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Stadium funding backup plan entails one-time revenue, ongoing tax money

The plan involves using one-time tobacco revenue and funds from closing a corporate tax loophole.

Revenue Commissioner Myron Frans on Thursday outlined the governor’s solution to the stadium funding issue to the Taxes Conference Committee.
MinnPost photo by James Nord

Key DFL lawmakers are close to agreeing on a backup plan to prop up underperforming charitable-gaming returns and fund the state’s $348 million share of the Vikings stadium.

They plan to use both one-time and ongoing tax proceeds.

The backup measure would fill the current shortfall in the state’s stadium reserve account with one-time tobacco revenue and provide an ongoing source of funding, should charitable gaming not pick up in the way officials and lawmakers expect.

In order to ensure long-term solvency, the governor’s plan would close a corporate tax loophole and direct roughly $20 million a year toward paying the state’s stadium bonds if the main revenue sources fail.

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Department of Revenue Commissioner Myron Frans on Thursday outlined the governor’s solution to the funding issue to the Taxes Conference Committee. That group is hashing out more than $2 billion in tax hikes to fund the spending priorities that DFLers have outlined this session.

Lawmakers there accepted the framework of Dayton’s plan but left some of the details hanging.

The governor’s proposal would increase the cigarette tax from $1.23 per pack to $2.52 per pack – a larger jump than the 94-cent target he’d earlier proposed — and would require retailers and wholesalers to make a one-time payment on existing inventory that would funnel $24.5 million into the stadium reserve account, solving the shortfall there.

Then, if electronic pulltabs or linked bingo games fail to produce the revenue necessary to fund the state’s appropriation bonds for the stadium, the commissioner of Minnesota Management and Budget would have the authority to direct revenue from a closed corporate income tax loophole toward the stadium.

Frans said that closing the “tax avoidance loophole” would prohibit the current legal practice of some Minnesota companies that avoid paying full corporate income taxes on sales they make by shielding themselves through a subsidiary in a different state. He said more than 20 states have similar regulations in effect.

That measure is projected to bring in $26 million in the first year and roughly $20 million annually after that, although those totals could change as the conference committee works out the specifics of their compromise.

Frans said with the new contingency plan, which would also be backed up by current taxes on suites and memorabilia if for some reason it doesn’t perform, officials are ready to close the book on the shaky stadium funding issue.

“We believe it’s reliable, it’s consistent,” he said.

The governor and the House and Senate had already proposed closing the loophole in their first budget plans, Frans said, so this proposal would simply direct that money toward the stadium rather than the general fund if it’s necessary to plug a shortfall. Otherwise, if no problems arise, the money would go toward other state expenditures.

“It’s hopeful we’ll never need to use this other mechanism,” he said.

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Republican Senate leaders, who said they’d only seen the basics of the proposal, criticized it for diverting general state money toward the Vikings stadium. Senate Majority Leader Tom Bakk said he was OK with the proposal shortly after Frans outlined it to the committee.