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.

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