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Tom Horner’s Vikings stadium plan: its strengths, its weaknesses

Tom Horner currently is the only candidate with a plan to resolve the Vikings stadium issue, but it’s a work in progress that even he admits needs some tweaking.

It’s easy, almost sport in Minnesota, to take whacks at stadium plans.

On the macro level, you’ve got the “hell-no” folks, who don’t want any attempts to figure out the Vikings stadium issue. That attitude comes from the left and right. It is a head-in-the-sand approach to a community dilemma that won’t go away, what with the Vikings’ Metrodome lease expiring after the 2011 season.

Then, you’ve got the “whatever-it-takes” crowd, but they conduct their meetings in the corner booth of a sports bar somewhere. As the state budget sinks deeper into its financial abyss and local government aid is slashed, the rah-rah group that hollers “just-build-the-darn-thing” numbers in the handfuls.

Finally, you’ve got the “let’s-figure-it-out-as-rationally-as-possible” contingent, which must, if we are intellectually honest, stipulate that pro sports financing and the public’s relationship to it, here and nationally, is fundamentally irrational.

Which brings us to the Independence Party’s Tom Horner, who has bravely left himself vulnerable on this topic because he has produced a Vikings stadium plan of sorts.

In so doing, he is the only gubernatorial candidate among the three to offer a relatively detailed framework for a Vikings stadium.

Horner’s is an evolving plan and one that he acknowledged in an interview Tuesday will likely evolve lots more were he to win the November election. (At one point, for instance, a per-drink liquor tax that would flow into stadium debt service was part of it, but it’s not now.)

Tom Horner
MinnPost photo by Bill Kelley
Tom Horner

DFLer Mark Dayton, a former state commissioner of economic development, has said he would examine and approve a deal that’s good for the taxpayers and the state — details to follow. His spokesperson said Tuesday no Dayton stadium plan is imminent.

Republican Tom Emmer has said he supports a Vikings stadium effort — details also to follow, but not any time soon, his spokesperson told us. Emmer continues to like the notion that Minneapolis city taxes helping to pay down the debt of the Minneapolis Convention Center should be redirected for a new stadium. This is an idea whose time came and went in the Legislature last session; for city officials, it is a non-starter.

A stadium, bonds and racino, oh my
Adopting some tried and true funding options — such as ticket taxes — and tweaking some other ideas — such as unusually long 40-year bonds, unheard of at the Minnesota Legislature — Horner tries to thread a needle with a cocktail of revenue streams. On close examination, his factors might not add up to the sums needed to build what he predicts would be an $800 million to $900 million stadium.

Horner’s most provocative and politically treacherous revenue stream: gambling money from casinos at the state’s two racetracks. He wouldn’t use all of the projected revenue of $250 million per biennium for a stadium, just enough to raise the $30 million or so needed to pay down the public’s yearly piece of stadium debt, he said.

But there are finance hurdles attached to using gambling money to back public bonds, experts say. Rating agencies in New York would likely want some standby or backup source to gambling revenues, and that could mean the state’s general fund.

And, then, of course, there’s the politics of getting the “racino” concept through the Legislature.

Even Vikings stadium point man and public affairs vice president Lester Bagley, who wants a new facility far more than Horner, says no one should count those slot machines yet.

“Realistically, the racino proposal is going to be a challenge at the Legislature, unless something changes dramatically over there,” Bagley said. “We don’t really have a dog in that fight. If that’s what our state determines is our best course of action, then we’ll participate. But the politics of it have been difficult for it over the past 10 years.”

Devilish details
Let’s drill down to Horner’s specifics, which he said “probably would be enough” to cover the public’s costs of stadium debt. And let’s raise some concerns.

Upfront: Horner would seek 40 percent of the stadium’s funding from the team. This is slightly more than the Twins’ contribution at Target Field and, generally speaking, a bit more than most other NFL teams have put into public-private shared projects. For the new Dallas Cowboys stadium, owner Jerry Jones has invested far more than 50 percent.

Question: Why only 40 percent? If this is a “public-private partnership,” why not go 50-50?

Because, Horner said, he envisions a stadium in which the Vikings control a limited number of dates, pay one-third of the operating costs “and the public gets all of the rest of the revenue … As a starting point, I think this is fair to the Vikings.”

He’s right that if the team only controls the stadium for a dozen games a year and the public for the other 350 days, then, perhaps, that 40 percent contribution makes sense.

Unfortunately, he has now locked himself in at that 40 percent threshold from an owner who will see the value of his team soar by about 50 percent when a new stadium opens.

40-year bonds: Horner would issue bonds with 40 years of maturity tied to a 40-year-long Vikings lease. (This 40-year horizon is rare for sports facilities, although the new Yankee Stadium is financed with some 40-year bonds.)

Generally speaking, the length of bond life that funds a project is tied to the useful life of the asset the bond is financing. The vast majority of publicly linked bonds are 20 and 30 years. Indeed, the state of Minnesota has some constitutional restrictions on general obligation bonds that require payments beyond 20 years. It’s all very complicated.

“The premise is: Are you matching the useful life of the asset to the length of the debt?” said Jon Commers, principal of Donjek, a St. Paul public finance consulting firm. “And what is the useful life of the typical professional sports facility?”

It’s not 40 years. The Dome is 28 and on its last legs. The debate over the Vikings getting a new stadium started more than a decade ago, when the Dome was a teenager.

A 1991 photo of the Hubert H. Humphrey Metrodome.
Photo by Mark Fay/Courtesy of the Minnesota Historical Society
A 1991 photo of the Hubert H. Humphrey Metrodome.

So, if a new stadium is financed over a 40-year period, what happens when a new wave of stadium construction arrives in 20 years after the stadium opens and there’s still 20 years on the mortgage?

This issue was raised in a recent New York Times report that showed how some aging stadiums have already been abandoned by tenants with years of debt to pay off.

Also, “The longer you extend the maturities, the higher the interest rate because of the risk an investor sees in tying up money for that period of time,” said former Minnesota finance commissioner Jay Kiedrowski, now a senior fellow at the Humphrey Institute.

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But others say, investors worry more about the sustainability of the taxes or revenue sources pledged for debt service on bonds than the life of the physical asset, that is, the stadium. For sure, any 40-year deal would require a special law, we’re told.

Horner, however, counters with optimism about the useful life of newer-generation stadiums: “To expect that a new stadium — given all of the better architectural understandings and all of the new designs — to expect that a stadium could last 40 years and be functional and profitable for 40 years is not unrealistic.”

That is wishful thinking, I’m afraid.

He acknowledged “challenges” with the 40-year bonds but said it gives the state “predictability and permanence” for the retention of the Vikings.

Lease:
The length of the bond is tied to Horner’s notion that a new lease should last for 40 years. That is, if it’s going to take four decades to pay off this stadium, then the team has to commit to play there for that long.

Do not expect the Vikings to blithely sign on to the longest lease in the NFL.

As Bagley points out: “After year 30 — the traditional lease term — we don’t want to be in a position we’re in now, locked into an untenable, non-competitive revenue situation that we have no way out of until the lease expires.”

Let’s not worry about the year 2040. In the present tense, Horner’s 40-year stadium and bond lifespan notions seem iffy.

Timing: In his plan, Horner states that the stadium decision needs to be made during the 2011 legislative session, but he seems to hedge: “The NFL has to resolve its collective bargaining agreement with the players union before any construction begins.” The union-management deal expires in March and there already is talk of a potential lockout for the 2011 season.

So, is he saying that Gov. Horner wouldn’t go forward until the union deal is settled? More or less, yes.

“There should be a contingency in there that not a shovel of dirt is turned until the Vikings, the NFL have an agreement in place,” Horner said.

Thumbs-up on this concept.

Other revenues
Here we begin to wander into the weeds of modern stadium-management models.

In Horner’s vision, the public would own the stadium and, it seems, manage it, except for the relatively few days that Vikings games are played. With that in mind, he says the public should capture the revenues from non-Vikings events and use that cash to help pay down stadium debt.

But the recent record at the Metrodome suggests there’s little money there to spend. At the Metrodome, about $1 million a year is generated by other events, but that includes such small-potatoes events as as Division III baseball and concourse inline skating.

That may not bode well for the other revenues that Horner wants to capture to pay down stadium debt.

On the other hand, he and others note that the Dome is not a good model for going forward. For one, a new stadium won’t be cluttered with 81 Twins games and would have more dates to sell. A new stadium would also likely be managed by a third-party facilities company/promoter, such as AEG, which operates Target Center, and not by a public agency like the Metropolitan Sports Facilities Commission.

Horner, like others, mentions the power of NCAA championships and Super Bowls. But NCAA events actually cost arenas; in 2006, for instance, the Sports Facilities Commission lost $386,000 on a regional. Super Bowls and other big events may bring in money for hotels, but not for stadiums. Horner needs to be careful in overselling and relying on the revenues from “other events.”

Ticket tax
Horner does want to capture the ticket taxes from all events. For now, a statutory 10 percent ticket tax raises more than $4 million annually at the Dome. Higher ticket prices could generate more, as would more events. That’s a solid piece of change, assuming the Vikings continue to sell out their games.

Again, the team will oppose this tax. It views that money as theirs, not the public’s. They see it as part of a ticket price that fans are willing to pay. The Vikings want to capture ticket taxes to cover their operating costs. Horner wants to use them to help pay down debt.

Ticket taxes are user fees. Vikings fans should have skin in this game, in addition to the increased ticket prices sure to come — and maybe even upfront seat licenses to assure good seat location.

If the principle circulating around the Capitol is that those who benefit from the stadium should pay for it, then the Viking fans need to kick in to the public coffers, too. Horner should stick by his ticket-tax guns, if and when he needs to negotiate with the team.

Roof
But taxes and operating costs are tied to another major stadium issue: a roof.

Horner wants a roof. But who benefits from a roof? The Vikings don’t. They can play their games outdoors. The value of enclosed luxury suites and club seats is enhanced by an open-air stadium in which the average schmoes freeze their tushes while the well-heeled can sip chablis in a heated stadium condo. We’ve written about this in the past.

If the state wants a roof for “other events” — like high school sports — the Vikings are open to the community controlling them, but the Vikings don’t want to pay to stage them. If it’s an open-air-only facility, the Vikings might want to operate the building and control every dollar that flows in there.

Is a roof worth its $150 million to $200 million cost? Still an open question for Horner, the Legislature and public.

Racino and Canterbury
Horner’s reliance on revenues from a Canterbury Park racino raises issues about how much Canterbury’s private owners could benefit from such gambling and how much bonding could be supported by unpredictable gaming dollars.

If a new stadium is built, everyone will be concerned how much Vikings owner Zygi Wilf will profit. But a racino link will benefit the Canterbury stock holders, too, and the owners of Running Aces harness track in north ex-urban Columbus.

Horner said in an interview he wouldn’t anticipate an upfront fee from the owners of Canterbury for their rights to operate a racino. Canterbury offered $100 million last legislative session to get that license. Horner shouldn’t leave that upfront money on the table.

There’s another racino hurdle. Horner is relying on data from the Minnesota Lottery for what racinos can raise. But he won’t be able to use all $125 million per year, nor does he want to. Rating agencies in New York won’t have any reliable data by which to evaluate the revenues from racinos, so would likely require some other revenue stream for a few years as a standby sort of tax, public finance experts said.

Although racinos in some other states have done well, gambling revenue clearly relies on the health of the economy. Other questions: would you buy a bond to help fund a stadium if your returns were based on Canterbury and Running Aces being alive in the year 2050? Could anyone bet on that, given the downturn in the horse industry over the past decade?

Experts say that State Lottery revenue — with a solid track record — would be a more reliable revenue source for a stadium. But Horner hasn’t proposed that, and lottery proceeds are already spoken for. 

Jobs: Before he spoke in front of the Metrodome Sunday, Horner was introduced by Cory Merrifield, the organizer of a group called SaveTheVikes. Merrifield, a Vikings stadium proponent of the highest order, cited a report commissioned by the Metropolitan Sports Facilities Commission that said a new stadium could generate more than 13,000 jobs.

When Target Field opened, the Twins touted this figure: 3,500 trades people, and an 800-person peak workforce. For the construction of the University’s TCF Bank stadium, Mortenson Construction has said there were 2,200 trades people and a 750-person peak workforce. In speaking of a potential Vikings stadium, a Mortenson executive projected up to 8,000 jobs.

As this debate goes forward, and the trade unions back a stadium plan, that jobs number needs to be vetted. As a supporter of an “honest” stadium plan, Mr. Horner should be careful with that stat.

Miscellaneous: Unlike Gov. Tim Pawlenty and some others at the Legislature, Horner should be applauded for not seeking “a local partner” for his plan because the team and stadium should be considered a statewide asset. Neither Hennepin County nor the city of Minneapolis can afford to contribute any more to sports facilities.

And Horner also said that he will insist on the availability of “affordable” tickets at a new Vikings stadium. Cheers for that.

One thing he should push: money from the NFL to help fund the stadium.

In conclusion
If he becomes governor, Horner is going to have to look at some other sources to pay for this colossal piece of state cultural infrastructure. He has set up a cocktail of options, and that’s good, but he might need some more ingredients from the shelf … like real public dollars.

There is some inconsistency to anyone who states, as Horner has: “Minnesota cannot afford to lose an asset as important as the Minnesota Vikings. Our state is blessed with an abundance of major league resources — from our lakes and parks to our theaters and museums. The Vikings are such an asset.”

If the team is such an asset, if this state virtually stops on Sunday afternoons to watch the team, and if the team generates, according to some studies, about $26 million in annual taxes to the state coffers, why not use general fund money to preserve the franchise?

Why just sock gamblers and ticket buyers with the bill for such an asset?

“Part of it is the political reality,” Horner said. “First of all, we do have more significant issues to deal with … Look at 2011, starting with the $6 billion shortfall — and that’s just the tip of the iceberg — they all really put a lot of important issues in line in front of the Vikings stadium.”

But he will find that threading a 65,000-seat stadium through a needle without dollars from real taxpayers takes more than political courage. It will be a Herculean task. Of course, he has another big task first: He has to get elected.

MinnPost’s Jay Weiner has covered sports facilities issues in the Twin Cities since 1993 and the demise of Met Center and public buyout of Target Center. He is the author of “Stadium Games: Fifty Years of Big League Greed and Bush League Boondoggles,” University of Minnesota Press, 2000.