This article first appeared in the St. Louis Beacon, Feb. 7, 2013 - Let's say your family is considering whether to build a new house close to where you live now, improve the house you’re already in or move to another city entirely.
One of the first things you’d do is try to crunch the numbers: What would the various options cost, where would the money come from and how could your current or your projected income pay for it?
But cold calculations are only part of the story, and maybe not even the most important part. Intangibles figure into the equation as well. Do you like your neighbors? Your children’s school? Your commute to work? Is family nearby? Friends? How are the weather, the job market, the shopping, the entertainment options?
In many ways, that exercise will be repeated as the Rams and local officials weigh the factors involved in deciding where the football team will play, now that arbitrators have chosen its plan for renovations to the Edward Jones Dome over a competing plan from the Convention and Visitors Commission.
“It’s useful to think about it in two steps,” says Glenn MacDonald, an economics professor at Washington University.
“For the overall region and football and the team, thinking of everybody in a broad sense, is it actually worth doing? Then once you think about whether it’s actually worth doing, the question is: Who is going to pay for all this stuff?”
All this stuff includes luxury seating that has a good view of both the field and the ubiquitous giant screens that reflect what is going on in front of the fans; a roof that doesn’t block out all the light; and general amenities that would place the stadium in the top 25 percent of those in the National Football League, as the team’s lease demands.
Officials of the CVC have made it pretty clear that they aren’t likely to proceed with the Rams’ plan, which costs more than five times what their own blueprint called for. So what’s next? That question can be as much about politics as it about economics.
“You can raise money in a number of different ways,” says Bob Lewis, president and chief executive of Development Strategies, an economic development consulting firm in downtown St. Louis.
“Like any developer or ball team owner, the Rams are going to look for ways not to use their own money. So they will propose that costs are so extraordinary, they have to go to the public sector.”
What the Dome costs
Any calculations about what changes to the Dome or a replacement stadium might cost have to take into account the money that is already being spent on the stadium that opened in 1995 as part of the downtown convention center.
The stadium itself cost $280 million and was financed by bonds issued by St. Louis, St. Louis County and the state of Missouri. When those bonds are paid off, over a term of 30 years, the actual cost will have risen to an estimated $720 million.
Since 2005, the St. Louis Regional Convention and Sports Complex Authority, which owns the facility, has spent another $30 million on improvements.
Each year, the Rams pay $500,000 to use the stadium, playing eight home games a year plus pre-season games and whatever playoff games they may qualify for. As part of the deal, they get most of the revenue from tickets, advertising and concessions.
The likelihood of the state getting involved in financing another stadium seems remote. Asked about the issue at a news conference in Jefferson City earlier this week, Gov. Jay Nixon said flatly, “I don’t have a new stadium in this year’s budget, nor do I have any ongoing discussions on how to do that.”
He elaborated on that during a visit to Arnold on Wednesday, saying:
"Right now, the state of Missouri pays $12 million a year to retire the debt on the facility. We have a deep interest in making sure that we stay an NFL town and region.
"The state of Missouri, a number of years ago when Gov. (John) Ashcroft served, they moved forward that measure and we are paying it. So making sure that we have an NFL team here in a stadium that the state of Missouri is paying 50 percent of the debt service is important for us both businesswise and economically, as well as a sports fan.
"Now that the first stage of the process is over, we'll begin to get into a longer-term discussion. None of this triggers anything until 2015 anyway, so I think we've got a little time to talk."
Legislators aren’t expected to get behind any tax dollars for the project, based on what Senate President Pro Tem Tom Dempsey, R-St. Charles, told St. Louis Public Radio.
“I’m telling you that I am not going to support public funding for a football stadium," Dempsey said. "I think everything, what I have heard and what I have read, is that no one is surprised about any decision that has taken place, up to and including the arbitrators' ruling, and that this is all a part of a negotiation.”
One factor in that negotiation may be a loan program from the National Football League that so far has helped the San Francisco Giants build a new stadium down the road in Santa Clara and has helped the Green Bay Packers renovate venerable Lambeau Field.
But to get a loan from that so-called G-4 fund for new construction, team owners have to put up a big chunk of their own money.
Arbitrators rule
The stage for the stadium scramble was set last week when a three-member arbitration panel ruled in favor of the Rams in the dispute over how the Dome could be upgraded to meet the team’s requirement that its amenities be in the top tier of NFL stadiums – a standard that the panel noted is “exceptionally high.” Scroll down to the end of the story to read the ruling
Improvements would primarily involve luxury seating and the overall physical structure of the stadium.
In general, the panel said changes would have to include a roof that was either wholly or partially retractable, plus high-priced seats that gave occupants not only a good view of what was happening on the field but also a clear vantage point for viewing action on the big screens of a new scoreboard.
“Simply seeing the game on the playing field,” the panel said, “is not the full NFL experience.”
It also pointed out that making changes would be difficult because the Dome has the smallest footprint of any facility in the league. The Convention and Visitors Commission had proposed making improvements costing $124 million; the Rams countered with a proposal that had no official price tag but was believed to cost $700 million or more.
How the dispute ultimately will be resolved is far from clear. If they choose, the Rams can take advantage of a clause to make their lease a short-term one, throwing the team’s presence in St. Louis into question. A statement from the CVC after the arbitration decision was issued implied that probably will be the case.
“The CVC believes that a decision by CVC and the sponsors under the lease to commence construction of the Rams May 2012 improvements, which we estimate to cost in excess of $750 million, is very unlikely,” it said.
“The more likely outcome of this proceeding will be that effective March 15, 2015, the Rams lease will be converted to a year-to-year lease. The Rams decision with regard to its plans beyond that date is of course up to them."
What’s next? The arbitrators put it this way in their conclusion:
“The panel lacks jurisdiction to debate and adjudicate the politics of the choices offered, to involve itself in the dynamics of friendly versus unfriendly regulators ….” they wrote, “or to opine whether any of the available choices make sense for a city contemplating massive investment in a stadium whose lease will be within several years of expiration when the new facilities, whatever they may be, are completed. The panel leaves these and all other considerations, except its assigned task, to the wisdom of others.”
Wisdom, conventional and otherwise
To reach that wise conclusion, economic experts say, you have to start with the numbers, but you can’t finish with numbers alone.
First, you must look at what a football team and a stadium generate in terms of added revenue, not only for business owners but for tax receipts.
“You look at employment, at economic growth, the type of things you can measure,” says Muhammad Islam, an economics professor at Saint Louis University.
Then, he adds, you look at the factors that are harder to quantify but may in the end turn out to be decisive.
“There is also how much we as residents value having the team here, what kind of benefit we enjoy by identifying with a local team.”
The more definite figures, says Lewis of Development Strategies, may not amount to a whole lot.
“Does it create a lot of jobs?” he asks about the presence of a football team. “Yeah, it does on a Sunday afternoon for restaurants and bars, and for professional services like lawyers. But you can’t operate a restaurant or bar in downtown St. Louis on the strength of 10 home games. There is just not enough business. So you have to have other reasons to open that restaurant in the downtown area.”
One of the problems with the Dome, he adds, is that unlike Busch Stadium II downtown, it can’t be used for other sports.
“The old Busch Stadium was multipurpose,” Lewis said. “The football team could play in it in the winter and the baseball team could use it in the summer and it could help pay for itself. It still works that way fairly well for baseball teams, but not so much with football teams.”
That fact, he said, was one of the reasons the city was wise to connect the Dome with the convention center, so it could be used for big meetings as well as for football.
Trying to make the numbers work also has to take into account whether new dollars are involved or the money is simply moving from one activity to another, Islam says. A true multiplier effect, of say 1.5 to 2 times the original money spent, needs to be examined closely.
“If I’m going to take money I was going to use to go a local restaurant and use it instead to go to a ball game,” he explains, “that isn’t new money. That is just a substitution.
“What you have to be careful about is what incremental money is involved. That’s where the difficulty is.”
And questions of a new economic benefit, where public costs supposedly are covered by additional taxes that are generated, can also be suspect.
“Even if it’s a dedicated tax,” Islam said, “there is still an opportunity cost. Suppose it’s a restaurant tax, another 2 percent. You and I still have to pay for it, and that money could have been going to something else.”
MacDonald, at Washington U., says that some factors often considered in the economic calculations mean more than others. Being a “big-league city” may appeal to the emotions, he said, but not necessarily to business executives with a sharp focus on the bottom line.
“No company is going to go, St. Louis has a football team, let’s move our headquarters there,” he said. “But a company may say, St. Louis is a thriving place, there are a lot of things going on there, they’re growing. That’s an entirely different argument.
“You have to take a lot of that stuff with a grain of salt. If someone says, I feel all emotional about the St. Louis Rams but won’t buy a ticket to see them, that level of emotion can’t be very high. Talk is cheap.”
If government is going to get involved, Islam says, a lot will depend on what level of government steps in to cover part of the bill.
“Suppose it’s $300 million in public financing,” he says, “and the state says it will pick up $200 million and the city has to pick up $100 million that’s a good deal for the city.
“But if I’m someone living in southwest Missouri, not close to St. Louis, and I’m being asked to pay, then what’s my benefit and what’s my cost?”
In the end, Lewis says, the “big-league city” argument may not carry much weight.
“A lot of very good cities don’t have football teams,” he said. “Los Angeles is the classic because that is where we got the Rams. There’s no huge clamor out there for it. I don’t think the clamor here was all that strong, frankly, before we got the Rams.
“It’s nice to have. Some people think it makes you look like a big league city. But that’s an argument that’s easily refuted, given the numbers.”
Still, no one can dismiss the emotion that a football team – particularly a winning one, can bring to the final calculations.
“When you have the leverage of the National Football League,” Lewis says, “people want to be a part of it. So right now would be an excellent time to pass a tax in Baltimore if they need one.”
Jo Mannies of the Beacon staff contributed information for this story.
Arbitrators' Report - Rams/CVC by St. Louis Public Radio
Dale Singer Beacon staff