Nearly a year-and-a-half after Minneapolis agreed to pay $50 million toward a renovation of downtown's Target Center, city staff returned Tuesday saying it wasn't enough.
The request to commit another $24.5 million in public money to the project, now expected to reach $129 million, passed a City Council panel led by a vocal critic of stadium subsidies. But the agreement could face additional scrutiny when it reaches the full council early next month.
Council members said the changes, driven by rising construction costs, were in the city's best interest over the long run. The city has owned the concert venue and home of the Minnesota Timberwolves since 1995.
"We have an obligation and I think today we're moving forward in a way that's frugal, versus other alternatives that might be politically feasible but negligent in terms of our obligation," Council Member Kevin Reich said.
Others were not pleased that the project's costs have soared nearly 30 percent. Council Member Andrew Johnson, who does not sit on the committee that discussed the issue Tuesday, said the matter should be put to the voters under a clause in the city's charter requiring a referendum on major public stadium investments.
"I think my residents feel that we have spent enough on sports facilities," said Johnson, who in 2013 ousted the swing vote council member who made the new Minnesota Vikings stadium possible. "And they expect to me to honor any sort of referendum requirements."
The Target Center funding issue is the latest test of the new mayor and council, seven of whom did not vote on the original Target Center renovation estimate. The Vikings stadium sowed deep divisions on the previous council, but Target Center upgrades were less controversial. Stadium financing agreements have proved to be divisive for some city leaders leery of using taxpayer money to assist billionaire team owners while other needs in the city go unmet.
Five council members not present at Tuesday's meeting did not return calls seeking comment; one was out of the country. Mayor Betsy Hodges declined an interview through a spokeswoman.
"For the city to be good stewards of the public money already invested in this project, we need to ensure that we do a renovation right so this city asset will continue to be a viable entertainment venue for the next two decades," Hodges said in a statement.
The renovation includes an overhaul of the building's exterior as well as major upgrades to technology, seating, crowd flow and loading bays. The building opened in 1990 and has long been viewed as an antiquated rival of the Xcel Energy Center in downtown St. Paul.
Timberwolves owners will pay $49 million for the renovation project, which has grown by $5 million. The city's costs will be borne by a group of local sales taxes that will be dedicated to paying for a share of the new Vikings stadium, as well. That stream of money is now paying off debt on the city's convention center. Staff said increased renovation costs would translate to an extra $500,000 to $1 million each year in debt payments — above the $4 million initially projected.
Kevin Carpenter, the city's chief financial officer, said the sales tax revenue, which has been between $55 million and $60 million each year, will easily cover the difference. About $25 million of that is also committed to the Vikings stadium starting in 2021, though Carpenter said the exact number will vary. The additional revenue otherwise would have been available for other city needs.
The new agreement also lowered the city's long-term commitment to repairs and improvements at Target Center from $50 million to $20 million. However, the maintenance costs are likely to exceed the $20 million budgeted. Carpenter said the new arrangement allows future city councils to "decide precisely, on an annual basis, how much more to put in and when to put it in."
Council Member Lisa Goodman, chairwoman of the committee that heard the issue Tuesday, said Target Center events have a major impact on the downtown hospitality industry.
"This old elephant is still an economic generator for this part of downtown and the people who work there, many of whom live in the city of Minneapolis," Goodman said.
Capacity hasn't increased
The higher cost is in some ways a return to an earlier estimate for the project of $135 million in August 2012. When the renovation was first unveiled in 2011, the cost was pegged at $150 million.
Mortenson Construction, which is handling both the Target Center renovation and the new Vikings stadium, last year projected a 6 percent increase in Twin Cities construction costs in 2015. More complex projects may see higher growth, the company said.
"I think the capacity of the industry shrunk quite a bit during the downturn," said Clark Taylor, Mortenson's chief estimator in Minneapolis. "And as there's more and more work to be had, that capacity hasn't necessarily increased."
Both labor and material costs factor into the cost increases, which Taylor said accounts for everything from mining cement to applying paint. Mortenson declined to speak specifically to the Target Center expenses.
The $1 billion Vikings stadium has also had to make adjustments as costs have crept up from initial projections — such as a higher-than-expected price for steel.
"That's some of the reason that the Vikings have been putting in more money is because we have seen some increased costs that we've been dealing with," said Michele Kelm-Helgen, chairwoman of the Minnesota Sports Facilities Authority, which is overseeing stadium construction. "And there clearly is no more money from the government side of things."