Missouri proposes $50m Rube Goldberg funding scheme for Rams so no one notices it’s spending $50m

The state-run St. Louis Regional Convention and Sports Complex Authority is set to ask for $50 million in state tax credits for a new St. Louis Rams stadium tomorrow, something that isn’t entirely a surprise, given that this has always been part of Gov. Jay Nixon’s stadium funding plan. Way down at the bottom of the St. Louis Post-Dispatch article, though, there’s a tidbit that’s worth exploring further:

Under one option to be presented to the finance board, the Dome authority would donate $100 million raised for the project to a nonprofit entity, which would then contribute $100 million to the board’s Infrastructure Development Fund.

In return for this contribution, the board would issue $50 million in tax credits to the nonprofit, which in turn would sell the credits and donate the proceeds to the Dome authority. The application says it expects to get about 95 cents on the dollar for those tax credits.

That’s a whole lot of paper-shuffling, but the interesting bit is at the end, where the state would be issuing $50 million in tax credits, but the Dome authority would only be getting $47.5 million in proceeds. That’s not a huge difference, but $2.5 million is $2.5 million, which raises the question: Why not just have the state give $50 million to the project directly, instead of mucking around with funneling money through tax credits and nonprofits?

I’m guessing here (Missouri locals and/or public finance experts, correct me if I’m wrong), but my assumption is that it’s so the headlines read “Dome authority to ask for $50 million in state tax credits” and not “Nixon proposes giving $50 million more to Rams.” It comes to the exact same thing, but for whatever reason some people think of tax expenditures as different from public spending, so apparently it’s worth $2.5 million to keep up this charade.

12 comments on “Missouri proposes $50m Rube Goldberg funding scheme for Rams so no one notices it’s spending $50m

  1. Thats how tax credits work. You see them in a lot of urban areas when they are rehabing old buildings. The developer is awarded tax credits and then turns around and sells them to someone who has an income tax bill to offset. They by them at a slight discount to make it worthwhile to do the transaction. It would be pointless to pay 100 cents on the dollar for tax credits.

  2. Oh, yeah, I understand why tax credits work that way. I was just noting that the state could save itself $2.5 million in this case by spending the money directly on the stadium instead of funneling it through tax credits.

  3. Well two things. 1) the tax credits may not all be used right away so you may have the expenditure spread out over more than one year 2) if they did that with everything they issue tax credits for could you imagine how many other projects would come under scruitiny? In Cleveland while some people are complaining about the sin tax extension they didn’t even notice the tens of millions of tax credits for high end apartments down.

  4. It’s spread over only three years — Missouri could have just allocated that money directly.

    I’m with you that tax credits are a good way of hiding expenditures in general, yes. Just this particular case points up that governments are willing to pay a monetary price for doing so.

  5. Boy you should go look at the foolishness involving the KC Chiefs practice facility at Missouri Western University a few years back. Predictably none of the “millions in revenue” really appeared from the Chiefs camp for MoWest. It was hilarious. The parking lots sat empty and they had to fire all of the workers they’d hire to work the camp.The whole thing violated the Missouri Constitution by spending Missouri tax dollars (in the form of the tax credits) on university athletic facilities but Missouri Western got an NFL grade facility out of it. Now if they’d just fire their entire coaching staff maybe they’d make the D2 playoffs and advance.

  6. Neil – this is what gets to the core of my angst with the people who have made a name for themselves on ranting about sports venues. There are so many more examples of welfare for the rich and powerful and the numbers there are make the amounts spent on sports venues look like pocket change in comparison. At least with a stadium or arena people get a recreation activity out of it. If you take Ohio for example and add up everything spent on the 6 major league teams, I’d bet dollars to donuts that Governor Kasich has doled out a whole lot more to companies that posed no risk of leaving.

  7. Well, non-sports corporations threaten to leave to get subsidies, too. Where do you think sports team owners got the idea? And while there are more non-sports subsidies, the dollar figure for each stadium subsidy tends to be higher, so really, pick your poison.

    Right now this website covers sports subsidies, and occasionally dips into convention centers (when Heywood Sanders stops by) and other related projects. If I had somebody willing to pay me to write about this full-time (and better yet, hire a staff!), I’d absolutely cover other corporate subsidies as well. Until then, clawback.org is your best bet — Greg LeRoy and Good Jobs First were part of the initial inspiration for researching Field of Schemes, and they continue to do great work in that area.

  8. No offense but you and/or Andrew Zimbalist get cited in debates accross the country and in a way contribute to the distraction. Here is one article that details some of the more eggregious deals: http://www.nytimes.com/2012/12/02/us/how-local-taxpayers-bankroll-corporations.html?pagewanted=all&_r=0
    Now granted giving a break to GM years ago probably paid itself since some of those plants were in place for generations and obviously a higher number of jobs than a stadium would, but there are instances of companies moving a few miles away to cross a state line. Kansas and Missouri lost corporations to each other via these sort of things. But would AIG really have left NYC without its breaks? Or would Wall Street 2 have shot scenes anywhere but New York if the city didn’t give them $10 million, and even if they would have would did the city make $10 million back?

  9. And I’ve written about many of those egregious deals, just usually not at this site, since it’s specifically focused on sports. And the sports reporters who interview me generally tend not to be interested in, say film subsidies, though I do mention them when I can.

  10. “There are so many more examples of welfare for the rich and powerful and the numbers there are make the amounts spent on sports venues look like pocket change in comparison.”

    This has got to be the weakest possible argument against the efforts of people like Neil. Are there worse examples of corporate welfare? Of course there are — but so what? Should we stop trying to cure lung cancer because heart disease kills more Americans every year? An “all hands on deck” approach to the single biggest problem to the exclusion of all others is almost never the best solution. Try it at work and see for yourself.

    The reason why stadium issues are important is because so many people think it is not corporate welfare at all. Take a peek at the Rams Talk forum on the St. Louis Post-Dispatch’s web site. You can find thread after thread of earnest Midwesterners disputing every economist’s findings that publically-funded stadiums are bad investments. If you believe those nitwits you’d think that the key to economic prosperity would be to build the Rams a new stadium every decade (which will be nearly entirely paid off by a combination of tourists through hotel and car rental taxes, and players’ state income taxes) and then sit back and bask in the glory of the economic boom and regional revitalization that will inevitably follow.

    Since so many people exist who actively argue in favor of this particular strain of corporate welfare the focus that Neil and others puts on it is very much justified.

    Keep up the good work, man.

  11. Neil and I have gone back and forth about the Rams. The state is talking about $12 million a year. At Missouri’s income tax rate the taxes on players salaries will get most of that back. Considering the state budget is $36 billion. I don’t get why this is the hill people choose to die on.