Vikings stadium subsidy passes $1.1 billion

Today’s a day of last-ditch efforts to stop the Minnesota Vikings‘ $1 billion stadium deal, with several groups planning protests. The Minneapolis city council is set to give final approval to the plan in votes tomorrow and Friday.

If the council votes for the stadium, it looks like that’s it: The state legislature granted the stadium an exemption from the Minneapolis law that requires a referendum for sports subsidies over $10 million, and even if it hadn’t, the city’s lawyers insist that the stadium bill would be legal because it’s technically state tax money that the city is diverting for stadium funds. Which might or might not hold up in court, of course, but that doesn’t matter regardless because, hey, state exemption.

Meanwhile, we now have a figure for an additional public subsidy in the deal: $11 million worth of land will be removed from the property tax rolls and handed to the Vikings as part of the project, it was revealed to the council on Monday. If I’m using this correctly, that’s about $460,000 a year in additional taxes the Vikings will get out of paying, which comes to a present value of around $7 million.

That’s just for the new land being exempted from taxes, though; there’s no reason not to charge the Vikings property taxes on the Metrodome land, or on the stadium itself, since it will be primarily a private facility. (Or, if you insist on considering it a “people’s stadium” because the state can hold monster truck rallies there, the city could charge a pro-rated payment in lieu of taxes for the amount of use that goes to football.) State senator John Marty has previously estimated this exemption as being worth $25 million a year, which comes to about $380 million in present value.

Add that to the previously discussed $800 million in public outlay, and that brings the current tally to $1.187 billion. Just in case, you know, you had taken $1.185 billion and bet the under.


18 comments on “Vikings stadium subsidy passes $1.1 billion

  1. Neil,

    Something is amiss in this $1.1 billion calculation.

    The stadium is owned by the government, correct? Even if we say the Vikings own the master lease, doesn’t the owner of the property typically pay property taxes on it? The Vikings are paying rent, after all. I am no property tax expert so I could be wrong here, but I’d imagine that tenants of government buildings don’t pay property taxes.

    You’re saying that the $189 million (in today’s dollars# in operating costs plus $150 million cash contribution amounts to $525 million in today’s dollars. That appears incorrect on its face. I get that the tax revenues that go towards the project could fluctuate, but even if they do how is that a subsidy to the Vikings? Will the state just hand over the extra revenues in cash? And don’t the owners of a building usually pay its operating costs? It seems unfair to count that as a subsidy.

    To me this looks like a $498 million subsidy #$348 million from the state and $150 million from the city) to build the stadium. Otherwise maybe we need to organize a protest here in L.A. for the $40 billion subsidy to high school football teams, rave promoters, CONCACAF and the USOC for what has been spent building, renovating and operating the Los Angeles Coliseum since 1923.

  2. The only reason the state will own the stadium is so that the Vikings don’t have to pay taxes on it. The team will control virtually all revenues from the building – if you want to consider it a public building and exclude foregone property taxes from the equation, then instead we’ll have to start adding up all the naming-rights fees, ad revenue, and other items that the state won’t be receiving one penny of despite it being their building.

    As for the operating costs, you’re counting wrong: I said that $150m cash plus the annual operating costs will add up to about $450m. That’s based on the Star Tribune’s figures for how much the city will put in based on future sales tax receipts – the city actually will give the Vikings more money in cash operating subsidies, yes, if tax receipts come in higher:

    www.fieldofschemes.com/news/archives/2012/05/4936_now_minnesota_g.html

  3. Ben,

    The L.A. Coliseum is publicly owned, but is not supported with tax dollars. L.A. taxpayers have not been subsidizing the operations of the stadium.

    latimesblogs.latimes.com/lanow/2010/12/coliseum-commissioners-vote-unanimosuly-to-lift-moratorium-on-raves.html

  4. Neil,

    I think we’ll have to agree to disagree on the property tax thing. I mean, the government gets whatever revenues come in from non-Vikings events. It is true that ad revenue and naming rights go to the team, but those most of that money is because the Vikings play in the stadium.

    On the operating costs, again it is a government building, so I just don’t see that as a team subsidy. If there was no team the government would pay for the building’s operation and get revenues from non-Vikings events. That appears to be the situation here. The only thing the government is losing out on in the aforementioned naming rights and ad revenue (which, again, are derived largely from the cache that comes from being associated with the Vikings).

    The way I look at it is, what would the government do if there were no Vikings? If the government wanted a Super Bowl, Final Four, U2, Taylor Swift, etc., then they would built a darned nice stadium — probably for about $300-400 million — and then pay to operate it without receiving any property tax revenues. So I see the government paying $100-$200M of the $600-$700 million that goes into making the building luxurious enough to house the Vikings. What the state gets out of it is an NFL team. I get that the Vikings make out very well in this deal, but I don’t buy that the state is somehow getting snookered for $1.1 billion.

  5. I don’t think it’s debatable that if there were no Vikings, there would be no new stadium.

  6. Ben-

    So it wouldn’t be a subsidy to me if I somehow convinced the state to buy my house (exempting it from property taxes) and to pay my utilities and maintenance costs? In exchange I’ll let the state host a party at my house a couple times a year and keep the cover, but I continue to be the primary user. I’ll even pay half the mortgage (the state can cover the other half).

    Lets put the value of the monies I would save at ~$30,000/year. In exchange I am giving up my house for 2 weekends. That isn’t a subsidy? I am getting everything I want (a place to live) and giving up nothing but expenses.

    Now I wouldn’t count the state ownership (and thus property tax exemption) as a subsidy if the state actually played hardball with the lease (i.e. charge the Vikings something close to FMR for the rent (which you could calculate from the expected revenues and the amount of construction which was done specifically for this tenant (all of it)). But there is no chance of that because I am pretty sure the FMR of the rent would be near $100,000,000/year and the Vikings aren’t going anywhere near that figure.

  7. Neil,

    I can’t think of a city that is even close to the size of Minneapolis that has no large stadium. Is the argument that a city should build a stadium on the cheap once and then try to use that stadium no matter how outdated it ever becomes? If so, then I agree with your point. If not, then building a stadium to replace the outdated Metrodome should not be considered 100% team subsidy.

    JN,

    The analogy is so ludicrous I can scarcely respond. Nobody gives a crap if you live in your house or not. The same cannot be said for the Vikings.

  8. Ben you suffer from the same flaw any stadium support suffers from, i.e., that is the governments problem to build a stadium for a football team. If it had some economic impact it would be one thing. But to fool ourselves into believing that we’re doing anything more than subsidizing a TV show for Vikings fans is foolish. In reality, we’re spending all this money in hopes that 65,000 people come on a Sunday to see the Vikings play. Everyone else is watching on TV. As for jobs, I don’t see it helping. WE passed the stadium bill and MLT, General Mills and Medtronic all announced layoffs. Target, of all companies, is hiring in India. Maybe we should have built a bigger stadium?

  9. Minneapolis has several existing large stadiums: TCF Bank Stadium, Target Field and the Metrodome.

  10. Joshua Northey’s big example is right on the money. The only difference is that the owners will be using the stadium for 10 days out of the year. The state of Minnesota will get to use it for 355 days out of every year. Of course you would have to subtract one or two more dates from the state and give them to the Vikings if they win their division, and when the Vikings host the Super Bowl, that will be another two dates given to the NFL from the state since the stadium will also host Super Bowl media day, and add one more if the Minnesota Golden Gophers get the NCAA to give Minneapolis a College Bowl game. That is a whopping 14-15 days out of the year where football will be king in the stadium. Finally, you will likely have Twinsfest hosted at the stadium. That is a whopping 17-18 days of use out of 365 days. That means that the stadium will stand empty 347-348 days out of the year.

    So what else will we put inside the new stadium. I know, baseball. Let’s move the A’s to the Twin Cities and force them to share with the Vikings when the stadium is complete. That would allow the stadium to be used 98 days on the low end and 110 days on the high end including playoff games and the A’s hosting the wild card round. That would mean that the stadium stands empty anywhere between 267-255 days out of the year.

    Then I think we can put in Kings basketball and Coyotes hockey for an additional 81 regular season games. That would be 180 days on the low end and then on the high end we would assume that both teams win their regular season conference and play four seven game series each, that equals 224 days that our new stadium is going to be used. That means that the stadium will stand empty anywhere from 185 to 141 days.

    Of course, I am being stupid because there is no way in hell that the city of Minneapolis and the state of Minnesota will be able to sustain long term use of the stadium. Aside from the Vikings, the Super Bowl, and the NCAA Basketball Tournament (not just the Final Four, but all 130 Men’s and Women’s tournament games), the stadium will have to play host to major bands every weekend for twenty years, and have the national Republican and Democratic Conventions every year for forty years. I think it is safe to say that Governor Dayton and his ilk have bankrupted the state of Minnesota. When everything is said and done, I believe that the price tag for the Stadium will be north of $3 billion. I have taken into account the naming rights, but those will not be enough. What will be enough is if the Vikings cancel all subsidies and agree to pay for the entire stadium and their fair share of taxes.

  11. “Is the argument that a city should build a stadium on the cheap once and then try to use that stadium no matter how outdated it ever becomes? If so, then I agree with your point. If not, then building a stadium to replace the outdated Metrodome should not be considered 100% team subsidy.”

    You’re making the false assumption that NFL stadiums wouldn’t exist if cities didn’t build them. If – like most other businesses – the NFL had to build their own facilities, they would. And they would fill it the rest of the year with other events.

    So, yes, it absolutely is a “100% team subsidy”.

  12. Master Zygi will be worshipped on Friday. The stadium will officially pass on that day.

    No worries, the leaders already have the votes. Master Zygi is a great owner who will be bowed down to.

    SKOL Worship the Vikings.

  13. The way I look at it is, what would the government do if there were no Vikings? If the government wanted a Super Bowl, Final Four, U2, Taylor Swift, etc., then they would built a darned nice stadium

    Aside from a superbowl, isn’t that what the XCel Center is for? And the superbowl, IF it happens in Minnesota, will only happen once. And are people really expecting a final four in the new Vikings stadium?

  14. This thread has become amusing, but nobody (aside from possibly Neil) has even attempted to put forth a logical argument disputing my initial statement that the $1.1 billion figure as a Vikings subsidy is incorrect. What is really happening is that the state and city are paying about $500 million to build a $1 billion stadium when they should probably be paying more like $300 million. That’s it.

  15. It is a government building in name only; if the various government levels had written a check for $500 million to the Vikes and let them build and own the stadium, the government could at least charge property taxes (and let the Vikes try to get non-football revenues too). Unless you really believe that the non-football revenue will be meaningful, MN paid $500 million AND forgoes having the team pay property taxes, all for the privilege of trying to entice non-football tenants. I can’t imagine that the non-football revenue offsets those foregone taxes. It may not a 1.187bill, but you can see it from here. Good luck Minnesotans!

  16. Stadium supporters always forget to add in the interest.
    When someone buys a home, there are laws requiring full disclosure of all loan cost, taxes, etc. including year by year payments due for principal and interest. Full disclosure of stadium costs ought to be required too. Of course, stadium boosters don’t want full disclosure, so they don’t talk about how much interest will be paid.

  17. Actually, once you translate the annual costs over time into present value, the interest usually comes out to be a wash. Sort of like how when you take out a mortgage on a $300,000 home, it really is costing you only $300,000, because the added interest payments are balanced out by the fact that you get to push a lot of your mortgage checks far into the future.

    The reason that the initially reported $189m in stadium operations costs here is worth more like $300m has to do with the provision that the city kicks in more if sales tax receipts go up. It’s a guesstimate, but it’s the best one we have without a crystal ball.

  18. Well, converting the costs of a mortgage – or bond issue – into the present value of the future payments might make accounting sense, but it’s also somewhat misleading. The total payments (including interest) is something that should be considered. Whether you’re responsible for a household budget or a state budget, “20 years of payments of $X” is more meaningful than “20 years of payments with a present value of $Y”.