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Minnesota pays off Vikings stadium early, total taxpayer tab could still be $1.4B

access_time personNeil deMause

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.

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Friday roundup: Developers pay locals $25 each to hold pro-arena signs, a smoking and farting winged horse team logo, and do you even need a third thing after those two?

access_time personNeil deMause

It’s been another week of pretty bad news, topped off by a private equity firm somehow buying the entirety of .org domains, meaning every nonprofit website will now have to be licensed from an entity whose sole mission is to squeeze as much money from them as possible. The stadium and arena news, by contrast, isn’t all terrible, so maybe it qualifies as cheery? You be the judge:

  • The Richmond city council voted Tuesday to put off a decision on a $1.5 billion downtown development that would include a new arena (public cost: $350 million), after a contentious hearing where both supporters and opponents held signs espousing their opinions. Or espousing somebody’s opinions, anyway: Some locals holding “yes” signs later reported that the project’s developers paid them $25 a pop to do so. City council president Michelle Mosby replied that if anything people were just reimbursed gas money, which 1) only makes sense if everyone there drove their own car and had to travel like 250 miles round trip to get to the hearing and 2) isn’t really any less corrosive of democracy anyway.
  • If you’ve been wondering how Inter Miami plans to build a temporary 18,000-seat stadium in Fort Lauderdale (later to be turned into a practice field) between now and March and figured it would have to involve throwing up a bunch of cheap metal bleachers, now there’s video of construction workers doing exactly that. Also laying down the sod for the field, which I thought usually takes place after the stadium is more or less built, but I guess if they can build the stadium without treading on the field, no harm in doing so now. This all raises questions of whether the stadium will feel excessively crappy, and if not why more soccer teams can’t just build cheap quickie stadiums like this without the need for public money; I guess we’ll know the answer by springtime one way or another.
  • When the state of Minnesota agreed to pay for the Vikings‘ new stadium with cigarette revenue after electronic pulltab gambling money didn’t come in as expected, it still kept collecting the gambling cash; and now that e-pulltabs (which are just lottery tickets, only on a tablet) have taken off, there’s debate over what to do with the cash that the state is collecting, about $5 million this year but projected to rise to $51 million by 2023. The Vikings owners want the money used to pay off their stadium debt early, while some lawmakers would like to use the revenue to fund other projects or reduce taxes on charitable gambling institutions now that it’s no longer needed — all are valid options, but it’s important to remember that the state already paid for most of the stadium, this is just arguing over what to do with the zombie tax that was left over after the financing plan was changed. (It would also be nice to know if e-pulltab gambling has cannibalized revenues from other gambling options, thus making this less of a windfall, but modern journalists have no time for such trivialities.)
  • The city of Wichita is spending $77 million (plus free land) on a Triple-A baseball stadium to steal the Baby Cakes from New Orleans, and have been rewarded with the Wichita Wind Surge, a name that’s supposed to reference the city’s aviation history or something but actually means “storm surge,” which isn’t a thing that they have in landlocked Kansas? It also features a logo that looks like a horse and a fly got caught in a transporter accident, which the team’s designer explained with “The nice thing about Pegasus, however, to me, was the fact that it’s got a horse in there.” A local designer responded with a sketch of a winged horse smoking a cigarette, drinking a beer, and farting, which by all accounts is much more popular with Wichitans. (The sketch is, I mean, though I’d love to see a poll asking Wichitans, “Which do you prefer, the name Wichita Wind Surge or farting?”)
  • San Diego State University’s plan to buy the city’s old football stadium and its surrounding land for $87.7 million has hit some “speed bumps,” namely that city economists have determined that the price could be below the land’s market value and $10 million of the sale price would have to be set aside for infrastructure improvements for the university’s development. “There’s also the matter of the $1-per-month lease that, as proposed, may not adequately protect the city from expenses or legal risk,” notes the San Diego Union-Tribune. Given all these uncertainties, the city’s independent budget analyst called SDSU’s proposed March 27 deadline “very challenging,” not that that’s stopped city councils before.
  • Saskatoon has enough room under its debt limit to finance either a new central library or a new sports arena, and regardless of what you think of how badly Saskatooners need a new library, it’s still a pretty strong example of how opportunity costs work.
  • The Phoenix Suns‘ new practice facility being built with the help of public money will include a golf simulator for players, because of course it will.
  • Speaking of Phoenix, the Arizona Republic has revealed what the Diamondbacks owners want in a new stadium; the original article is paywalled, but for once Ballpark Digest‘s propensity for just straight-up paraphrasing other sites’ reporting comes in handy, revealing that team owners want a 36,000-  to 42,000-seat stadium with a retractable roof and surrounded by a 45- to 70-acre mixed-use development and a 5,000-seat concert venue and good public transit and full control of naming-rights revenue and public cost-sharing on ballpark repairs. And a pony.
  • “Will Raiders football hike your home value?” asks the Nevada Current, apparently because “Is the moon made of green cheese?” had already been taken.
  • And last but certainly not least, your weekly vaportecture roundup: The New Orleans Saints‘ $450 million renovation of the Superdome (two-thirds paid for by taxpayers) will include field-level open-air end zone spaces where fans have ample room enjoy rendered people’s propensity for flinging their arms in the air! The new Halifax Schooners stadium designs lack the woman hailing a cab and players playing two different sports at once from previous renderings, but do seem to still allow fans to just wander onto the field if they want! It should come as no surprise to anyone that even Chuck D can do a better job of drawing than this.
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WI pols “confident” Bucks deal will be ready by Friday, just in time for no one to read it before vote

access_time personNeil deMause

Wisconsin political leaders held what had been announced as their “final” closed-door meeting to negotiate a Milwaukee Bucks arena deal yesterday, and … they didn’t finalize anything. But they’re close! Really they are, because they say so!

“The number of issues is narrowing,” Milwaukee Mayor Tom Barrett said Tuesday.

“There’s still work to be done, so there’s no white smoke. But I feel confident we’ll be able to work out the remaining issues,” he said.

We’ve heard this before, needless to say, but now things are really coming down to the wire: The state legislature’s joint finance committee is set to issue its budget proposal by the end of this week, so if the Bucks want to have their plan considered this legislative session, they really need to get it done tout de suite.

And what do we know about what this eventual plan will look like? The four Milwaukee Journal-Sentinel reporters (Tom Daykin, Patrick Marley, Crocker Stephenson, and Daniel Bice) who are filling the shoes of the late Don Walker provide some clues:

  • A “source” indicates that the state would sell $93 million worth of bonds to help finance the arena, paying them off with existing surcharges on car rentals, hotel rooms, and restaurant food and beverage sales in Milwaukee County. Those taxes currently go to the Wisconsin Center District, which mostly uses them to pay off construction debt on its convention center, but there’s about $8 million left over for the city’s tourism and convention marketing budget — which would just barely be enough to pay off $93 million in bonds if the city is fine with promoting tourism from now on by holding up a big “COME TO MILWAUKEE WE HAVE CUSTARD” banner at nationally televised Bucks games.
  • Milwaukee would provide $35 million for a new parking garage, and get back some unspecified parking revenue in return. It would also kick in $12 million in future property taxes from new development around the arena via a TIF district.

Assuming that the state would still be putting in something on the order of $150 million to be repaid out of NBA player’s future state income taxes (which is assuming NBA salaries continue to rise at a hyperinflationistic rate), that would be $290 million total in public money, which should be enough to make Bucks owners Wes Edens and Mark Lasry happy.

Whether it will make the state legislature happy, especially in a year when Wisconsin is going to have to be cutting everything else to the bone to fill a budget gap, remains to be seen. The big worry here is that the last-minute nature of the deal could end up working in its favor — if it gets dropped into the budget on, say, Saturday morning, that won’t leave much time for either state legislators or local journalists to read and digest what’s looking to be an extremely complex plan before it has to be voted up or down. The last time we saw one of these two-minute offense sports subsidy pushes, it resulted in Minnesota’s e-pulltabs fiasco. Which isn’t to say that the Bucks plan is necessarily as bad as that one (I mean, nothing could be as bad as that one), but the way things are going, this plan may be law before anyone has figured out what it means, which is never a good way to run a railroad.

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How Milwaukee leaders could use stealth tax to fund Bucks arena without anyone taking the blame

access_time personNeil deMause

As part of his campaign to get funding for a Milwaukee Bucks arena approved by Memorial Day, Wisconsin state senator Scott Fitzzgerald has called a meeting of the minds for tomorrow, bringing together state, city, and team officials to discuss, presumably, how none of them have any ideas for how to actually pay for the thing. And maybe actually play a physical game of hot potato with the $500 million bill, wouldn’t that be cool?

For a refresher on why exactly there’s no money for this thing, we can turn to Milwaukee Magazine’s Matt Hrodey, who points out that Fitzgerald’s plan to have a state board lend the money lacks a viable way to pay off the loan, something everyone is still waiting for Gov. Scott Walker’s secret idea to fund beyond his old idea of using player income taxes and crossing his fingers that NBA salaries soar; meanwhile, it would require the city to come up with its own pile of money, something it would have trouble doing given that the arena wouldn’t pay any property taxes of its own, and the state has dramatically restricted the city’s borrowing power.

Hrodey does come up with one possible way for the city to contribute, but it would amount to a stealth property tax surcharge. It goes like this: The Board of Commissioners of Public Lands, which Fitzgerald is proposing as lender for the public arena funding, loans the city a pile of cash. In that case,

If the BCPL also lends a chunk – $25 or $50 million – to the city, county, or both, state law would require each entity to raise its tax levy by an amount sufficient to pay off the resulting debt service on the loan. This tax would have to be “separately designated” and calculated apart from the usual municipal levy. And to boot, it would be “irrepealable until the loan and all interest on the loan are fully paid.” If for some reason the local government was to miss a payment, it would be automatically deducted from state aid.

Milwaukee Mayor Tom Barrett, meanwhile, has said he won’t raise property taxes for a Bucks arena, which would seem to kill this plan, but you have to figure there’s going to be pressure for him to cave in to make a deal happen. One possible out, which Hrodey kind of hints at but doesn’t say outright: Barrett could agree to take out BCPL loans and then pay them back by some fanciful revenue stream — say, tax-increment financing based on increased property taxes paid by development around the arena, or hell, maybe e-pulltabs. Then once the revenues fail to arrive, he (or whoever was mayor by the time anyone noticed the revenue shortfall) would be forced by the big bad state government to raise property taxes to fill in the gap. Voila, taxes raised for the Bucks, and nobody is to blame!

All of this could be moot, meanwhile, if the state budget projections come in as poorly as they could in mid-May, leaving everyone involved scrambling to avoid looking like they’re throwing money at the Bucks while slashing spending for everything else under the sun. But even then, that’s only a temporary obstacle: If Fitzgerald can put together even the vague outline of a plan in the next few weeks — say, with the state paying off a BCPL loan with pretend player income taxes, and the city paying off a BCPL loan with pretend TIF money — there’s plenty of time to implement it next year after everyone has forgotten where the money is coming from, and the lobbyists have had another year to make all the politicians involved just want this issue to go away, already.

Hey, I think I just solved the Bucks arena funding problem! If by “solved” you mean “found a way to stick taxpayers with the bill without any politicians having to lose their jobs over it,” that is, and I’m pretty sure that’s what Fitzgerald and company have in mind. Now they can knock off early at tomorrow’s meeting and go for custard.

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Vikings e-pulltabs plan hit with lawsuit, now officially complete disaster

access_time personNeil deMause

Minnesota’s beleaguered e-pulltab gambling scheme has hit yet another bump in the road, this one a lawsuit charging that the maker of the games failed to get a license from Apple to run them on iPads. Which led to this hilarious lede on the Minnesota Public Radio website:

A dispute over licensing the iPads used in Minnesota’s most popular electronic pulltab games has brought roll out of the devices to a halt, at least temporarily.

All together now: How can you tell?

MPR also suggests that this could cause problems for the Vikings‘ stadium financing deal, but given that the state pretty much already threw up its hands and decided to use other tax money to pay off the Vikings stadium, it probably won’t matter much. If the games are shut down, though (currently they’re under a restraining order allowing them to remain in operation), patrons of Knucklehead’s may have to find something else to do to pass the time for a while.

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Vikings stadium fund to run out of money by 2016

access_time personNeil deMause

The state of Minnesota’s budget and economic forecast has a section on what’s happening with the various revenue streams that were supposed to pay for the new Vikings stadium, and — you know, would it be that terrible for a state budget office to just once hire some writers who can actually put a coherent English sentence together? You can read the original here (pages 49-50, if you dare), but the upshot appears to be:

  • Total state gambling tax revenues are now projected at $83 million, $52 million lower than previous estimates, with barely any uptick from the disastrous e-pulltabs game that was supposed to create a windfall to pay for the stadium. (But you knew that.) “We’re assuming no growth, until we actually see it,” Minnesota Management and Budget commissioner Jim Schowalter told Minnesota Public Radio.
  • Initial debt payments on the stadium will be lower than expected, mostly because the stadium bond sale was delayed from last August until next month. And the state and city if Minneapolis will still be on the hook for $34 million a year in payments starting in the 2015 fiscal year.
  • This will eat up the entirety of the $26.5 million one-time cigarette inventory tax that was redirected last summer to fill the stadium financing gap, as well as the $20 million a year in future out-of-state business taxes that was redirected at the same time, plus the entire contents of the state’s $36 million stadium reserve fund by 2016.

And after 2016, what happens? Minneapolis tax revenue currently going to pay off the convention center should be available starting in 2020, but until then, it’s anyone’s guess. Schowalter said the state could “restructure” the payments to forestall any budget gap until the convention center money starts flowing, but that would mean higher payments later, and the convention center money is also going to be needed to pay for previously approved renovations to the Timberwolves‘ Target Center, so … I’m serious, this is really the kind of thing that should be explained in a budget forecast document. If budget forecasts were really about the explaining.

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E-pulltabs raise zero dollars instead of $62.5m for Vikings stadium; governor calls it “honest mistake”

access_time personNeil deMause

The first year of e-pulltab revenues for the new Minnesota Vikings stadium have been tabulated, and instead of bringing in $62.5 million as Gov. Mark Dayton had initially projected, the actual total is, well, a bit less:

Electronic gambling, which hit Minnesota bars with great fanfare last September, did not raise a dime for the glassy new Vikings football stadium this year.

That’s right: After collecting $15 million from people gambling with creepy Uncle Sam, then shelling out almost $13 million in prize money and paying a share to charities, there was a grand total of zero dollars to help defray the state’s $1.1 billion in stadium subsidies. Or to put it another way, bupkis. That is, diddly-squat. Sweet Fanny Adams?

For his part, Dayton declared on Friday that his “number one take-away from this” is that “to take an untried source of revenue for the sole source of funding for a major project is ill-advised.” He added, “We made an honest mistake and corrected it” — meaning, took hundreds of millions of dollars in current cigarette taxes and future corporate taxes and handed them over to the Vikings instead. Which the state could have voted to do in the first place, but didn’t because legislators would only vote to approve the thing if it involved gambling revenue, not tax money. But proposing gambling revenue and then switching to tax revenue after the fact, that’s totally cool because it was an “honest mistake.” Even though legislators were warning a month before the pulltab vote that gambling revenue might not come through. Hmmmm.

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MN plans statewide tour to beg people to gamble more so that Vikings stadium can be funded

access_time personNeil deMause

Minnesota Gov. Mark Dayton may have come up with the nifty idea of diverting cigarette tax revenues from the general budget to help pay for a Vikings stadium, but that doesn’t mean the state is giving up on its original plan of getting Minnesotans to gamble their money away to pay for the new NFL facility. So both state officials and local charity groups have announced a statewide publicity tour in June to convince people of the total awesome coolness of the new e-pulltabs that nobody wants to install or play at the moment.

The Minneapolis Star Tribune article on this includes the first photo I’ve seen of the actual e-pulltabs, so let’s take a look and OH GOD UNCLE SAM WANTS ME TO DEPOSIT MY IMMORTAL SOUL IN HIS TOP HAT!

“Our hope,” Allied Charities director Al Lund told the Star Tribune, “is we increase money for our [charity] missions by selling more games, which in turn provides more tax revenue for the state, and ultimately we hope enough revenue to pay for the stadium.” Come on, people of Knucklehead’s! The fate of Minnesota depends on your misplaced faith in the law of averages!

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MN gov proposes diverting cigarette and sales taxes for Vikings stadium

access_time personNeil deMause

Heads up, everybody, Minnesota Gov. Mark Dayton has a new plan to pay for a Vikings stadium, and it doesn’t involve gambling of any kind at all. Well, not the fun kind of gambling where you can win cash prizes, anyway, but just gambling with your health: The state would take the first year’s $24.5 million windfall from a new cigarette tax and pour it into the stadium fund. And if gambling revenues continued to fall short, the state could tap $20 million a year from a new provision to get Minnesota-based corporations to pay their full taxes on in-state sales.

All of which is well and good, except that both of these taxes were already in the state budget plan, and expected to put money into Minnesota’s general fund. Dayton is only proposing to use them for the Vikings stadium — instead of the far simpler method of just appropriating money straight from the general fund — because he promised that no general fund money would go to the stadium, and since these are new taxes that haven’t hit the general fund yet … well, let’s let Minnesota Revenue Commissioner Myron Frans explain it:

“These are new revenues coming in to the state for the first time. And the same thing is true of the new electronic gaming situations for gambling, that was a new revenue source and it all goes into the general fund. It’s just that the Legislature designates some of those funds to be used for certain purposes.”

Yes, right, money is fungible, so it doesn’t really matter which pocket you take it from, we get that. None of this changes the fact that the gambling plans were put into place specifically to fund the stadium, while the cigarette and sales-tax provisions would be there to fund schools and such if the state doesn’t give the proceeds to the Vikings.

Though really, maybe the best way to look at this is that Frans has a point: All tax revenues could go to the general fund if you wanted them to, so no matter how you raise the money, a stadium subsidy is a public cost. In fact, the same thing goes for those e-pulltabs and e-bingo and all the other e-things that Minnesota is trying to use for stadium funding: The state could be using those revenues for other services if it wanted, too, so it’s not really found money, either. So really the way to look at this is that no matter how they end up paying for it — gambling, smoking, bake sales — Minnesota taxpayers are out $1.1 billion on the Vikings deal, and it doesn’t really matter how they pay for it, one way or another they’ll pay. Um, that was your point, right, Myron?

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MN sports teams hate idea of taxing sports gear to pay for stadium, duh

access_time personNeil deMause

Predictably, the Minnesota Vikings aren’t too happy with state representative Ann Lenczewski’s proposal to pay for the shortfall in stadium funds by taxing sports memorabilia sales, since that would mean they’d be paying the bills, not taxpayers. And that’s not what they agreed to at all:

“This legislation fundamentally changes the agreement the Vikings negotiated with the state of Minnesota,” said Lester Bagley, the Vikings vice president of public affairs and stadium development, after a hearing on the bill in the House Taxes Committee.

The team put in an additional $50 million in the final stages of negotiation on the bill for the National Football League stadium, Bagley said, and “that commitment was in exchange for an assurance that there would be no further impacts on stadium revenues, including taxes on stadium revenues.”

And other Minnesota sports teams are even less happy with the plan, if possible:

Representatives of the Timberwolves, the Wild and the Twins testified against the bill, which one said essentially would require the teams to subsidize a competitor. A spokeswoman for state retailers spoke against the bill as well.

Still, it seems at least possible that some kind of memorabilia tax will be seriously considered by the legislature — the head of the Minnesota Sports Facilities Authority says it’s a good idea, and really, the state doesn’t have a lot of other options. And even if the Vikings are upset, would they really walk away from $1.1 billion worth of subsidies just for fear of losing a bit of money on memorabilia taxes?

Which is both the strength and the weakness of the proposal, by the way: It’s not actually expected to raise much money. Estimates are that the memorabilia tax would generate $6.8 million in its first year, while the funding gap from e-pulltabs is more like $50 million a year. So while this could help, it wouldn’t be a solution by any means. But at least it’s nice to see the legislature considering trying to make this deal better for the public, rather than just promoting compulsive gambling.

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