Aug 22, 2019

St. Louis Should Not Succumb to Subsidizing Its New MLS Stadium

Michael D. Farren Research Fellow , Anne Philpot Staff writer

Major League Soccer (MLS) officials announced Tuesday that St. Louis is getting a MLS expansion franchise, growing the league to 28 teams. This is great news for local soccer fans, but if St. Louis learned anything from their stadium subsidy for their former NFL team—which has been called the “most scandalous deal in the country”—it’s that public officials should demand that any new stadium project be 100 percent privately funded.

Even today, three years after the Rams moved back to Los Angeles, St. Louis residents are still paying off $47 million on their former stadium. Local taxpayers seem to have learned the hurtful lesson from the Rams’ move. In 2017, St. Louis voters rejected a special sales tax that would have contributed $60 million toward an MLS stadium.

Now, the St. Louis MLS team owners say the $200 million downtown stadium project will be “overwhelmingly” privately funded, but city officials admit that various tax exemptions are still on the table.

Though St. Louis will likely spend far less than DC’s record-breaking MLS stadium subsidy, even smaller tax breaks are costly and unnecessary. Professional soccer is likely to be successful in St. Louis without them. After all, the failed sales tax referendum didn’t end the private investors’ efforts to create the team; in fact, their eventual success suggests that St. Louis voters shouldn’t have been asked to fund it in the first place.

Furthermore, peer-reviewed academic research consistently shows that public financing for professional sports stadiums is a poor way to spur economic development or accomplish “downtown revitalization.” The cost to local taxpayers and businesses outweighs any potential benefits created by stadium construction and game days. At best, a new stadium and the surrounding businesses will only redistribute spending and jobs from other restaurants, bars, and entertainment venues.

So why do cities continue to fund new stadiums? The benefits are concentrated in a small group of people and the costs are spread out. In other words:

"Public subsidies for stadiums are a great deal for team owners, league executives, developers, bond attorneys, construction firms, politicians and everyone in the stadium food chain, but a really terrible deal for everyone else."

Meanwhile, states and localities feel as though they can’t back out of the subsidy arms race while their neighbors continue to offer deals to teams. One solution calls on officials to band together and mutually agree to stop subsidizing stadiums. This agreement, in the form of an interstate compact, would create an enforceable contract to limit how politicians can spend taxpayer money.

A compact would protect taxpayers from the political influence of wealthy team owners. Stadium construction would be funded through private means, just like any other business.

When it comes to stadium subsidies, even a good deal isn’t great. The public should not underwrite the cost by providing any funding, land, services, or special treatment. St. Louis taxpayers should continue to insist that politicians treat the incoming MLS franchise like every other business—by requiring the team owners to pay their own way.

Photo by Michael B. Thomas/Getty Images

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