Dome-a-nomics: Why we pay

There’s a lot of talk about the dollars and cents of the Rams proposed renovations to the dome. There’s a wide-range of emotions, from letting them leave for greener pastures all the way to build a brand new stadium. Right in the middle of all those emotions is the Rams proposal. At 700+ mil, it would turn the dome into, well, not a dome, but also a first tier facility.

There’s something about the use of taxpayer money that rubs many people the wrong way. Why should cash-strapped governments shell out more money to help billionaires make more money? The simple is answer is; the market demands this.

Because certain local and state governments have begrudgingly paid to keep their teams, it has created a market for tax-payer dollars funding stadium construction. I would argue that the deal the Rams have put forth is both practical and fair market for an NFL team (albeit one that hasn’t really produced a great product).

My discussion points after the jump.

The NFL understands scarcity very well. They understand the amount of resources (players) the league will support. They understand how many teams will or will not dilute the league. The same goes with cities who want an NFL franchise. In a crude manner, there’s always another sucker out there. They leverage this fact to get new stadiums built all the time. St. Louis isn’t alone in upgrading “aging” facilities by NFL Standards. Even if the stadium isn’t that old.

Recent NFL Stadium Construction

St Louis - ???

Minnesota – $975 Million (2014)

New Meadowlands - $1600 Million (2010)

Cowboy Stadium - $1150 Million (2009)

Lucas Oil Stadium - $720 Million (2008)

Why is the proposal practical?

Everyone would agree these stadiums are/will be first tier facilities. The Rams have a chance to renovate the dome back into a first tier facility. Granted, this is like buying a rundown house in a nice neighborhood and sinking ton of money into it. At the core of the proposal, the Rams will be getting a “new” dome with a savings of $275 million in comparison to the latest stadium proposal putting them at the same level as Lucas Oil Stadium.

Stadium project these days rarely come in under a billion dollars so arguing that they should just build a new stadium is patently ridiculous. This is why I personally hate when millions of dollars are shown like they are hundred dollar bills. The cost of a new stadium new stadium would increase the overall cost of the stadium project by 40%. Let’s just write this difference down. $275,000,000. Can we stop talking like a new stadium is the right way to go, or that it’s just incremental cost.

There’s also talk of letting the Rams walk. There’s an opportunity cost associated with that too. I’ve read numerous studies that show the economic impact of a new stadium is negligible and even possibly in the red. This also has no bearing because the new stadium, while being sold as an economic boon, really is about the prestige of having an NFL franchise in your city. In today’s world, it’s easy to follow your team anywhere they go. TST has Rams fans across the globe. The real impact of the stadium is for the fans in STL and the city having their own team.

Additionally there are discussions about the new events they would draw to the stadium. Soccer matches, final fours and the coveted Super Bowl (a guarantee for new stadium projects in today’s NFL). These events do bring real economic impact to the city in the form of tourism dollars, but a very real secondary impact of fame and notoriety. Recruiting new businesses and talent to the city becomes easier. People want to live there because they see it on TV. They see people having fun and opportunity.

What Needs to Be Done?

I won’t say the CVC needs to accept this proposal as-is. There are a lot of gaps in the proposal the Rams, most likely, left intentionally void for discussion. The negotiations need to include the Rams share of renovation costs, G4 Loan opportunities, extending the lease beyond 2025, and revenue sharing for events are all on the table.

There will also be a lot of political posturing around the same tax issues that everyone questions each time one of the stadiums will be built. This is yet another part of negotiations the NFL understands and expects. Politicians need to talk and rail, but in all the really want is to keep the team while appearing to have taken the hard stand.

Finally, the Rams need to win. They need to be a team St. Louis wants to keep. They have to sell tickets and generate revenue. The thing that could kill this quicker than anything is fan apathy and another 2 win season.

These negotiations will go to arbitration. There will be plenty of angst. The deal may never get done and the Rams will leave. All of these are real possibilities.

And it’s because if the city of St. Louis doesn’t pay the Rams, another city will.

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