Star Tribune Online

LA Rams finally win big but most of us stand to lose

Published Friday, Jan. 20, 1995
Mike Meyers
Staff Writer

St. Louis has bribed a pro football team to come to town. Forgive me if I'm not celebrating, even though I'm from the city of the Gateway Arch, a 500-mile paddle downstream on the Mississippi.

The only clear winner in the move to the "Show Me State'' is the owner of the Los Angeles Rams, a team unaccustomed to victory.

Fresh research from the Federal Reserve Bank of Minneapolis suggests that the prospects for the U.S. economy are diminished by the kind of bidding war that will bring the Rams to St. Louis.

And, I might add, the same can be said of future efforts to lure a pro hockey team to Minnesota or to keep the Timberwolves stumbling around on a hometown court by, in effect, selling the Target Center to the taxpayers.

Taxpayers, city council members and state legislators—from Minneapolis to Maine to Maui—should take heed.

Let's assume that the hundreds of millions of dollars St. Louis taxpayers have sunk into the deal will be repaid many times over - a generous assumption, if ever there was one.

Was the deal to bring the Rams to St. Louis a sensible economic proposition? Maybe for St. Louis, and that's only a maybe. But for the national economy, the transaction surely is a loser.

In a paper to be published this spring in the Minneapolis Fed annual report, the authors assert that the come-hither tactics of politicians vying for teams and corporations have hurt the economy. They call on Congress to prohibit states and localities from offering subsidies or preferential treatment to individual companies or sports franchises.v

"Even if it's good for the state, it's still bad for the country,'' said Arthur Rolnick, director of research at the Minneapolis Fed.

Here is the reasoning of the authors, Rolnick and Mel Burstein, Minneapolis Fed general counsel:

Cities and states vying one against the other to provide the biggest package of goodies for a sports team or a Saturn plant needlessly drain resources that could be spent more wisely.

In St. Louis, taxpayers are on the hook for a stadium mortgage that will cost $55,000 a day to pay off over the next 30 years. The millionaire who owns the Rams will accept another $45 million in public largesse in the form of paying off old debts the team ran up in California and in building a new practice site.

But does it matter where the team ended up?

Whether St. Louis or competitors like Baltimore, Md., or Anaheim, Calif., ultimately got the Rams, the team will play somewhere in the United States. The same goes for a hockey or basketball franchise. Minnesota may care if its hockey team skates away to Dallas or its basketball team dribbles off to New Orleans. What the national economy gets out of the deal, however, are cities and states depleted of resources used to tear away a sports franchise or factory or some other enterprise from another locale.

Without these winner-take-all competitions among localities to attract the lords of sports or captains of industry, state and local government could devote more energy to creating better economic climates for everyone by improving schools, building and repairing roads and bridges and making other investments with clear financial paybacks.

How many computers could St. Louis schools buy with the $260 million spent on a new stadium? How many water purification plants or fire houses or police stations could be built with the $15 million St. Louis will pour into a sunny training camp for the Rams?

A few hundred million dollars invested in the right places in a town the size of St. Louis could deliver a lot more than payrolls for a handful of millionaires and a few hundred dead-end positions for parking lot attendants, ticket clerks and peanut vendors.

In a world without subsidies aimed at the few, the many would be better off.

"For the country as a whole, the economy will be more efficient and there'll be more public services provided by the states,'' Rolnick said. Only a congressional ban, he said, can stop the bruising bidding battles and the waste.

He's right.

In many cases, the beneficiaries of special subsidies work against their own long-term interests.

If the Rams couldn't make a profit in the Los Angeles metropolitan area of 9 million people, will they do better in St. Louis, a metro area of 2.6 million?

If they do, it's only because the local governments have defrayed so much of the financial risks up front. As for the taxpayers, their risks get higher as the subsidies get larger. And with every deal, the public risks seem to grow.

Unfortunately, somehow governors and mayors, legislators and city council members can't seem to resist falling into a competition that drives up the cost of attracting a sports franchise or factory.

Ad hoc efforts to stop the special deals seemed doomed.

A few years ago, states of New York, New Jersey and Connecticut pledged to drop the practice of made-to-measure inducements. The deal fell apart, however, when one of the states started cheating.

Since the problem is national, the solution must be national.

If Congress listens to the Rolnick-Burstein appeal to stop the foolhardy competition for the likes of the Rams, the Timberwolves and other questionable enticements, the taxpayers will get a well-deserved break.

And that will be something to celebrate.

© Copyright 1996 Star Tribune.

All rights reserved.
Federal Reserve Consumer Help