How Vikings stadium financing became a thing, again, at the Legislature

Gov. Mark Dayton has taken to the road to pitch for several of his core issues. In the last two weeks, the DFL governor has said he wants the Legislature to send an additional $138 million to the state’s school districts; he’s stood with a farm family to argue again to let Minnesotans buy into Minnesota Care; and he’s argued for stricter gun laws alongside high school students who attended the “March for Our Lives” protest in Washington.

And, last but not least, he’s put his foot down firmly against any attempt to use reserve funds set aside for the Vikings stadium to build three centers for military veterans needing critical care.

Wait, did someone say Vikings stadium?

No, one of these things does not look like the other, given that there are likely few among Dayton’s DFL base who would stand with the governor to defend anything related to U.S. Bank Stadium and the wishes of the Vikings — especially over veterans needing end-of-life care.

But Dayton has been adamant against a plan by Republicans in the Minnesota House to use $26 million from a reserve fund — established in case revenues for the state’s share of the debt on U.S. Bank Stadium ever came up short — to build the veterans homes. The state’s share of the stadium project is funded by proceeds from electronic pull tabs and a corporate tax.

“Just, no. It’s not gonna happen,” the governor said last week. “I’m not going to muck around.”

Dayton: supportive of project, not the method of financing

While Dayton said he supports construction of the three veterans homes — which would be located in in Preston, Montevideo and Bemidji — he said money should come from the state bonding bill, not from the stadium reserves.

He even accused Rep. Sarah Anderson, R-Plymouth, of claiming falsely that he opposes the homes. “That’s untruthful and she knows it,” Dayton said at a press conference last week. Then Dayton, a former state auditor, tried to parse what constitutes an adequate reserve fund and the difference between budgeting on actual reserves rather than projected reserves.

Little of that, however, is likely to make much headway with the veterans organizations that favor the projects. The United Veterans Legislative Council of Minnesota even found a nexus between use of the reserves and care for veterans. Since VFW and American Legion halls are a big contributor to e-pulltab spending, which funds the state’s share of the stadium costs, using the money for vets “fits well within the UVLC’s mission,” wrote Jerry Kyser, the group’s chairman.

Blame the e-pulltab boom?

Anderson denies making any accusations about the governor’s opposition to veterans homes, though Republicans did seem to relish what politicians like to call the “optics” of Dayton’s position on the issue. “The Vikings have a home the state of Minnesota provided to them; Maybe it’s time we start looking at the veterans,” Rep. Bob Dettmer, R-Forest Lake, said during a meeting of the State Government Finance Committee last week. 

During the committee meeting, legislative finance staff went through a short history of stadium legislation and the somewhat complex and once controversial financing scheme for U.S. Bank Stadium. While revenue from e-pulltabs were thought at first to be a good source for stadium debt repayment, they underperformed in the early years after they were approved. That forced the state to make changes to the corporate income tax to produce more revenue for stadium debt repayment, which resulted in an additional $20 million a year.

Lately, however, e-pulltabs have increased in popularity, causing revenue to increase. According to the state Gambling Control Board, sales of e-pulltabs are up 500 percent in the last two years alone.

There is also the fact that the state has been fronting the city of Minneapolis for its share of the stadium in the early years in order to allow the city to repay convention center borrowing. But that ends in 2020, after which the city will start paying its debt obligation on the Vikings stadium with sales tax revenue, and will even repay the state for those early year payments, according to an analysis by House committee staff.

House staff also noted that the stadium debt is a general obligation of the state; the building was not funded with revenue bonds that are directly tied to stadium tax collections. And while the e-pulltabs and the corporate income tax revenue are intended to pay for the state’s share of the project, there’s no legal obligation for those proceeds to be used for that purpose. In other words, if those revenue sources don’t produce enough money, general state taxes pick up the slack.

How much is enough for the reserve fund?

Stadium legislation created a reserve fund, but left it to future Legislatures and governors to argue over how much is enough. In a letter to legislative leaders from earlier this month, Minnesota Management and Budget Commission Myron Frans wrote that there should be one year of expenditures in reserve, or $42 million. The account currently has $27 million.

And while Frans acknowledges that forecasts show the balance of the reserve fund growing to nearly $40 million this fiscal year, more than $57 million next year and $79 million in 2020, he said lawmakers shouldn’t appropriate based on projections.

Or as Dayton put it: “What he is saying is let’s be conservative, let’s be prudent and let’s set a floor of $42 million. If the Legislature wants to come back in January with actual dollars, that would be time to talk about whether there are other uses for it.”

The Vikings support Dayton’s position. In a letter to Anderson, Vikings Executive Vice President Lester Bagley wrote that is premature to spend the reserves, arguing that in addition to being there to make up for shortfalls in debt-repayment revenues, it could be used to prepay or refinance stadium debt at an overall savings to taxpayers.

“In the short time since the stadium legislation was passed there were times revenues came under projections, and though they are currently outperforming estimates, we believe it is too early to make long-term assumptions about the fund,” he wrote.

Frans is also concerned that the GOP plan underestimates the full cost of the veterans homes, which he said are closer to $75 million than $30 million, even if the locals chip in land and other financial help. Under a federal program, the state’s must come up with 35 percent of the cost.

For her part, Anderson said she thinks the reserve should only hold one-year’s worth of state debt obligation, but not enough to cover Minneapolis’ share and other expenditures in the stadium legislation, which also includes money for St. Paul’s Saints stadium and compulsive gambling treatment. She also noted that appropriating money based on projections of revenue rather than actual collections is how the state budgets.

An issue for 2019?

During the State Government Finance Committee hearing, which was little more than a means for Republicans to make their case for using the reserve fund, Democrats mostly held their tongues. Rep. Liz Olson, DFL-Duluth, said Democrats support veteran home construction and simply wondered what the point of the meeting was, since legislation to that effect had already passed the House.

By the time the meeting ended, Senate Republicans had released their bonding bill, which proposed borrowing $32 million for the veterans homes.

Anderson would still prefer the state to pay for its portion of the projects in cash rather than borrowing, but both methods are still in the mix as lawmakers work out the details of the bonding bill and the omnibus supplemental budget bill, which both currently contain money for veterans.

Yet should the bonding method prevail, next year’s legislative session will certainly look at stadium reserves, which the state estimates will reach $120 million by mid-2021. And there will be no shortage of people with projects and causes with ideas for how to spend the money.