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Vikings stadium backup-funding controversy: General funds or not?

Foes of the funding plan say it uses “forbidden” general funds. No way, say Gov. Dayton’s folks.

At the time the Viking stadium bill was approved last year, Gov. Dayton assured lawmakers that none of the stadium funding would come from the state's general fund.
MinnPost photo by Terry Gydesen

Toward the end of the legislation session, Gov. Mark Dayton coyly announced that he had a secret plan as a backup to cover the public’s share of the Vikings stadium.

By session’s end, that plan turned out to be using one-time funds from a special cigarette tax and ongoing funds created by closing a corporate income tax loophole.

The plan was quietly slipped through a late-session tax conference committee, meaning it wasn’t vetted — and picked apart — in the typical legislative committee process.  

At least some Republicans are now saying that the new plan means that the governor “lied” about how funds would be raised for a new stadium.

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Sen. Sean Nienow, R-Cambridge, long has been the most adamant foe of the stadium funding plan — a plan that initially called for the public portion to be paid through proceeds from electronic pulltabs and bingo.  For the time being, of course,  revenue from those games has fallen far short of projections, a scenario that created the need to come up with “backup’’ measures.

“If they were going to raise those taxes, then it’s money they were going to spend on schools and health care, but now they can’t because it will be dedicated to make Zygi [Vikings owner Zygi Wilf] richer for the next 30 years. It’s absolutely general-fund money. It’s dedicated to pay off the stadium, and that means the governor lied.’’

To support his claim, Nienow uses a letter Dayton wrote to former Sen. Ray Vandeveer a year ago when Vandeveer, who retired following the 2012 session, was chairman of the government operations committee. Dayton was urging Vandeveer to pass the “people’s stadium’’ plan and the charitable funding method of paying for it.

Wrote Dayton: “Building a people’s stadium would provide up to 8000 construction jobs and an additional 5000 jobs among suppliers during its three years of construction, employ many more through its ongoing operations and keep the Minnesota Vikings here for the next 30 years — all without using a single dollar of General Fund tax revenues.’’

No general fund revenues?

Hmmm.

Lies? No way, staff says

Did Dayton lie?

Not even close, say members of his administration. The new funding plans — which are to be in place until e-gaming (if ever) starts to pay off to the state in ways the industry vowed — stay within the guidelines that Dayton always established, according to Myron Frans, the state’s revenue commissioner.

Frans, it should be noted, was among those behind the “secret plan’’ Dayton was teasing reporters about.

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frans photo
MinnPost photo by James Nord
Revenue commissioner Myron Frans explained the new stadium funding mechanism to the tax conference committee.

“We promised not to use current money from the general fund, and we couldn’t create a new tax,’’ Frans said. “Those were the constraints.’’

But isn’t raising the tax $1.60 on a pack of cigarettes “a new tax,’’ and isn’t closing an existing legal loophole virtually the same as creating a new tax?

Frans and members of the governor’s staff say no.

Much like  the electronic pulltabs were an “extension’’ of charitable gambling, the cigarette tax is simply an increase in an existing tax, and the closing of a loophole also is merely an “overdue adjustment’’ in collection of corporate income taxes, they argue.

The cigarette tax may be the least understood.

This will be one-time money — Frans predicts about $26.5 million — collected from cigarettes currently in stock in stores and warehouses across the state starting July 1. Vendors will be receiving letters from the state in a few days, calling for an inventory of existing stock. Spot-checks will follow to assure that inventory numbers being reported are in line with actual current stock.

Funds from the “tobacco floor stock tax’’ will be used for the stadium reserve fund, which is lagging because of the poor performance of the e-games.

When current cigarette supplies are sold, tax revenue from new cigarette supplies will go into the general fund.

That puts the revenue from the closing of the corporate income-tax loophole into play for backing up the state’s $398 portion of the billion-dollar stadium.

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That loophole allowed Minnesota companies to avoid corporate income taxes by shifting parts of their Minnesota sales to out-of-state subsidiaries. For example, Company A could sell $15 million worth of snowmobiles in Fergus Falls but claim that $12 million of those sales actually occurred at a subsidiary in South Dakota, thus claiming the smaller amount as Minnesota income.

Closing that loophole, Frans said, will generate $26 million in additional corporate income tax revenue this year and $20 million per year in future years. It also will make the system more fair, he said.

All, or part, of those funds will be used to back up the proceeds from e-gaming, which supporters still claim eventually will perform as promised. If that would happen, if e-pulltabs and e-bingo would achieve promised amounts, the “new’’ corporate income tax would revert to the general fund.

November forecast next test

The first indication of how these new numbers are working out will show up in November’s economic forecast.

What all of these twists and turns in finding funds for the Vikings stadium shows again is how transparent — and workable — funding for the Twins’ Target Field is.

Recall, the public’s portion of the baseball park is being paid for with a sales tax in Hennepin County of 0.15 per cent, or roughly three cents on $20. The controversy surrounding that arrangment was that the Legislature, in 2006,  allowed the county to raise the sales tax without a referendum.

Whether or not you approve of the tax or the avoidance of the referendum, the payment system has been transparent and workable.

The county not only is paying its annual $20 million for reducing the public’s $390 million  debt on the stadium, but there also has been $31.3 million in pre-payments. By pre-paying, the county claims it’s already “saved”  nearly $53 million in interest payments. Another $10 million pre-payment is expected this year. The baseball field has generated about $15 million a year in sales taxes, including $4 million in annual Minneapolis entertainment taxes. (Entertainment taxes were not collected on tickets sold at the Metrodome.)

Additionally, Hennepin County libraries have received $7 million from the tax for expanded hours of operation, and $11 million has been invested in youth sports facilities.

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But over the years, the state has never been able to come up with such a simple funding mechanism for a stadium.

For example, in 2011, St. Paul Mayor Chris Coleman proposed a statewide two-cent-per-drink tax that would have funded a Vikings stadium in Minneapolis.

That idea was shot down by a number of players and interests. The powerful liquor lobby opposed it. Legislators who “Just say no’’ to all tax increases scoffed at it. Minneapolis Mayor R.T. Rybak opposed it because the plan including moving the Timberwolves from Minneapolis to St. Paul.

Instead of transparency, state pols tend to look for “free’’ money.  They never find it.  

Rather than clarity, there are semantics, “secret plans’’ and, ultimately, a lot of finger-pointing.