St. Louis officials overwhelmingly approve MLS deal marginally less onerous than one voters hated last year

The St. Louis Board of Aldermen voted 26-2 on Friday to give preliminary approval to tax breaks and free land for a new MLS soccer stadium, with final approval to come when and if the city actually lands a team. Which means it’s a perfect time for me to help throw some cold water on the board’s enthusiasm, via column by St. Louis Post-Dispatch columnist Tony Messenger (which he spoke to me for before the vote, but which ran this morning).

My only actual quote should be pretty uncontroversial:

“The latest plan is arguably less onerous for the public than lots of other stadium projects out there — and certainly better than the previous soccer proposal for St. Louis,” deMause says. “But that’s damning with faint praise, because the median in stadium deals is ‘pretty awful.’”

Most stadium deals are terrible, and this one is better than most! But it’s not the best, either, which Messenger notes by pointing to my recent Deadspin article on stadium deals that don’t suck, citing in particular the Orlando S.C. deal where the team owner paid for construction, land, and property taxes like a normal land developer. St. Louis mayoral chief of staff Stephen Conway retorts that Orlando’s situation is an “outlier,” which is true, but when you’re giving your own plan five stars out of five, by definition you’re saying it’s as good as any outliers. (What would an Orlando-style plan get, six out of five stars?)

Anyway, to recap and update what the prospective St. Louis MLS owners will get as part of the tax and land break package, with some numbers via city documents helpfully provided by Messenger:

  • A 3% sales tax surcharge on goods sold at the stadium. The present value of future taxes is estimated by the city at $21.3 million, but since the higher sales taxes which arguably would just force the team to charge lower face-value prices, it’s not fair to consider this entirely a city cost.
  • An exemption from half of city ticket taxes, with the other half funneled into a stadium upgrade fund. Project supporters say that all the other St. Louis sports teams get an exemption on this, so the soccer team should too; still, that makes it less “not a subsidy” than “a subsidy, but one that the city hands out like candy.” The city analysis estimates the value of this exemption at $11.6 million in present value.
  • An exemption of sales taxes on construction materials, which is estimated to cost the city $1 million in present value while saving the developers $4-5 million; no explanation is given in city documents how this bookkeeping magic occurs (the city sales tax rate is about equal to the state’s), so just roll with it.
  • Free state highway department land and an exemption on property taxes for it. This is the big unknown, since the city apparently threw up its hands and said, “Well, we’re not getting any money from the land now, so may as well give it away for free,” which is not how assets work. (Not that it’s stopped far bigger developers from trying the same argument.) Here’s a vacant lot in the same general vicinity selling for a little under $23 a square foot; if you figure at minimum about 500,000 square feet for a soccer stadium, then you’re looking at $10 million in forgone land value, plus whatever the city would be giving up in forgone future property taxes.
  • The state has already approved $30 million in tax credits, though since it doesn’t appear to be a rebate of any specific taxes, this is probably better thought of as “cash.” (Really, all tax rebates are better thought of as cash, since there’s no functional distinction between the two.)

Add it all up, and we’re looking at maybe $60 million in public subsidies, whereas the previous soccer stadium plan that was rejected by voters in 2017 would have provided … $60 million in city subsidies, plus $40 million from the state. So, yeah, this would be somewhat better, but not all that dramatically so. Probably the most honest way to present this to the public would be “We want a soccer team, and at least this way we’d get one at a mild discount over what some other cities are spending,” but maybe that’s just what “FIVE STARS!!!!!” translates into in the politician-to-English dictionary.


15 comments on “St. Louis officials overwhelmingly approve MLS deal marginally less onerous than one voters hated last year

  1. I’m hoping your additional detail in point 4 is because of our previous convo, so kudos for doing additional research on comparables.

    The real problem with this point is I’m not sure your getting the fundamentals on it right. It’s not a city asset. The land is currently owned by the state, so not only can the city not sell it, but they haven’t even bothered trying to buy it from the state in 50+ years because it’d cost them too much to attempt to develop it and nobody has stepped up to do it for them in 50+ years. This stadium plan calls for the city to purchase it form the state, and the ownership group will reimburse the city the full cost of the purchase and development of the land, in addition to fully paying for the stadium they’ll build on it.

    So comparing it to really any city owned land with value isn’t accurate, since this wouldn’t even be a city owned plot of land to create value without this deal.

    • It’s a public asset — for the purposes of figuring out the public cost, it doesn’t matter whether they’re losing an asset as St. Louis citizens or Missouri citizens. Though if the city buys it from the state at market value, that’s a city cost, not a state one.

      You say that “the ownership group will reimburse the city the full cost of the purchase and development of the land,” but I’ve been unable to find any reporting that backs that up, and the city documents don’t say anything about it either. Can you provide a link to where you’re getting that information?

      • Sure, this link has a ton of info from last week, including the actual presentation to the city’s HUDZ committee.

        https://stlouist.com/event/11282018-housing-urban-development-meeting

        24:45 of the presentation is where the ownership group’s lawyer states that the team will cover “any costs associated with LCRA buying the land…No cost from LCRA or city towards land acquisition”.

        • Thanks! The team lawyer there mentions a “funding agreement” — is the idea, do you know, that that would be incorporated into the lease?

          • If not a part of the lease, then the preamble to the lease, yes. The lease would be between LCRA and the owner group just like this funding agreement, so it would either be one then the other or together. I’m not a real estate expert, so I don’t know if you can have a lease and land acquisition deal be part of the same agreement given that arrangement and plan.

          • It could be as simple as just setting the annual rent high enough to cover debt payments on the land purchase.

            That said, it’s a promising promise, but I’d like to see it in ink. Since the lease won’t be negotiated until St. Louis gets a franchise (per the board of aldermen), there’s lots of room for these owners, or future investors who get involved, to say, “Yeah, I know that’s what we said, but now that MLS raised the expansion fee we can’t afford to do that.”

            I’d say it’s a better than average MLS deal for the public, but it’s still a chunk of change. Ideally you’d want to see another referendum on this to see if it’s the public is okay with the price, especially since that’s what the law passed after the Cardinals stadium funding (which was similarly better than most but still not terrific) was supposed to guarantee.

  2. Hmmmn.

    So, if I’m reading this right, it appears that the city has essentially agreed to forego the vast majority of “normal” taxes it would levy on any other entertainment option (including construction taxes), forego any property taxes this property might have otherwise generated, and awarded $30M in ‘tax credits’ for the owners (are these specific to the stadium/team businesses or are they transferrable?)

    In exchange the sports business pays for the land (indirectly and possibly not up front) and builds a stadium on it… that will pay little or no taxes of any kind for it’s lifetime.

    The standard to evaluate these sorts of sports deals ought to be “would this incentive package offend you, the taxpayer, if it was offered to Walmart or Home Depot?”

    Yes.

      • Or the even more straightforward, if I wanted to build a nice patio for entertaining my friends.

        Certainly brings in more spending from me and more guests to my jurisdiction.

        Should I get some sort of subsidy for my patio just because my activity has some economic benefit to the jurisdiction?

        The idea that any benefit require equal subsidy is a quick route to bankruptcy. And even partial subsidy is in most cases fundamentally unfair.

  3. The vacant lot is “listed” at $23 per square foot its not “selling” for that. One thing I wonder with Rust Belt cities which have lots of vacant (or surface parking) lots, is giving away land for development really a bad thing?

    • Typically when small(ish) cities or towns sell undeveloped land for a token amount (often $1-10), these offers come with conditions… namely that the property will be substantially developed within a year and full property tax on the development proposed will be payable within two years (regardless of the state of the development at that time).

      So, if the incentive offered spurs development that results in an ordinary residential lot generating $2,000 in taxes annually instead of $250, there is some merit to the incentive (although, again, I will note that taxes are not “profit” for the municipality… they represent the incremental cost to provide government services to that parcel of land, prorated based on FMV of the parcel… a developed property requires more services and ‘government’ than an undeveloped property does, hence the increase in taxes levied)

      Something that often gets missed in these discussions is that undeveloped non-municipally owned private property is still taxable and, depending on jurisdiction, may be taxed at it’s highest and best use rather than current state. The property tax generated on undeveloped land tends to be 5-10% of the equivalent amount an ordinary residential development might be levied, but it still exists. And, obviously, undeveloped land does not require maintenance and service on utility systems and the like.

      There is an expectation in these “$1” lot sales that revenue will be developed annually from that incentive where none may have otherwise come. It is hard to see where this development will produce much in the way of gross revenue for the city, let alone net revenue. It may be true that this parcel generates no revenue currently, but it is also highly unlikely to become a tax dollar drain on the general fund in it’s current state. The same cannot be said for this parcel with a stadium sitting on it.

      • Well empty lots within the urban core are a blight on a city (although not quite as bad as abandoned housing or buildings). One of the problems Rust Belt cities have is people in the suburbs avoid the urban core like the plague so something that lures people downtown that wouldn’t otherwise go is a net benefit. That’s one of the flaws in the “replacement theory” which says something along the lines of “well you didn’t have a sports team people would go to the movies or out to dinner instead”, while partially true in Rust Belt cities people would go to the movies in the suburbs vs going to a game downtown.

        • The Cardinals sold 3.4 million tickets in 2018, the official attendance is 3.4 million. Therefore, its not like people are not going to Cardinals games. (I know that the official attendance is not actual attendance and actual attendance late in the season has dipped but so have the Cardinals).

          The lot in question is in an area in the central corridor and not (for example) were National Geospatial-Intelligence Agency is going. Which is a separate boondoggle of its own.

          • Right and the MLS is another thing that will draw people to downtown St Louis. I bet there was a chunk of public money in Busch Stadium as well.

          • About a third of the total cost. But public opposition to that deal was so great that voters passed a referendum saying that any future stadium subsidies would have to go to a public vote, which … this one is not going to, for some reason.

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