{"id":38299,"date":"2024-12-10T13:45:00","date_gmt":"2024-12-10T13:45:00","guid":{"rendered":"https:\/\/www.lifeandnews.com\/articles\/?p=38299"},"modified":"2024-12-10T15:51:58","modified_gmt":"2024-12-10T15:51:58","slug":"stadiums-dont-have-to-be-a-drain-on-taxpayer-dollars-%e2%88%92-4-lessons-from-st-louis","status":"publish","type":"post","link":"https:\/\/www.lifeandnews.com\/articles\/stadiums-dont-have-to-be-a-drain-on-taxpayer-dollars-%e2%88%92-4-lessons-from-st-louis\/","title":{"rendered":"Stadiums don\u2019t have to be a drain on taxpayer dollars \u2212 4 lessons from St. Louis"},"content":{"rendered":"\n

Peter Boumgarden<\/a>, Washington University in St. Louis<\/a><\/em> and Nathan Jensen<\/a>, The University of Texas at Austin<\/a><\/em><\/p>\n\n\n\n

The world of professional sports is flush with cash, thanks to multibillion-dollar TV deals, sponsorships and ticket sales. Yet some of the biggest investments in major franchises come from taxpayers. Between 1970 and 2020, state and local governments spent US$33 billion<\/a> in public funds on sports arenas, including nearly $20 billion since 2000 at an average cost of $330 million<\/a> per project.<\/p>\n\n\n\n

Lawmakers often justify those subsidies by saying they\u2019ll create jobs, boost local businesses and attract tourists. But economists are skeptical. A 2017 survey<\/a> found that 80% of economists think the costs of stadium subsidies outweigh their benefits. One analysis even compared the local economic impact of a sports franchise with that of a midsize department store<\/a>.<\/p>\n\n\n\n

As professors who study<\/a> stadium financing<\/a>, we wanted to dig deeper into the impact of ownership strategy in sports and economic development goals. So, in partnership with former MBA student and now graduate Jessica Timerman<\/a>, we recently wrote a case study focused on our hometown\u2019s foray into Major League Soccer. Starting in 2022, St. Louis welcomed a new team, CITY SC<\/a>, and a new stadium, CITYPARK<\/a>, both of which received significant family funding. <\/p>\n\n\n\n

We came away with four key lessons from this work.<\/p>\n\n\n\n

1. Local families care more about the community<\/h2>\n\n\n\n

Our story began when the Rams left St. Louis for Los Angeles in 2015, leaving the city with a struggling downtown and an underused NFL stadium. Sensing this gap, a few groups tried to build momentum around soccer, a sport with a deep history<\/a> in St. Louis<\/a>. But in 2017, city voters rejected<\/a> a $60 million proposal to bring a new soccer stadium to town.<\/p>\n\n\n\n

In the absence of broader taxpayer support, it was a local family<\/a> \u2013 the Taylors of Enterprise Mobility \u2013 that came in with both financial backing and a novel strategy focused on economic development in the short term and profit in the long term. The Taylors secured $34.5 million in tax incentives but avoided broader public subsidies. Importantly, the family privately financed the construction.<\/p>\n\n\n\n

It\u2019s not surprising that family ownership would be a good fit for a civic project: Research shows that family businesses \u2013 especially those that are committed to a community \u2013 tend to value nonfinancial objectives as well as pure profit<\/a>, and are willing to wait longer to see returns on their investment. This kind of \u201cpatient capital<\/a>\u201d is often a key to long-term civic improvement projects.<\/p>\n\n\n\n

These factors likely contributed to the decision to pursue a form of private development that took advantage of tax incentives but didn\u2019t fully depend on public funding.<\/p>\n\n\n\n

As family patriarch Andrew Taylor noted in the case write-up<\/a>, \u201cCITY Soccer is a for-profit enterprise, but the profit may not be here for a while.\u201d<\/p>\n\n\n\n

To be fair, the wait for profits \u2013 for the family and city alike \u2013 might not be that long. Before the soccer team\u2019s first game, the St. Louis Development Corporation estimated the project would generate $10 million for the city over the next decade<\/a>, but estimates of taxable revenue<\/a> from the team\u2019s first year, at a city tax rate of 5.45%, make such 10-year projections seem conservative.<\/p>\n\n\n\n

And fans are buying tickets: CITYPARK sold out 34 home games in a row<\/a>, becoming Major League Soccer\u2019s 11th most valuable franchise<\/a> \u2013 out of 29 \u2013 according to Forbes. It\u2019s worth $680 million.<\/p>\n\n\n\n

\"The
A St. Louis fan holds up a scarf during a game at CITYPARK on July 1, 2023. Bill Barrett\/ISI Photos via Getty Images<\/a><\/figcaption><\/figure>\n\n\n\n

But not every city has a Taylor family to bear the costs of this kind of project, and there are clearly cases of family owners who are more interested in extracting money from taxpayers than in building community. That raises the question: What other principles from this case could enhance similar projects seeking broader economic impact?<\/p>\n\n\n\n

2. To maximize payoff, get the site right<\/h2>\n\n\n\n

One critical issue in economic development is targeting investments<\/a> where they can do the most good. For example, research shows that even tax incentives for businesses \u2013 which many academics, including one of us<\/a>, have criticized \u2013 have a much higher return on investment if they target high-unemployment areas<\/a>.<\/p>\n\n\n\n

In other words, it\u2019s smarter to build a stadium in a distressed area than in a wealthy neighborhood. That\u2019s what we saw with CITYPARK. Downtown West, where it was built, was once known as part of the Mill Creek Valley neighborhood. In the late 1950s, Mill Creek Valley housed 20,000 predominantly black residents and 800 businesses before these citizens were relocated to the north part of the city proper and corresponding county<\/a> and the area was razed to make way for a highway.<\/p>\n\n\n\n

This history matters. To this day, three of the top five neighborhoods for housing vouchers are located<\/a> in and near the current stadium, all of which make it a higher-impact area for development.<\/p>\n\n\n\n

Targeting development in places without much momentum doesn\u2019t just generate new economic activity. It also reduces the potential for negative economic returns<\/a>, such as when a game day squeezes out other nearby activity. While more precise work remains to be done, early economic impact studies<\/a> of CITYPARK have been positive.<\/p>\n\n\n\n

3. Don\u2019t let your stadium go empty most of the year<\/h2>\n\n\n\n

A related issue centers on the event calendar. One reason NFL stadiums have such dismal returns is that they host just eight home games a year<\/a>.<\/p>\n\n\n\n

CITYPARK decided to avoid this by housing the stadium, practice facility and team headquarters in the same location \u2013 something unique for a city located within an urban corridor. It now hosts about 200 events annually, many of which have nothing to do with soccer.<\/p>\n\n\n\n

4. Remember that workers and suppliers are your neighbors<\/h2>\n\n\n\n

Research on anchor institutions<\/a>, such as sports teams, hospitals and large businesses, suggests that paying good wages can have a positive impact on local economies. It\u2019s important to remember that sports teams are small to midsize businesses, a segment that disproportionately fails to create \u201cgood jobs<\/a>,\u201d as measured by pay, benefits and culture. By paying workers well, sports teams also invest in their local economies.<\/p>\n\n\n\n

Using local vendors can also have positive economic effects. CITY SC, for example, partnered with local James Beard winner Gerard Craft as their chief flavor officer<\/a>, and then had him curate a roster of local food vendors within the stadium walls. In the first two seasons, $5.5 million of revenue went to local restaurant partners on match day, and 60% of attendees surveyed said they were more likely to seek out these venues outside of the games.<\/p>\n\n\n\n

Ownership groups advocating for clear economic returns from large-scale stadium projects face a steep uphill battle, as most deals result in financial losses. Public financial support is almost always a losing proposition for communities in the narrow economic sense of the term.<\/p>\n\n\n\n

However, the intangible benefits of having a big sports arena \u2013 such as fostering civic pride and social connections \u2013 shouldn\u2019t be overlooked.<\/p>\n\n\n\n

A key way to justify the cost of these large projects is by minimizing the public financial burden and finding long-term investors whose motivations go beyond just making a buck. For many teams, this points to the families sitting in the owner\u2019s box.<\/p>\n\n\n\n

But for cities without such benefactors, practices like we saw in St. Louis \u2014 such as opening a stadium in a distressed area with minimal public funding and using creative strategies to get the community on board \u2013 offer an innovative model.<\/p>\n\n\n\n

The next year will bring plenty of changes to CITYPARK, including a new name<\/a>. But while the stadium\u2019s future is unwritten, and its long-term economic impact remains to be seen, we think it stands out as an example worth watching.<\/p>\n\n\n\n

Peter Boumgarden<\/a>, Professor of Family Enterprise, Washington University in St. Louis<\/a><\/em> and Nathan Jensen<\/a>, Professor of Government, The University of Texas at Austin<\/a><\/em><\/p>\n\n\n\n

This article is republished from The Conversation<\/a> under a Creative Commons license. Read the original article<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Peter Boumgarden, Washington University in St. Louis and Nathan Jensen, The University of Texas at Austin The world of professional sports is flush with cash, thanks to multibillion-dollar TV deals, sponsorships and ticket sales. Yet some of the biggest investments in major franchises come from taxpayers. Between 1970 and 2020, state and local governments spent […]<\/p>\n","protected":false},"author":56,"featured_media":38300,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[5,7,25,289,6],"tags":[15815,885,891,886,860,15816,15817,7780],"_links":{"self":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/38299"}],"collection":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/users\/56"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/comments?post=38299"}],"version-history":[{"count":1,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/38299\/revisions"}],"predecessor-version":[{"id":38301,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/posts\/38299\/revisions\/38301"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media\/38300"}],"wp:attachment":[{"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/media?parent=38299"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/categories?post=38299"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lifeandnews.com\/articles\/wp-json\/wp\/v2\/tags?post=38299"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}