Letter to the Editor from Adam Kazda
There’s been much talk of bringing the MLS to St. Louis. Having went to one of the many St. Louis high schools that treasure soccer above all other sports, I understand the value of bringing a team to St. Louis.
What other city can you drive around on a weekend morning and see grown men playing “the beautiful game” at almost every city park? The city has a rich soccer history and the MLS has expressed an overwhelming interest in bringing a franchise to St. Louis. However, let’s not beat around the bush when we talk about building a new stadium. We want it because we want soccer, not because it benefits the city economically.
There is overwhelming research from economists that cities get no substantial return on investment by subsidizing a sports stadium. Perhaps the reason the MLS stadium has drawn so much attention is the recent memory of the Rams burning St. Louis. Twenty years ago the Rams got the deal of a lifetime, and left the city with heartburn after leaving.
Jonathan Laing, of Barron’s, wrote in 1996 of the Rams deal with St. Louis:
“The Rams were able to lock in an annual rent over a 30-year lease period of just $250,000, the fifth-lowest rent rate in the NFL. Yet the Rams will receive 100% of the revenues from the stadium’s 100 luxury suites and 6,250 club seats. On top of that, the team got the option to add 20 more luxury boxes and convert 4,500 more seats to club status, plus a guarantee that 85% of all suites and club seats will be sold over the next 15 years. The team also gets all concession revenues generated by the stadium, $4.5 million of the first $6 million received in stadium advertising and 90% of any ad revenues over $6 million. The Rams also get to pocket the $1.3 million a year that Trans World Airlines is paying for the stadium naming rights. Lastly, St. Louis agreed to build a store for the Rams to sell team merchandise.”
If this were the only thing you knew about the Rams deal, you would probably say the City of St. Louis didn’t put up much of a fight at the negotiation table. However, take comfort in knowing St. Louis isn’t the only city that a billion dollar franchise has taken advantage of taxpayers.
In Atlanta, local taxpayers are on the hook for more than $397 million in bonds for the Atlanta Braves’ new $622 million stadium. According to a National Conference of State Legislatures report, since the early 1960s, 91 sports stadiums have been built with public funding, and 22 of them were fully paid for with public funds. Twenty-nine of the publicly financed stadiums were funded through a hotel tax, 27 were funded through general obligations, 24 were funded through sales taxes, 23 were funded through bonds and four were funded from lottery or gambling revenues.
Even though professional sports franchises are raking in billions, local politicians see using tax credits as a way to keep franchises in town and believe their community will receive long-term benefits, even if the short-term cost to taxpayers is high. However, the economic benefits of stadium subsidies are questionable.
According to a 2016 Brookings report, “evidence for large spillover gains from stadiums to the local economy is weak. Academic studies consistently find no discernible positive relationship between sports facility construction and local economic development, income growth, or job creation.” In addition, teams do not employ a high number of people, and the economic output of a sports team constitutes a small share of the local economy.
Conversely, some economists believe there are benefits in using local subsidies for sports stadiums. In San Diego, where the football team recently departed for Los Angeles, some economists said, “the stadium helps maintain the city’s reputation for promoting active lifestyles, and the stadium adds to quality of life for residents.” Another San Diego economist had this to say:
“I am not aware of a recent example of a major sports facility investment that earned anything approaching a reasonable return on capital or turned out to be self-financing in terms of tax revenues. The owners of major sports franchises essentially hold cities up for ransom with constant threats to relocate to other communities, not because of better market conditions but because the local governments are prepared to subsidize the sports team even more heavily. The best reason for giving in to these demands is to keep the Chargers here and make the fans happy, not to boost the San Diego economy.”
Most economists agree. In fact, according to a Harvard professor, 85% of economists surveyed, believe local and state governments should end pro sports subsidies.
In short, a soccer stadium will surely benefit quality of life in St. Louis, but let’s not kid ourselves, if we get a stadium it’s because we like soccer, not because our city will benefit financially.
