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

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.

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Comments (25)

  1. Submitted by Tony Spadafora on 10/05/2010 - 11:38 am.

    Another Hennepin Co. local option sales tax in the 0.20 – 0.25% range… with another referendum “waiver” of course… and “Metrodome Next” can become a reality for our beloved Vikings.

    Why not?

  2. Submitted by Fritz Dahmus on 10/05/2010 - 11:41 am.

    Again, this is why the Twin and Major League Baseball DID NOT need taxpayers help. We all knew this would be a success. Even though attendance across all MLB teams is down slightly, historically teams building a new stadium enjoy major increases in attendance and revenues. It is a great investment. Taxpayer dollars were not needed and were never designed to go towards such an enterprise. Doug, you are simply making our argument for us.

  3. Submitted by Paul Udstrand on 10/05/2010 - 12:36 pm.

    Tax revenue provides a stable source of funding? Who knew? Isn’t this the second time Mr. Grow has done this story?

    He even used the same photo.

  4. Submitted by Noel Martinson on 10/05/2010 - 12:45 pm.

    The age-old argument that the ends justifies the means. Another interpretation of the economic “benefit” is that the Twins captured a large share of the entertainment and food expenditures in downtown this summer leaving the other restaurants and entertainment businesses struggling more than ever.

    I think the real story here is big money wins, they rest of us lose with the best we can say is that at least Minneapolis didn’t lose too much tax revenue on the deal and Hennepin County is keeping up on its payments for the moment. Only 25 years to go…

    Sorry, Mr. Grow but this article seems to overlook too many issues in its accounting. Those of us who oppose and continue to oppose the way the stadium deal was done deserve a little more credit than to be simply labelled as resentful. I look forward to a future article from you elaborating on the other point of view.

  5. Submitted by Tara Barenok on 10/05/2010 - 08:29 pm.

    Almost no investment isn’t any entirely accurate view of Minneapolis’s investment in infrastructure surrounding the ballpark: both in the years leading up to the designation of the site and after its designation.

    One could argue the City’s 1995 purchase of the Target Center could count as infrastructure in the warehouse district. The target center being there certainly laid the ground work for maintaining and growing the entertainment district that surrounds the ballpark.

    Further the fact that the City bought the Center predominantly with tax increment funding, which falls on the shoulders of Minneapolis and Hennepin County taxpayers, also causes a rational person to pause about having Minneapolis and Hennepin County shoulder another Sales Tax increase to fund an NFL statdium for another team which is at least nominally a state-wide resource.

    Also it is unclear at what point adding additional sales taxes will drive purchases to the surrounding area: being cautious about the long-run of the sales tax yields and their sustainability to pay for the debt service is essential.

    The City also made room within existing taxes to pay for both the Target center and infrastructure improvements (they had to be squeezed into the existing capital plans). Certainly Hennepin County has done the heavy lifting on financing target field, but they did have an advantage of a new tax coming on line.

    In addition, the City manages the ABC ramps around the construction center – they were paid for with Federal dollars and the ramps themselves are owned by the state. This investment certainly made the citing of target field in the district attractive.

    As a reminder, the City’s yields on the entertainment tax go to the general fund, the fund most effected by reductions in LGA and also the fund that provides the bulk of police, fire, street maintainance and snow removal services. (Some entertainment taxes – those charged in the Target Center go towards paying back a portion of the debt for its purchase – about $2 million a year). All other increased tax yields are dedicated by state statute to the debt and operations of the Convention Center. Certainly the increased yields because of Target Field are welcome but the are dedicated to purposes outside of police, fire and streets.

  6. Submitted by Joe Musich on 10/05/2010 - 08:34 pm.

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

    Here’s the headline. I have lived in this city of Mpls for years. I don’t feel any homerun in my wallet. I’ve taught here for 40 years need a new car badly and cannot afford one. And if I could because I reside in Hennepin Cty wherever I went to buy a car I’d pay the additional sales tax. And I cannot pay the price for the ticket on my income if I wanted to go. Grow up.

  7. Submitted by Hiram Foster on 10/06/2010 - 06:53 am.

    “Another Hennepin Co. local option sales tax in the 0.20 – 0.25% range… with another referendum “waiver” of course… and “Metrodome Next” can become a reality for our beloved Vikings.”

    Hennepin County can barely afford the burden of one stadium, it can’t afford two.

  8. Submitted by Hiram Foster on 10/06/2010 - 06:56 am.

    “Again, this is why the Twin and Major League Baseball DID NOT need taxpayers help.”

    Major League baseball, in relative terms at least, needed a stadium more than the Vikings. It’s a bad business run by incompetent leaders. Because it has a strong union, MLB can’t keep it’s labor costs under control.

    The NFL on the other hand is a good business run by capable leadership, with a very weak union, and so it has always been able to control costs.

    The Vikings don’t “need” a stadium. We “need” to provide them one if we want to keep them here.

  9. Submitted by Jeff Klein on 10/06/2010 - 08:59 am.

    I remain somewhat torn, but I think the end truth is this: there’s something deeply wrong in principle about using taxpayer money for a stadium. But in practice, that’s how it’s done, and it seems like in this case we got the best deal imaginable. I don’t think that would be the same for 8-games-a-year football.

  10. Submitted by Paul Udstrand on 10/06/2010 - 09:06 am.

    //Because it has a strong union, MLB can’t keep it’s labor costs under control.

    You can’t pin those multi-million dollar salaries on the unions, those aren’t union scale salaries.

    This brings us to the fact far and away and without any comparison it is the Pohlads and they’re players that have benefited the most from this stadium, not Henn Co. It’s no accident that they were able to offer Mauer such a huge salary once they go their new stadium. In terms of growth pro-sports has hit a wall, that’s why they need public subsidies. The subsidies let the owners put their money into the salaries instead of the stadiums, that’s why the payroll is huge. Those payrolls aren’t dictated by union contracts, the contracts set a floor. More than anything else these new stadiums increase the teams revenue in a variety of ways and increase the value of the team when they hit the revenue wall.

    As to whether or not any of the pro sports industries are well run business, well it depends. The primary reason they have as much money as they do is because they are living off of tax payer subsidies. The subsidies create the illusion of success but if those subsidies were to end or be severely curtailed, you’d see exactly how sufficient the revenue stream for the industry. Maybe we’ll lose the Vikings if we don’t build them a new stadium, but even I know there is no brand new empty stadium sitting somewhere for them to move into. I keep hearing about these privately funded stadium plans here and there but not one shovel has hit the dirt anywhere. Maybe we’re about see just how healthy pro-football really is.

  11. Submitted by Paul Udstrand on 10/06/2010 - 09:23 am.

    The Twins deal is done, there’s nothing we can do about it now. It would have been nice if the deal had allowed Henn. Co to divert some of that revenue towards essential services. Try to imagine a deal where instead of contemplating cutting services at Henn. Co. Medical Center they were cutting the Twins subsidy. Imagine a deal whereby the Pohlads would have to poney up some money for a subsidy shortfall instead of people losing health care, or shelter, or police and fire protection. Why is it that governments contract with sport franchises is always rock solid but the social contract with it’s citizens is always subject to amendment without notice? Why is it that the public has to tighten it’s belt and live within it’s means but pro-sports is exempt from such mundane realities? That’s something to think about for the future.

    Meanwhile, I was riding my bike home after working on a photo project downtown a couple week ago, and I happened to be riding by the stadium before a game. The stadium is beautiful, the lights and the colors and very cool. It was also nice to see so many happy and excited faces. There’s no denying that sports provides serious entertainment to a lot of people. The problem is we fall into this false dichotomy that says we can’t have pro sports without massive subsidies, and if we lose a team our communities die. We have to end or severely curtail these subsidies sooner or later, and when we do pro sports will have to adjust, but it won’t die.

  12. Submitted by Hiram Foster on 10/06/2010 - 09:54 am.

    “You can’t pin those multi-million dollar salaries on the unions, those aren’t union scale salaries.”

    It’s cyberspace, I can pin anything on anyone I want. But in this case I was make an objective judgment, not a policy statement. I am very much a pro union guy, and I think it’s great the baseball union is strong and sad that the football union is weak. But my opinions on these matters don’t change the underlying facts.

    Professional sports live off taxpayer subsidies, but so do a lot of people. There would be no airlines if taxpayers didn’t provide them with airports, no trucking companies if taxpayers didn’t provide them with roads.

  13. Submitted by Bernice Vetsch on 10/06/2010 - 10:16 am.

    But what would Zigi want included in any deal he makes with the city or country??

  14. Submitted by Hiram Foster on 10/06/2010 - 10:39 am.

    “The Twins deal is done, there’s nothing we can do about it now.”

    Personally, and I realize I am being quixotic here, but I would insist that as a part of any Vikings deal, the state should assume the financial burden of the Twins Stadium. It is simply unfair and poor tax policy that Hennepin County taxpayers should assume the entire burden for a facility like the Twins Stadium, and possible Vikings Stadium, when these facilities benefit the state as a whole.

  15. Submitted by Paul Udstrand on 10/06/2010 - 01:16 pm.

    //Professional sports live off taxpayer subsidies, but so do a lot of people. There would be no airlines if taxpayers didn’t provide them with airports, no trucking companies if taxpayers didn’t provide them with roads.

    Yes, but transportation infrastructure is essential to commerce and the economic benefits are widely dispersed. Sports is entertainment, it’s not essential to commerce, and the economic benefits are hugely concentrated in a very small number of pockets. Stadiums are not public infrastructure.

  16. Submitted by Hiram Foster on 10/07/2010 - 06:32 am.

    Life is about more than what is essential, whatever that might be.

  17. Submitted by Paul Udstrand on 10/07/2010 - 09:52 am.

    If we were talking about “life” you’d have a point, but we’re talking about massive public subsidies. Public policy requires some degree of prioritization. The history of publicly funded stadiums is a history of politicians figuring out one way after another to defy known public priorities and deliver subsidies to billionaires.

  18. Submitted by Paul Udstrand on 10/07/2010 - 10:03 am.

    Ya know on another note, I think it’s interesting that we haven’t seen an retail sales tax receipt data from MPLS since the stadium opened. Typically that’s a quick and dirty way to get a handle on the economic impact of any given attraction. For instance when the hockey players were locked out a few years ago we found out that it virtually no impact on local sales with the exception of a handful of bars right next to the arena. Typically data reveals that sales moves from one area of the city to another but doesn’t increase much if at all. If you really wanted to brag about the economic boon of the stadium you would point to increased sales in the city over last year. I don’t know what the data is but I know it exists, and I think it’s interesting that all these pro-stadium numbers crunchers haven’t got hold of it.

  19. Submitted by Paul Udstrand on 10/07/2010 - 10:21 am.

    OK, Mr. Grow you should be ashamed of yourself! I just figured out, and correct me if I’m wrong, these play-off games are not being televised on regular over-the-air television? We built these guys a half billion dollars stadium with $350 million bucks worth of public money and now the public can’t even watch the fricken games on TV unless they pay for cable? And your bragging about the big public benefit? Shame on you sir!

  20. Submitted by Hiram Foster on 10/07/2010 - 10:57 am.

    “If we were talking about “life” you’d have a point, but we’re talking about massive public subsidies.”

    I was talking about life.

  21. Submitted by Hiram Foster on 10/07/2010 - 11:04 am.

    “Public policy requires some degree of prioritization.”

    Sometimes, but not always. There are some things we don’t have a choice about. but talking about priorities in the abstract doesn’t tell us what they should be. And in this case, the money spent on the Twins Stadium wouldn’t have otherwise gone to some other public facility or convenience; it wouldn’t have been collected or spent at all.

    For me, the terms prioritization, restructure, redesign, all that language that Emmer is so fond of, are nothing much more than euphemisms for closing nursing homes and hospitals.

  22. Submitted by Paul Udstrand on 10/07/2010 - 12:08 pm.

    //Sometimes, but not always. There are some things we don’t have a choice about.

    Yes, always. We’re making choices even when choose not to choose but there’s nothing even that abstract about publicly funded stadiums. The Twins stadium was not an accident of history it was a deliberately organized diversions of public resources for a very narrow return. Our elected representatives made a choice to raise $350 million for the Pohlad’s instead of health care or any other legitimate government service. We had choices, the Twins got their stadium while battered women got the street corner.

  23. Submitted by Tony Spadafora on 10/07/2010 - 11:37 pm.

    Hiram…. I was being sarcastic when I said this…. couldn’t you tell by what I wrote after it? “Another Hennepin Co. local option sales tax in the 0.20 – 0.25% range… with another referendum “waiver” of course… and “Metrodome Next” can become a reality for our beloved Vikings.”

  24. Submitted by Hiram Foster on 10/08/2010 - 06:53 am.

    I just don’t spend a lot of time trying to identify sarcasm or irony in postings. Some times I catch it, most of the time I don’t. The same goes for humor. Lacking a sense of humor myself, I rarely respond to it in others.

  25. Submitted by Tara Barenok on 10/08/2010 - 07:49 pm.

    Regarding analysis of city sales tax data:

    The City’s sales taxes are collected by the state revenue department. there is typically an 8-12 week lag in receiving complete information by each type of tax as the collection process completes (returns from vendors filed with payment, review, payment to the City). So the City probably had just the first month worth of data (april) when this report was prepared.

    The third quarter report will probably be released in November, with the same 2 month lag – so likely they will have data through July. A full baseball season’s data will be available in the 4th quarter report, likely released in February 2011.

    I think Mr. Born’s comments in this story are most likely based on a year to date projection based on data thru June or July.

    Another challenge for data analysis at the City level is that the sales tax is collected based on the location of the payee who files vs location of the business. So there isn’t good location information to do some of that tracking.

    Many of the impacts of strikes (NHL) and playoffs (NBA) and moves (state tournaments to mpls from st paul) are based on full season, big picture comparisons. Getting at the more detailed information is possible, but would require more of special effort to add information to the collection data.

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