Graham Renz

Do you smell that smoke? It’s from the hole your money is burning in the pockets of Saint Louis City officials.

Last Thursday, city officials advanced two bills full of questionable spending. One bill proposes that the city’s already high sales tax rate (10.054% on average) be increased by 0.5% to help fund a section of a planned North–South MetroLink route. (Read about MetroLink’s poor track record here and here.) The other bill would raise the city’s use tax by 0.5% to help fund the construction of a Major League Soccer stadium downtown. The use tax increase is supposed to raise some $60 million.

The widespread economic consensus is that public spending on stadiums is a terrible use of taxpayer dollars. But even more troubling is the way in which the bill advanced out of an Aldermanic committee in the first place.

When it was first considered, the bill abated an amusement tax that would have been levied on ticket purchases, diverting revenue from the city. It also would have given tens of millions of dollars to developer Paul McKee, no stranger to subsidies. Why? Well, that’s the troubling part: no public officials knew why the bill abated the amusement tax or gave funds to a developer unrelated to the stadium project. As the Post-Dispatch’s Tony Messenger aptly notes, “This is the story of development in St. Louis. Assets are given away and nobody even knows why.”

But even after one alderman proclaimed that he wasn’t elected to “rubber stamp bad proposals for a City that is already on the financial brink,” the board arguably rubber stamped a bad proposal for a city that is on the financial brink. After closed-door discussions between the board and the ownership group behind the stadium proposal (SC STL), the bill emerged with amendments that abated half the amusement tax and still gave Paul McKee several million dollars in tax-increment financing subsidies.

After passing a vote of the committee, the amended bill was heralded as a win for the city and for taxpayers. Compared to the original bill (which abated all of the amusement tax), the amended bill is estimated to bring in $17 million to the city over 30 years. But does this really constitute a win for taxpayers? For one, although it is described as “new revenue,” this $17 million (and more) is what the city should have been slated to collect if not for the abatement in the original bill that no one could explain. Also, the city will contribute $60 million over that same 30-year period. That makes the stadium deal a loss for the city. Some claim (without providing any financial evidence) that the proposal was originally revenue-neutral for the city, and now will turn a $17 million profit for municipal coffers. Assume, for argument’s sake, that these rosy projections are true. That means the city will net $17 million on a $60 million, 30-year investment. Even if those figures are presented in what’s known as net-present value (which takes inflation into account), that hardly makes this a lucrative investment.

After the bill received approval, SC STL executive Dave Peacock said “The city drives a hard bargain, but they should.” It’s difficult to see how agreeing to this deal constitutes “driving a hard bargain.” But, Peacock is correct—that’s what the city should be doing, which is why recent developments with the stadium bill are so troubling.

About the Author

Graham Renz
Policy Analyst

Graham Renz is a policy analyst at the Show-Me Institute.