Billionaire Kroenke's Rams Give Cities Lesson in Stadium Financeby
Rams moving to privately financed southern California home
Leaving town keeps Missouri from going deeper in debt
Billionaire Stan Kroenke is providing a business lesson to states and cities that for decades have poured taxpayer funds into professional sports stadiums: You may be better off letting the teams pay.
Kroenke’s decision to move his National Football League Rams from St. Louis to a privately financed $1.8 billion stadium in Inglewood, California, will wind up benefiting both cities, according to Moody’s Investors Service. The Los Angeles suburb, which is letting the team foot the bill, should pick up additional revenue. St. Louis will lose little, the rating company said, and be freed from building another stadium while still paying for the old one.
“Privately financed stadiums have less risk for government,” said John Medina, a Moody’s analyst who helped write a report released Tuesday on stadiums. “Every private company wanting to build a sports stadium will ask for as much as they can get, but the question comes down to what the officials are willing to pay and what the value is.”
A dozen new stadiums will be built in American cities over the next three years, driven by the expansion of Major League Soccer, Moody’s said. Private financing eliminates the potential strain on the public purse as the coliseums take subsidies or use up the capacity to borrow for projects such as schools and roads, according to the report.
Recent examples of privately funded venues include New York’s Yankee Stadium and MetLife Stadium, the home of the NFL’s Giants and Jets. It’s too soon to predict how many of the new ones will follow that model, Medina said.
State and local governments for decades have used taxpayer money to help build professional sports venues, seeking to lure teams from elsewhere or keep the hometown one from picking up stakes. They’re typically seen as a way to spur the local economy, create jobs and attract tourists. Such benefits are more noticeable to smaller cities, according to Moody’s.
So are the drawbacks. Glendale, Arizona was spending $15 million a year in subsidies for the home rink of the National Hockey League’s Coyotes. That required it to cut spending elsewhere before it was able to strike a deal with the team in July that reduced the payment by more than half. With less pressure on the city, it won an upgrade from Moody’s last week to A2 from A3.
The impending pullout of the Rams led Missouri officials to dangle subsidies to keep the team. The state and city offered $400 million to help build a new gridiron for the Rams, two decades after drawing the team from Los Angeles by using public funds to build the Edward Jones Dome. That wasn’t enough to keep the NFL from moving back to southern California, which has a larger media market and population.
Inglewood will gain $18.7 million to $28 million of new annual revenue over 16 years, according to another Moody’s report.
By spurning the subsidies, Inglewood eliminated the risk that the public investment won’t reap the promised payoff in jobs and tax revenue, or leave the city still paying for a vacant property if the team leaves. While Inglewood’s revenue would be boosted by one-fourth, St. Louis will only lose about 1 percent of its revenue and avoiding the cost of another stadium. The state of Missouri and St. Louis city and county collectively owe more than $100 million from building the Edward Jones Dome.
“Sometimes the economic incentives aren’t always offset,” said Randy Gerardes, senior analyst with Wells Fargo Securities. “But often you get the blimp flying on Sundays, civic pride and important meeting place where people can meet.”