Scottrade Renovation Financing Plan Calls for 1% Sales Tax, $50M from Blues

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Today the St. Louis Blues and City of St. Louis announced financing plans for the renovation of the aging city-owned Scottrade Center. The 19,150-seat arena opened 22 years ago this month and is one of the 10 largest in the NHL. This would be the arena’s first significant remake since opening in 1994. Plans call for a $160M renovation funded by team funds, a new sales tax, and a bond issue.

Under the announced plan, the Blues are said to contribute $90M to the project, $40M of which would come from a new 1% sales tax on sales at Scottrade and the adjacent Peabody Opera House. Revenue from the additional tax is being described by project supporters as a “private contribution”. The remaining $50M would come directly from the Blues over the course of the next few decades.

According to the plan, from the estimated $6M of tax revenue produced by Scottrade currently, $4M per year through 2048 would fund the renovation. The team stated Scottrade produces more than $130M in direct revenue annually, and $14M in combined city and state tax revenue. Nearly $70M in bonds would be issued by the city’s Land Clearance for Redevelopment Authority (LCRA) under the plan. It is unclear exactly how much revenue the new tax would be expected to generate. It does not appear that funding for the renovation will be put to a public vote.

In June of last year the Blues outlined the need for renovations, stating costs for infrastructure improvements would be $57.8M, technology $29M, fan and event amenities $51.8M, and financing costs of $21.4M. At the same time, the organization detailed its own financial losses running the team. Team and city officials suggested a possible phase II renovation could seek state and other support, bringing the total renovation costs to as much as $240M.

Forbes listed the franchise value of the Blues at $310M in 2016, 23rd in the 30 team league. Back in 2012, an ownership group led by Stillman, then a minority owner, won approval from the NHL to purchase the team, becoming the organization’s 8th owners since its founding in 1966. The price tag was pegged at $130M. The team was purchased from majority owner Towerbrook Capital Partners, which bought the team for $150M in 2006.

{rendering of the “Rafter Club” – part of a proposed renovation of Scottrade Center}

In addition to hosting the Blues hockey team, Scottrade is used for dozens of other sporting events and shows. City officials and team ownership have expressed concerns that the city-owned arena would begin losing NCAA events such as basketball, wrestling, and gymnastics if renovations are not forthcoming. In total, just more than 100 events were hosted at the arena in 2015, including 51 Blues games and events, 20 other sporting events, and 32 entertainment events.

It’s unclear if the financing plan will have an impact on efforts to bring a Major League Soccer franchise to St. Louis. That plan, which includes a city-owned soccer-specific stadium in downtown, faces challenges as governor-elect Eric Greitens has categorically ruled out state funding. As late as last month it appeared the effort would receive $40M in state tax credits. St. Louis City mayor Francis Slay has pledged that any city support will go before city voters. The city’s Board of Aldermen face a deadline later this month to approve a ballot initiative if it is to appear in April. MLS has set and end-of-month deadline for the roughly 10 hopeful ownership groups to apply for an expansion franchise. In addition, an effort to finance the renovation and possible expansion of the city’s convention center is proceeding. That plan could total $300M or more.

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  • kevin smith

    Putting aside whatever mechanisms are ultimately used to pay for any of the desperately needed updates to an aging building, what I fail to understand in a bigger sense is people’s hesitation to take action on multiple city projects that attempt to draw people, i.e. outside money, downtown from suburbia and more importantly, from outside the region.

    Any development, which puts people in hotels/restaurants/shops within the city limits that generate multiple revenue streams needs to be figured out and advanced. Without growth from say real estate taxes collected which happen from people wanting to live, shop and work in the city, this is an opportunity to generate money that is needed to improve the schools, address crime and support homelessness initiatives that are desperately needed.

    The region has proven it can’t / won’t support some exisiting properties or developments in their current state as how many local citizens are going to Union Station for example outside of a special event. While the Blues are a great tenant, they only play 40 games a year and they are not a cash rich franchise. And, by not having these assets ( concerts/soccer games/events/etc.) in the city, everyone in the state is losing as it does not pull in IL money for example. So if this means getting state money or raising taxes to build a stronger city-which helps the entire state prosper-it needs to happen.

    And, as a marketing / event professional, there is huge value in having highlights of a STL sports franchise on Sportscenter or a concert being promoted outside the region. Anything that puts STL on a national / regional platform in a positive light verse, say our crime problems, is a good thing.

    Ultimately, the Scottrade Center is a city owned asset that simply needs updates to stay competitive. How many people haven’t updated their homes in some way over the last 30 years?

    • Patrick Goodson

      While I don’t disagree with you as far as getting and keeping people in the city for some time, there are other items missing in this article, such as how much does the city make off Scottrade as they host multiple other events there and how much in concession revenue, parking, etc. So, if they are making money off the property, then they should have a reserve fund for upgrades, etc. And they also state that it would be paid off in 2048, yet it was 22 years ago when done last and will be done again before 2048, so the tax part is misleading as they will have to raise it again at some point.

      • kevin smith

        To the best of my knowledge, the city owns the parking garage and the Blues don’t make anything off parking which is a very significant revenue stream they lack verse many other sports franchises. I am not sure of the breakdown/distribution of peripheral revenue streams like concessions for events but it would be interesting to know.

        Hockey is a very expensive business to be in and if funds have to be diverted within the organization from say, community outreach or players salaries to provide building upgrades it seems everyone agrees need to be done, then the on-ice product suffers and then suddenly we have less people spreading money around the city on the overall game day experience. And, as I mentioned above, there is a significant PR value in having a good team and while not everyone is a sports fan, there is unfortunately a civic price that does need to be incurred for that PR.

        I am not saying we should hand the Blues, or any company, a blank check. But in this case, the Blues are operating a public building in a city that lacks the capability to operate it so they do need to make money. If we were talking about a billion dollar owner with legitimately deep pockets, like say the Rams or even the Cardinals, I would feel differently on some points. All public financing deserves and should receive detailed scrutiny and is often abused but I would also question if we were discussing providing an IT firm or real estate company ( BPV-really deep pockets ) asking for some form of public support, would people feel differently?

    • STLrainbow

      I think the majority of folks in the city would like to support these venues at a reasonable level but a lot of the hesitation is the very fact that we city taxpayers are asked to go it alone on multiple projects with the result of our credit rating and budget revenues being put at risk. Where is the rest of the region to support these regional amenities? And obviously the Dome/Convention Center and Scottrade aren’t going anywhere; the question is what is a reasonable city contribution/investment in these facilities. With Scottrade, the more I’m learning about this initial proposal the less excited I am about it and think it should be re-worked. For MLS, a new facility, I don’t see how this is going to work out w.o help from the state and rest of the region.

      I wish we more like the Indianapolis metro, where while you can argue whether it was worth it or not, multiple counties (I wanna say 7) helped pitch in for the Lucas Oil Stadium. There is only so much the city can do and if the metro wants these regional amenities it needs to step up.

      • kevin smith

        I completely agree that local political infighting forces the city to carry an unreasonable burden for many of these projects with little help from any of the neighboring counties but didn’t want to even get into the city/county discussion. I know it was an hotly debated issue but off the top of my head, I don’t know what or if there was ever a resolution just trying to get Franklin, Jefferson and St. Charles counties to chip in for the zoo.

    • STLrainbow

      fwiw, 1M people are projected for the Union Station redevelopment, which would be considerably more than what Scottrade brings in for non-Blues events. Will be interesting to see if they meet that.

  • Tim

    Great, raise taxes to keep hockey. Excellent. Sometimes it seems like failing inner cities will do ANYTHING to keep status. Homeless people? Screw them, we need hockey and soccer!

    • JB

      Not exactly. When you’re raising taxes on the use of the facility itself, those who don’t use it aren’t paying for it. And reallocating a portion of that money into improvements for the property is a logical way to extend and increase the tax revenues it produces. It’s not and won’t be operating at a deficit.

      There is nothing bad about reinvesting tax revenue into an asset that has a 20-year track record of producing positive financial returns for the city. In fact, it’s pretty crucial to the city’s financial health.

      If the failing inner city you reference spent all of its revenue on humanitarian missions, it would fail a whole lot quicker.

      • STLrainbow

        The 1% sales tax increase would be credited to the Blues contribution amount, not the city’s. I don’t believe any other on-site tax increase that would go to the city has been announced. so those not using it indeed would pay for a good chunk of the upgrades. In addition, the city’s budget would take a hit as it would have to re-direct most of the tax revenues currently going to the general budget back into the arena.

        • jhoff1257

          Based on the reporting I’ve read the City’s contribution DOES include that 1% sales tax on Blues tickets and using some of the sales taxes already generated by the arena. And whether or not it’s “credited” to the Blues or the City since it’s a 1% tax on Blues tickets literally the only people getting charged for it are people using the arena. The Blues owners are kicking in an additional $50 million themselves and will cover any overruns and maintenance on the facility.

          • Nick

            According to the Post Dispatch, $70.5 mil is asked of the state, the Blues will contribute $50 mil, and the city’s $67 mil portion will be covered by the sales tax and a bond issue.

          • jhoff1257

            Literally what I just said. The bond issue would be paid off by the funds raised by a 1% sales tax on Blues tickets.

            From the Post-Dispatch:
            “Under a proposal expected to be submitted to the Board of Aldermen this week, the city’s contribution would come from current sales taxes generated at Scottrade as well as a new 1 percent sales tax on Blues tickets.”

            The state contribution would be for a phase two that has not yet been finalized.

            http://www.stltoday.com/news/local/metro/city-business-leaders-want-million-in-renovations-for-scottrade-center/article_5ed239cf-48b5-51ce-9016-ce069693eef7.html

          • STLrainbow

            Hopefully that is the case on the sales tax; the reporting I read yesterday (and tweets from one of those reporters) indicated that the increase would be attributable to the Blues. It is very complicated to follow, with a Phase 1 & 2, with possible state support and Blues kicking in $50M at some time in the future (unclear on how much for Phase 1.) and city support “up to” $6M.

            Anyway, I guess we’ll know a bit more when the legislation is filed … the more on-site revenues can cover the better.

          • STLEnginerd

            So is there a reason that this should be a sales tax instead of just raising the price of everything in the venues by 1%. Seems like there has to be a hook into why its proposed to be done this way…?

          • jhoff1257

            From the Post-Dispatch:

            “Under a proposal expected to be submitted to the Board of Aldermen this week, the city’s contribution would come from current sales taxes generated at Scottrade as well as a new 1 percent sales tax on Blues tickets.”

        • Tim

          http://www.forbes.com/teams/st-louis-blues/

          The Blues make a killing. The venue makes money. I can find that proof as well.

          This mentality that raising taxes solves problems is not smart. Especially when your city has more dire needs.

          • JB

            What part of that link shows that the Blues make a killing? 2016 was the first year in the past 10 where they showed a profit of any kind ($3.2million in 2016). Sure the venue makes money for them, but let’s not pretend they’re banking money hand over fist, enough to expect them to pony up for 100% of the capital improvements to a property they don’t own. The intent with the renovations is to preserve or even increase the revenue it does make, which is good for both the city and the Blues. Stand pat and risk eroding that secondary non-hockey business over time.

            Of course arbitrarily raising taxes is a bad idea (hence why I think the MLS proposal is bad news), but strategically raising taxes on specific event-related product to benefit the venue hosting those events is reasonable.

            We’re obviously free to disagree on where the priorities should be, but I’m of the opinion that it’s wise to invest money in a proven, revenue-producing asset such as the Scottrade Center.

    • jhoff1257

      This would be a 1% sales tax on Blues tickets. Don’t wanna pay the tax? Don’t buy Blues tickets. Easy peasy.

    • Dahmen Piotraschke

      The area surrounding the Scottrade Center around and up 14th to Washington Ave. is the center hub for homeless people. I was once well aware. The new Amtrack/Greyhound station and large Metro bus and train hub are all right there…also below hwy. 40, the steam grates on the sidewalks directly adjacent to the Scottrade, and up to the Larry Rice block..are all sleeping spots for the homeless population..also the Centenary Church which offers daily meals. The newly opened Biddle House has many beds, but the homeless need to go thru the proper channels with the HRC hotline…to get a bed, and set up with resources from St. Patrick, Places for People, and BJC Behavioral Health. That is the big hurdle .

      • Patrick Goodson

        The biggest hurdle so far has proven to be the Larry Rice block and shutting that facility down. It has failed multiple health violation codes, court has ordered it shut down but it seems to get a reprieve and I live several blocks from there and hear about the place regularly and will not walk my dog on that three block section of Locust. You add the fact the Central Library is drug central at night and Larry Rice is drug central all the time, it’s a combustible mix when trying to get people to go from say Ballpark Village to Washington Ave.

    • Dahmen Piotraschke

      Exactly..I hate to agree with our new Republican Governor, but these billionaires in hockey, soccer, and as we saw with the Rams…it’s corporate welfare for the rich. Its a ransom payment they demand from the people. If they want to keep the revenue coming in and continue making their millions off fans, then they should make the investment!!! We need the few resources and declining tax revenue for social programs, healthcare, and affordable housing. The suburbanites can drive 30-60 m minutes on the brand-new highways and bridges from the outlining counties and trek to downtown..where it is a symbolic place to have a stadium and arena…The new Arch grounds, Kiener plaza, BPV, Union Station, amazing architecture, is why St. Louis has stayed afloat.

  • jhoff1257

    Regarding the Governor-Elect’s comments yesterday I’m a little surprised they would come out today and push for state funding as the Post-Dispatch is reporting. However I do think the building needs work. It’s pretty dated and compared to say Sprint Center in KC it’s not going to compete very much longer. I don’t have a problem with the City funding some of this provided the City’s contribution comes only from Scottrade’s current sales tax receipts and the proposed 1% levy would only be applied to those using Scottrade or Peabody. If you can afford season tickets for the Blues you can probably afford an extra 1% in sales taxes on the $10.00 beers you’re drinking. Unlike the MLS proposal at least this one isn’t asking for any city wide increases.

    • Alex Ihnen

      I wonder about the Governor-elect’s statement and if there’s still some wiggle room. I’ve read what he said – stadiums are welfare for millionaires…however, IF a clear case can be made that a venue is an economic asset to a city and the state, perhaps he agrees to fund that part of the project. For example, would he be in favor of funding renovations to the Sprint Center, since it’s not owned by a millionaire, but by the city?

      • jhoff1257

        That’s an interesting point. I would imagine that Scottrade is probably a pretty good revenue generator for the city and the state and I think it would be pretty easy to make the case that these renovations are worth the subsidy as keeping Scottrade competitive is good for the city. I just wonder if Greitens can compartmentalize that against the list of names in the Blues ownership group. There are a lot of very, very wealthy people in that group. People that could more then afford these improvements on their own. If I’m not mistaken the MLS proposal had the City owning the stadium, correct? So one would think that if it could be shown to be a net economic benefit for the city and state there would be some wiggle room there, yet Greitens seems more inclined to kill the whole thing. For the time being I just don’t see him being very receptive to this. I think if he were to support the Scottrade renovations that a lot of people would see that as flip flopping on his promise to cut state funding to stadiums.

        • tpekren

          Scottrade argument over most pro sport venues and venues for the region as a whole is probably the fact that it has help St. Louis attract its fair share of NCAA events and some odd entertain/concerts. A much stronger economic case at the moment then MLS stadium vs. the incentives they are pursuing.
          .
          I also think the other argument but much weaker for Scottrade upgrades is without NFL and if MLS doesn’t score a goal in St. Louis is that St. Louis Blues will have a stronger market as well as the fact that St. Louis is a legitimate market for NBA expansion or relocation. Scottrade upgrades offers a ready made venue for a NBA franchise at a fraction of the cost..

          To me the key point/selling point is how the incentives structure is added venue/use related tax where the bulk of funding is coming from. So no huge hit on city budget. However, I have to be careful how to state that as it also means bonding capacity through the city so their is some real cost or impacts in there. Just don’t know how to quantity it or if you really can.

        • JB

          I think the bulk of the financing for the upgrades would come from tax revenue generated by the Scottrade, although the info seems to be still trickling out.

          This one seems like a no-brainer for both state and city, especially if it’s compared side-by-side with the MLS stadium which unfortunately the public and the new governor seem prone to do. It would be impossible to argue that an outdoor MLS stadium has the same value as the Scottrade which can attract 150+ events a year including the Blues games. Comparable outdoor MLS venues are only used for a handful of non-soccer related events each year.

          The MLS proposal is about evaluating whether the initial output of money is justified to build a stadium from ground-up and frankly, I don’t know that it passes that test. The Scottrade upgrades can look at the 20-year track record of generating revenue to base the decision on. The city of St. Louis already owns it as an asset, and unless they’re reaping all the rewards, a tenant is not going to pay for capital improvements to a property they don’t own.

          • jhoff1257

            Completely agree with you. My point above was more about if Greitens can see that. Or is he just going to cry “corporate welfare!” and try and kill it.

          • STLrainbow

            Correct me if I’m wrong, but isn’t Stillman, as operator of Scottrade, essentially getting all the rewards? City technically may “own” the arena, but it doesn’t get a cut of the arena profits in a traditional ownership sense; it only gets the benefit of on-site taxes generated by arena activity. (Apparently that figure is about $6M currently and under the proposal the city would give up “up to” $6M, so essentially we’ll lose most of the present benefit.)

          • jhoff1257

            Stillman isn’t the operator of the arena, the St. Louis Blues are. And while Stillman is the public face of the ownership group there are nearly a dozen other owners in said group. They would receive profits from the team (though last I heard the operating profit of the Blues was a paltry $3 million and change for last year). These guys don’t own the Blues to get rich. Based on the roughly $500 million in loses the team has incurred over the last several decades I’d say the only real “reward” here is having a good hockey team.

            And I’d hardly say the City is losing the present benefit. Like you, I’m not crazy about diverting any sales taxes the city collects on the arena, but I’m also not crazy about seeing the MUCH nicer Sprint Center in KC start stealing the events Scottrade used to be a lock for. The indirect spending created by these events is far greater then $4-6 million a year in sales tax revenue. Without those events, there won’t be any revenue left.

    • Matthew Wittich

      I thought Scottrade was owned by the city and the Blues own the lease, no?

      • jhoff1257

        Yes…where did I say otherwise?

  • STLrainbow

    Apparently they want $70.5M in state funding as well, according to post-dispatch.

    • Jakeb

      Yep, but this seems to be for a ‘phase 2’ plan independent of the renovations and revenue now being discussed.

      I don’t see any reason for optimism on any state funding until such time as the KC Chiefs want it and then a deal can be struck. I assure you no one will say ‘no’ to the Chiefs.

  • Big ern

    ‘MLS has set end of month deadline’? Is this for a better stadium site?….unification? Where can I find this info?