Many Minnesotans may know that the subsidy being considered for the Vikings is around $700 million (actually closer to a cool billion by the time it’s fully financed). However, I’ll wager that few people realize that this would actually be the largest public subsidy of a private company in the history of the state. Do the Vikings really deserve the largest subsidy in our state’s history?
Typically large public subsidies for companies are justified with compelling economic arguments. The largest public subsidy in Minnesota history thus far was the Northwest Airlines subsidy back in the mid 1990s. The NWA subsidy amounted to around $600 million: $330 million from the state, and $250 million from the Metropolitan Airport Commission. In 1992, NWA employed around 11,000 people in the state, was promising to create another 1,000 permanent jobs. It was teetering on brink of bankruptcy, which would have put thousands of Minnesotans out of work.
With NWA you had several compelling reasons for public subsidies. NWA was (and Delta remains) the largest tenant at the Minneapolis/St. Paul airport; its failure would have damaged a regional asset. Northwest’s employees, with an average salary of $40,000 a year, bought a lot of cars, groceries, houses, etc. You get a huge multiplier effect to the economy with that many people. And NWA was promising to create 1,000 new jobs (in addition to temporary construction jobs) . Things didn’t quite work out the way it was planned, but NWA did eventually create another 600 or so jobs.
What about the Vikings? The Vikings directly employ fewer than 130 people, only a handful of which work year-round, and 53 of whom are athletes. Beyond temporary construction jobs the Vikings promise no new jobs or economic expansion whatsoever, nor can we expect any indirect economic growth or expansion. What about the Dome, you say? The Metrodome employs 19 full-time workers and there’s no reason to assume more people will work at the new stadium. You get almost no multiplier effect at all with an NFL franchise because you have so few employees, and so much of the revenue is not recirculated locally.
Second largest nonsport public subsidy: MOA
The second largest nonsport public subsidy was for the Mall of America, which got around $300 million in state and local aid. The MOA created around 12,000 permanent jobs (in addition to construction jobs), and 2.5 million additional square feet of retail space. The Vikings stadium? The new stadium will simply replace the old one and is not that much larger.
Aside from the small number of jobs and minimal economic impact, there are a number of unique characteristics that make NFL franchises particularly bad candidates for public subsidies. For one thing pro sports teams, unlike almost any other company, are literally prohibited from expanding in any meaningful way. They cannot hire more athletes, for instance, don’t need any additional staff, and can’t use more facilities than they’re already using. They can’t even actually sell more tickets, which is why the new stadiums are not much larger than the ones they’re replacing. The main reason sports franchises produce no economic expansion is that their business model doesn’t depend on growth to increase revenue, they can’t increase attendance, but new stadiums let them charge more to attend – and that, along with network TV deals, is how they grow revenue.
Sports franchises have other unique qualities. Consider, for example, the fact that the payroll for the Vikings is $140 million a year. In almost any other industry $140 million would get you thousands of employees. For example, at $140 million you could get around 2,300 auto workers or nurses. In the NFL, $140 million gets you 53 guys who may or may not play well enough to get into the playoffs and a handful of year-round jobs.
Is that really worth a billion public dollars?
MOA and NWA subsidies had their problems
One can argue about the notion of giving public subsidies to any private company. Even the MOA and NWA subsidies had their detractors, and for good reasons. There were serious problems with those subsidies, and they didn’t work out the way they were supposed to. NWA no longer exists, and for years the MOA drained as much business from other retailers as it created. But the argument about public subsidies for private companies is an argument for another day.
Today the inescapable conclusion is that whatever reservations we may have about public subsidies, they are a thousand-fold magnified when we consider subsidizing an NFL team. The unique qualities of an NFL team, its huge payroll relative to a small number of employees, its mediocre local sales activity relative to other businesses, and its inability to offer any kind of economic expansion or job growth make the contemplation of large subsidies an exercise in absurdity.