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.
I have talked to people who are in the “know” , most of them believe since the money isn’t coming out of the state budget the state politicians will vote in favor of the team. Moreover, the city of St. Paul wants this 25 acre dump to be cleaned up. They have tried everything to change to no avail in my opinion this area will change forever. As of today the city will spend $18.4 million of the $57 million on new roads and sewers, not a bad idea considering the area is so downtrodden. The neighborhood around the 25 acres seems to be a solid shape it’s this old bus barn land bringing the area down.
When the Twins got their county tax hike money, it was the same argument in the state legislature: “Hey, it’s not our money, whatever.” But of course, the senate shot down a United property tax break when it was for Minneapolis, and Hodges opposed it. So I’m not sure this is really about standing on consistent principles.
Also, to be clear: The $18.4m in St. Paul infrastructure spending is *on top of* the $57m in tax breaks, not part of it. Two different things.
I have never been to Minnesota, but if a particular area is a dump it is better to spend money and put it to use then leave it as is. Does it always mean a Sports Stadium is the best investment? Of course not. Hudson Yards turned out to be more valuable then the proposed Jets Stadium. But each project should be judged on its own merits.
I’m more curious about the other terms of the deal and eventual lease. If this is the only subsidy, then it’s not too bad of a deal. But with these kind of deals the team’s always seem to come back for more….and more and more and more. (renovation subsidies, building management fees, ticket sales guarantees, reduction of sales taxes on game day revenue, subsidy for operating costs, “top-tier” clauses, etc., subsidy for training facility, etc., etc., etc.)
“For United’s owners, paying $57 million less in future taxes is exactly the same as getting $57 million in cash from taxpayers”
Certainly I think if somebody wants to build a stadium (or arena) and buy a team then that’s a private business deal and there should be no expectation of taxpayer contribution or taxpayer risk. I’m not sure I would lump a tax break in with that. If the stadium is never built then those taxes won’t exist.
I agree with Jim, in that I would be more curious as to the other terms of the deal.
I do find this “if we didn’t build the stadium there wouldn’t be taxes” the strangest argument about stadiums.
If someone built a 50 story apartment building with 5,000 residents, I would presume that there may be additional annual costs to the city (as well as an annual benefit). Property taxes are one way to bridge that, and not paying them, essentially forever, is poor public policy at best.
The wiser thing to do would have been to get the lease agreement first, contingent on a property tax rebate for a limited time. Municipalities love to give away leverage, I guess.
GDub: Precisely.
If I didn’t work I wouldn’t have any income and there wouldn’t be any income tax applicable. So why do I have to pay income tax? The government(s) can share in the great benefit of me working simply by knowing that I work. Imposing taxes is regressive and pernicious.
All buildings, by the standard noted above, should be exempt from property tax. Mud streets and wooden boardwalks with open sewers running underneath worked fine for decades in the 1800s. If someone wants their kid educated, they should hire a personal teacher to do it, not depend on the state. Leeches!
Time to go back to the tried and true methods of 1877, I say.
It is so easy to jerk Minnesota pols around. I should know! They are the biggest suckers in the universe.