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April 21, 2006

MN house committee gives Twins get-out-of-vote-free card

Last night's Minnesota state house hearing, ostensibly for opponents of the Twins stadium deal, began amidst tailgating and chants by season-ticket holders bused in and outfitted with Twins caps by team management. Three hours later, it ended with the house taxes committee allowing a stadium sales tax hike to move forward without a local referendum, as would otherwise have been required by Minnesota law. Twins president Jerry Bell called the vote "a huge step forward" that "provides us momentum."

In between, 33 Minnesota residents spoke out against the plan to help fund a new Twins stadium with $373 million in sales-tax money. Referendum campaign leader Laura Lehmann noted that new school buildings need approval by referendum, while Minneapolis resident John Zimmerman countered a guy who showed up with a jar of pennies by estimating that that "three pennies on each $20" sales-tax hike would add up to $600 per family over 30 years. A few stadium supporters also spoke - their official time to testify had been the previous day - including former Twins outfielder Tony Oliva, who declared, "I come from Cuba. Taxes for me are no big thing." Does that mean he'd also endorse public ownership?

In related news, the Forbes magazine estimates of baseball team value were released yesterday, and the Twins' value had gone up 21% since last year, from $178 million to $216 million. While stadium-subsidy opponents argued that this shows that Twins owner Carl Pohlad can afford to pay for his own stadium, Forbes associate editor Kurt Badenhausen argued that "although the Twins have a small profit, in order to keep up with the rest of Major League Baseball, they need a new stadium. The Twins have one of the worst stadium deals in all of baseball."

Badenhausen is half-right: The Twins' lease at the Metrodome is indeed lousy for the team by baseball industry standards, with the team's public landlords collecting half of gross concessions revenues, one-quarter of stadium ad revenue, and 100% of parking fees. But that should make the Twins more willing to cough up their own money for a stadium, not less: They get so little revenue from the Metrodome that the marginal revenue from a new stadium - the difference between what they earn now and what they'd bring in from a new home - would be enormous, making a privately funded stadium more feasible.

That Pohlad is instead offering to kick in only about one-quarter of the $522 million price tag - and most of that "private contribution" would come from naming-rights fees on the publicly owned stadium - shows both the degree to which he's a cantankerous old coot, and that he knows that the local newspaper are never going to try explaining "marginal revenue" when there's a jar of pennies to write about.


Does anybody remember the driving rain and hail storm that was isolated over south Bloomington during the hearing? Perhaps a higher power was sending a message about stadium funding

The weather would have meant a rain delay. We've played outdoor ball for 20 years in the old Met and the St. Paul Saints play outdoor ball all the time but given the changability of Minnesota weather, I think the Twins will miss having the dome, especially during summer thunderstorms, early and late snow and cold events.

I have another questions about how the county is financing the stadium? If construction starts next year, I'm assuming the contractors and subcontractors will want money up front. The county is counting on tax revenues to finance their end of the bargain. What happens if the following happens:

Cost overuns: It happens with projects like this. Even my kitchen remodel suffered from serious scope creep. Does the county cover this or do the Twins pick up the tab.

Tax revenues not meeting expectations: Economy goes up and down. With high fuel prices, people may cut back shopping or traveling. What happens if the tax revenue doesn't meet expectations?

The numbers $300 plus dollars per county resident assumes the debt for the stadium is spread out per resident for the county that is financing the stadium. Of course, people travel and will spend money in Hennepin County but the assumption is tax revenues can't meet the financial committment, ultimately, the county is on the hook and its decisions to reallocate resources or to increase tax revenues to meet this new obligation will fall on the residents of Hennepin County.

I've resigned myself to the fact that the bill will pass and construction will start next year. I hope that Hennepin County hasn't bitten off more than it can chew.

Posted by Mark on April 22, 2006 08:09 AM

Cost overruns will be covered by the team (ostensibly, that's why they are also controlling the design process).

As for tax revenue expectations, it's my understanding that they're using a very conservative estimate (and a generous "coverage ratio" on their bond debt) to get good better bond ratings. Even if the economy stagnates, they should have no trouble paying it off in time, and will likely retire the debt early.

The plan is actually fairly sound (the lack of a roof should only be an occasional annoyance), but like Neil said, I think a lot of people still wish Pohlad would put up more dough, or else the investing public should receive some sort of direct return. And given the fact that our Governor and House are both aligned with the Taxpayer's League these days, it's disappointing we can't get a similar tax raised for lower-profile causes such as schools, health care, etc.

Posted by spycake on April 25, 2006 04:27 PM

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