The Blues Have Given the Lauries the Blues
When billionaire Wal-Mart heirs decide owning a major league team is too costly we have a problem. The problem is the City (and hence all of us tax paying residents) owns the Savvis Center where the Blues have a long term lease. Post-Dispatch columnist Bernie Miklasz argued yesterday
The Savvis Center however, won’t do jack for the city, and downtown interests, if there’s no hockey team or NBA team to fill valuable dates. That’s the reality. So really, it’s up to the city to decide what to do with this investment. Think short term, and stick with the 5 percent amusement tax. Or think long term and consider this: If there are no major league sporting events at Savvis Center, then where will the revenue come from? Surely, bright people can come up with a solution to satisfy hockey ownership while accommodating the city’s desire for a piece of the revenue.
I’ll summarize his entire article for you. We gave tax breaks to the Rams & Cardinals so why not the Blues? We need sports, regardless of cost. It is cheaper to buy the Blues now rather than replace them if they move to another city.
i guess I’m just not as wise as some. We pay hundreds of millions of dollars for facilities to create tax revenue and jobs. Do these things ever pay off as planned? Add up how much was spent on building the Savvis Center and then look at current debt, taxes received and jobs created. Does it work? Got me. The Post-Dispatch is reporting:
The Lauries, of Columbia, Mo., have owned the Blues and the team’s lease at the city-owned Savvis Center since September 1999. According to a source close to the Lauries, the Blues have lost $60 million over the past two years. And in recent conversations, Blues officials told the Post-Dispatch that combined cash deficits of the team and the Savvis Center have exceeded $225 million since the arena opened in 1994.
Previous owners also put in millions of dollars to keep the team afloat financially. Suppose I owned a popular retail store in the city that had a good customer base but it failed to turn a profit year after year. Sales provided tax revenue to the city and the business created jobs. Would the city be willing to build a new facility for me that I’d lease from them in the hopes I’d keep my business open?
If someone can prove to me the fiscal benefits outweigh the costs and risks then I’ll concede that sports is a good thing. Until then I see the Cardinals, Rams and Blues as big annoying problems. I believe if we spent our public time and money building great urban neighborhoods (including a downtown neighborhood) with great mass transit to connect them that we’d reap far greater benefits per public dollar.
Kansas City, if you want the Blues for your new publicly funded stadium I say fine. Pay us the balance of the lease on the stadium and best of luck. To Father Bondi at St. Louis University: you can stop building your stadium a few miles to the West because I think space just freed up at Savvis.
– Steve
So you’re arguing that instead of easing the Blues’ tax situation to — if it even has to come to this — keep them in town, you’d cut them loose entirely? The public already built Savvis Center; that mistake has been made. How would eliminating all of the tax revenue (instead of some) it generates help the city of St. Louis now?
It’s one thing to be anti-sports subsidies. It’s another to argue that getting rid of the team at this point in time — after building the arena — would be economically beneficial to the city. How would the public’s interest as the owner of Savvis be served if there were 50-60 fewer revenue-generating events held in it per year? How would the city benefit from losing the income taxes on the multi-millionaires who would have played there? How would the city benefit from the loss of all the jobs the team provided, even if they’re less in number and impact than what the team promised in 1994?
Maybe the city shouldn’t have built it in the first place, but surely, even from a civic point of view, keeping events in it now is better than having none in it at all.
[REPLY – I am suggesting we not give away the city, again, to keep a sports team around just because we gave away the city ten years ago to keep them from leaving then. When does it end? Why don’t we do this for any other business? Again, if you can show me financial benefits of keeping a team here far outweigh the costs of having the facility empty 50 times per year then maybe I’ll change my mind. – Steve]
SLU might not have to build their arena after all.
The city could drop the 5% tax (or whatever the number is) on tickets to maintain the income tax revenue, parking, and part-time jobs, etc. the team generates. Or the city can lose those ancillary benefits (however small in actuality they may be) while maintaining that 5% tax, muliplying it by the exactly zero tickets a lost team has for sale.
From the city’s point of view, some tax revenue is better than zero tax revenue. It’s really not that complicated. Your argument is one to make BEFORE the Kiel was built. It doesn’t hold water anymore. How would lowering the tax rate so there remains something to tax be giving away the city??
[REPLY – Or we stop the public handouts to only some businesses and not others. If they stay that is fine. If they leave that is fine too. SLU looked to build their own stadium because they couldn’t get the dates they wanted. So as a community we’re going to have two similar venues costing millions each located less than 2 miles apart. Are we as a region that wealthy? Looking at how we can fill the facility without a hockey team should at least be considered an option. – Steve]
“Your argument is one to make BEFORE the Kiel was built.”
Not really. Steve’s argument comes at a point where the city has to choose between figuring out a more sustainable use for the Kiel Center or continuing to keep an unprofitable business afloat. It’s the right time to be talking about big changes. The city made a huge mistake eleven years ago, but that mistake doesn’t bind it to perpetual failure.
Here are some approximate numbers.
The City pays approximately $1.1 million a year on Savvis Center construction debt service. The Parking Fund pays another $400K a year.
The Blues generate approximately $2.8 million a year in direct taxes to the City — $1.7 million of that from the amusement tax.
[REPLY – OK, so we gain about $1.3 million a year over debt service. Of course it is hard to quantify the multiplier effect of people spending money while here for a game and employees having income which will get spent in the community. On the other hand, it is hard to quantify the toll on our roads for all the folks driving in for a game as well as added police and such. These are all very subjective.
What is not subjective is the literal numbers. It has been suggested the amusement tax is keeping the team from being profitable. Given their losses were $60 million over the last two years and that since 1994 combined losses were $225 million I fail to see how the city’s tax revenue of $1.7 million would make a big difference in making the team profitable. If we gave up all of the amusement tax bringing in $1.7 million each year so that we can keep the facility open and get taxes on the other portion that leaves us $400K short each year just on debt service.
Am I missing something? – Steve]
[Am I missing something? – Steve]
Yes, you are missing something. I love your Blog Steve, but in this case I think you are wrong. I agree that we don’t need to make any concessions to keep the team in town, but it would definately be bad for St Louis if the team moved.
[REPLY – It would be bad if the team moved and we were not able to replace the revenue with increased use of the facility for concerts and other events. – SLP]
1. The city will go from a net gain of 1.7 million to a net loss of 1.5 million. The other intangible spending and expenses are hard to quantify, but this much is known for sure.
[REPLY – The net revenue from above is $1.3 million ($2.8m – $1.5m). Yes, not having any revenue we change the picture to a loss. – SLP]
2. Slu will continue to build their own arena. The “dates” problem was not the only factor in their decision ot build on campus. SLU wants a facility first on campus, to make it more convinient for their students to attend games. Second building their own facility gives them complete control over it. This would not have
been the case with leasing the Savvis.
[REPLY – Agreed, SLU is well on its way to have its own facility to complete with ours. – SLP]
3. Building the Kiel was not a mistake as some suggest. It was almost totally privately financed, with the city only on the hook for 1.5 million in debt service, which is more than covered by the revenue from the facility. If you want to talk about mistakes with public money look around Broadway and Cole.
[REPLY – We’ll have to agree to disagree. It was a mistake for the city to obligate itself for $35million in bonds for $1.3 million in net gain/year. The facility is outdated before you even break even. Private bonds represented another $100 million or so in debt. – SLP]
4. And this is the big one in my eyes. Professional sports are one of the amenities that make big city living great. It’s just like the Art Museum, the Zoo, or the Science center. These are all other organizations that get tax payer support that do not generate a profit. But they are all part of the fabric that make the city great. I can understand if you are not a sports fan looking at the massive Kiel Center and wondering what else the money could have been spent on; but the same can go for people who never go the the zoo, or the science center.
[REPLY – I’ll be the first to admit I’m not a sports fan. I see your point to a degree. A publically owned cultural institution such as a museum or zoo is very different than a facility for a privately owned sports team. Major league sports facilities are seldom urban friendly. Like a shopping mall they attract people in cars from a wide area. They come in, do their business, and leave. My bigger issue is the assumption we must have these things in downtown St. Louis. I like that KC’s football and baseball stadiums are far away from their downtown. – SLP]
Finally, I agree that we should not make concessions to the new owners whoever they may be, in terms of cutting or eliminating the amusement tax. The NHL needs to get itself in order before anything should even be looked at. When your revenue is 70 million and you spend 60 million on payroll alone, there are going to be problems. I really hope when they reach a new CBA that the NHL’s finances will be more realistic, and this won’t even be an issue. But for anyone to say that the team leaving will have no affect on St Louis is short sighted.
[REPLY – I fully agree and do realize that if the team leaves it will have an affect on St. Louis. I still think an option is for them to leave and see if another team wants to move to our facility or if we can do OK stepping up other events in the center. – SLP]
$1.3 million in A-tax — even less than I remembered.