An unintended outcome from Election Day: St Louis loses the Rams?

Economic Topography of St Louis | Infoshot by 600 Series Design It’s well known that 2015 is a big do-or-die year for the City of St Louis and the Rams. That’s the year that Stan Kroenke can flex the opt-out clause in the Rams’ stadium lease, if the stadium itself isn’t up to league standards. As Forbes reports, the Ed Jones Dome is a long way from qualifying. Who will pay the bill? If Stan Kroenke’s past land development deals are any indication, a combination of tax offsets and bond sales from the city, private money and taxpayer money will all pay into the pot.

However, thanks to the just-passed Proposition A, state-wide voters can decide as early as next year whether to strip the City of St Louis of $150 million dollars of annual revenue. And if current voter sentiment is any indication, they will do just that.

As you can see from this economic topography of St Louis, the City isn’t exactly flush with cash as it is.

The impact on the Rams? If the City of Saint Louis is scrambling for money, their bond rating will take a dramatic dip. And as the Post-Dispatch’s David Niklaus points out, 2015 could see the city in a crucial bind.

If city voters decide to abolish the earnings tax, Proposition A calls for a 10-year phaseout. In theory, that gives the city time to adjust its budget and find new revenue. The bond market, though, will want a credible solution up front. And the important thing to know about the bond market is that investors often change their opinion of a borrower even before the rating agencies take action.

— STL Today: “Bond markets likely to take note of earnings tax

Jeff Gordon chimed in last week with his take, and offers some interesting possibilities:

From this corner of cyberspace, I see Kroenke working to keep the Rams in greater St. Louis. I also see him working to make the enterprise more lucrative — perhaps as the centerpiece of a new development should the Dome fail to meet his expectations.

— STL Today: “Rams challenges off the field are daunting too

For you out-of-towners, it’s important to note that the tax bases of the city of Saint Louis (home of about 350k people, including me, and the Rams’ stadium) and the surrounding Saint Louis County (home to about 4 times as many people, and the Rams’ practice complex) are entirely separate. When Gordon says “greater St. Louis,” he means we could see a move out to the county, which is relatively flush with cash. But a whole new stadium is much more expensive than any renovations would be, and the ripple effect of a revenue loss on the scale that we’re talking about from the region’s center is unknown.

UPDATED: Nicklaus followed up his original analysis with a slightly less-dire follow-up. (Hat tip to @HixxinSoulard).

If next spring’s vote does result in a decision to phase out the tax, Friedman [of Standard & Poor’s] says St. Louis would go on the credit watch list, meaning that the agency would be considering a downgrade. He explained:

“If it (a tax phaseout) does pass, we would immediately have to take a look at the rating. We’d talk with the city about what the city could do to offset it, and go from there.”

The city could avoid a downgrade if it came up with a credible plan to raise new revenue or cut spending, Friedman said. He added, though, that “there’s no doubt it would put some pressure on the city.”

The earnings tax accounts for 30 percent of the city’s general-fund revenue, and 15 percent of total revenue, which includes such things as airport fees and water bills.