Category: Minnesota United

Almost exactly one year after Minnesota United had a property-tax break for its new St. Paul stadium vetoed by Gov. Mark Dayton because somebody accidentally wrote “or” instead of “and” in an unrelated part of the bill about paying off the Vikings stadium with bingo-hall proceeds, the team finally got its money Tuesday night, when Dayton signed the bill after the state legislature re-passed it. Now that the team has its $57 million in tax kickbacks, construction is now expected to begin in the next month or two, with the stadium scheduled to open in time for the 2019 season, because soccer stadiums are relatively simple and so don’t take three years to build like, say, NFL stadiums. Still, that’s a year later than it would have opened if some state official had been more careful with their conjunctions (or, I suppose, if United had been willing to build a stadium and pay taxes on it, instead of only being willing to do one or the other).

In unrelated news, the New York Times decided yesterday to get rid of all of its copy editors. The future is truly a wondrous place.

Last May, it looked like the Minnesota United stadium in St. Paul had the full go-ahead, after the state legislature approved a property tax exemption worth an estimated $54 million for the project. But, as it turned out, there was a snag: Whoever wrote the omnibus tax bill it was attached to accidentally put in an “or” instead of an “and” in a description of tax breaks for bingo halls — a typo that would have cost the state $100 million in tax revenue — and so the governor refused to sign it, leaving the MLS team’s tax break in limbo.

There’s nothing stopping the legislature from re-passing the bill this year, of course, so that’s exactly what they’re doing. And as an apology to the team for taking so long, they’re sweetening the deal with an additional $3 million tax break on construction materials as well:

Minnesota United team owners have said the tax exemptions are essential to moving forward with a $150 million stadium in St. Paul, though they’ve also said that they were confident the Legislature would come through. They have denied that the lack of exemptions was a hold-up for starting stadium construction.

That … what? Whoever at the St. Paul Pioneer Press was responsible for editing that paragraph really needs to have done a better job, since saying that tax exemptions are “essential” to moving forward and also not “a hold-up” to moving forward are, well, contradictory. Admittedly, it’s the kind of contradiction that team owners like to put forward — We’re going to build this either way, don’t worry, but if you don’t give us money we can’t build this — but there’s really no need for newspapers to be their enablers, now is there?

Turns out there indeed wasn’t much suspense around the Minnesota legislature’s vote on a full property tax exemption for Minnesota United‘s new stadium in St. Paul: The tax break was rolled into the annual tax bill and easily passed on Sunday. At least the exemption only applies to the stadium itself, not any surrounding development, but even then a Minnesota Public Radio investigation came up with numbers that imply that United’s owners will save $54 million worth of future tax payments via this stroke of the legislative pen.

The new MLS club also got a liquor license approved on the last day of the legislative session, but, interestingly, did not get an exemption from construction sales tax, a common subsidy for many development projects, sports-related and otherwise. (The MPR report gave an estimated value for this of around $3 million.) Gov. Mark Dayton, however, said that just because United isn’t getting the sales tax break now doesn’t mean that it can’t get it later:

As Dayton considers a possible special session, he said in a Monday afternoon news conference that he hoped United officials could see they received most of what they wanted at the Capitol…

While the tax break on construction materials was unapproved, Dayton said United can apply for a sales tax refund under existing state law, an avenue used to build the Saints’ year-old stadium in Lowertown. The law, shared by Coleman’s office Monday, relates to building materials for capital projects of regional significance.

“While the city sought an up-front exemption at the Legislature this session, which is easier from an administrative perspective, the lack of action simply means that contractors can move forward and a refund will be granted on the back end,” Coleman said in a statement.

Okay, sure, the state can just cut United a $3 million check after the stadium is built. But — and I can’t stress this enough — why on earth would it want to? The whole reason for considering the tax breaks in the first place was that United principal owner Bill McGuire claimed that he wouldn’t move ahead with building the stadium without them. (Whether that was true or gamesmanship, we’ll never know at this point, but let’s leave that aside for the moment.) If United starts construction now, it’s not like they can give up halfway if they don’t get their retroactive construction sales tax rebate check — they need to decide if they’re going to move forward under the current law, and if they do, giving them an extra $3 million is just a gift, not a negotiated agreement in order to get a soccer team.

Taken along with Florida’s crazy new stadium-subsidy system, this is an extremely worrisome trend: Suddenly, not only are sports team owners getting public cash because they’re driving a hard bargain, but just because, you know, they asked, and they’re nice guys who built something, so don’t they deserve not to pay taxes on it like normal people? Taken to its logical extreme, it’s probably only a matter of time before Tom Ricketts demands retroactive tax rebates on all the economic activity that Wrigley Field has brought to Chicago over the last century — oh crap, I just gave him an idea, didn’t I? Quick, somebody go distract him with pictures of baby pandas or something until this post has expired from his Twitter feed.

The Minnesota state senate voted 37-30 yesterday to approve a full property tax exemption for St. Paul’s proposed Minnesota United stadium, without once attempting to calculate how much this tax break will be worth to the team owners. Or at least that’s what all available evidence is showing — for starters, here’s the entire text of the stadium-related portion of the bill they voted on:

Section 14. Soccer stadium; property tax exemption; special assessment. Provides that any real or personal property acquired, owned, leased, controlled, used, or occupied by the city of St Paul for the primary purpose of providing a stadium for a Major League Soccer team is exempt from property tax. The properties are still subject to special assessments. Any real or property subject to a lease or use agreement between the city and another person for uses related to the purpose of the operation of the stadium and related parking facilities are also exempt regardless of the length of the lease or use agreement.  This property tax exemption does not apply to any real property that is leased for residential, business, or commercial development or any other purpose not necessary to the operation of the stadium. Effective upon approval by the St. Paul City Council.

Also, the Minnesota senate has only posted partial video of the hearing, but there’s no discussion there of an actual price tag on the value of the tax breaks, or any talk about the stadium at all. (Yes, I actually listened through 38 minutes of an omnibus tax bill hearing to determine this, so you don’t have to. I’ll be hitting the Advil early today.) So our best guess is still the $57 million in present value that Minnesota Public Radio estimated back in March.

Two notes on this: First off, yes, a tax break is still a public cost even if it’s on land that’s not currently paying taxes. For United’s owners, paying $57 million less in future taxes is exactly the same as getting $57 million in cash from taxpayers to help pay for a stadium. (Well, slightly different in that they’d be getting payments over time instead of all at once, but they can always just borrow $57 million from a bank and pay it off with the future tax savings — that’s precisely what “present value” means.) United owner Bill McGuire has been saying that there’s no way he can afford to build a stadium without the tax exemption, and whether you believe him or not, clearly it’s worth a significant pile of cash if he’s threatening to walk away from the stadium plan without it.

Second, it’s worth noting that this same senate voted 61-4 to approve a ban on tax breaks for a Minneapolis soccer stadium last year. The difference? Minneapolis mayor Betsy Hodges was opposed to it, while St. Paul mayor Chris Coleman is in favor of it. You can pretty much ignore most of the arguments made for or against the tax exemption on the grounds of what’s good policy or how much it’d cost whom: This comes down to “the mayor wants it, so the senate isn’t going to argue with him.” It’s possible things will be different when the state house votes — both Coleman and the senate leadership are Democrats, and the house is controlled by Republicans — but given past history, I wouldn’t hold my breath.

The Minnesota state senate is set to vote today on whether to give a full property tax exemption to Minnesota United‘s new stadium project, writes the St. Paul Pioneer Press:

On Tuesday, the Senate Tax Committee passed a tax-related measure, including property tax exemptions for the pro soccer team’s proposed stadium at the intersection of Interstate 94 and Snelling Avenue.

“That’s great news,” bill sponsor, Sen. Sandy Pappas, told the Pioneer Press. “We certainly expected this. The soccer stadium is very popular on both sides of the aisle, and we think that as long as we have tax bills that are moving in the Senate, we have a really good chance to be in the final bill.”

The Pioneer Press goes on to add that a related proposal to exempt the stadium from construction sales taxes is expected to be added in conference committee once both houses of the state legislature have voted, and has a lot more to say about the plan … with the notable exception of how much these tax breaks would actually cost, which seems like an important detail. For the record, the best estimate so far is that the tax breaks would cost about $57 million in present value ($54 million in property tax breaks, $3 million in construction sales tax breaks), which for a $150 million stadium would be a decent chunk of change. We’ll see if any updated numbers emerge during today’s senate vote, but I’m not holding my breath.

The St. Paul city council voted 5-2 yesterday to approve $18.4 million in spending on infrastructure for a new Minnesota United soccer stadium, as was revealed last week would be the city’s price tag. United’s owners are now just awaiting state legislative approval of a full exemption from property taxes and construction sales taxes, and then they say they’ll begin construction.

So what exactly did the St. Paul council agree to? There are a whole lot of documents, but the most interesting one is the “playing and use agreement,” which is effectively the team’s lease. It says, in short:

• United gets all rights to the stadium and “appurtenant” areas. (Whoever wrote this document really likes the word “appurtenant.” As they should, because it’s an awesome word.)
• United will pay the city $556,623.96 a year in rent, which is the exact amount that the city will have to pay the regional Met Council in rent for its land.
• The city can use the stadium for high school sports and stuff, unless United doesn’t want to let it.
• United will be responsible for all operations, maintenance, and capital improvement costs to the stadium. The city gets to maintain the sewers, because that’s why they’re paid the big bucks.

This answers most of the remaining questions about the deal, and is mostly reassuring — you could argue that the city might have wanted to shop around to see if someone else would pay more for development rights to the land, but at least the public’s costs do seem to genuinely be capped at $18 million. Plus whatever the property tax and construction sales tax break would be worth, of course — previous estimates of the property tax break have put it at around $2.4 million a year, rising over time, which would come to around $54 million in present value, while the construction sales tax break would add about another $3 million.

So the final total public subsidy looks to be $93 million — on a stadium that will cost $150 million to build. Which just goes to show that there’s a big difference between mostly reassuring and all reassuring.