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Vikings vs. NWA: Does the NFL really deserve the largest subsidy in Minnesota history?

Paul Udstrand

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.

Paul Udstrand is a professional photographer and amateur blogger who lives and works in the Twin Cities. His photography can been seen at Paul’s Photography. He blogs at Thoughtful Bastards.

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Comments (32)

  1. Submitted by rolf westgard on 02/27/2012 - 09:08 am.

    Do we really need the Vikings?

    I am a long suffering but still loyal Vikings fan. I have been in the ‘whatever it takes to get them to the Super Bowl’ club. But Mr. Udstrand’s well reasoned commentary has me wondering “Why do we need them?”

  2. Submitted by Victoria Wilson on 02/27/2012 - 10:55 am.

    Pay to play

    If we all followed this analysis I would think that cities would halt providing baseball diamonds for Little Leagues to play on, ice rinks for the hockey players, municipal swimming pools for the swimmers. And certainly no community would be crazy enough to compete to build an Olympic Village that would be used one season, ever, or perfect a Super G course so we can watch Lindsey Vonn set another record, or construct a hockey arena to watch team Team USA bring home the gold as they did in 1980.

    Either cities and countries worldwide are economically blind or there is a public economic value to the provision of funds for sporting events. Since I have faith in the reasonable nature of people, I guess I have to go with the later. So then it is not a question of whether public money should be involved, but rather: What is the fair market value to the public of a NFL stadium?

    • Submitted by Neal Rovick on 02/27/2012 - 11:46 am.

      I would argue that there is a significant public benefit in public-access athletic facilities that encourage activity and fitness in the general population as opposed to a facility that essentially feeds the idea of sitting on one’s butt on weekends (and more weekday nights) watching professional sports.

      Large sports facilities are basically ego-driven projects. This is true for football stadiums and Olympic games. When all of the costs associated with holding the games is added up, no modern Olympics has made money. It’s the same thing with professional sports venues. And, like with pro-football, there is no difference in economic outcomes for cities that successfully competed to get the games and those that were not successful in their bid for the games. But, it feeds the ego of the city that gets the games.

      I have a pet proposal for the Olympics–why not just return them to Greece. Build the permanent state-of-the-art facilities there funded by IOC members. Training and competition would focus on Greece. The permanent inflow of money over the years would restore some portions of the crippled Greece economy.

      • Submitted by Brian Hutchins on 02/27/2012 - 12:53 pm.

        I agree

        with your comparison of public-access athletic facilities and private sports stadiums. Stadiums really fall in the “bread and circuses” category of public goods. Television supplanted the circus needs long ago. Regarding the Olympics, I could not agree more.

      • Submitted by Victoria Wilson on 02/27/2012 - 02:11 pm.

        And where did it all begin?

        Those professional atheletes probably started their careers in Little Leagues and Youth Hockey programs and at community pools. Didn’t Lindsey Vonn ski at Highland (a county park)? or maybe it was Buck Hill.

    • Submitted by Brad James on 02/27/2012 - 12:51 pm.

      Certainly not $700 million

      “What is the fair market value to the public of a NFL stadium?” Certainly not $700 million plus.

      • Submitted by Victoria Wilson on 02/27/2012 - 02:13 pm.

        If not $700, than how much?

        Oh, finally! Someone who wants to talk about determining the public market value of the stadium instead of looking at a cost justification in for-profit business market terms.

        The way to find any other market price is by comparing it to how much others have paid, or are willing to pay, for the same product. So the going rate is what another city will do to attract an NFL team. Is it really $700 million?

        • Submitted by Brad James on 02/27/2012 - 03:24 pm.

          If not $700 million, then how much? Well if you use the same metric the Twins received which is about $4.10 per ticket assuming annual attendance of 3.168 million. So the Vikings could expect around $80 million dollars for a stadium that has a life of thirty years. If they received a similar subsidy per ticket that the Guthrie received we would see about a $49 million chip in from the state.

          • Submitted by Victoria Wilson on 02/27/2012 - 04:39 pm.

            apples to apples

            I guess I see it differently. If I’m shopping for a car, I compare car prices to car prices. If I’m shopping for a bike, I compare bike prices; even though both cars and bikes provide transportation. So in my mind, if the public wants an NFL team they have to compare the public contributions made to other NFL teams in other cities, and not to this state/city’s contribution to either other sports teams or arts venues.

            • Submitted by David Wintheiser on 02/28/2012 - 09:59 am.

              Apples to apples?

              I guess I’m a bit confused here — on one hand, you argue in favor of an apples-to-apples comparison between public subsidies for NFL franchises, but then in a different part of the discussion you’re comparing a Vikings stadium with municipal ballparks and ski hills? I’m not seeing the reasoning here.

              But if you really want an apples-to-apples comparison, then I’ll suggest the one between a proposed Vikings stadium and Gillette Stadium in Foxborough, MA (home of the New England Patriots).

              Public dollars spent = $0.

              • Submitted by Victoria Wilson on 02/28/2012 - 11:29 am.

                Just to clarify

                There seems to be a group who are philosophically opposed to spending any public money on a sports stadium. I point to municipal baseball fields and swimming pools to show that we already do use public money to support sports related activities. So if you are philosophically opposed to a stadium, why not all the other sports facilities too?

                The reason for focusing on determining the public market value of an NFL stadium is so that, if Minnesotans want a stadium – and they may choose not to – at least we are being prudent with our public dollars and paying the right price.

  3. Submitted by Bernice Vetsch on 02/27/2012 - 11:38 am.

    One reason the Viking “need” a new stadium

    is that they want more executive suites that return higher dollars than lower-priced stadium seats.

    I would be interested in knowing how many regular priced seats are actually affordable for ordinary fans and how many of these seats remain empty for that reason.

    Might the Vikings be satisfied with buying the Dome for $1 (Senator John Marty’s and Rep. Linda Runbeck’s idea) and converting a section of lower priced seats to luxury suites for which high prices would be paid?

    Zero public investment. Zero continuing public cost for maintenance of a private facility, but the city and county might rent the Dome for public events and inline skating and thus provide a little more income for Wilfs.

    • Submitted by Matthew Kilanowski on 02/27/2012 - 03:18 pm.

      Dome for $1?

      The Vikings won’t accept this. If they own the stadium, then they would be required to pay property taxes. That cuts into their bottom line.

  4. Submitted by Gregg Larson on 02/27/2012 - 02:16 pm.

    Recover Portion of Team Value

    The day that the stadium opens will be the day that the value of the Vikings increases dramatically. Given the large public subsidy the Vikings want, why not repay all or part of the public portion using the increased value of the the Team at the time it’s sold, or at 10 years, whichever occurs first? The time period would ensure that the value would be based on a stadium that was still relatively new. The percentage of the appreciated value used to retire the public debt would be equal to the percentage of the stadium cost that was publicly financed. The Vikings share would not be less than the Team value before the stadium was constructed, and the public share could not exceed the amount of the subsidy.

  5. Submitted by Jackson Cage on 02/27/2012 - 03:42 pm.

    Once again, the World According to Udstrand

    Once again, Paul continues to pass off his subjective opinion as fact. An “exercise in absurdity”? Really? I suspect the stereotypical blue-collar guy finds a lot more “absurdity” in the MOA or Guthrie deals than in the Vikings proposal. Face it, these are all value judgments. I’m on Paul’s side in that I don’t want the public subsidizing a private business. But I would have enforced the same conclusion for the Guthrie, NWA or the MOA. I’m not going to try to pretend my personal likes and biases make one deal “absurd” and another “compelling”.

    • Submitted by Gregg Larson on 02/27/2012 - 04:48 pm.

      A Few Good Reasons Beyond Value Judgements

      I never liked the subsidy for the MOA or NWA, but at least they were related to significant employment numbers, unlike the Vikings. In the case of the Guthrie and other arts venues that may receive some public funding, they’re not-for-profit, can’t maintain closed financial books, are usually open most days of the year, do not threaten to leave Minnesota if they don’t get their way, and are built primarily with private sector contributions from businesses and benefactors.

    • Submitted by Brad James on 02/27/2012 - 04:52 pm.

      Guthrie $25 Million subsidy ≠ Vikings $700 Million subsidy

  6. Submitted by Joe Musich on 02/27/2012 - 06:46 pm.

    and there it is

    Well written an argued. I was already convinced against sports welfare. This piece breaks it down for the welfare it is. Maybe the 700 million could be used for start up dollars for employment opportunities that would actually create employment.

  7. Submitted by Paul Udstrand on 02/27/2012 - 08:59 pm.

    Pay to play?

    Professional football is an entertainment industry, it competes with other local entertainment venues for dollars. If someone wants to buy an NFL franchise, build a stadium, and compete for entertainment dollars in MN, well that’s the American way, THATS how you pay to play. The NFL and Ziggy however don’t want to pay to play, THATS what the public subsidy is all about.

    There’s nothing about my analysis that suggests that for some reason a community of responsible adults would be unable to distinguish between a $700 million NFL stadium and a little league field, I tend to think that’s an elementary observation. As silly as they are these false dichotomy arguments keep popping up… either we dump a billion dollars on an out of state billionaire or we stop build building little league fields, zoos, or fountains etc. Maybe this some kind of attempt to frighten us into paying for stadiums, kind of a: “Build stadiums or build NOTHING!” kind of deal. Maybe it’s a slippery slope kind of thing: “First you’ll lose your stadium, then before you know it you’ll lose your little league fields!”. It’s silly, but it keeps coming up. Guess what, if little league fields cost $700 million, we wouldn’t be building them.

    The idea of a “public market value” disconnected from any economic measurements is basically incoherent. It suggests that we can assign a value to a local team by comparing it to what some other community paid for a stadium. Of course the notion that we’re obligated to build a stadium because someone else did it is silly. Our responsibility for OUR community is to determine our own priorities and decide how much if at all we want to pay. Guess what? We have a mechanism to do just that, it’s called referendum. For some reason these folks who oh so interested in the public value of pro sports franchises never want to put it to a vote.

    Don’t get me started on the Olympics.

    • Submitted by Mark Nordstrom on 02/28/2012 - 11:55 am.

      You’re wrong though. You ignore the economic impact the stadium has on other areas like bars/restaurants local sales tax generated and the sales tax and tourism generated from major sporting events like a SB of final four. Indianapolis said the SB generated 300 + mil for that city alone. The NFL will guarantee us at least 1 SB within 5 years of it being completed if we build it and we could probably negotiate a 2nd within 10 years to make the deal get done.

    • Submitted by Mark Nordstrom on 02/28/2012 - 12:00 pm.

      You’re also wrong on the Olympics.

      I agree they don’t make money compared to the investment most city’s would have to make to host them. (building new arenas etc), BUT the impact it has on the city the tourism the hype the world wide publicity to show off your town your state there is no price you can put on that.

    • Submitted by Victoria Wilson on 02/28/2012 - 07:00 pm.

      Silly,silly

      What I think is silly is despite having relegated public goods to the realm of market failures and externalities, smart people still try to understand their value through the private goods model. Maybe it is time to keep an open mind about some new ideas?

      • Submitted by Paul Udstrand on 03/01/2012 - 08:54 am.

        Silly?

        NFL teams are not public entities, they are privately owned franchises. The “new” idea here is that the public isn’t responsible for building new stadiums. Yes, a little open mindedness would be nice.

  8. Submitted by Mark Nordstrom on 02/28/2012 - 11:52 am.

    Stadium

    What kind of impact does a state of the art stadium provide?

    Ask Indianapolis how much the SB brought in to the local area (I heard somewhere from 300-500mil). We would be guaranteed at least 1 SB in the next 5 years if we built a stadium and im betting we could negotiate a 2nd within 10 years if we wanted.

    How much does a final four bring it to the local economy?

    We talk about economic impact but we ignore major events that a new stadium would attract that the metrodome simply does not and will not anymore.

    Now let’s talk about players who are taxed for at least half of their salary per year in this state (players are paid per over 16 games per game so only half would be taxed here). Do we ignore that every year we get to tax over 60mil in salary from these players? How about that most of these players live here for at least 6 months out of the year? They buy houses, cars, businesses etc and shop and live here.

    How about the impact this stadium would have on local sports? I know the metrodome works for them, but a new stadium wouldn’t be a Vikings stadium it would be a public stadium that the people use for more than just the NFL 8 times a year.

    You say no Stadium ever proves to make money and I say that’s because you cannot put a value on the impact it has on the city and local area. I also say it’s because these people only count revenue from the stadium not revenue attributed to the stadium like the fact that local bars and restaurants are busier on game days and concert days then when nothing is going on. I watched on Fox9 a local bar owner saying he lost at least 30% of his business when the twins left and 50% when the dome closed because of the roof.

    Conclusion ? You cannot judge the impact a stadium has by the ticket revenue and food revenue from just the stadium. Just to get 1 SB would make it worth it to the local economy and would be money well spent considering everything else they waste money on that does nothing for our state.

    • Submitted by Brad James on 02/28/2012 - 03:43 pm.

      Which bar was it? Hubert’s is the only bar close to the Metrodome, and they opened a new location next to Target Field and has been packed at every T-Wolves game I have been to this year.

      Academic research has shown that the economic benefit has been minimal and fleeting. Education brings in much more long term economic gain.

    • Submitted by Erica Mauter on 02/28/2012 - 05:51 pm.

      Intangibles

      The research is pretty clear that the economic return on a stadium is negligible. Whether/how sports teams contribute to the local culture, much like the arts, is a different question. I’m ambivalent about this when it comes to sports. But given the fact that Minnesota has professional sports teams in all the other major sports (and some minor ones, and college teams), I don’t think the loss of the Vikings changes that impact either way.

  9. Submitted by Paul Udstrand on 02/28/2012 - 06:50 pm.

    Wrong?

    If anyone wants to see more complete treatment that examines the past 48 years of data on stadiums in MN you can check a blog I wrote last year: http://pudstrand.fatcow.com/blog/?p=108

    It’s actually quite easy to get your head around the larger economic impact of the Vikings, just look around. MN without the Vikings looks exactly today and the other 355 days or so a year the Vikings don’t play a game in MN. Do you see the devastation? If the Vikings aren’t playing people spend their money on something else, that’s what they doing today, and that’s what they’d do if they have an extra 8 Vikingless days or so a year on their hands. In fact one can make a decent argument that the economy is better off if people spend their money on something other than a Vikings football game.

    Here are some numbers folks might find interesting.

    The combined debt service and expense for a $700 million stadium would be $40 million or more for 30 years.

    We currently collect around $16 million a year worth of income taxes from the Vikings.
    Between 1961 and 2009 we collected a total of $459 million dollars in sales taxes from ALL of the professional sports activity in the state of MN. That’s $459 million over the course of 48 years.

  10. Submitted by chris berg on 02/29/2012 - 02:44 pm.

    public market value

    [quote] The idea of a “public market value” disconnected from any economic measurements is basically incoherent. It suggests that we can assign a value to a local team by comparing it to what some other community paid for a stadium. Of course the notion that we’re obligated to build a stadium because someone else did it is silly… [/quote]

    One can absolutely glean a value to a local team based on other public contributions to stadiums.

    The reason being that major professional sports in North America are allowed (or in the case of MLB, protected) monopolies. They are unlike any other form of entertainment (movie theaters, restaurants, bars) because the number of franchises are kept artificially low. I could not for example, build a stadium, hire 54 players of the street, and force the NFL to accept my team into their schedule.

    Having an NFL team in your market is a form of exclusivity with only 32 teams. Cities, States, counties and other public entities have been willing for decades to pay large sums of money for this sort of exclusivity, so that value DOES exist.

    You point to the Patriots as having no public funding, but surely you know, if you’ve studied the issue of stadium funding at all, that the Boston market is an outlier in terms of public funding of pro sports facilities. It’s been a while since I looked at the exact numbers, but from what I recall, they are the ONLY market in the US with one of the major pro teams to not spend significant public funds on stadium or arena construction or remodeling.

    I don’t care one way or another if we build a stadium, but I accept that the norm in major pro sports is that significant public funding is expected for facilities. That may seem out of whack as far as priorities go, but that is the way it works.
    .
    The team will not stay in the dome long-term. They simply won’t, and the NFL doesn’t want them there. The new stadiums in the league are palaces that showcase the grandeur of the game on TV, and provide high-revenue amenities for the ownership. The Vikings playing in an outdated warehouse with a tarp roof doesn’t project the image that the league wants.

    As far as referendum goes, that’s just a cop out for lazy legislators who don’t want to do their jobs. If we aren’t going to help fund a stadium, fine, but just have the guts to say so.

  11. Submitted by Paul Udstrand on 03/01/2012 - 08:41 am.

    Exclusive and Normal?

    Just a couple more points:

    First, everything has intangible characteristics and possible benefits, this quality is not unique to pro-sports franchises. My wife and I were on a river cruise on the Thames river in London a few years ago and only thing the Brits knew about Minnesota was that we had that big “bloody” mall. The thing about stadium supporter arguments is that they want us ignore EVERY other consideration and make a billion dollar public policy decision based solely on the “intangible” benefits of a sports franchise. Benefits that they can’t quantify but must surely be worth hundreds of millions of dollars.

    Does exclusivity establish the community value of an NFL franchise? It’s an interesting idea but the conclusion isn’t that obvious. For one thing, an NFL franchise is 31 times less exclusive than the either the MOA or NWA. The MOA was the only largest mall in America when it was built, and the Twin Cities was the only hub for NWA, and NWA was one of only 6 major carriers in the US at the time. Maybe one can point to only 32 cities that have NFL teams, but that means that thousands of very successful cities all of the world exist without an NFL franchise. Limiting the number of franchises is certainly part of the pro-sports business model, but it’s not at all clear that it establishes “community value”.

    As for “normal” practices- the thing about normal is it’s only normal until it isn’t anymore. Women weren’t “normally” allowed to vote in 1910. Again, it’s silly to suggest that we have no choice but to make irrational public policy decisions because that’s what’s “normally” done elsewhere.

  12. Submitted by chris berg on 03/01/2012 - 08:32 pm.

    Well, I can pull out random anecdotes too. I was in a small resort town in Australia last year, and when we said where we were from, people knew of Minneapolis because of the Timberwolves (which was really odd, because at the time, few people here cared about them.)

    The Twin Cities wasn’t the only hub for NWA. They had Memphis and Detroit to name two others.
    Unless you’re talking about back in the 1950’s or something.

    Nobody is saying that we have to spend public money to build a stadium. However, without public funding of some sort, a stadium isn’t going to get built, and it becomes likely that the NFL will allow the team to move to another market. Actions, or lack of actions, have consequences. If that’s the choice we make here, that’s fine, and lives will go on, but then the politicians need to just come out and say that.

  13. Submitted by Paul Udstrand on 03/02/2012 - 08:20 am.

    Hubs and anecdotes

    Thanks for the clarification on the NWA hubs, I stand corrected. However that makes MSP one of three hubs, which still leaves it more exclusive than the Vikings.

    It’s not about competing anecdotes. The point is that pro-sports franchises are NOT unique in that they have intangible benefits. Anecdotes simply illustrate that point, they don’t prove anything in and of themselves.

    We all know the Vikings could leave if we don’t build them a stadium. The question is whether or not that’s worth the largest subsidy in the states history, hence the comparison with other subsidies. The WORSE case scenario is that we loose an NFL franchise. There may actually be some benefits to losing an NFL franchise. There are consequences for building the stadium, just as there are for not building.

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