How cities haven’t actually fallen out of love with funding sports stadiums

The May issue of Governing magazine has an article with the provocative headline, “How Cities Fell Out of Love With Sports Stadiums,” though it’s really mostly about why St. Louis balked at throwing money at an MLS stadium and fought back against paying for arena upgrades for the Blues after getting burned when the Rams got the most sweetheart lease deal in history and then used a lease loophole to move back to Los Angeles just 21 years later.

All that is good and fine, as is the article’s discussion of how “the economic impact reports singing the praises of sports development have largely been discredited.” But in the service of trying to make the story into “regular folks used to fall all over themselves to hand money to sports teams, but now they’ve smartened up,” writer Liz Farmer oversimplifies or just plain gets wrong a number of things about the stadium subsidy game and how it’s played, which is going to be a problem if any people in the business of actual governing take it as gospel. Let us count the ways:

“When [Rams owner Stan] Kroenke came along and had the gall to start making demands for a football team that hadn’t had a winning record since 2003, the city was — quite literally — spent. St. Louis was suffering under the same socioeconomic and fiscal pressures as Cleveland, Detroit and most other Rust Belt cities. Its population was declining rapidly, and it was stuck paying off debt for the existing stadium until 2022. Residents were increasingly skeptical when it came to investing in gaudy entertainment amenities the lower-income population couldn’t afford to use.”

St. Louis’s population has been declining since 1950 — if anything, it’s leveled off some in recent years — though its county population has soared as more people moved to the suburbs. And residents were pretty darned skeptical before, too: Way back in 2002, St. Louis citizens approved a referendum requiring that all public subsidies for sports facilities would need to go to a public vote. Unfortunately for voters, courts ruled that the target of that referendum — the Cardinals stadium deal that had just been approved prior to that — was grandfathered in, but it’s not like public resistance in St. Louis is anything new.

“The era of taxpayer-financed stadiums came about almost by accident. Seeking to limit the use of government bonds in stadium financing, the federal Tax Reform Act of 1986 included a provision that capped at 10 percent the direct stadium revenue — mostly from ticket sales and concessions — that could be used to pay for the cost of the facility. That meant that governments would have to raise broad-based taxes, such as on sales or business, to cover the rest of the cost.”

Not quite. What the 1986 tax reform law was attempting to do was to rein in cities’ use of federally tax exempt bonds for private projects — not just stadiums, but all kinds of development — by saying, “Look, only really public amenities, okay? Don’t just offer discounted bonds to anybody who asks and then stick federal taxpayers with the bill.”

Unfortunately, the way that Congress chose to address this was by defining public amenities as things that were paid for by the public — if more than 10% of the cost was paid off by private funds (or special taxes that were just private funds masquerading as public dollars to get eligibility), low-cost federal bonds were off the table. Unfortunately, what that did was to increase the leverage of sports team owners, who could now say, “Yeah, sorry, we would love to put in more money of our own, but then it would increase the financing costs, and we can’t have that, can we?”

This is by no means what started the era of taxpayer-financed stadiums, though: Team owners were already demanding new stadiums and arenas left and right, using the usual playbook of methods to do so (move threats, claims of economic benefits, etc.). The tax reform law further titled the scale toward bigger demands, but it didn’t create the demands in the first place — and while getting rid of tax-exempt bond subsidies would be a nice step, it wouldn’t put an end to stadium subsidies in the slightest.

“But Congress didn’t account for the fan loyalty and pride that — at the time — made raising local taxes more acceptable.”

Fan loyalty and pride are still on full display, but sports fans are taxpayers, too, and have been resisting handing their tax dollars over to sports team owners as much as anyone since the beginning. Just ask Frank Rashid.

“The boom was driven in part by demand from teams and fans for a more sophisticated sports experience than the drab concrete coliseums they were used to.”

If by “more sophisticated sports experience” you mean “more pulled-pork sandwiches and nicer cupholders,” sure. But plenty of sports venues have been torn down in recent years to make way for new facilities that are arguably even drabber than the ones they replaced.

“The Washington, D.C., soccer team, D.C. United, spent years negotiating with the nation’s capital over a new soccer-specific stadium. Those talks effectively shut down once the economic downturn hit in 2008, and the team spent another seven years shopping around in the surrounding counties — even going as far as Baltimore — trying to find a local government that would pay for the facility. None would bite. Ultimately, the team stayed in D.C. and is paying to build a stadium on land the city spent $150 million acquiring. The deal includes a non-relocation agreement.”

In addition to that free land, D.C. United is also getting $43 million in property tax breaks, making it the most expensive MLS soccer stadium subsidy in history. The tide is turning!

“Kiel Center Partners, the firm that owns the NHL Blues, had asked the St. Louis City Board of Aldermen for $64 million to finance upgrades to the Scottrade Center. Had the city’s voters not been distracted by the soccer stadium proposal and by a heated mayoral election, the financing might have met more resistance. Some aldermen did question whether the city’s 1994 lease with the team required it to pay for upgrades, but still the proposal narrowly passed. If it had been submitted to a popular vote, it most likely would have failed.”

Again, “if voters had been asked, they would have voted it down” is likely true of all of St. Louis’s past sports subsidy deals. (Possibly not the original Rams deal, though if they’d known that it would allow the team to move away by claiming their two-decade-old stadium was no longer “state of the art,” they might have balked at that, too.) And voters didn’t get to vote because the city council just up and decreed that they wouldn’t be allowed to, despite that 2002 referendum, so it’s tough to see how this is a sign of increased political resistance.

“So the hockey team got its way. Things like that still happen. But they don’t happen easily, and they don’t happen with broad public support. Several years ago, for instance, when the NFL’s Minnesota Vikings wanted a publicly funded stadium, the state legislature rejected the proposal. Eventually the team got its money, but with a state law capping public contributions to the $1 billion project at $498 million.”

OMG, the Vikings owners actually had to ask for stadium subsidies multiple times! And then they had to settle for a mere half-billion dollars in cash, except counting tax breaks and other hidden goodies it’s actually costing taxpayers more like $1.1 billion, so, uh.

In the end, the Governing article isn’t a terrible one, and it does touch on a lot of details of the stadium scam that Governing likely wouldn’t have been caught dead discussing 20 years ago. (Now there’s some progress.) But if the takeaway is that the general public loved sports stadium plans, but now have realized they were duped, that’s not the story at all: Actually it’s been a battle from the beginning between team owners trying to extract as much public money as possible, and taxpayers and some of their local representatives trying to push back. And while maybe a few more elected officials are pushing back harder, there’s pushback against the pushback, too. So this whole mess isn’t ending anytime soon, much as I wish it were so I could retire this blog and go back to treating sports as the purely apolitical, fun pastime that it never really was.

Friday roundup: Battles over Blues arena, Vegas bond subsidy, Belmont land for Islanders

Let’s get right to this week’s remainders:

St. Louis puts temporary hold on Blues practice rink that bulldozed public park

The St. Louis County Council voted 4-3 last night to put on hold construction of the new St. Louis Blues practice rink that, it turned out a few days ago, is destroying public parkland without the required permission of the National Park Service:

“When council members called the developers of this project, they were told that the land disturbances that were taking place in Creve Coeur had nothing to do with the ice rink, it was for stormwater,” [council char Sam] Page said. “We know that now to be false … It’s important to tell the truth and follow the rules.”

The council’s decision to put the rink — sorry, it can’t be avoided — on ice came despite heavy turnout by youth hockey parents, who Blues execs had asked to come show support for their construction project, which would also include amateur rink space. More than 17,000 people have now signed a petition calling for the rinks not to be built in the park.

Meanwhile, the cost of the rinks appears to have gone up, from $59.3 million to $66 million, including $38.3 million in public bonds, according to the St. Louis Post-Dispatch. The bonds would be repaid via a complicated series of lease agreements with a nonprofit organization — I still haven’t been able to find all the details, though the Post-Dispatch does report that the county would be on the hook for as much as $450,000 a year in “backstop payments” if money fell short. Seems like lots of reasons to call a timeout on this one, really — now let’s see how everyone does going forward on that whole telling the truth and following the rules thing.

Blues don’t wait on Park Service permission, go ahead and bulldoze park for practice arena

If you remember the long battle over the new New York Yankees stadium, you may remember how one key hurdle was getting the approval of the National Park Service for the project, since the stadium site was on parkland that had previously gotten federal funds, meaning it either needed to be maintained as open space in perpetuity or replaced with equal land elsewhere. (A requirement that was eventually met, sort of, by building a new park years late on the other side of a highway.)

The St. Louis Blues are currently working on building a new practice rink on 40 acres of similarly federally funded parkland in suburban Maryland Heights — using $6 million of county money, in addition to the county land — and so are stuck in the same boat of waiting on the NPS. Except, according to St. Louis Post-Dispatch columnist Tony Messenger, the Blues owners aren’t waiting:

Today, the site tapped for the ice complex is scraped bare by bulldozers. On both sides of Marine Avenue in the northwestern corner of the federally protected park, trees, grass, wildlife and wildflowers are gone, replaced by acres of dirt being flattened and raised by heavy construction equipment every day.

That work, key county officials claim, has nothing to do with the ice project, which has yet to get the approval it needs buy generic lorazepam online from the National Park Service to go forward.

Messenger reports that Sheila Sweeney, CEO of the St. Louis Economic Development Partnership, insists the park was bulldozed not for the Blues, but for “an unrelated stormwater project.” Only one problem:

The proposed site of the Blues practice arena project is 13750 Marine Avenue, which besides being in the county park is also in the city limits of Maryland Heights. That means the company doing the grading work needed a permit from the city.

That permit was issued July 6. It lists the description of the work to be done:

“Construction of an Ice Center.”

Environmental groups are fighting the use of parkland for the hockey complex, with a Change.org petition that notes that not only is Creve Coeur Park valuable green space, but it sits in a floodplain, making it maybe not the best place for a permanent sports facility. And now the chair of the St. Louis County Council has called for a timeout on the project, on the grounds that “information that now appears to be incorrect, misleading, or incomplete” and that “we were purposely misled.” Better late than never, I guess, though maybe it would have been nice to do this before the chainsaws came out.

 

Blues’ $67m arena subsidy hit with lawsuit as city comptroller refuses to issue bonds

Speaking of arena upgrade lawsuits, St. Louis’s plan to provide $67 million in public subsidies toward a redo of the Blues‘ arena, which was passed back in February, is facing a court challenge of its own:

Opponents of the publicly funded $64 million renovation to Scottrade Center filed suit Friday to keep the city from paying for the project, alleging the plan is unconstitutional in Missouri.

And on the same day, a spokesman for St. Louis Comptroller Darlene Green said she had no intention of signing the financial agreement that would fund the city’s commitment to the arena.

“The Comptroller has not approved the transaction to issue bonds for the renovation of Scottrade Center, as it would incur debt to the city’s general fund for nonessential services and negatively impact the city’s credit,” Green spokesman Tyson Pruitt said.

The Blues owners insist that Green, who was one of the prime critics of the Rams‘ stadium subsidy plan, doesn’t have the jurisdiction to refuse to issue the bonds, any more than La Liga did to refuse to accept Neymar’s transfer fee from Barcelona to Paris Saint-Germain. (Note: This is not meant to suggest a legal precedent between FIFA rules and St. Louis city regulations, just an excuse to mention my favorite part of the recent Neymar madness.) As for the suit, filed by currently alderman Cara Spencer, former state Rep. Jeanette Mott Oxford — who has long been a prominent critic of sports subsidies in St. Louis, dating back to the Cardinals stadium deal —and former city counselor James Wilson, it’s based on a Missouri constitutional provision that public money can’t be granted to for-profit corporations for the purposes of boosting their profits. A bunch of states have these provisions on the books, and pretty much none of them are ever enforced — courts generally rule that the real purpose of the subsidies is “creating public economic benefits” or somesuch. It’ll be interesting to watch, though, not least because the arena renovations have already begun, so if the lawsuit prevails presumably the Blues owners would be on the hook for all the costs themselves; or, you know, would have to find some other public body to try to hit up for money, which is always possible too.

St. Louis mayor says Blues arena needs $70m to keep wrestling finals, but what does math say?

I spend a fair amount of time here ragging on media outlets that go out of their way to parrot the arguments made by sports team owners and their political allies on behalf of stadium and arena subsidies. But it’s also instructive to stop and take a look at a more routine kind of media bias: the kind where journalists do their basic job of reporting the facts, but stop short of the most important step, actually explaining to readers what those facts mean.

For today’s punching bag, I present reporter Austin Huguelet of the St. Louis Post-Dispatch, whose entirely competent article on St. Louis Mayor Francis Slay asking the state of Missouri for subsidies to his city’s hockey arena (or the Blues‘ hockey arena that is on the city’s books, if you prefer) included the following:

A proposal from Sen. Dave Schatz, R-Sullivan, would allow the state to contribute up to $6 million per year to upgrading the St. Louis Blues’ 23-year-old home ice, which officials say needs urgent fixes if it is to continue attracting top-flight sporting events and concerts…

Without the money, Jack Stapleton of St. Louis Sports Commission said Scottrade could lose out on events like the wrestling championships to better equipped facilities with better public support.

“The competition is stiff,” he said. “We are going to up against a lot of cities with newer buildings with public funding.”

He listed Louisville, Chicago and Oklahoma City as examples.

Proponents also offered an array of statistics to support the bid. A report prepared by Johnson Consulting and given to legislators said Scottrade has generated nearly $170 million per year in spending from visitors and an average of about $11 million in annual tax revenue for the state.

So far, so good, though it’d be nice to explain who Johnson Consulting is or what their track record is for economic projections for their other consulting projects. (One example from this site’s archives: Johnson’s prediction of hotel stays due to Austin’s new convention center ended up being overly optimistic by more than 25%.) But more to the point, let’s connect the dots between the first and last figures in that story: The state is being asked for $6 million a year in subsidies in order to avoid hurting an arena that produces $11 million a year in state tax revenues. Unless the wrestling championships are a huge chunk of the arena’s business, that seems like a pretty terrible return on Missouri’s investment — taxpayers would be far better off letting Louisville have the damn wrestling and keeping their $6 million a year for other, more economically productive uses.

Sure, there are other benefits to having the shiniest arena on the block. (Though there are also other downsides that aren’t reported here, like the roughly equal amount of money that the city of St. Louis would be putting up under the Blues owners’ proposal.) But still, this is one of the huge drawbacks of a media industry that sees its job merely as accurately reporting what elected officials and business leaders say, not exploring whether it makes any damn sense. Doing basic math isn’t bias, and neither is investigating the bona fides of the institutions you’re reporting on — though both take time, something that’s increasingly in short supply at newsrooms stripped to the bone in response to declining revenues (and demand for higher profits). So my sincere sympathies to Huguelet and his ilk, but if you have a moment to spare, please try to up your game some next time, okay? Little things like an informed public and the fate of democracy depend on it.

 

St. Louis council approves $127m for Blues, MLS venues, voters can still block the latter

St. Louis lawmakers took major steps last week toward throwing $127 million at upgrades for the Blues‘ hockey arena and construction of an MLS soccer stadium, though the latter will depend on the results of an April voter referendum:

  • The board of aldermen voted on Friday to approve $67 million in subsidies for Blues arena renovations. (It will add up to $105 million over time, but it’s worth $67 million in present value. And while it would mix sales taxes, ticket taxes, and other revenues, all those are all diversion of existing taxes, not new ones the team owners are agreeing to pay, so as discussed earlier, it’s all money that the city would otherwise be able to spend on other things if not being siphoned off for the Blues owners.) Alderman Steve Conway defended the subsidy as necessary to keep drawing NCAA events (“If we don’t make improvements, what comes into general revenue diminishes over time”), though he didn’t appear to provide numbers showing that any added revenue is worth the expense; Alderman Antonio French retorted, “We do not have $105 million to give to anybody. And we’re about to give money to some of the richest people in town because they want a new scoreboard.”
  • Circuit court judge Michael Mullen approved putting $60 million in funding for a new MLS stadium on the April ballot, despite the board of aldermen having approved it too late for the deadline after the initial bill was withdrawn and revised. There will actually be two votes: one to raise sales taxes by 0.5% to expand St. Louis’s light rail system, which would automatically cause use taxes on out-of-state purchases to rise by the same amount; the other would approve taking those use taxes and pouring them into paying off $60 million worth of stadium costs. If either fails to get a majority, the stadium subsidy wouldn’t happen.

The soccer stadium vote will be, unless I’m mistaken, the first time that St. Louis voters will actually be going to the polls under the law approved by a 2002 referendum requiring a public vote on any sports subsidies. (The Cardinals stadium had already been approved then, and the Rams stadium never happened.) The only poll on the subject that I can find is just of Democratic primary voters (though St. Louis is pretty overwhelmingly Democratic); it found respondents opposed to soccer subsidies by a 61-22 margin, so I think it’s fair to say the proposal faces an uphill battle. There’s still two months of campaign spending left, though, so open up those Jamba Juice (and Bain Capital) coffers, Paul Edgerley!

St. Louis committee approves more than $100m in subsidies for Blues, MLS, but who’s counting?

The St. Louis Board of Aldermen’s Ways and Means Committee approved bills this week to funnel public money into both renovations of the St. Louis Blues arena and a new MLS stadium. How much money? As is so often the case, that’s a complicated question:

  • In the Blues’ case, the original plan was to demand $67.5 million from the city, mostly in the form of kicked-back sales taxes. (It would add up to $112 million over time, but the present value would only be $67.5 million.) The committee amended the bill to include $55 million in ticket tax revenue — in place of some of the sales tax money, I think, maybe? — but that cash flow wouldn’t start arriving until 2034 since it’s currently being spent elsewhere. And since it’s not a new tax surcharge but just money that otherwise the city could start collecting for other uses in 2034, I’m not going to go through the trouble of firing up Excel to figure out the present value of that, because it’s a subsidy either way. (The Blues owners are still also demanding an additional $70.5 million from the state of Missouri, though given the new governor’s feelings about such things, that may not go so well.)
  • For the proposed St. Louis MLS team, the original plan was for the city to provide $80 million from mumble-mumble-hey-look-over-there, but that bill was withdrawn by its sponsor last month. In its place now is legislation to provide $60 million in city money, mostly from redirected property taxes, but also including a ticket tax surcharge (really payments in lieu of a ticket tax, for reasons not worth going into here) that would provide $7.5 million to $12 million over the next 30 years, and … okay, now I will fire up Excel, and that’s worth: somewhere between $4 million and $7 million now, so not really a big concession on a $60 million get.

The MLS stadium plan, if approved, would go before city voters in an April referendum. The hockey deal for some reason everyone thinks doesn’t require a public vote, though that’s not what the law passed in 2002 says. Hey, Jeanette Mott Oxford, if you’re reading this, any plans to file suit to intervene in this one?

Blues owner demands $138m for arena one day after governor declares end to sports subsidies

As if to prove that when one governmental subsidy door closes, a governmental subsidy window opens, the St. Louis city council followed up new Missouri Gov. Eric Greitens’ declaration that he won’t approve any state sports subsidies by announcing it would vote on spending $67.5 million in city tax money on upgrades to the Blues‘ arena. A funding bill, which would involve $4 million a year in kicked-back arena sales taxes and a new 1% arena sales tax surcharge over 28 years (yes, that’s $112 million total, but since much of it would be collected far in the future it’s only worth $67.5 million in present value), could be introduced as soon as this week in the city council, and council president Lewis Reed has said it won’t require a public vote, notwithstanding that disputed St. Louis law saying that all sports spending requires a voter referendum.

And why, exactly, does Blues owner Tom Stillman think the city should pay to upgrade his team’s 23-year-old arena with such items as new seating, a new scoreboard, sound and lighting upgrades, and renovated locker rooms and concessions stands? Glad you asked!

“The Scottrade Center is no longer competitive,” said Blues Chairman Tom Stillman, adding that NCAA and concert promoters have warned that they will stop coming to St. Louis without upgrades to compete with facilities in Indianapolis, Kansas City, Nashville, Tenn., and elsewhere.

Yeah, that is a concern — to whoever is in the business of operating the Scottrade Center, which would be Stillman. The only potential cost to the city would be the loss of some sales tax revenues if the NCAA or concert promoters actually cut back on events, and since even according to Stillman the city only earns $6 million a year in sales taxes from the arena currently, it’s pretty inconceivable that any loss would be worth $4 million a year, since the Blues would still be playing there 41 nights a year. But as we’ve seen before, the first refuge of a stadium-subsidy grubber is to declare the old place obsolete, so it’s not surprising to see Stillman making that claim, even if the numbers don’t quite add up.

And speaking of numbers, Stillman’s total subsidy demand could more than double, as he’s preparing to ask for a second round of money from the state, Greitens’ Monday announcement be damned:

City and Blues officials also are planning to ask state legislators for $70.5 million for further renovations in a second phase, the timeline for which is still being finalized.

That would come to $138 million in public money for upgrades to a 23-year-old arena, with the only public benefit in return being “maybe we’ll get more concerts and NCAA tournament games this way.” A sane city negotiator would say, “Okay, great, how about you give us a cut of the actual revenues from those events to help pay off the public’s costs, like you’ll be using them to pay off your own share of the renovation?” Instead, we get this:

Reed stressed that the facility has already paid for police officers and transportation needs but hasn’t had a major upgrade since it was opened. “We must stay competitive,” he said.

Greitens hasn’t publicly commented on the Blues subsidy proposal yet, but one newspaper columnist has already decried local officials’ “disunity” on sports funding as the reason why St. Louis is having trouble keeping up with the likes of Louisville. Yes, he said Louisville. Apparently they don’t teach irony in journalism school.

With Rams gone, Blues owner wants St. Louis to throw money at him instead

Okay, who didn’t see this coming?

The St. Louis Blues want local governments to renovate their city-owned downtown arena as part of a project that will also upgrade the city’s convention center and former home of its recently departed NFL team.

The Blues ownership’s renovation request is expected to cost more than $100 million (the entire franchise sold for just $120 million in 2012), while adding upgrades to the convention center and the Edward Jones Dome — which won’t be home of the Rams anymore, but is still used by conventions every once in a while — could run into the “hundreds of millions,” says the St. Louis Post Dispatch. Blues owner Tom Stillman first asked for arena upgrades last October; convention center president Kitty Ratcliffe says “it would not have been the right time” to ask for this money before, what with Missouri being in the middle of debating shoveling money at the Rams and all, but now it’s a different story.

And why exactly would St. Louis want to spend hundreds of millions of dollars to upgrade its convention center and its NHL team’s arena, entirely at public expense?

“We’re looking at this as a boost for the region’s tourism industry,” said Mary Ellen Ponder, St. Louis Mayor Francis Slay’s chief of staff. “But right now it’s basically us listening to their needs.”

Translation: The Blues owners said they need it, so we’re going to try to give it to them. Excuse me now while I go write a letter to Mayor Slay explaining why I need a pony.