Okay, there was one piece of news this weekend involving NFL teams threatening to move to L.A. that wasn’t just blowing leverage smoke: The details of the St. Louis Rams stadium bill were revealed on Friday. Here’s what we know:
- The city would redirect $6 million a year worth of hotel taxes that are currently being used to pay off the Edward Jones Dome, as has been part of the plan all along. The dome debt would be refinanced, meaning it wouldn’t be paid off until much later, and the hotel tax surcharge would be extended well past its original sunset date.
- To replace the additional “city event day taxes” that everyone hated — which itself would be replacing money that the county balked at putting in — there would be this Rube Goldberg device: The state authority that owns the Jones Dome would put in $75 million by taking it from the stadium’s recently announced naming rights deal — but since that’s money that Rams owner Stan Kroenke wants to use to pay off his own share of the stadium costs, the city would then reimburse Kroenke with … kicked-back game day tax money! Betcha didn’t expect that surprise twist, huh?
- The Rams ownership state-run stadium authority [EDIT: Sorry, misread a reference] would cover all construction cost overruns, and the Rams would agree to a “binding and enforceable non-relocation agreement.”
All this would be enough to pay off about $145 million in stadium costs, which is a rather low number considering the annual payments. So either a large chunk of it would still be needed for existing dome costs, or the city is anticipating a lousy interest rate.
The controversial part of this, obviously, is keeping in the bit about kicking back taxes on anything sold at the stadium, which could come to a huge chunk of change — Mayor Francis Slay’s chief of staff, Mary Ellen Ponder, said the exact amount of the rebate is still being negotiated, so it’s hard to say how huge. Not only have members of the St. Louis board of aldermen have already been complaining about the price tag of tax kickbacks, but NFL VP for stadium grubbing Eric Grubman was out on the hustings on Friday, trying to move the goalposts on what exactly is a subsidy:
Generally, the NFL considers naming rights and even game-day taxes — on tickets, hot dogs, parking and beer, for instance — revenue that belongs to team owners, not to the public, said NFL Executive Vice President Eric Grubman.
Grubman said he had not seen the city bill. But if such money was bonded to pay for construction costs, he said, it should be credited toward the team’s portion, not the public’s.
“It’s an NFL asset in the way we view the world,” Grubman said. “Whether on tickets or parking, that tax wouldn’t exist but for the activities of the team.”
Laying claim to taxes on everything spent by your fans at the stadium is pretty ballsy — not only is this something that literally every other human who pays taxes on anything could claim (“Yes, Mr. IRS Auditor, but don’t you understand that my income tax bill wouldn’t exist if I hadn’t worked?”), but keep in mind the Rams would only be moving a few hundred feet, so it’s all tax money that’s currently being collected by the city and kept for public uses. But it’s even ballsier than that: Grubman is apparently trying to insist not only that tax kickbacks get used to pay stadium costs, but that they be used to pay the team owner’s share of stadium costs, and the city needs to come up with some other source for its own half of the tab.
This upset even Dave Peacock, the main booster of the Rams deal, who replied to Grubman’s remarks: “We’ve been discussing these taxes as a source of funding with the league since mid-July. I’m surprised they’re becoming an issue in late October.” Maybe this is just an example of Grubman playing bad cop, so that city officials are more willing to accept the game-day tax thing so long as it counts for their side of the ledger. (“Hooray, we get to give our tax revenues to the rich football team owner and count it as money we’re giving him rather than money he already has!”) On second thought, maybe this is a story about blowing leverage smoke after all.
Neil,
I’ve seen you write several times on this site that ticket taxes should be considered as a team contribution. Why should it be different for the Rams?
Once you’ve established the “principle” that for whatever spurious reason game-day taxes on concessions “belong” to the NFL for the Super Bowl, it isn’t that much of a leap to apply it to every single game.
A great next step would be to apply this ownership principle to the taxes of sports bars within a certain radius of the stadium who advertise the ability to watch NFL games. After all, people wouldn’t eat if it weren’t for the NFL!
Ben: Ticket taxes that are specially applied to a stadium, with the revenues redirected to pay off construction costs, end up coming out of owners’ pockets because it means they can raise ticket face value as high as they would otherwise. For sales taxes that broadly apply to all businesses, it doesn’t work the same way.
There’s a bit more to it than that – we could also get into how price setting works differently under a tax that all your competitors pay as well – but that’s the nut of it: whether these are taxes you’d have to pay normally but are getting rebated, or it’s just team money getting laundered through the city treasury.
If details of a government spending proposal are released on a Friday, with the hope it gets buried over the weekend, it’s not a good deal for the public.
In my opinion, the Rams are as good as gone. There is no incentive for them to remain in St. Louis. A move to LA will substantially increase the net worth of the franchise and Stan Kroenke knows that. As for the stadium proposal, its a bad deal for taxpayers. However, that has been the case with many new NFL stadiums. What matter is if the taxpayers of St. Louis believe its worth the investment. Frankly, I believe that city has too many things to take care of which are a greater priority than professional football.
Neil,
My understanding is that the Rams aren’t trying to duck general sales taxes. They just want the specific “game day” taxes that get applied in and around the building to be kicked back.
Those are just regular sales, income, etc., taxes, collected at the game on game days.
Actually the Regional Sports Authority (city it stl, county of stl and state of Missouri funded agency) would cover the cost over runs and not the team owner
Grubman has consistently told St. Louis that they do NOT have a plan, are a long way from having one; that a plan includes land under control and finances fully sequestered and legally available; and, just last week that the half-plan they sent the NFL has multiple unacceptable provisions (like who owns the revenues?!). The PD’s take on this was that these points are open to negotiation! With who, Kroenke? Who just won on the old lease arbitration and so you decided to simply breach the contract? What is this, best 2 out of 3? There is a reason that Kroenke insisted on an out-of-state arbitrator and NOT the Missouri legal system to make the decision.
Rams to LA is a done deal. NFL has repeatedly called the St. Louis plan “not a plan”; Raiders would give anything to be a renter in Inglewood; Kroenke doesn’t need to sue, the NFL would have to sue him in California courts to stop him; the Committee is in favor of Inglewood; the ownership in general is overwhelmingly in favor of Inglewood; etc. It goes on and on.
As i recall the city of Arlington collects a parking tax on every car and it kicks it back to the Cowflops. I thought that was ridiculous but this is a great negotiating ploy in the tradition of the old “ask for it and see if you catch them sleeping”. If they were stupid enough to agree to a “state of the art” clause 20 years ago, there’s no point in not asking for everything.
Gdub: Bars are already taxed by the NFL when they buy Sunday Ticket so the NFL would never tell a city tax proceeds from sports bars belong to the NFL. What’s the taxation system where a city collects taxes and hands it over to a corporation? Doesn’t exist, Bubbuh. The system for billionaires works sympatico, not at odds within itself. They feel what they generate in the stadium is theirs, not going beyond the tv deals they sell to, which supplies Sunday Ticket.
As for the bizarre premise of this article, the Rube Goldberg city funding hoohah, there is no legal way the city could confiscate naming rights to the stadium that would actually go to Stan Korenke, or to dispy-doodle a kickback scheme to Kroenke with game day tax money. City govt does not work that way. Nor would “the Rams ownership…cover all construction cost overruns, and agree to a ‘binding and enforceable non-relocation agreement.’ This expectation is from Planet Mars. There is no legal way any city could force any owner to stay put and pay any such bills when he clearly does not want to and will not support any stadium plan in St Loo, especially this one. If this is how they think their stadium plan is viable, it is dead on arrival before it reaches the corridors of the NFL, where it will be laughed out of the building as something out of a mental asylum.
James: Thanks for the correction on overruns — this was either misreported in one of the articles I read, or I just misread it while focused on the city funding.
Craigbhill: I don’t even really know where to begin, but suffice to say that that *is* how city government works, or at least how it can work if the city agrees to it. (Cities collect taxes and hand them over to corporations constantly — it’s why this site exists.) The board of aldermen agreeing to it doesn’t look all that likely right now, certainly, but there’s still lots of hardball haggling left to go.
Neil,
My mistake. Thank you for the correction.
Craig,
I really was just kidding, sort of.
However by the NFL’s new principle, the NFL gets the admission fee (tickets) and somehow “owns” the tax revenue for regular season games. I’d say the satellite charges are more akin to an admission cost than a tax.
It isn’t a huge intellectual or technological leap to create a “ballpark zone” around the stadium and recoup sales taxes paid for designated businesses with some connection to the playing of professional football. TIFs work to redirect taxes of different kinds to private businesses for politically driven reasons. In fact, as audiences move more away from stadiums and towards televisions (as seen in some stadium construction ideas), conceptually this could occur anyway.
The point is that once the public accepts this nonsensical line of reasoning that a league can “own” what it doesn’t even possess simply because it is popular/there are only 32 teams, the sky is the limit on poor public policy.
GDub:
Too right. I am eagerly awaiting an NFL broader interpretation of this policy as it relates to other private businesses. For example, why stop at demanding that sports bars pay exorbitant fees (far in excess of what private citizens have to pay for the same product) to air NFL games in their businesses? Why not demand that all tax revenues paid by the sports bar on Sundays be redirected to the NFL as well, or that the breweries that supply the sports bar (who also so clearly benefit from the existence of NFL football) dutifully forward their vig to the The Corporation. And don’t even get me started on chicken wing, dry rib, mozza stick and nacho manufacturers & suppliers…
Really, the sky is the limit here. I think the NFL is being overly altruistic in just extorting money from governments of districts that have teams. There is no reason in the world they could not apply an annual franchise fee to all those cities which don’t yet have a team. We already know that sports cartels have desmonstrated to court’s satisfaction repeatedly that they “own” the rights to non-existent franchises in every market or potential market in North America.
So why just leave that money on the table???
I mean, at the very least Piggy and his ilk should be getting some sort of annual maintenance payment for keeping all these theoretical non-existent franchise available… and for doing so when they don’t even have stadiums for them to not play in either. The NFL is really a public service when you think about it in the “right” way.
@ Neil,
The board of Aldermen will pass the stadium funding deal. A couple Alderpersons were grandstanding to get the mayor to listen to their pet causes but it’s expected to pass.
I’m not claiming this as a good deal just pointing out the facts in St. Louis and how none of the aldermen want to be blamed as the politician who lost an NFL team or turned away construction jobs for the local union workers. It will pass no problem.
insidestl.com/insideSTLcom/STLSports/STLRams/tabid/137/articleType/ArticleView/articleId/19327/St-Louis-8th-Ward-Alderman-Says-Stadium-Financing-Bill-Should-Pass-if-Details-Pan-Out.aspx
insidestl.com/insideSTLcom/STLSports/STLRams/tabid/137/articleType/ArticleView/articleId/19340/Former-St-Louis-Mayor-Chief-of-Staff-Believes-Aldermen-Will-Pass-Stadium-Financing-Bill.aspx