Pro & Con: Proposition 2, a St. Louis ballot measure, regarding the use tax for stadium funding
On Thursday, St. Louis on the Air hosted a moderated conversation about Proposition 2, one of the ballot measures that city of St. Louis voters will decide on during the April 4 election. Also on Thursday, we heard about Proposition A, which you can listen to here.
Proposition 2, which most people equate with funding for a soccer stadium in St. Louis, is dependent on the passage of Proposition 1, a one half of one percent (.05%) sales tax. If Proposition 1 does not pass and Proposition 2 does pass, it will not go into effect.
Should Proposition 1 pass, Proposition 2 proposes that the use tax derived from that sales tax paid by businesses on out-of-state purchases would be used for a portion of the construction costs for a multipurpose stadium for soccer, amateur sports, concerts and community events as well as minority job training and business development programs.
We heard from one proponent and one opponent of the measure:
- Jack Coatar, 7th Ward alderman, represented the “pro” side of the argument, he is for the proposition.
- Megan Ellyia Green, 15th Ward alderman, represented the “con” side of the argument, she is against the proposition.
Below, please find points from the discussion summarized. Listen to the full discussion here:
The full text of the proposition reads as follows:
(Proposed by Ordinance) Shall the use tax paid by businesses on out-of-state purchases and derived from the one half of one percent increased use tax, which corresponds to approval and levy of an Economic Development Sales Tax in the City of St. Louis, be used for the purposes of minority job training and business development programs, and a portion of construction costs, but not construction cost overruns, of a multipurpose stadium for soccer, local amateur sports, concerts and community events? A use tax is the equivalent of a sales tax on purchases from out-of-state sellers by in-state buyers and on certain taxable business transactions for which a sales tax is not levied. No taxpayer is subject to a sales tax and a use tax on the same transaction. The City shall be required to make available to the public an audited comprehensive financial report detailing the management and use of the portion of the funds each year.
What is a ‘use tax’ and how does the proposition work?
Before we summarize the points each person made, we should define what a use tax is: In 2001, the city of St. Louis authorized that anytime a sales tax is raised then the “use tax” would also increase by the same amount. The use tax is a tax on tangible goods purchased by businesses from outside the state of Missouri.
As Coatar explained it, “If a business in downtown St. Louis has a product they use that they purchase in Paducah, Kentucky, in lieu of paying sales tax on that product, they pay a use tax. An increase in sales tax means corresponding increase in the use tax.”
But, and this is important to note, use tax is not paid by individuals. The tax is carried by businesses.
If Proposition 1, concerning a half of one percent sales tax, is approved by city voters, then a half of one percent use tax also goes into effect. It is estimated that this increase in revenue would amount to $4 million.
Proposition 2 proposes to use the revenue from the increase in the automatically-triggered use tax to help publicly fund a multipurpose soccer stadium, among other development programs. Opponents of Proposition 2 say that that increase in use tax revenue is needed in other city services.
Now, let’s get to the arguments:
PRO: Alderman Jack Coater wants you to vote “YES” on Proposition 2.
“This town has a rich soccer tradition and history and there is a desire to have a pro soccer team here. After losing the Rams, our pro football team here, that was a real blow to the community. It is nice to see an ownership group and some folks who want to bring entertainment back to St. Louis. This facility and this pro soccer team is an opportunity, a shot in the arm for us. It is not going to be a panacea, it won’t fix everything for us, but it is certainly something positive, entertainment, that I think people are interested in.”
- Even if Proposition 2 is passed, the funds going to the stadium are contingent on state participation in the project, such as the State of Missouri donating the land (which it owns) or giving a low-interest lease on the land.
- “In a perfect world this would be a regional effort but in a more perfect world we’d be in a place where you cannot use tax-free municipal bonds for public stadiums for these kinds of projects. That’s not the case. It would take Congress to do something about that and they have shown no interest.” St. Louis city is competing against peer cities, like Nashville, Memphis, Indianapolis and Kansas City, all of which have shown willingness to spend public funds for amenities people enjoy. “We can put our foot down and be the ones that say ‘no, we’re not going to do this,’ but we do this at the expense of not having the types of amenities that attract people, especially young people to your city.”
- This proposition would not divert any existing funds. The use tax, as it currently stands, will still go to fund affordable housing, public health and other public initiatives. “We’re talking about the incremental increase in the use tax. If it goes up, we are asking the voters of the city: do you want to spend this increase on the stadium? We’re asking the people, we’ll know soon enough if this is something they’re in favor of.”
- The ownership group of the soccer team recently released a Community Benefits Agreement, which was made after feedback from the Board of Alderman, who said they want to see what the stadium would bring to St. Louis in terms of community benefit. The ownership group has committed to bringing soccer to disadvantaged neighborhoods, such as in north St. Louis, where soccer has not flourished as compared to Catholic parishes and in south St. Louis and St. Louis County. This agreement also guarantees on-site job training that will develop a workforce that can move from one construction job to another one. “This will help create careers, no just temporary jobs.”
- There is a need for a new stadium, not just a rehabilitation of the (formerly) Edward Jones Dome (where the Rams played), because retrofitting the Dome becomes “astronomically expensive, more expensive than remediating the land and building a new stadium for soccer.”
- The proposed stadium would be a 20,000-person facility, with the possibility of expanding to 26,000. Soccer games in St. Louis have proven popular, with two sold-out soccer events at Busch Stadium, great attendance at the St. Louis Football Club games and exhibition games with premiere league teams at the Dome. If a soccer facility is built, it will drive a big interest in soccer in the city and, perhaps, other developments around that. Coatar said that his ward covers downtown St. Louis, Soulard and Lafayette Square and people in his ward see great benefits from sports facilities, which bring people out to bars and community gatherings.
- "The ownership group has been up-front: the franchise fee for a team is $150 million, they have agreed to put $100 million into the stadium. They are asking for public participation to the tune of $50 million. They don’t think they can make the numbers work without that. We’re asking voters: what are you in favor of?”
- Missouri Wonk did a study on the 30-year life of the project and found it would generate $77 million in revenue at a cost of $50 million. This is a net positive.
CON: Alderman Megan Green wants you to vote “NO” on Proposition 2.
“It doesn’t matter if you are conservative, liberal or a university, no matter your interests, all of the research on publicly-funded sports stadiums is unanimous: these are never good investments for tax payers. We are talking about diverting $4 million in use tax money. If prop 1 is approved, we would be diverting that to a soccer stadium rather than for its intended use: public housing, health and safety. Those are things that we do not fund at the levels we need to fund right now. We have a lot of needs in St. Louis. Although a soccer stadium would be wonderful to have, and we do have folks who would benefit and would like to go, I think we have other needs that the money needs to go to.”
- The city is routinely asked to carry the brunt of the burden of funding for projects that are utilized by the County and State and that is the case in this instance: The city is being asked to put forth money that St. Louis County and the State of Missouri would not put up to fund the stadium.
- The city of St. Louis should compete with other cities, but the way to compete is by having good health care outcomes, low crime rates, affordable housing, and “things that do strengthen communities and people who live here. When we look at people who can afford soccer games, these are largely middle and upper class folks. The use tax money would go if not for a stadium to really support the most vulnerable in our community. We are asking to divert funds from populations with the most need in our city and giving that to the wants and not the needs to the most affluent in our city. I don’t think that is a good use of taxpayer money.”
- The city of St. Louis is looking at a $20 million possible budget shortfall for next year. If you go through the Democratic nominee for mayor’s platform, that could easily increase to a $31 million budget shortfall. More than likely, that use tax money is not going to be used to expand affordable health … it will be used to fill budget gaps that already exist.
- Pushed for and commends the Community Benefits Agreement, but views it as a first step. “When we look at it, it doesn’t seem as though the benefits are above and beyond what a normal sports team would have with public engagement. We need to look beyond. I believe the team is only obligated to eight annual visits to local schools: that’s not enough.”
- The Dome is in need of major renovations, close to $100 million in renovations. I hope to see it upgraded and expanded for use by the Convention Center, which does bring positive growth to the region.
- There is possibility for growth in the interest in soccer, particularly as large numbers of immigrants and refugees move to our community. Green said she represents those communities and she has constituents buy tickets. “But, No. 1: Can they afford it? No. 2, it still doesn’t take away from needs that are greater.”
- “There is a national trend away from the public funding of sports stadiums. I hope to see federal legislation soon that clarifies what municipal bonds can be used for, though this is not exactly the case here. They want trash picked up, streets paved, they want safe communities, healthy communities and they don’t want to pay for pet projects of people with a net worth of more $100 million.”
- The projections in the Missouri Wonk study are “too rosy.” “Sales tax projects are cited at a growth of 2.5 percent per year, which is above inflation rate. Ticket sales and attendance are recorded above average. I think we should be safe and cautious with projections.”
St. Louis on the Air brings you the stories of St. Louis and the people who live, work and create in our region. St. Louis on the Air host Don Marsh and producers Mary Edwards, Alex Heuer and Kelly Moffitt give you the information you need to make informed decisions and stay in touch with our diverse and vibrant St. Louis region.