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Vikings stadium backup-funding controversy: General funds or not?

vikings stadium celebration photo
MinnPost photo by Terry Gydesen
At the time the Viking stadium bill was approved last year, Gov. Dayton assured lawmakers that none of the stadium funding would come from the state's general fund.

Toward the end of the legislation session, Gov. Mark Dayton coyly announced that he had a secret plan as a backup to cover the public’s share of the Vikings stadium.

By session’s end, that plan turned out to be using one-time funds from a special cigarette tax and ongoing funds created by closing a corporate income tax loophole.

The plan was quietly slipped through a late-session tax conference committee, meaning it wasn’t vetted — and picked apart — in the typical legislative committee process.  

At least some Republicans are now saying that the new plan means that the governor "lied" about how funds would be raised for a new stadium.

Sen. Sean Nienow, R-Cambridge, long has been the most adamant foe of the stadium funding plan — a plan that initially called for the public portion to be paid through proceeds from electronic pulltabs and bingo.  For the time being, of course,  revenue from those games has fallen far short of projections, a scenario that created the need to come up with “backup’’ measures.

“If they were going to raise those taxes, then it’s money they were going to spend on schools and health care, but now they can’t because it will be dedicated to make Zygi [Vikings owner Zygi Wilf] richer for the next 30 years. It’s absolutely general-fund money. It’s dedicated to pay off the stadium, and that means the governor lied.’’

To support his claim, Nienow uses a letter Dayton wrote to former Sen. Ray Vandeveer a year ago when Vandeveer, who retired following the 2012 session, was chairman of the government operations committee. Dayton was urging Vandeveer to pass the “people’s stadium’’ plan and the charitable funding method of paying for it.

Wrote Dayton: “Building a people’s stadium would provide up to 8000 construction jobs and an additional 5000 jobs among suppliers during its three years of construction, employ many more through its ongoing operations and keep the Minnesota Vikings here for the next 30 years — all without using a single dollar of General Fund tax revenues.’’

No general fund revenues?

Hmmm.

Lies? No way, staff says

Did Dayton lie?

Not even close, say members of his administration. The new funding plans — which are to be in place until e-gaming (if ever) starts to pay off to the state in ways the industry vowed — stay within the guidelines that Dayton always established, according to Myron Frans, the state’s revenue commissioner.

Frans, it should be noted, was among those behind the “secret plan’’ Dayton was teasing reporters about.

frans photo
MinnPost photo by James Nord
Revenue commissioner Myron Frans explained the new stadium funding mechanism to the tax conference committee.

“We promised not to use current money from the general fund, and we couldn’t create a new tax,’’ Frans said. “Those were the constraints.’’

But isn’t raising the tax $1.60 on a pack of cigarettes “a new tax,’’ and isn’t closing an existing legal loophole virtually the same as creating a new tax?

Frans and members of the governor’s staff say no.

Much like  the electronic pulltabs were an “extension’’ of charitable gambling, the cigarette tax is simply an increase in an existing tax, and the closing of a loophole also is merely an “overdue adjustment’’ in collection of corporate income taxes, they argue.

The cigarette tax may be the least understood.

This will be one-time money — Frans predicts about $26.5 million — collected from cigarettes currently in stock in stores and warehouses across the state starting July 1. Vendors will be receiving letters from the state in a few days, calling for an inventory of existing stock. Spot-checks will follow to assure that inventory numbers being reported are in line with actual current stock.

Funds from the “tobacco floor stock tax’’ will be used for the stadium reserve fund, which is lagging because of the poor performance of the e-games.

When current cigarette supplies are sold, tax revenue from new cigarette supplies will go into the general fund.

That puts the revenue from the closing of the corporate income-tax loophole into play for backing up the state’s $398 portion of the billion-dollar stadium.

That loophole allowed Minnesota companies to avoid corporate income taxes by shifting parts of their Minnesota sales to out-of-state subsidiaries. For example, Company A could sell $15 million worth of snowmobiles in Fergus Falls but claim that $12 million of those sales actually occurred at a subsidiary in South Dakota, thus claiming the smaller amount as Minnesota income.

Closing that loophole, Frans said, will generate $26 million in additional corporate income tax revenue this year and $20 million per year in future years. It also will make the system more fair, he said.

All, or part, of those funds will be used to back up the proceeds from e-gaming, which supporters still claim eventually will perform as promised. If that would happen, if e-pulltabs and e-bingo would achieve promised amounts, the “new’’ corporate income tax would revert to the general fund.

November forecast next test

The first indication of how these new numbers are working out will show up in November’s economic forecast.

What all of these twists and turns in finding funds for the Vikings stadium shows again is how transparent — and workable — funding for the Twins' Target Field is.

Recall, the public’s portion of the baseball park is being paid for with a sales tax in Hennepin County of 0.15 per cent, or roughly three cents on $20. The controversy surrounding that arrangment was that the Legislature, in 2006,  allowed the county to raise the sales tax without a referendum.

Whether or not you approve of the tax or the avoidance of the referendum, the payment system has been transparent and workable.

The county not only is paying its annual $20 million for reducing the public’s $390 million  debt on the stadium, but there also has been $31.3 million in pre-payments. By pre-paying, the county claims it’s already “saved”  nearly $53 million in interest payments. Another $10 million pre-payment is expected this year. The baseball field has generated about $15 million a year in sales taxes, including $4 million in annual Minneapolis entertainment taxes. (Entertainment taxes were not collected on tickets sold at the Metrodome.)

Additionally, Hennepin County libraries have received $7 million from the tax for expanded hours of operation, and $11 million has been invested in youth sports facilities.

But over the years, the state has never been able to come up with such a simple funding mechanism for a stadium.

For example, in 2011, St. Paul Mayor Chris Coleman proposed a statewide two-cent-per-drink tax that would have funded a Vikings stadium in Minneapolis.

That idea was shot down by a number of players and interests. The powerful liquor lobby opposed it. Legislators who “Just say no’’ to all tax increases scoffed at it. Minneapolis Mayor R.T. Rybak opposed it because the plan including moving the Timberwolves from Minneapolis to St. Paul.

Instead of transparency, state pols tend to look for “free’’ money.  They never find it.  

Rather than clarity, there are semantics, “secret plans’’ and, ultimately, a lot of finger-pointing.

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Comments (16)

break that promise

Sure, what do people matter when it comes to making sure Ziggy and the Vikes get there mega million dollar home? Maybe we'd like to take what little is left in social services and give it to him. Perhaps we can get rid of some police and fire personnel like we do whenever the money is tight. Or better yet, let's make a special tax category for the Vikes, say 10 percent on food, that way we know that everybody will have to contribute to Ziggy's , er, Minnessota's team.

$$ Stadium Subsidy

We might as well have the Governor write Ziggy a check for $50 Million a year. It will be way less expensive than what it will cost in the end. Don't know why the politicians refuse to step off of this train wreck of a boondoggle. Current estimate for the cost is just shy of 1 Billion. It is sure to cost half again as much.
Why do those in charge love to fund sports instead of services for people who actually work and pay taxes?

It was a lie.

I'm not impressed with Frans's sophistry. They wouldn't have kept it a secret if they thought it would is pass the smell test. This logic is even more tortured than the logic the Republicans used to claim they had balanced budgets. And the fact that this is all in the service of a franchise that employes fewer than a 150 people and pays out $150 million to 52 athletes makes it even more disgusting. And again, no opportunity should be passed up to point out that many of us warned that the funding mechanism on for this plan was a pipe dream in the first place. This was predictable, and it was predicted. Now $30 million a year or more that was supposed to go towards legitimate state spending is going to be sucked into a welfare program for an out of state billionaire.

"....a welfare program for an out of state billionaire."

"Lie" is a little too strong for me, Paul, but I do agree with your position, . The "people's" stadium!? What a crock! The cost of tickets to attend this "sporting" event is out of reach for the vast majority of Minnesotans.

When the funny numbers started coming out about the pull-tab tax, many of us here on this site expressed a great deal of appropriate skepticism.

That money didn't come out of my right pocket...

...it came out of my left pocket. So it's all different, don't you see ??

"Lying" isn't really the issue

First, thank you for getting the facts right. Too many media stories say, "raised the tobacco tax to pay for the stadium." That's not right.

Second, I'm about to write words that I would rarely ever write: Nienow is technically correct that these are general fund dollars.

But there is an important difference in context between spending general fund dollars in the last session, which would have meant additional reductions in other spending or additional debt, and spending them in a year in which you can actually increase revenues. It will always be the case that new revenues could have been spent on something else, but it is much less problematic when other priorities are being funded as well.

Let's not forget that other,

Let's not forget that other, very stable, tax that is funding the Vikings stadium without a referendum (the article refers to the Target Field funding by Hennepin County sales tax): a Minneapolis .5% sales tax. Over probably more years than this version of the Vikings playground will last, Minneapolis taxpayers will pay a sales tax on all their utilities and everything they buy in the city. Nearly a billion dollars' worth of sales tax.

Only Minneapolis is paying this very stable sales tax for the Vikings (and the Timberwolves, actually!).

Is it too late...

to just send 'em off to L.A.? Cali's got a shiny new budget surplus, don'cha know...

It's not really technical

Yeah, money could always be spent elsewhere but the point we were told that this stadium would be built without general fund money. The new "secret" plan pulls 98% of its funding out of the general fund. This was a bait n switch. Furthermore, pulling $30 million out of the general fund for the stadium IS a reduction in spending for something else, somewhere. Remember, they were NOT predicting a future deficit when they passed this stadium bill, they were predicting a surplus. Comparing this to a deficit budget doesn't make any easier to swallow because we still have had cuts in spending to balance the budget.

If this isn't lying, what is?

If this isn't lying, what is?

Movable Domed Stadium & Lottery Game

The Stadium drawings look nice and it's been said we can get a movable dome for only $25 million or so more so why not a movable dome like other recent NFL Stadiums? Sports Themed Lottery Games are a part of the Stadium Bill/Law all Governor Dayton has to do is say the word. $975 million and you can't come up with $25 million more, would you buy a $40,000 Car and not put a sunroof on it? Two years at TCF and people will want a movable dome which is used 35% of the times in other Stadiums. Vikings met with business leaders today will they or Governor Dayton provide the leadership to get this done?

New Target Center vs. Renovation

$200 million was allotted for renovating Target Center which provides a new loading dock and a glass facade on the building but does nothing for the fan experience or sell tickets. TC the fifth oldest arena and is rated the 28 & 29th worst in the NBA why are we doing this when we can have a new TC for $400 million? New gets will gets us NCAA Championship Basketball games every year & other new events for $600 million in economic impact just over the next 10 years plus we save $400 million over a new arena in 2026. Doug Grow's excellent research shows that the money is there if Governor Dayton or Mayor Rybak would do a cost benefit analyses and use common sense. Full information at www.marchmadnessmn.com. Indianapolis has a movable domed stadium and Bankers Life Fieldhouse is rated #2, why are we always so penny wise and pound foolish?, can't leadership have some guts and let's go after that tourism and jobs? Write/call the names mentioned, thank you.

Digging deeper holes.

Publicly financed arenas and stadiums never pay off economically for anyone other than the franchise once you get beyond $50 million or so. Doubling down on the T-wolves arena make no economic sense. MPLS is already in a hole it will never get out of with that arena. Since 1981 the Minneapolis has spent $85 million dollars on pro sports subsidies, mostly associated with the Timberwolves arena, and got $28 million dollars in tax revenue back. MPLS bought that arena for (I think) $70 million when it was only worth $30 million, and it costs them $2 million a year out of their general fund to run because revenues fail to even break even. Putting more money into that arena new or refurbished CANNOT change the economics. All you will do is increase the debt burden for the people of MPLS. Listen, by the time you get done paying off a $400 million public bond over the course of 30 years it will cost you $800 million, so even if we accept the $600 million economic impact claim, you can how this doesn't pay off. In reality, the economic impact is nil, so that only makes it worse.

New is cost effective...

A new Stadium with $100/$85 million from the Wolves, new Naming Rights money from Target or US Bank going directly to the Arena costs and Doug Grow showing that $10 million a year from the Hennepin County Sales Tax and the Convention Center Tax would mean that some will be cash and some like you say occur debt but not $800 million. The alternative is building in 2026 with at least a $200 greater cost and the $600 million impact is for just the first 10 years when open. Your are right that one can never win the overall argument to justify the costs of sports venues but if there ever is a time where it would pay TC new over renovation wins at this time. Also, Downtown Minneapolis has done nothing new to attract people since the Nicollet Mall in 1968 and the 1st Street-wide Skyway Boulevard from the ramps and a new Target Center to 5th Ave. will provide weather & hassle free Mall-like Space for Downtown and again the www.marchmadnessmn.com web site goes into more detail. Revitalizing a city has to start from somewhere and a cost effective new Target/US Bank Center is a good place to start. Thank you for your thoughts.

There is not cost effective public financing for stadiums

William,

This is the same bogus argument that's used all over the country, and was used to build every arena and stadium in the Twin Cities. The only cost effective stadium we've every built was the Metrodome and everyone hated it. It cost less than $30 million, and all our teams played in one location. Once get more than $50 or $60 million in public financing for pro sports, you never get that money back because within ten years the franchises either want knew or remodeled stadiums and arenas and they want you to sink even more money the subsidy. Once you get into the $100 million range the public and the local economy NEVER get their money back much less make money on the deal.

"Also, Downtown Minneapolis has done nothing new to attract people since the Nicollet Mall in 1968 "

Dude, we built the Metrodome, the the Twolves arena, and the new Twins stadium since 1968.... and yeah, they were ALL supposed to bring more people downtown. Have you been to Block E lately?

In the end the question is cost effective for whom? These are not public infrastructure projects, they are subsidies for very small private franchises that employ fewer than 150 people on average. Dollar for dollar they actually end up hurting the local economy and distorting government budgets one you get beyond $50 - $75 million. The truly cost effective thing for MPLS to so would be raise the rent to cover the costs, or tear the arena down and sell the land. A new city parking ramp would actually make more money for MPLS, a new area would simply add to their debt burden and cost them more.

Simply

Why should we tax payers pay for a stadium? It is a subsidy to a private for profit business. They make the profit and the tax payers get to pay.
Who is getting the better end of this deal?