We penned a piece on the absurdity of the so-called “Jock Tax”, a duty day tax calculation which assigns local taxes to athletes, referees, coaching staff, and waterboys that travel with a team – even though your doctor probably doesn’t pay anything similar when she attends conferences. Today we’ll discuss a disturbing trend which might even be affecting your local tax bill – cities paying for the old stadium after the team which playing in it has left for greener pastures.
When Teams Leave and Cities Are Left Paying for the Old Stadium
Robin Respaut, writing for Reuters, shined the spotlight on stadium debt which was still being paid by localities after teams left town.
Most recently, the Los Angeles (previously St. Louis) Rams moved from the Edward Jones Dome in St. Louis (constructed in 1995) to the Los Angeles Memorial Coliseum (opened in 1923) to share a playing field with my alma mater, the University of Southern California Trojans. To be fair, it isn’t exactly breaking new ground: the Rams did previously play there from 1946 – 1979.
All that’s well and good, but of the $280 million in debt agreements on the Edward Jones Dome, the stadium is estimated to have about $144 million in debt and maintenance costs hanging over it… leaving St. Louis on the hook and still paying for the old stadium for the forseeable future. And… all that without much prospects for replacing Rams revenue: as the Reuters article put it, they have “only the help of revenue from tractor pulls, volleyball tournaments, concerts and the like.”.
But this isn’t really a piece about depreciating assets so much as the means to fund them: as we showed how aggressive localities can be when taxing visiting athletes, they are even more aggressive in courting franchises to move to – or stay in – town. That translates to, as you can imagine, huge bids by localities in terms of tax breaks, coverage of construction costs, traffic and infrastructure improvements, and area renovations. Of course, the economic benefits to publicly financing a stadium are dubious – so all of those costs are for something more intangible… local pride.
But don’t take that dubiousness from me, take it from another St. Louis institution (which gets plenty of press here on DQYDJ): the St. Louis Fed.
Scarcity and Civic Pride
Other than a few periods of over-expansion in the major sports leagues, it’s easy to see why such bidding happens: there are only so many teams to go around.
For every area institution – The Boston Red Sox, the New York Yankees, The Green Bay Packers, even the San Francisco 49ers (who just moved a mere 50 miles to Santa Clara) – there are tons of expansion teams from the major sports which don’t have the same attachment to an area. Even so, the threat of movement is often enough to inspire renovated or new stadiums in many cases.
Victor Matheson of Holy Cross’s Economics Department has been on the beat for some time. In a 2011 paper he penned with Robert Baade, they noted that “by 2012, 125 of the 140 teams in the five largest professional sports leagues, the National Football League (NFL), Major League Baseball (MLB), National Basketball Association (NBA), Major League Soccer (MLS), and National Hockey League (NHL), will play in stadiums constructed or significantly refurbished since 1990.”
Yes, all of this math applies to American Soccer too (although, to be fair, the league only formed in 1993).
The soccer point does prove an important point, though – while still living on the East Coast I did watch the New England Revolution (and Alexi Lalas!) play in the 1971 constructed Foxboro stadium, it is notoriously difficult to have a major league team move into a previously existing stadium. The Reuters article abounds with examples of cities paying for the old stadium of a lost franchise – the Astrodome and the Silverdome which never found new marquee tenants. Worse still are the demolished stadiums like Seattle’s Kingdome (2000) which still have debt to be repaid!
A lot of that with debt, yes, from the taxpayers.
So, What’s the Solution?
We still live in an era where Oakland, a city of 400,000, has 3 major sports teams – and Las Vegas, a city of 600,000, has none. (San Jose, or San Jose and its immediate surrounding communities – 1,000,000+ people – just grabbed their second from San Francisco… three if you count the Earthquakes of MLS).
We’re not sure, exactly, what the solution is – a free market solution doesn’t really work as that would imply allowing new teams to join the major leagues at will – and probably periodic busts removing teams from the leagues. Say what you want about centralized control, but it makes for a more interesting product in the sports arena (but we’d love for you to make that argument below, if you want! Bonus points for bringing up the XFL).
The other ‘solutions’, too, seem heavy handed: banning public funding? Banning teams moving more than X miles? Worst of all, inserting some sort of formal public politics into it?
So, yeah, the solution isn’t really clear to all of this, but it would be interesting to see more and more cities start saying ‘no public financing’. Even the Rams’ new Inglewood stadium plays around with this wording – the LA Times reported that while no public funds would be used in the construction of their new stadium, there would be tax benefits.
A good start? Maybe – but that still doesn’t pay for the publicly financed Edward Jones dome.
St. Louis is taking care of that.