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.