The state of Minnesota has paid off its debt on the Vikings stadium 20 years early, thanks to money from electronic gambling coming in faster than expected:
With the support of Gov. Tim Walz, the Legislature agreed this year to pay off the debt early, mostly by using the cash accrued in the stadium reserve account. That fund developed a surplus when tax collections from pulltabs surged in recent years.
This sounds great on the surface, especially if you only read as far as headlines like “U.S. Bank Stadium paid off as of Monday.” Being in debt is bad, according to the prevailing wisdom, and if the tax revenue being used to pay off the stadium has come in more quickly than expected, then the stadium has worked out better than expected, right?
Let’s try looking at the story a slightly different way, and see how it pencils out:
- After devoting $348 million toward the Vikings’ stadium in 2012, the state still owed $378 million thanks to the reverse magic of interest front-loaded amortization. It is now paying that off with a combination of $366 million from a stadium reserve fund, plus $12 million from the general fund.
- That stadium reserve fund is flush because electronic pulltab gambling — basically gambling on iPads — has finally taken off after a slow start. The start was so slow, in fact, that the state had to approve using cigarette tax money and corporate tax money to fill in the gap in the early years, until pulltab revenues started coming in.
- Spending $378 million now will save the state $226 million in future interest payments, which is good! But it also means it won’t have that $378 million to do something else with now, and those interest payments would have been spread out over the next 20 years, so it’s entirely possible that the state will end up worse off, or at least just breaking even, in present value terms.
What’s happened here, then, has nothing to do with the stadium, and everything to do with bookkeeping: Minnesota is taking advantage of a big budget surplus year to pay down some debts early, using tax money now to save tax money in the future. But it’s still all tax money: If the state had approved e-pulltabs and not a stadium, it could instead be using that $366 million reserve fund for something else. That the reserve fund is flush is a sign that e-pulltabs worked well — if you don’t account for the social costs of promoting more gambling, anyway — but says nothing about whether the stadium was a worthwhile expense.
But still, it’s worth at least one small cheer that Minnesota can stop budgeting money annually toward paying for the Vikings’ football stadium—
A report commissioned by the stadium’s oversight board, the Minnesota Sports Facilities Authority (MSFA), the building will need $280 million in maintenance and upgrades in the coming decade.
Welp. Assuming the MSFA ends up paying for the maintenance and upgrade costs, this will take the total public cost to around $1.4 billion. “At least Minnesotans are gambling enough that we can keep pouring tax money into the place” may be better than the alternative, but not by all that much.
It never ceases to amaze me how people don’t understand money. (And come to think of it how does that still amaze me?!).
Sure some reporters get it and can report on it, but in general they tend to repeat what they’re told, and hey stadium debt it paid off! Without consideration to the time value of money, how it’s allocated, whether the value proposition worked, and so on.
And so here we are. I’ll agree with you that it’s not nothing and at least it’s progress on that front.
Which means that the Vikings will soon start to put feelers about a new stadium, right?
Feelers out, that is.
Minnesota’s top tax rate is 9.85%. So with the salary cap of $224.8 million the state is getting over $20 million in income taxes from the players (yes the Vikings players only pay taxes for the home games but visiting teams players would be paying for the games in Minnesota) So whatever financial analysis you do should include this
Not all of that is new revenue, though, because if Minnesotans would have spent more money at, say, restaurants if they didn’t have Vikings games to go to, there would be more income taxes from that sector that would partly make up for the loss of NFL salaries. (Not entirely because a chunk of NFL salaries are paid for by things like TV money, which isn’t local.)
And, of course, all this is assuming that the Vikings would have moved without a new stadium, which they didn’t in 10 years of posturing before this one was approved.
Waiters and chefs wouldn’t generate the same level of income taxes as NFL players do. Also, let’s say everyone who would have gone to a Vikings game instead goes out to dinner twice for every Vikings game they would have gone to. That’s about 1.3 million dinners being bought over the course of a year. That’s roughly 3600 people going out to dinner every night. So how may waiters are working dinner shifts as a result? 200 maybe? At 15 an hour for 4 hour dinner shifts thats about $4.4 villain a year in wages being generated at a much lower tax rate.
The Vikings wouldn’t have stayed in the Metrodome forever. We’ve seen 3 NFL teams move in the past couple of years.
As far as the TV contracts and other revenue I didn’t include the teams income taxes as part of the equation because I’m sure there would be some accounting tricks and tax shelter used to pay that off.
But the waiters and chefs all live locally year round and spend a large percentage of their income locally. That’s not true of football players.
You’re correct that there is some benefit to having NFL players paying income taxes. (Again, assuming the team would have moved without a new stadium.) But it’s not nearly as large a benefit as the total income taxes they pay – if it were, cities that gain sports teams would show a higher per capita income, and they don’t.
The $4.4 million in wages that the waiters and waitresses would earn probably wouldn’t have as much impact as what the $200+ million the NFL players would have. Its not like NFL players (Even if they are only in town for the season) are known for living frugally.
As far as the overall impact goes, sure you can argue that the presence of an NFL team and resulting taxes don’t really move the needle for a city, on the flip side can you really argue that the absence of an NFL team really moves the needle in the opposite direction? Do St Louis, Oakland, and San Diego suddenly have better roads and schools as a result of not having teams to do deal with anymore?
NFL players may be free-spending, but they’re only one person each. There is a mountain of economic research showing you get more economic impact from giving a little money to a lot of people than a lot of money to a few people, if only because when Tom Brady gets a mammoth paycheck, he doesn’t go out and buy 100 years’ worth of groceries.
And yes, St. Louis will likely have better roads and schools as a result of having that $700m check from the NFL, as well as not spending all the money it would have on a stadium.
I think “upgrades” is the scarier word…..
And Kevin Warren, who spearheaded the effort to get Minnesota to pay for a Vikings stadium, is the guy the Chicago Bears hired to do the same for the Bears…and today he is quoted as being frustrated with the lack of progress with Arlington Heights…insert eye roll as he continues to smile as suburb is pitted against suburb, while Chicago is likely revisiting what they can throw at the Bears.