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Target Field/sales tax combo providing a financial home run for Hennepin County and Minneapolis

Hennepin County receives at least $1.8 million a month from the special sales tax levied for the new ballpark. And Minneapolis, which made almost no investment in Target Field, is getting a nice bonus, too.

Courtesy of the Minnesota Twins

Although some always will resent the public’s participation in the construction of Target Field, baseball fans since April have been voting with their feet — and cheers — that this is an amenity that they enjoy.

But as Minnesota get ready to celebrate October baseball, how is the ballpark doing as a bottom-line structure?

To date, despite the sluggish economy, the financial returns are proving to be robust.

Each month, Hennepin County receives at least $1.8 million from the 0.15 percent Hennepin County sales tax that was imposed in 2007 — without referendum, as the still-bitter among us point out.

In the best months, though, the county gets “hundreds of thousands” more from the sales tax, which is generating the revenue to pay off the bonds for the public’s $350 million portion of the ballpark over a 30-year period.

Sales tax revenue boosts libraries, youth sports
The revenue generated from the special sales tax also has bolstered the county’s library system and youth sports programs. They each have collected their $2 million annual maximum share from the tax, which was the brainchild of Hennepin County Commissioner Mike Opat.

In fact, revenue is arriving at a rate that has allowed the county to pay $5.7 million of the bonds ahead of schedule. Additionally, $75 million in bonds were sold at a variable fixed rate, meaning the interest rate on those bonds has dropped from a budgeted 5 percent to ¼ of 1 percent, according to Dave Lawless, director of the county’s office of budget and finance.

The fixed-rate bonds were sold at 4.35 per cent interest.

If the economy does improve, Lawless believes the bonds could be paid off in 25 years, which would mean a savings on interest payments of more than $20 million.

Mike Opat
Mike Opat

Opat and other ballpark fans point out that this financial picture for Target Field is vastly different than the red-ink story being written in Indianapolis, where the two-year-old home of the NFL’s Colts is going under.

Sharp contrast to Indianapolis picture
In Indianapolis, the Colts put in a far smaller percentage of the cost of the $719 million, covered stadium. (The Colts contributed $100 million, as opposed to the $125 million the Twins paid to the ballpark project.)

But what’s destroying the financing of the stadium in Indianapolis is the sweetheart lease arrangement the Colts signed. The public is stuck with operating costs, which are running about three times the anticipated $7 million annual costs. The Twins are paying for all operating costs at Target Field. Additionally, the team has invested more in the ballpark than required.

City and county officials in Indianapolis are pleading with state legislators and the Colts for a “bailout” to solve their severe cash-flow problems. Not surprisingly, neither the Colts nor taxpayers nor legislators are excited about putting more going into the stadium.

Beyond being stuck with operating costs, Opat says the public problems in Indianapolis are the result of coming up with a variety of taxes, all of which have been negatively affected by the poor economy.

The sales tax in Hennepin County, Opat said, has proved to be far more “stable.”

From a tax standpoint, the ballpark has turned out to be a significant bonus to the city of Minneapolis, which made almost no investment in Target Field.

Because of the structure of leases at the Metrodome, Minneapolis did not collect any of the 3 percent entertainment tax charged on live entertainment at most venues in the city.

The city is getting that tax from tickets sold at Target Field, which is going to mean more than $3 million going straight into city coffers.

Again, given the state of the economy, that revenue could not have come at a better time, according to Pat Born, the city’s finance director. 

Most entertainment venues have struggled — as have restaurants and bars. (The city also collects a tax on downtown restaurants, bars and hotels to pay off convention center and other city obligations.)

“It’s clear, people are spending less on money for entertainment or for going out for dinner,” Born said.

Entertainment tax boost helping Minneapolis
In 2009, the city collected $9 million from its entertainment tax, a figure that was roughly 10 percent lower than 2008. This year, it appears the city will collect $11 million.

“Were it not for the Twins, we’d be down $1 million,” Born said. “Instead, we’re expecting an increase [on the entertainment tax] of $2 million.”

There are some in city hall who would say that much of that revenue is needed for extra policing and traffic management around the ballpark. However, too many people in the downtown area is a “problem” most cities would love to have.

Again, were it not for the ballpark, Born believes that liquor and restaurant taxes collected by the city would be down more than they are. Additionally, he “senses” that fans from the Dakotas, Wisconsin and Iowa are staying in downtown hotels more often than they were when the Twins were playing at the Dome.

The state has received a nice bump from dramatically increased parking at the state-owned ramps near the ballpark. (Parking is up more than 250 per cent at those ramps.) The city also is collecting increased amounts from meters.

Of course, the Twins have fared nicely in the new ballpark, too. The team’s attendance leap-frogged by 800,000 this year, the greatest increase in Major League Baseball and overall the Twins had the sixth best attendance in the game. In their last year in the Dome, the team finished 17th in attendance.

According to Forbes magazine, the Twins’ new venue increased the value of the team by almost 25 percent, to $405 million.

“I still hear from a few detractors” said Opat. “But supporters overwhelm detractors. It’s been a wonderful summer.”

Doug Grow writes about public affairs, state politics and other topics. He can be reached at dgrow [at] minnpost [dot] com.