ties and the like all forms part of the cost of building any development. In cases where the land is already serviced when you get it, those costs are covered in the price you pay the city (or developer, increasingly) for your land.

    Why should other taxpayers in and around Inglewood pay these costs for a billionaire who has also managed to marry into the Walton family?

    Instead of viewing these types of proposals from the POV of desperate football fans who want access to live NFL games in their city while fobbing part of the bill off on someone else, perhaps city councils should be looking at it from the perspective of the 70-75% of their voting public that has no interest in professional football?

    Or better yet, from the POV of the business owners 2 blocks away who will effectively be levied a special tax to fund a business that will compete with them for entertainment dollars.

  4. The documents submitted to officials in Inglewood, where the stadium would be built, say that if annual tax revenue to the city from the completed project exceeds $25 million(which would go to Inglewood) as expected, the developers would be entitled to reimbursements for funds they invested in streets, sewers, parks, and other projects deemed dedicated to the public. So, someone please explain to me how this is a bad thing for the city of Inglewood(taxpayers)?? Correct me if I’m wrong, but isn’t the city of Inglewood(taxpayers) supposed to pay for improvements to streets, sewers, and parks anyway? Would it really be in the citys’ best interest to turn down this project because of the developers outrageous demands and wait for someone else to come along who would make this kind of an investment without asking for anything in return? I’m all for not subsidizing billionaires but this sounds like a win/win situation for everyone, it’s called compromise…….

  5. Also, why would it be wrong to include tax subsidies if the city(and the community) is going to benefit from the project(especially one of this magnitude)?

  6. “Also, why would it be wrong to include tax subsidies if the city(and the community) is going to benefit from the project(especially one of this magnitude)?”

    Because there’s something undeniably unfair about giving assistance to a business that doesn’t need it? (See John’s comment above about competing with other businesses.)

    Personally, I’m just bored with supposed businessmen who spend too much time whining about having to play by the rules. Just shut up and get on with it.

  7. Keith, the developers are asking to be reimbursed for expenses(streets, sewers, and parks) that the city is supposed to pay for anyway……. How does that constitute, “giving assistance to a business that doesn’t need it”? For arguments sake, let’s assume this project gets denied because of developers outrageous demands. Who do you think is going to have to pay for investments to streets, sewers, and parks eventually?? The city/taxpayers will!

  8. Oscar: When developers develop raw land, THEY pay for the infrastructure under discussion here.

    The general ratebase does cover things like parks, but that is really not what we are talking about here (it’s a drop in the bucket compared to the ongoing cost of policing and other services Kroenke gets for free). The parks are a carrot to throw to the city (and taxpayers) to make them feel like they are getting something in exchange for their money (and how much money is, as Neil points out, never clearly defined).

    The question I think taxpayers (and elected officials) should be asking is “why would we trade off all potential revenues from development on this land for $25m annually (maybe)?”

    It’s not like the $25m is free money in the city’s pocket either… there are significant operating costs that the city would have to cover in exchange for that fixed fee (more or less).

    Put another way, if building a football stadium is such a wonderful idea for this property, why wouldn’t Kroenke just build it privately and pocket all revenues associated?

  9. John, I’m not sure you’re entirely right that the developers would normally pay for all the infrastructure involved here — it likely depends on whether we’re talking about water lines and sidewalks on their property, or leading to their property. (Shuttle buses, obviously, are not “infrastructure” by any stretch of the imagination.) The mayor is right now selling the line that these are all things the city would normally need to be on the hook for, and Kroenke would be “lending” the public the money; that seems a bit dubious, but it’s really hard to tell until they release the friggin’ documents.

  10. When the smoke clears the bottomline is, does this project benefit the city of Inglewood(and it’s taxpayers) in spite of what the developers are asking for? If not, would it be better for the city to reject it and leave things as they are(wait for something better to come along)? In a nutshell, that’s what it all comes down to…….

  11. I don’t consider shuttle buses or event policing to be infrastructure, though.

    Shallow and deep utilities are infrastructure, and the Mayor may be trying to sell that as a “public” cost in this case, but it isn’t. The cost of serviced municipal land tends to be 40-50 times the cost of raw (unserviced land) precisely because of the cost of installing services.

    The city may pay the upfront cost of installing deep services, but they recoup that from the purchasers when the land is sold. That makes it a cost borne by the developers… do you disagree?

  12. If people are wondering how Kroenke and his development partners are going to privately finance this project on the front-end, you must understand how Stockbridge works. EB-5 money will be the junior financing arm of this. This is SLS Las Vegas all over again. The entire city of Inglewood is a TEA, which is one of the main requirements for EB-5. The project definitely qualifies for such an infusion of foreign cash, plus the demos are already there (LA Metro that is). Believe you me, the financing details will include some sort of EB-5 funding.