Busting myths about the stadium

In advance of Minneapolis City Council votes on Thursday and Friday on final approval of the stadium bill, it is important to bust several myths and misleading claims about the new stadium that have surfaced in recent weeks. These claims do not hold up in the face of the facts.

MYTH: The City of Minneapolis is on the hook for the greatest amount of money and is the largest contributor to the new stadium.

BUSTED: This claim is false. The local share of the new stadium is demonstrably lower than the Vikings’ and the State’s shares.

When the term sheet was originally signed, the Vikings’ share of total (i.e., lifecycle) stadium costs was 50.6% and the State’s share was 26.7%. The local share, the smallest of the three, was 22.7%.

By the time stadium bill passed, the Vikings’ share of total stadium costs rose to 55%, while the State’s share fell to 23.8%. The local share, still the smallest of the three, fell to 21.2%.

The false claim that the City is the largest contributor to the stadium is based in comparing apples to oranges. It misleadingly compares the future value of the local share — which is $678 million, assuming a 4% interest rate on capital obligations and a 2% growth rate in operating expenses through 2046 — to the present value of the Vikings’ $477-million share.

In other words, the claim assumes that only the local share is subject to interest and growth in expenses. This is misleading: the Vikings will also borrow money at interest, most likely at higher rates than the public share, while the Vikings’ operating expenses are fixed in the stadium legislation to grow 3% a year through 2046.

Comparing apples to apples, the future value of the Vikings’ share is estimated to be at least $1.5 billion — more than twice as high as the future value of the local share.

This false claim also omits an important fact: the $678-million future value of the local share will come from total revenue of $2.591 billion generated by the existing hospitality taxes that support the local share. This means that $1.913 billion will be available to the City to fund the projected needs of the Convention Center and Target Center — with money still left over after those needs are met.

In other words, the local investment in the stadium generates a return of nearly 3:1 — making it a good deal for Minneapolis.

MISLEADING: The local share of the new stadium could rise as high as $890 million.

BUSTED: This claim is misleading and omits important facts and context. It would be true only if revenues increased dramatically — which would be a very good development for Minneapolis.

1)    The public share of the new stadium could rise to $890 million in future value only if revenue from the hospitality taxes that support the local share of the new stadium rises at 5% a year each year through 2046.

2)    That scenario is highly unlikely. Revenue from these hospitality taxes has risen at a historical average of 2.7% a year.

3)    If revenue from these taxes did indeed rise at 5% a year through 2046, the local share of $890 million would come out of total revenues of $4.3 billion, leaving $3.4 billion that the City could use for capital, economic-development or infrastructure projects. Given that the projected needs of the Convention Center and the Target Center through 2046 total approximately $2 billion, the City would be left with an additional $1.4 billion after all those needs were met.

In other words, the unlikely scenario in which the local share of the stadium rose to $890 million would be a very good scenario indeed for Minneapolis.

MYTH: The State cut a better deal for Minnesota taxpayers in final negotiations over the bill, but no one looked out for Minneapolis taxpayers.

BUSTED: This claim is false. The final bill improved considerably for Minneapolis taxpayers from term sheet to final passage. Some of the ways include:

1)    The local share fell from 22.7% of total stadium costs to 21.2%. (See above.)

2)    The City negotiated a share of the profit if the Vikings are sold anytime in the next 20 years, a provision potentially worth $15–110 million to Minneapolis taxpayers. This clawback provision is significantly stronger than the one negotiated with the Minnesota Twins for Target Field. In earlier versions of the stadium bill, however, only the State stood to benefit from the clawback.

3)    For the first time ever, the City’s 3% entertainment tax will be explicitly applied to Vikings tickets, as well as to all events held at the new stadium. This provision will be worth approximately $2 million a year to the City’s general fund.

4)    The City will avoid $25–32 million in borrowing costs because the State, instead of the Vikings, will finance the local share of the operation of the new stadium from 2016–20. The savings arises because the State will be able to borrow money at lower rates than the Vikings. In earlier versions of the bill, however, the Vikings would have financed the local share of stadium operating expenses from 2016–20.

5)    The City won a sales-tax exemption on capital projects of greater than $40 million that are funded in part by the hospitality revenues. The value of this exemption for Target Center renovation alone will be several million dollars.

MYTH: The Convention Center loses money in the stadium deal.

BUSTED: This claim is false. The local stadium-financing plan, which assumes a modest, 2% annual growth in revenues, provides the City with $1.913 billion to meet the needs of the Convention Center and Target Center, after meeting obligations to the stadium.

The Convention Center’s long-range finance plan anticipates needs of $1.528 billion through 2046, including $402 million in capital improvements. This amount will be more than met by the excess revenues from the hospitality taxes that the City will control for the first time.

This financing plan does not fund the additional “competitive capital” needs of the Convention Center — which would be the case whether or not hospitality taxes were used to fund the stadium in Minneapolis. But to claim that the Convention Center loses money in the stadium deal is false.

MISLEADING: Downtown Minneapolis has the highest sales taxes of any neighborhood in the United States.

BUSTED:  This claim is misleading and omits important context. According to the Tax Foundation, sales taxes collected in Minneapolis actually rank 52nd of large American cities.

In addition, Minneapolis ranks last in the country in sales taxes on the basic necessities of groceries and clothing. These items are not taxable in Minneapolis or in Minnesota.

Since 1986, the State has imposed a 3% restaurant tax and a 3% liquor tax in downtown Minneapolis only. These taxes are paid by anyone who eats a prepared meal in a restaurant or buys a drink in downtown Minneapolis. Many people who eat and drink downtown are not downtown residents and come from across the region.

MISLEADING: The hospitality industry in Minneapolis will suffer because the hospitality taxes that finance the local share of the new stadium are high.

BUSTED: This claim is misleading. No new taxes fund the local share of the stadium financing plan: the plan relies on existing hospitality taxes that will remain at current rates at least through 2020, even if they were not being used to help build and operate a new stadium in Minneapolis.

There is also no empirical evidence that hospitality-tax rates hinder the hospitality industry in Minneapolis.

The hospitality industry in Minneapolis strongly supports the stadium deal.

Even better

The Vikings stadium bill — which is a good deal for Minneapolis — got even better by the time it finally passed. Now it’s up to the City Council to approve it.

When Council President Barbara Johnson and I first got involved in solving the long-standing stadium problem, our top priority wasn’t building a new Vikings stadium in Minneapolis. Our top priority was ensuring the future of two significant, existing City-owned assets, the Target Center and the Convention Center, and slowing the growth of property taxes in the process. And we didn’t want to lose a business that draws hundreds of thousands of people and millions of dollars into our city.

We got everything that we set out to get — and more.

Now I don’t like the economics of professional sports; no one does. But we got involved because if we hadn’t tried to solve this long-standing problem, it would have gotten solved without us. That’s why we were at the table — to make sure Minneapolis got a good deal. And we got an even better one.

How the bill got better

Here are a few of the ways that this deal got better.

1) The Vikings share of total stadium cost went up — and the local share went down.

When we first struck a deal, the Vikings’ share of the total stadium costs was just over half, while the local share was less than a quarter.

But we kept negotiating, and now, the Vikings’ share of the cost of the stadium is even greater — 55% — while the local share is even smaller — just 21%.

And for the first time ever, the State of Minnesota is paying a significant share — 24% — of building a major sports and entertainment facility in our city. That has never happened before.

For our 21% share, we will get a new, publicly-owned, $1-billion investment downtown that will create 11,000 construction-related jobs and 3,400 permanent jobs, and support thousands more hospitality jobs. And it will be open for public use for 355 days a year.

Think about it: a private business is paying the majority of the cost for new public facility that they will use only 10 days a year for the next 30 years.

And we’re getting this major new investment for no new taxes. Only existing sales and user fees — which are already paid by everyone who visits, lives or works in Minneapolis — are being used for our share of the Vikings stadium. No new taxes. None.

2) We will get a share of the profit, called “clawback,” if the Vikings are sold within the next 20 years — a deal that is potentially worth between $15–110 million to Minneapolis taxpayers. At first, only the State would have benefited from the clawback — but we fought for Minneapolis to get our share, too. And we won.

What’s more, our stadium clawback provision is significantly stronger than the one negotiated for Target Field.

3) For the first time ever, we will control existing, State-imposed hospitality taxes that are paid by everyone who spends a dollar in Minneapolis, whether they’re visitors, residents or just work here during the day.

In the past, Minneapolis never had practical control over these taxes: the State collected them here and dictated how they could be spent.

Now, however, Minneapolis will control these hospitality taxes, providing us with billions over the next 30 years not just for the stadium, but to meet our top priorities: renovating the Target Center and making sure the Convention Center will keep drawing visitors (and their money) to Minneapolis for the next generation.

It helps us meet our other top priority, too: slowing the growth of property taxes. That’s because we can now use these widely-paid hospitality taxes, instead of property taxes, to fund Target Center.

We fought for years to control these taxes, with no luck until now. This is a historically significant change with positive, long-range implications for Minneapolis.

4) Also for the first time ever, Vikings games will be subject to a ticket tax. Twins and Timberwolves fans already pay this fee, so it levels the playing field for them. And it will generate at least $1.5 million a year directly to Minneapolis that will support core services like public safety and offset property taxes.

These are just some of the ways that the Vikings stadium deal got better for Minneapolis, and there are even more.

Now it’s up to the City Council to approve this bill and ensure that these investments go forward. The Council will vote this Thursday and Friday, so I urge you to contact your City Council member today and encourage him or her to support his good deal for Minneapolis that has gotten even better.

(Go here to find out who represents you on the City Council.)

Mayor Rybak Nominates Paul Aasen as City Coordinator

Current MPCA commissioner to bring 25 years of experience in public, private and nonprofit sectors

Minneapolis Mayor R.T. Rybak announced today that he will nominate Paul Aasen, the current commissioner of the Minnesota Pollution Control Agency, to be the next city coordinator of the City of Minneapolis. Mayor Rybak will make the nomination at the meeting of the City’s Executive Committee on Wednesday, May 2.

Mayor R.T. Rybak said, “Paul Aasen follows in the tradition of Steven Bosacker in bringing top-notch professionalism in public service to the critically important role of city coordinator. He brings a wide range of experience across many fields to a job that requires it. I’m also especially pleased that he brings a deep environmental background to a city with deep green values and proven results in enhancing our sustainability.”

Aasen will bring 25 years of experience in the public, private and nonprofit sectors to the job. At the State of Minnesota, he has served the public under three governors of three political parties.

 

  • As commissioner of the Minnesota Pollution Control Agency for Governor Mark Dayton from 2011 to the present, he leads an organization of 925 employees and a $135 million biennial budget.
  • As director of government relations and policy under Governor Jesse Ventura from 2000–03, he represented the Governor on all policy matters with the Legislature. In that role, he reported to former Minneapolis City Coordinator Steven Bosacker, who then served as Governor Ventura’s chief of staff.
  • As assistant commissioner of the Department of Public Safety under Governor Ventura from 1999–2000, he managed finance, human resources and information technology, and played a key role in criminal-justice information (CriMNet) legislation.
  • As director of the Division of Emergency Management under Governor Arne Carlson from 1998–99, he led the State’s effective response to the catastrophic spring storms of 1998.
  • As executive director of the Minnesota Emergency Response Commission under Governor Carlson from 1992–98, he managed the staff and budget of a 22-member commission under the Department of Public Safety that helps communities deal safely with hazardous chemicals.

Paul Aasen has also worked in the nonprofit and private sectors. In the nonprofit sector, he served as executive vice president of Global Volunteers from 2004–07 and as advocacy director of the Minnesota Center for Environmental Advocacy from 2007–11. In the private sector, he was principal of Independent Strategic Consulting from 2003–04.

He began his career in 1986 as an environmental scientist at the Metropolitan Waste Control Commission. He holds bachelor’s and master’s degrees from the University of Minnesota, the latter from the School of Public Health.

“Commissioner Aasen has done a superb job leading a state agency with critically important responsibilities,” said Governor Mark Dayton. “Our loss will be Minneapolis’ great gain.”

City Council President Barbara Johnson said, “Paul Aasen is a proven performer. He comes extremely highly recommended and will additionally help us strengthen our ties with many levels of State government. He will be a great fit for the City of Minneapolis.”

Council Vice President Robert Lilligren, chair of the Committee of the Whole to which the City Coordinator reports, said, “The work of the city coordinator often takes place quietly behind the scenes. In Minneapolis’ system of government, it is the Coordinator’s challenge to see that all the work of the city’s departments act in harmony to maximize our taxpayers’ dollars. I believe Paul Aasen’s wide range of experience in so many different areas will have a positive impact on our residents’ quality of life.”

Commissioner Aasen said, “I’m very much looking forward to working with Mayor and City Council to build on Minneapolis’ strong foundation and make it a world-class city where everyone has opportunity and everyone enjoys a high quality of life.

“This starts with two important pieces: efficiency and partnerships,” he continued. “We need to make sure that City government operates at its absolute best, so that residents get the value they deserve. And recognizing that the City never operates alone, we must continue to forge and strengthen partnerships, alliances and friendships with all Minneapolis’ stakeholders.”

If confirmed by the City Council, Paul Aasen is expected to start as city coordinator later this month.

The Minneapolis city coordinator is a key advisor to the Mayor and City Council on strategic planning, budget development and policy decisions. The city coordinator drives the City’s results-management agenda, the cornerstone of which is Results Minneapolis, where ever City department sets measurable performance goals and then tracks and reports progress towards achieving those goals.

In addition, the coordinator is the chief administrator for Minneapolis City government’s enterprise operations and priorities, including the City’s finance operations, intergovernmental relations work, neighborhood and community relations, sustainability initiatives, communications and public affairs, human resources, and 311 and 911 operations.