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Vikings stadium funding plans — their strengths and weaknesses

Vikings stadium funding plans — their strengths and weaknesses
Minnesota Vikings
The ink barely dries on one spreadsheet before another one appears on ways to cover the public share of the stadium funding package.

The ink barely dries on one spreadsheet before another one appears, outlining ways for Minnesota to cover the public share of a Vikings stadium funding package.

There are as many reasons for all the plans as there are legislators, but are there are two key philosophical groups unhappy with the current stadium financing plan:

• The skeptics, who don’t really believe the projections for the current plan’s funding source: expanded charitable gambling (electronic pull-tabs and electronic-linked bingo). They doubt the new games can create the sort of revenues projected by the Department of Revenue and some in the industry.

• And the outright opponents, a group that includes those who oppose any substantial public subsidy of sports facilities and those who oppose expanded gambling.

Still other legislators are looking for a way to make the deal “fairer” or “simpler.”

Still others are bored, as they wait for leadership and the governor to come up with some sort of “global”deal that also resolves the bonding bill and GOP efforts o craft a business tax relief package.

Then, of course, there’s Tuesday bombshell — a new Republican “secret plan” for stadium funding that is being shopped around.

Basically, the GOP plan would fund “infrastructure” for a scaled-back, roof-ready stadium through the state’s bonding bill. At this point, there are few details on costs and covered items.

The surprise proposal, however, quickly met with strong criticism from Gov. Mark Dayton and Minneapolis Mayor R.T. Rybak — and with a shrug from Vikings officials, who quickly distanced themselves from the plan.

With the stadium’s fate newly uncertain, here’s a look at some of the other funding dreams and schemes that have been floated in recent months — and their strengths and weaknesses.

Statewide drink tax/fee

This may be the simplest proposal for covering the state’s portion of this $975 million project.

The plan, suggested a while back by St. Paul Mayor Chris Coleman, failed to get much traction but recently got new life because of Sen. Linda Higgins, DFL-Minneapolis.

At a recent Senate Finance Committee hearing, Higgins introduced — as an amendment — a plan to pay for the state’s $398 million portion of the stadium with a statewide nickel-a-drink tax at bars and restaurants.

“If the Vikings are a state asset,” said Higgins, “here’s a way for everyone in the state to participate – if they want to have a drink.”

For each penny of tax, the state would receive $25 million, Higgins said. A nickel, then, would generate $125 million, which would be far more than needed to pay off bonds. The additional revenue, she said, could be used for all sorts of wondrous projects.

The fatal flaw: The Republican mantra remains “no new taxes.”

If the stadium bill comes to the Senate floor, Higgins plans to try to float the plan again, perhaps referring to it as a drink fee.

User fees

The recent plan is being promoted by an unusual cross-section of senators.

There are Sen. John Howe, a Republican moderate from Red Wing; conservative Republican Roger Chamberlain of Lino Lakes; and liberal DFL Sen. John Marty of Roseville. The plan would place an 18 percent surcharge on virtually anything to do with the Vikings and the new stadium.

There’d be an 18 percent surcharge on tickets, which would generate more than $15 million a year. There’d be an 18 percent surcharge on stadium naming rights, meaning if the Vikings collected $8 million a year for naming rights, the surcharge would amount to about $1.6 million. Popcorn, jerseys, parking — you name it, and the state would collect a surcharge under this proposal.

The big collection in this plan: an 18 percent surcharge on the Vikings’ share of the NFL’s national television contract, which is expected to pay the team $190 million next season.

That surcharge would mean a nifty state payday of more than $30 million.

Combined, the surcharges would amount to more than $50 million a year, easily covering the state portion of the stadium construction.

Howe said that not only is this plan a “fair” way for the stadium to be constructed but that it also would stop the move toward expanded charitable gambling. Although Howe believes the added gaming would hit revenue projections, he worries that it also would create an epidemic of problem gaming.

There are major problems, though, with the surcharge approach: The Vikings don’t like it, the NFL will oppose it, and most stadium supporters believe it would be a deal killer.

Racinos

Because of last week’s deal between the tribes and the horse tracks, racinos likely will not rise again this session, even though they’re always touted as the silver bullet that will save everything from the Vikings to schools to the horse industry.

Every year, promoters of the plan claim that putting slot machines at the metro area’s two racetracks would bring the state “at least” $100 million annually.

And every year for more than a decade, the idea has failed to gain legislative traction because the Indian tribes oppose it as added competition for their casinos. The DFL caucus, which receives support from the tribes, tends to oppose it. Also, anti-gambling legislators of both parties oppose it.

For those who want a stadium done now, there was also a huge concern that using racinos as a funding source also result in delays over lawsuits.

New White Earth metro casino

Erma Vizenor, eloquent chair of the White Earth Reservation Tribe, wrote a passionate letter to the governor over the weekend, wondering why the White Earth plan to fund a stadium hasn’t gained any legislative traction. She appealed to Dayton’s sense of “fairness” to act on behalf of the largest and poorest tribe in the state.

The tribe’s plan would give the state — up front — $400 million, once the way had been cleared for it to build a casino in the metro area. The tribe would pay for construction of a $700 million casino and then would split profits from the venture 50-50 with the state.

Virtually no legislator has taken the proposal seriously, even though the tribe claims it has lined up banks to swing the deal.

What’s the problem?

Several: The metro area tribes oppose the deal. There’s concern that if the state would take part in the arrangement, a court case would follow. And there’s the anti-gambling sentiment of some legislators.

In addition, there’s the simple fact this idea came out of nowhere. (At the Legislature, ideas typically must simmer for years.) There also are White Earth credibility issues, dating to scandals in the 1990s.

Vizenor addressed that history in her letter to Dayton.

“The White Earth Nation has come a long way in stable and credible government since 1996 when our tribe was financially bankrupt from corruption and fraudulent elections,” she wrote, adding that she was proud of being a leader in the clean-up process.

The only chance the White Earth deal would ever have is if the current stadium deal were voted down or never made it to the floor.

Block E casino

The owners of Block E (the E has come to stand for “empty”) in downtown Minneapolis were knocking on legislative doors before the White Earth plan surfaced.

Their pitch: Allow Alatus to turn the huge, failed project into a casino, and everyone would benefit. There would be construction jobs, plus 2,800 full-time jobs. The streets of Minneapolis would be filled with upscale visitors. And state and city coffers would be overflowing with money from this new, luxurious casino -- $125 million a year to the state, and as much as $15 million a year to the city.

Block E has the backing of labor, some pols and a portion of the downtown business community.

“Best idea we’ve heard over here,’’ said Rep. John Kriesel, R-Cottage Grove, who tried to sell the notion in the House. “But I can’t get it to budge.’’

That’s, of course, because it’s opposed by the tribes and by anti-gambling forces. To date, it’s never moved in the legislative process.

Electronic pull-tabs

This is the funding source that the state ends up with by default — and the one idea opposed by the fewest interest groups.

In particular, the tribes say they don’t oppose it. Meanwhile, it gets support from various charities and from Main Street restaurant and tavern owners across the state.

It also gets the support of some heavy-hitting legislators, such as Senate Minority Leader Tom Bakk and GOP Rep. Morrie Lanning, the author of the Vikings stadium bill, who is respected on both sides of the aisle.

Despite some legislative skepticism, the Gambling Control Board and the state’s Department of Revenue have insisted that the numbers work,

By adding electronic pull-tabs and electronic (linked) bingo, everybody will win, according to supporters of the plan.

There will be $62 million more for charities across the state. There will be $28 million more for businesses that offer charitable gambling.

And there will be $62.5 million more in gaming revenue for Minnesota than the $37 million that currently ends up in the general fund.

Why the suspicion about the numbers?  The trend line in paper pull-tabs has been heading down, as have the number of participating outlets. In 2000, nearly $1.5 billion was spent on pull-ltabs at 1,800 locations. By 2009, the numbers had fallen to $1 billion spent at 1,200 locations.

But Revenue studies show those numbers will be reversed with “modernization,” officials said.

Sen. Julie Rosen, the Senate author of the stadium bill, has frequently pointed out to skeptics that the Revenue Department has a history of solid projections.

Other critics of the use of pull-tab funds say that any resulting state revenue increases should go to the general fund, just as current gaming revenues do. If there’s a sudden jump in income taxes, they point out, those revenues go to the general fund? What’s different about this?

If the stadium bills do make it for House and Senate floor votess, there will be stacks of amendments as legislators attempt to change the funding mechanism.

Lanning and Rosen, however, insist that this is the single plan that has a chance to pass.

The Minneapolis Plan

Meantime, the financing plan created by Minneapolis Mayor R.T. Rybak seems to be gaining grudging respect among legislators.

“An incredible deal” is how Howe, former mayor of Red Wing, put it. “I can’t understand why he had such a hard time convincing people [on the Minneapolis City Council].”

Others are less kind. “A windfall for Minneapolis,” said Chamberlain.

It should be noted there’s far less enthusiasm for the plan among City Council members and among most of the Minneapolis legislative delegation.

Under the plan, Minneapolis, the local partner, is putting up $150 million toward construction costs. In addition, starting in 2021 and continuing for 25 years, the city will pay nearly $200 million more in operational costs. Those costs will be on a sliding scale, starting at $6.5 million in 2021 and climbing to $13 million by 2046.

All of these funds will be generated by the state-imposed, state-collected sales tax — of about 3 percent — on bars, restaurants and hotels in downtown Minneapolis. Those funds, currently about $52 million a year, pay off convention center bonds.

When the center’s bonds are paid, the funds will be turned toward the Vikings stadium — and the Target Center and continued operation and upgrade of the convention center and “other” neighborhood economic development programs.

The Target Center, which currently costs city property taxpayers about $4 million a year in minimal upgrades, will get a major facelift, something in the neighborhood of $130 million.

City finance officials say that even with interest paid on the bonds, the city gains on the bottom line over the life of the deal.

Half of the City Council members don’t buy it. But then, it should be remembered, that it was a Minneapolis City Council that came up with the original Block E, as in Empty.

The reality is that it’s hard to forecast 30 years out.

Will the public finally have grown disgusted with NFL violence? Will people actually visit casinos or VFW clubs frequently enough to sustain gambling projections? Will the Minneapolis Convention Center be hopelessly obsolete?  Will the state Capitol have crumbled?

Only one thing is pretty certain.

Thirty years from now, Minnesota legislators will be debating whether to publicly subsidize somebody’s stadium.

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Comments (8)

Unless...

The only plan I can get behind would be the user-fee approach, or a cap of $50-$75 million on any public contribution beyond some infrastructure. Why $50-$70 million? Because the debt payments on that would be around $15 million a year, and that's about how much the Vikings actually bring into the state.

But here's the thing, we have a game changer on our hands. If we refuse to publicly fund a stadium beyond the plans mention above, AND refuse to grant the Vikings a year to year lease on the dome while they keep pushing for public funding here or build a new stadium somewhere else, we completely change the economic landscape for pro-sports. I think this would set a precedent that would send shockwaves through the country. Instead of caving to future blackmail cities and states can will have leverage, and the only way out for the franchises would be to build their own stadiums and arenas.

Paul, I would be very

Paul, I would be very interested to see the total annual benefit of an NFL team to a state. We could then compare the investment to the payoff and see if that investment makes sense. Some benefits would be difficult to quantify but I would be very interested to see someone give it a try. Where did you get your $15 million amount? That seems very low. I wonder what the state income tax amount is for all Vikings employees...

Doug Grow seems not to have

Doug Grow seems not to have looked carefully into the funding mechanism for the almost $890 million Minneapolis would pay for the Vikings stadium (I speak of the pre-Tuesday "deal," not the weird last-minute invention of a couple of GOPs).

Funding for the gigantic Minneapolis subsidy of a new stadium includes a sales tax of .5% on every single item or service we pay sales taxes on: electric bill, gas bill, phone bill, toilet paper at Target, etc.

It's not just bar-hoppers, hotel visitors and fancy-restaurant diners who'll be paying for this stadium.

It's all of us who can't afford to buy a Vikings ticket, too. Our legislators' opinions tend to reflect our opinion that this is too much to give to the Vikings' profit. I wish that stadium boosters would begin to include that--that the mayor speaks only for himself and seven shaky Council votes here.

Mayor Rybak speaks with forked tongue

Ms. Sullivan, you've offered good common sense, but you go way too easy on the Mayor.

He kept information that he surely knew from the public.

So - dribble by dribble - we find out that

- his first claim that the cost to Minneapolis would be $150 million; then
-this grew to around $400 million;
- then his CFO reluctantly disclosed that with interest costs, it would come to $675 million; and
- just today, an analysis showed that depending on tax receipts, it could come to $890 million.

Then, there are other cute little conditions in this atrocious bill that could cause Minneapolis liabilities to climb even further.

- E.g., cost overruns (have you ever seen a real boondoggle like this one come in on budget?).
- E.g., that wonderful little matter of the public being '..legally obligated to maintain the stadium "in a manner that is first-class and consistent with comparable" National Football League stadiums -- a clause that could translate into substantial future costs.

A reasonable person could ask:

- What ELSE is the Mayor hiding from the people of Minneapolis?
- What would the REAL costs be of this scheming, shell-game chicanery, if the Legislature is fool enough to buy this pig-in-a-poke?

I. too, am baffled why the

I. too, am baffled why the White Earth proposal hasn't moved ahead.

No state money needs to be spent. A long term revenue source. The largest and poorest tribe in the state helped. A brown-field contaminated site gets used in an appropriate manner. The state gets a "people's stadium". Zigy gets his playing field.

Win, win, win, win, win, win.

So what's the problem?

The "wrong" tribe wins.

I agree with Paul...

At some point someone somewhere needs to stand up to the millionaire/billionaire NFL and all the goofballs that cover themselves in greasepaint and say, "NO". I think our politicians here in Minnesota are too gutless though, at least the majority that will ultimately approve this boondoggle.

But Paul...

the Vikings could simply move to the Rose Bowl. I agree with you about taking a stand on public funding, it's just not quite as simple as you pretend.

What you have are politicians from both parties trapped in The Box. They can't raise taxes (GOP), give welfare to the Rich (Dems) or expand gambling, yet they live in mortal fear of the label "You Let the Vikings Leave". They just have to figure out how they can all vote "no" while at the same time still pass the bill.

Recession

Apparently recession hasn't touched any of the individuals who would vote that the people of Minneapolis pay more money in taxes. Am I a football fan - no. Do I care if the Vikings build a stadium - no. I object to the monies the taxpayers will have to foot in a time of this deep depression, and, according to Paul Krugman, it is a depression. Have the people who want the stadium step up to the plate & put their own money on the table. If the Vikings want a stadium, let them pay for it as well as.