Missouri legislature sends amateur sports tax credit proposal to governor
03/14/2013 7:41 AM
05/16/2014 9:29 PM
Missouri lawmakers have passed legislation that could help St. Louis attract more sporting events, including college championships and Olympic trials.
The state House agreed Wednesday to a Senate plan that will establish a new tax credit for amateur sports events. The proposal, which is the first piece of legislation this session to go to Gov. Jay Nixon, a Democrat, passed both chambers by overwhelming, veto-proof margins and with bipartisan support.
St. Louis Sports Commission president Frank Viverito said the new incentive would help St. Louis and other cities in Missouri put together more competitive bid packages and attract more events to the state, such as college basketball’s Final Four or hockey’s Frozen Four, Southeastern Conference championships and potentially a college bowl game.
Missouri isn’t the first state to look for ways to become more competitive.
“When the economy got a little more difficult, it became more and more competitive,” Viverito said. “It was clear that other cities and states had tools that we did not have to attract business.”
House Minority Leader Jake Hummel, D-St. Louis, said that without the legislation, Missouri eventually would have trouble continuing to attract events.
“They’re just not coming back to the state unless we do this,” he said.
There’s no question that competition for hosting amateur sporting events has gotten more intense in recent years. Across the country, cities and states have offered growing financial incentives to land the contests.
Rodney Boyd, lobbyist for the city of St. Louis, recently told a House committee that the city has not been able to keep up with what others are able to offer.
“We’re losing events,” he said. “We have no events scheduled for 2015 or ‘16.”
The types of incentive programs vary by state.
Florida uses a fund generated with specialty license plates to attract sports events. Texas has established a “major events trust fund” that shells out millions to reimburse all production costs to cities that host special events. Some states allow their tourism divisions to dole out incentives.
Under the plan Missouri lawmakers approved, the state would essentially refund event sponsors $5 per ticket if they attract events to Missouri. The total allotted would be capped at $3 million a year, and the money would go toward production costs, including signage, banners and other marketing expenses.
“We looked for an avenue that would make the most sense for Missouri and still provide important support to the industry,” Viverito said. “This legislation seemed to make the most sense.”
Sen. Eric Schmitt, a Republican from Glendale who sponsored the bill, said he wanted to give Missouri cities a chance to be more aggressive.
“I think the logic here is that, based on the per ticket number, the more of these events we have, it’s a good thing for the state,” Schmitt said. “This is our attempt to recognize the changing landscape and move forward.”
Representatives from the St. Louis Sports Commission are traveling to Nashville, Tenn., this week for the Southeastern Conference basketball tournament to promote a bid to host a future tournament. The city also is in the running for the 2016 Olympic swimming trials.
Viverito said the new tax credit would be key to promoting those bids.
“It’s going to make a significant difference for our organization and our industry,” he said.
No one spoke against the proposal in committee or on the House floor, but some economists have been skeptical of these types of incentive tools and the actual impact they generate.
Victor Matheson, a sports economist and associate professor of economics at the College of the Holy Cross in Massachusetts, said the economic impact of events tended to be exaggerated — often because promoters don’t factor in the negative impact that happens when locals stay home to avoid crowded restaurants and tourists opt for other cities because of the crush.
“You can’t count the positive if you aren’t willing to count the negative,” Matheson said.
And, he said, the plans don’t take into account that some locals will go to the events.
“Is it really worth it for the state to pay $5 for a St. Louis resident to go to a basketball game instead of a movie?” Matheson said.
Asked about the skepticism, Viverito said the city already had seen positive effects from hosting high-profile events.
Last year and in 2000, St. Louis hosted the USA Gymnastics’ national championships — the last stop before gymnasts advance to the U.S. Olympic Team Trials. Just last week, the city hosted the Missouri Valley Conference basketball tournament. Kansas City is currently hosting the Big 12 Conference basketball tournament.
“I think it’s hard to say that those events didn’t have a significant positive impact on the region,” Viverito said.
The benefit goes beyond economic, he said. There’s also national television exposure that can draw interest from out-of-towners.
“The benefits are financial and emotional,” he said.
Skip Sauer, an economics professor at Clemson and founder of the Sports Economist blog, said that like many competitive strategies, incentives for sporting events are “contagious.”
“Once neighboring states adopt a tax incentive, your state is at a disadvantage without one,” he said. “Once in place they end up canceling each other out in theory, but the tax expenditure remains.”
The Missouri Legislature-approved sports tax credit will go away in 2019, unless lawmakers vote to extend it.
“There’s no doubt that it’s hugely competitive,” said Matheson, the sports economist from Massachusetts. “There are most definitely some benefits to having these large events.”
But he said eventually cities and states have to figure out the point that they are willing to be outbid. The best route, he said, is to use data to identify gains first.
Schmitt said he sees the program as having little risk for the state.
“The incentive is only awarded after the event,” he said. “The state has already received the benefit.”
Those advocating the bill say that 90 percent of the people who come to the events will come from other states.
Based on Missouri’s current 4.225 percent sales tax rate, the state would recoup its money if attendees, on average, spend at least $117 that they wouldn’t have spent without the event. Schmitt said most sports fans would exceed that threshold with hotel stays, souvenirs and food and drinks at area restaurants.
Rep. Eric Burlison, R-Springfield, said he feared that most if not all the money would be used up by St. Louis and Kansas City. He filed a version of the bill that would have set the cap at $10 million, with $2 million of that carved out for smaller cities.
Still, he said, he accepted the changes in the end.
“I’m ready to move the ball forward and see this in action,” he said.
Schmitt said the $3 million fund should be big enough to provide opportunities for other communities. Combined, a year’s worth of events would have to sell more than half a million tickets to deplete it.
“If that happens, by the way, then we’re doing great,” he said.