Where the Rams Will Play in 2016 and Whether St. Louis Should Care

The St. Louis Rams lease on the 16 year old Edward Jones Dome may come to an end in 2015. The terms of the lease require that the stadium be a "top-tier" football venue, one of the best seven in the 32 team league. Currently, 20 NFL stadiums are newer than the Dome and 21 are larger.

While "top-tier" isn't defined, by any measure, the relatively small, old Dome would require a couple hundred million dollars to be considered in the top seven. The same measure was to be applied in 2005, but the then owner waived the clause and $30M was found through refinancing debt to make several modest improvements. As the Post-Dispatch noted, this all means that new owner Stan Kroenke has an "out". There's virtually no way the Edward Jones Dome will meet the lease requirements.

So what does this mean? Only Kroenke knows. St. Louis has shown it can get creative with stadium financing. The current Busch Stadium was lauded by many as a good example of private financing. Headlines declared that Cardinals owners were paying "77% of the cost on the $388M project." This sounded good compared to say, Cincinnati, where the region subsidized 83% of the $361M MLB stadium (2003) and 100% of the $452M NFL stadium (2000). In reality, the Cardinals received plenty of public money as well, the main source being the forfeiture of the 5% admissions tax once paid. It may sound small, but could total as much as $350M over 30 years.

Forfeiting an existing tax will always be an easier sell than implementing a new one. The later was done in St. Louis in the 1990's. An increased hotel tax and commitments from the State, City and County general funds provided 100% of the financing for the Dome. As the Post-Dispatch noted, each year until 2025 the State is on the hook for $12M and the City and County $6M apiece to pay down the stadium debt.

What are the chances of a new tax or general fund commitment to fund improvements? Slim to none. Is there a tax (revenue source) we're willing and able to hand Kroenke? Unlikely. At this point it's worth asking whether we should use public funds to subsidize an NFL stadium. This is a topic that has received a lot of attention, and been the focus of rigorous study.

The consensus by economists is that there is no net economic benefit to a city or region resulting from the presence of a professional sports franchise. In fact, studies have found that there may be a net negative economic impact. How is this possible? From the Professional Sports Facilities, Franchises and Urban Economic Development study (full study embed below):

household spending on sports – direct spending on tickets, licensed merchandise, etc. and indirect spending on food and drinks at or near a sports facility – is highly substitutable for other forms of entertainment spending like movie tickets, food and drinks in areas of the city far from the facility, bowling and the like. Professional sport does not induce residents to increase total spending by drawing on savings or borrowing against future earnings. Residents maintain their level of entertainment spending but alter the allocation of this spending toward sport-related spending and away from other close substitutes. Sports redirect spending by residents from one part of the local economy to another.

That's fairly straight forward. In addition, studies have found that the impact of visitors to a city are minimal as they simply substitute for visitors who would have spent money elsewhere, that is, cities with professional sports franchises have not been found to have higher hotel occupancy rates, increased retail sales or increased airport traffic when compared to those without. Also, it is theorized that productivity of workers is reduced in cities with teams and, perhaps more importantly, public funding for stadiums come at the expense of important and productive public services.

An additional expense for the region comes in the form of spending on sports being a smaller multiplier than other forms of entertainment spending. Why? Because a substantial portion of spending goes to pay multi-million dollar player contracts, manager salaries and to franchise owners. This money leaves a community at a higher rate than money paid to bartenders, movie attendants and others. It appears at best that we are simply redistributing income.

This should sound familiar in St. Louis. As a region, we give away millions upon millions of dollars in the form of Tax Increment Financing (TIF) and other incentives to relocate retail within the region, resulting in no increase in retail sales or retail employment. Any argument to keep the Rams in St. Louis should not be made on an economic basis. To paraphrase the author of the study cited: "keeping the Rams in St. Louis might produce intangible benefits. Rooting for the team might provide satisfaction to many local football fans."

So Kroenke will be able to take his Rams where he wants after 2015. The Dome will not be among the top seven NFL stadiums without a massive redesign, or a new stadium. Recent NFL stadiums have cost $750M-$1B. The St. Louis area appears unlikely to provide several hundred million dollars in subsidy. But for the sake of argument, where will, where should, the team play if they're still in St. Louis?

A retrofitted stadium, perhaps with a retractable dome and other modern features could remain where it is today. A new stadium on the east riverfront could provide incredible views of downtown and Arch, as well as provide room for tailgating and other event related activities. Better yet, the Fenton Chrysler site could make use of a large site that currently has few prospects for significant future use. The economics of the NFL should favor suburban locations as the stadiums host games fewer than a dozen time each year and dual use as convention space generally fails to meet expectation.

Of course it's possible another creative arrangement can be manufactured, and another waiver of the "top-tier" clause granted. If not, expect an effort to build a new stadium in St. Louis. And if that effort finds any substantial resistance, expect the Rams to look to their old home in Los Angeles, where the $800M Los Angeles Stadium is already planned. In the end, can St. Louis compete with that? Should it?

Professional Sports Facilities, Franchises and Urban Economic Development

NFL Stadiums 2011