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November 28, 2011
Vikings stadium plan: We keep taxes, eat them too
The Minnesota Vikings owners announced their latest stadium funding plan yesterday, and this time left nothing in the hands of nasty journalists, doing so via a series of newspaper ads laying out their proposal just as they wanted to. Which then had to be reported on by journalists so we could all read about it on the web, because what's a "newspaper"?
In any case, the Vikings are calling for what could be called the mother of all TIFs: funneling every last cent of tax money paid by anyone remotely associated with the team — whether it be income taxes paid by players or team employees or sales taxes on anything purchased by fans at the stadium — back to the team to pay off its stadium costs. The ad dubbed this the "purely purple financing package" and the "but-for" solution because "All the money would come from sources that would not exist 'but for' the Vikings being in Minnesota."
Except, of course, that this is tax money that the state collects currently, and much of which it would continue to collect even if the Vikings were to leave and fans had to spend their money on mine and cave tours or something. (The Minneapolis Star Tribune, to its credit biting the hand that feeds its print ad department, noted that "No mention is made in the advertisements, which ran in the Star Tribune and the Pioneer Press, of how the state would make up the revenue it would lose if it accepts the team's plan.") And that by "purely purple" the team doesn't actually mean "purely" in the sense of being pure: The state would still have to come up with another $400 million in non-Vikings-related tax money to make the stadium deal happen.
State-designated "let's go build a stadium!" guy Ted Mondale immediately endorsed the Vikings' plan, saying, "It could work," and "I think they have a legitimate argument." What matters, though, is what the state legislature thinks of the Vikings' argument, something we should find out tomorrow at the first of two scheduled "informational hearings" ... or actually, probably not until a week from tomorrow, since the first hearing is supposed to only focus on where to build a stadium, not how to pay for it. Because why worry about where to get a horse until you've picked out your cart?
Yes if the Vikings don't get a stadium all the money people currently spend on the Vikings will disappear like magic. Poof!
I hear Target and Best Buy already have a 0.5% pay cut scheduled for MN, ND, and SD employees if the Vikings don't get a stadium. 3M, Cargill, General Dynamics, Hormell, Honeywell and others have also pledged salary reductions for MN employees if the Vikings leave.
The businesses have stated that if the Vikings are not here they know their employees will not use the money so they might as well take it back instead of letting it be used as kindling in fire places. They know that none of their employees to will spend that money on other things like bowling, or going to hockey games, or attending movies, or hunting, so why not just keep it!
Posted by Joshua Northey on November 28, 2011 09:57 AM
Not that I agree with the plan, but I do not believe there is a one to one relationship on the TIF spending. People who spend money going to games might spend more locally, but they might also save it for vacations outside of MN. Maybe that is only 5-10% of the funds but there is a loss. Also, there is a value to the city having a team. Whether it is the community pride or watercooler talk, there is a value. There is also some economic impact. The 8 games on TV with outside crews filming. The other teams spending and hotel nights.
Again no where close to one for one, but there is some economic value.
Posted by Bigjer on November 28, 2011 11:49 AM
Not that I agree with the plan, but I do not believe there is a one to one relationship on the TIF spending. People who spend money going to games might spend more locally, but they might also save it for vacations outside of MN. Maybe that is only 5-10% of the funds but there is a loss. Also, there is a value to the city having a team. Whether it is the community pride or watercooler talk, there is a value. There is also some economic impact. The 8 games on TV with outside crews filming. The other teams spending and hotel nights.
Again no where close to one for one, but there is some economic value.
Posted by Bigjer on November 28, 2011 11:49 AM
So let's see....they want all the tax money their activity generates--they just don't see why THEY should have to pay any taxes themselves. Notice the conspicuous absence of any mention of state income taxes paid by the team itself? Am I the only one who finds it even a little ironic that the team wants money from a state that it shields its income from for taxation?
Posted by Bob on November 28, 2011 12:13 PM
Bigjer-
If every activity that provided some economic value to the state deserved a subsidy in exchange for that value the state's economy would implode.
Say I have a convenience store. I say, "If you don't help me build a new one I will close it down, my current building is too expensive. If you don't help me some portion of that money will probably be spent out of the state or whatever. Some travelers will get gas the next town over."
But that is no reason to subsidize a new facility for me. Much less at 70%!
It is better to have the Vikings here than not, but it isn't even close to $700 million dollars better, and even if it was letting businesses hold the government hostage for handouts is horrible policy. It gets you nowhere.
Posted by Joshua Northey on November 28, 2011 01:47 PM
@Joshua - I agree with most of what you said in your last statement (and thoroughly enjoyed the first) but in all fairness, cut Bigjer a break. He's playing a bit of devil's advocate here and making some good points.
Bottom line - sports spending might keep some spending in city/state. Not to the tune of billions of dollars in subsidies, but something and that should be acknowledged and *maybe* supported.
The city shouldn't go into debt for this. The state shouldn't slash budgets to make it happen.
But I believe even Neil (or someone Neil has quoted here) has said that there's a 25/75 benefit to this type of expenditure with 25 being to the immediate area and the rest going to the team.
Andrew T-
First off, the stadium finance world is so screwed up I honestly think the "devil's advocate" position is that the stadiums should get any public money whatsoever. The debate should be whether or not the public or team is going to pay for the transportation and infrastructure improvements (just like any other developer), not whether the team is going to bother to chip in anything substantial for its new facility.
Most of this is because of opportunity cost. It is not that the state shouldn't subsidize certain types of economic activity. It should. But football/stadiums are a really really poor choice from an economic development perspective.
If you want to drop 200 or 300 or 700+! million dollars on an economic development project a stadium should be far down the list. There simply isn't enough good employment created, enough value added, or enough money flowing into the state. Too much of the money is just one time spending on a facility that has limited use once it is constructed.
Stadiums are good at relocating spending within a metro area. I could see the rationale for a small jurisdiction spending that kind of cash to steal the spending from a neighboring jurisdiction, but A) that is part of a dreaded "race to the bottom" and B) It is probably prohibitively expensive on a scale that makes sense (since the benefits are in such a small area).
It definitely doesn't make sense for something as large as a state or large county to fund a stadium because almost all of the spending they will be relocating is spending that already occurs in their borders. They are spending subsidy to "steal" from themselves.
The real litmus test here is to ask what kind of stadium Wilf and his customers would be willing to pay for without the help of their neighbors, and I think you would find the answer is they would rather stay in the Metrodome because the improvement isn't worth the cost to them unless other people are paying most of the bill.
Posted by Joshua Northey on November 29, 2011 10:16 AM
@ Bigjer - Pfffff. 5 to 10% loss is beyond a generous estimation. Teams only add a little value to a city, be it a small number of tourists & modest out of town season ticket holders, again nothing huge.
Community pride is overrated, it's to sell a bunch of NFL merchandise from a few retailers where most of the money goes into NFL's pockets, and all ticket & gameday related spending is just reappropriated spending. You're talking 8 to maybe 12 measly games a year. And I wouldn't waste $700M+ so a few stupid hotels could be booked up. Minimal. And as if hotels haven't figured out how to nickel & dime everyone to death to make up costs anyway.
To see companies punish employees and tell them they deserve less money because there's not a team to spend it on is nothing but blasphemy. Who the hell are they to say how to spend MY paycheck? I would definitely look into relocation out of spite.
Posted by Mark on November 29, 2011 11:55 AM
"..because the improvement isn't worth the cost to them unless other people are paying most of the bill."
And that sums up every single sports stadium in modern history. A new stadium is great only if someone else is suckered into paying for it.
The Skydome set up a horrible, horrible precedent. Another problem is nobody wants to build a modest, practical cost-effective stadium without all the stupid technology crap, bells and whistles and excessive design & construction materials. I say leave the frivolity to the luxury suites.
Posted by Mark on November 29, 2011 12:03 PM
I'd say 5-10% is a reasonable guesstimate of the amount of "new" spending generated by a football team, depending on how big a circle you draw. (If you're just looking at Minneapolis you can count spending siphoned off from St. Paul, if the whole state only money that would otherwise go to North Dakota, etc.)
Still, that's a relatively small amount of money: Given the Vikings' estimates, we're talking $1-2 million a year. If Wilf were asking for that level of subsidy, I think we can all agree it would be a very different conversation. But there's no way to justify $20 million a year in subsidies on "but-for" grounds.
Posted by Neil deMause on November 29, 2011 12:14 PM
If it is such a great plan(but for),why doesn't the vikings borrow from the NFL.They have deep pockets w a 10 billion profit each year.
Why,because they know that its not a sustaining plan.
Love the "but for" name they have given their plan.
As taxpayers,we know what the "butt is for",we are about to get hosed,bend over.
In MN,we had to balance the state budget by borrowing against the schools education fund and credit.
What happens when we lose more Federal funding to the state?
The Fed. gov has already started to do this.
Just announced today-state heating assistance is being cut off in a couple of weeks.Minneapolis schools are cutting their budget by 61 million this year and laying off 2,000.
Perhaps granny can keep warm by staying at the stadium since they are there only 10 times a year.F@#$ the NFL.
PS. Ziggy is involved in New Jersey's longest court case involving 10 million in fraud.