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Nicklaus: Stadium may sparkle, but it's not an investment

Nicklaus: Stadium may sparkle, but it's not an investment

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Peacock and Blitz Unveil Study for New St. Louis NFL Stadium

A computer model of a proposed NFL stadium in St. Louis, looking southwest. Credit HOK | 360 Architecture

Most of us wouldn’t make a big investment without expecting some kind of a return.

If St. Louis socks half a billion dollars into a new football stadium, however, the best it can hope for are some intangible benefits. An open-air sports palace can provide a spectacular riverfront vista, boost the region’s image and make St. Louisans feel better about their city.

All those are good things, but if you want economic benefits, professional sports are the wrong place to invest.

Study after study has found that stadiums and teams provide no measurable boost to a city’s economy. “The biggest fear is a loss of visibility for your city” if a team moves away, says Patrick Rishe, a professor of economics at Webster University. “In terms of economic loss, most people who go to the games are local, so there isn’t any.”

“There’s not a change in net spending of a magnitude to really matter to a large, diverse urban economy,” adds Robert Baade, an economist at Lake Forest College in suburban Chicago.

Sure, football fans buy tickets, parking and beer, but their bank accounts didn’t magically expand to make room for that expense. They shifted money from elsewhere in their budgets.

“It’s not as if people in non-NFL cities don’t spend money on entertainment,” says Victor Matheson, professor of economics at Holy Cross College in Massachusetts.

Why, then, do cities subsidize stadiums that primarily benefit wealthy owners?

It’s because they’re negotiating with a monopoly. The NFL and its owners can threaten to take their game elsewhere, and cities fear the bad publicity that comes with losing a high-profile team.

No owner has pressed that advantage harder than Stan Kroenke of the Rams. He let it be known last week that he and a business partner want to build a stadium in Inglewood, Calif., near Los Angeles. So now St. Louis is not only trying to please Kroenke, it’s also competing with him.

Under those circumstances, telling him to finance his own stadium simply won’t work. He’d build it in Los Angeles. The only way to keep the Rams is by opening the public purse.

Dave Peacock, the former Anheuser-Busch president who presented St. Louis’ stadium plan Friday, tried to emphasize that the purse is not being opened very wide. He said Missourians won’t pay any more in taxes to finance the new building.

That may be true, but Peacock’s plan calls for raising at least $300 million by refinancing the bonds on the Edward Jones Dome. Stretching out the bond payments, probably for 30 years, represents a real commitment of public resources. Even if tax rates don’t rise, those bonds represent resources that can’t be used for other needs, such as roads or schools.

The financing plan, which calls for about half the stadium’s cost to come from public sources, is similar to the deal the Vikings are getting in Minnesota.

Their new stadium in Minneapolis is scheduled to open in 2016, with taxpayers bearing about half the $975 million cost.

New stadiums in Dallas, New Jersey and the San Francisco area involved smaller subsidies, but those teams’ owners didn’t have Kroenke’s sense of wanderlust.

St. Louis is being asked to pay dearly for the prestige of remaining an NFL city, so I think Peacock described his stadium plan accurately when he called it a “crown jewel.” A jewel can sparkle and make its owner feel good, but it’s hardly a productive use of half a billion dollars.

Weekday updates on the latest news in the St. Louis business community.

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