Trust Us

Six months after political heavyweights signed an agreement with the Cardinals, a deal is still up in the air

Jan 2, 2002 at 4:00 am
Never mind the recession. Never mind a $1 billion hole in the state budget. Never mind public opinion.

State Rep. Jim Foley (D-St. Ann) thinks the Cardinals are in a better position than ever to extract $200 million from taxpayers to pay for a new baseball stadium.

"I think it's going to be easier than last year," says Foley, who will again sponsor a bill to give the team $100 million in state money to replace Busch Stadium. For one thing, Foley notes, team owners in June reached an agreement in principle with Gov. Bob Holden, Mayor Francis Slay and County Executive Buzz Westfall, who all signed a memorandum of understanding that's supposed to serve as a framework for a deal. "Four of the components are in place -- the city, the county, the governor and the Cardinals," Foley says. "The Legislature is the last component to be done to finalize the bill. The fifth component is the toughest component."

In addition to the state's money, the team, which has offered to contribute $120 million, wants $60 million from the city and $40 million from the county. The state is considered the toughest sell. Although the Board of Aldermen hasn't been presented with a bill yet, Aldermanic President James Shrewsbury says the aldermen are generally in favor of a new stadium and would be hard-pressed not to agree to a city subsidy if the state agrees to pay its share.

With the mayor, governor and county executive on board, it's now time to come up with details, and state lawmakers, Foley predicts, will swallow what they are served, no matter what their constituents might think. "Legislators were waiting for a lot of answers, and we have them now," Foley says. "Here's what the penalty's going to be if it's not built on time. Here's what the penalty's going to be if they sell the team. Here's the 30-year lease."

There's just one catch: Foley can't say right now what those lease terms or penalties will be. Nor can he pin down whether the team or the public will benefit from millions of dollars in naming-rights revenue. He promises that all will be revealed when he files his bill, with any luck before the session starts. "Right now, the lawyers have it," he explains. "The lawyers are checking it over to make sure everything's covered."

And so some things never change.

In the four years since the Cardinals began their campaign for a new stadium, key provisions of the deal have been either undecided or shrouded in secrecy. Both the team and politicians have pooh-poohed criticism of backroom dealings by saying this is too complicated for voters to understand, as if elected officials somehow hold the franchise on brains in Missouri. Really, though, it's not complicated at all. The Cardinals get a massive public subsidy for a new ballpark. Only the packaging to make it look like a good deal for taxpayers is complicated. It's somewhat akin to making cod-liver oil taste like honey.

The team's strategy hasn't changed since it announced plans for Ballpark Village more than a year ago. Pound on supposed economic redevelopment that a new stadium would bring to downtown and repeat the theme often enough that people believe you. Tack on a few threats about what will happen if a stadium isn't built -- in addition to moving the team to Illinois, the Cardinals are now claiming the Cupples Station redevelopment next to Busch Stadium is at risk if they don't get a new ballpark -- and you've got a great argument, especially for the 77 legislators who can't run for re-election because of term limits.

Not everyone shares Foley's belief that legislators from St. Louis and Kansas City will team with enough outstate lawmakers to get the deal done. Besides an economic downturn that has the state mulling layoffs and scrambling to fund basic education, there's also the prospect of a baseball work stoppage smack in the middle of the legislative session if owners and players can't work out a new labor agreement.

"I don't have any special inside information, but everybody I talk to says it's still a 50-50 proposition," says Alan Artibise, a public-policy professor at the University of Missouri-St. Louis who served as an advisor to the city's negotiating team until Slay took office last spring.

The city stands to gain economically from a new stadium, Artibise says, but that may not mean much to legislators from other parts of the state. "I hope at some point, particularly in the Legislature, there's some serious analysis of the quote-unquote economic benefits of major-league sports franchises in a region," he says. "It's not often that economists agree on anything, but there is overwhelming evidence that this is a game that is no longer arguable. The benefits on a region-wide basis are nil or very marginal at best." Ballpark Village may help undercut that position, but only so far -- even with a mixed-use district where Busch Stadium now stands, Artibise says, "the benefits are still grossly exaggerated." If economic revitalization were the true purpose of a public subsidy, politicians wouldn't be talking about a ballpark. "Nobody ever wants to talk about opportunity costs," Artibise says. "I can absolutely guarantee you: You give $200 million to the University of Missouri-St. Louis, let us build a downtown campus, and we'll generate economic benefits 20 times that of a Major League Baseball team."

Ballpark Village, of course, is far from a sure thing. In the memorandum of understanding signed six months ago, the Cardinals say they'll reimburse the city and state for tax revenue that would have been generated by half of the village if it isn't built. (The penalty for not completing the second half on land already owned by the team is clear-cut: The team would turn the vacant property over to the government.) The promise has prompted the governor and the mayor to crow that this is a no-risk, win-win deal for taxpayers. But just how the parties would calculate the financial penalty is a mystery, especially given that no one has said exactly what Ballpark Village would be: Maybe some shops, maybe some residential, maybe some offices, maybe some restaurants, maybe an aquarium, definitely a parking lot. The formula for calculating penalties on the basis of something neither built nor precisely defined would be tricky at best. "I would love to see the legal agreement," Artibise says.

Artibise is equally eager to see what penalty the owners would pay if they sold the team. In the memorandum, the Cardinals say the public would share in any profits if the team is sold, but that is as precise as they get. If this is indeed a fair deal, the Cardinals should be prepared to write a big check. "To put it not even crudely, but relatively accurately, the current owners of the Cardinals only have less than $50 million invested in the team," Artibise says. "Ask anybody: The team right now is worth between $200 million and $250 million. With a new stadium, we're probably approaching $300 million or $300 million-plus. These four very rich guys come along, we build them a stadium, they flip the team and make 200 million bucks. What the hell kind of deal is that? I'd really like to see the fine print about this profit-sharing."

The Cardinals have come remarkably far without laying many cards on the table. Naming rights that could be worth more than $50 million are a case in point. Contrary to what the team and the St. Louis Post-Dispatch may say, the Cardinals haven't given up naming-rights money -- if they had, it would be spent up front to reduce public debt on a baseball palace with an estimated cost of $326 million. Instead, what we have is a trip-down-the-rabbit-hole scheme that has been so often mischaracterized by politicians and misreported by the media that it has taken on the aura of truth. The complexity is rooted in federal tax law: The IRS is taking a hard look at whether teams can legally bank millions in naming rights from stadiums financed by tax-exempt public bonds, which are supposed to be used for public purposes. The IRS has yet to come up with a definitive answer, and so the Cards appear to be trying for a deal that would allow tax-exempt financing while holding open the chance for the team to profit from naming rights should the feds settle lingering tax questions in favor of sports franchises.

According to the memorandum of understanding, the team will negotiate a naming-rights deal, collect the money and deposit a portion into accounts that could be used to reimburse the state and city if new tax revenue from the ballpark isn't sufficient to cover the bond payments (and even then, the public would have to wait at least 10 years after the debt is issued before drawing from the accounts.) Whether there will be enough in those accounts to cover any shortfalls is far from certain. For one thing, the federal tax code has a 10 percent cap on the amount of private money that can be used to pay off tax-exempt government bonds, and the parties expect the team to collect more from naming rights than can legally be used to reimburse the state or city. That's why the memorandum includes provisions for the city and state accounts to be replenished with naming-rights revenue in case either entity draws money from the kitty over the lifetime of the 30-year lease. If the Cardinals had really given up naming-rights money, there'd be no naming-rights revenue available to put into government accounts decades after the deal is sealed, the stadium is named and the money collected.

It gets even better for the Cards if tax-revenue projections prove true and neither the state nor the city draws from the accounts. In that case, naming-rights money in the unused accounts goes for "the benefit of the stadium," according to the memorandum of understanding. That would presumably reduce the Cardinals' obligation to pay for maintenance and capital improvements. As it stands now, Foley admits that unused money in the accounts could be used for landscaping, restroom upgrades or any number of things besides reducing the public's debt. He'd like to change that but makes no promises. "I personally would like to see it go toward paying off the bonds," Foley says. "I would like to put an emphasis on that." The Cardinals, meanwhile, aren't talking. After a recent public forum about the stadium proposal, team president Mark Lamping dodged a question about naming-rights revenue, saying he'd talk to the Riverfront Times the next day. But he didn't return calls.

Jean Stussie isn't concerned with naming rights, lease terms or other particulars. She doesn't look it, but she may be the Cardinals' worst enemy.

Standing outside the Clifton Avenue post office a few days before Christmas, Stussie collects signatures at a furious pace. If she gets fewer than 50 an hour, she says, she moves elsewhere, and she's right on target this morning. People are hurrying to mail packages and get to work, but still they stop and sign. Fewer than five people outright refuse her in the space of 45 minutes. At one point, four people are signing petitions at the same time.

Stussie is trying to collect 10,000 or so signatures to put the city's contribution for a new stadium on the ballot in St. Louis. At this rate, she'll have enough signatures in 200 hours, if she works all by herself. But she's not alone. There are others out there just like her, and Stussie, without a trace of braggadocio, predicts that she and her comrades will have enough signatures within a month.

The Coalition Against Public Funding for Stadiums, an ad hoc group that includes Republicans, liberal Democrats and others, says it collected 1,100 signatures with volunteer help before hiring signature gatherers such as Stussie about a month ago. Fred Lindecke, a coalition member and retired Post-Dispatch reporter, calls this a David-and-Goliath battle. Then again, a Post poll last spring showed that 75 percent of the city's residents oppose public subsidies for a new ballpark.

Shrewsbury concedes that a public vote could be disastrous for the deal. "I think that has the potential for being a major roadblock," he says. "If the voters of St. Louis clearly say no, everybody, I think, would have to reassess their position."