Target Center has been a burden to Minneapolis and is becoming a broader issue.
Renee Jones Schneider, Star Tribune
Target Center deal bound to 'mistake'
- Article by: MAYA RAO
- Star Tribune
- February 2, 2012 - 12:23 AM
They call it an albatross. A mistake. Worst decision ever.
These are some of the ways Minneapolis leaders describe the bailout of Target Center in 1995.
Minneapolis owes roughly $55 million from its purchase of the arena. But the home of the Timberwolves -- which is managed privately -- also has taken annual operating subsidies of about $1.6 million from the city. New figures released last week predict that the city will have to spend more than $32 million over the next decade to keep Target Center up to date.
Now Mayor R.T. Rybak's push to subsidize a new Vikings stadium in a deal that also renovates Target Center and retires its debt has highlighted how the arena has become the bane of the budget.
Rybak sounded another call for action Wednesday, e-mailing supporters that without it, city taxpayers could end up with a "raw deal."
Even so, Council Member Betsy Hodges views the pitfalls of the Target Center deal as Exhibit A in the case against the public financing of sports facilities.
She asked: "If we already feel like we have one albatross around our neck, why would we think the solution is putting another albatross around our neck?"
Target Center was not supposed to be Minneapolis' obligation.
The arena opened in 1990 under ownership of the Timberwolves. Within just a few years, its owners ran into financial problems and explored moving the NBA team.
Minnesotans were still reeling over the North Stars hockey team's move to Dallas in 1993 when Gov. Arne Carlson signed a legislative package in 1994 enabling the purchase of Target Center, on the condition that the Timberwolves stay in Minnesota. But when federal tax complications nixed that plan, Minneapolis approved its own bailout. The City Council issued about $80 million in bonds to buy the arena, and businessman Glen Taylor purchased the team.
Matters grew more complicated after St. Paul's Xcel Energy Center opened in 2000 and began vying with Target Center for concerts and other events. Later changes in state tax regulations squeezed the city's ability to pay the debt through a mechanism known as tax-increment financing.
Jackie Cherryhomes, the former City Council member who helped drive the Target Center purchase, has no regrets. In an interview, Cherryhomes said professional sports add to the city's cachet and help the economy.
"Hindsight is always 20/20, but ... on balance it was a good investment for the city," Cherryhomes said. "Had the team not remained in town, we would not have the economic impact we do have."
Moody's Investors Service said in 1995 that the city's per-resident debt had swelled to unacceptably high levels following the Target Center purchase, the Bond Buyer reported at the time. But today, analysts at major credit rating agencies say Minneapolis' debt is acceptable. They do not view Target Center with concern.
Rybak has sounded more alarm, despite acknowledging some risk to his plan.
"There's also an enormous risk of doing nothing ... letting this thing move in another direction could very easily lose the only chance we have to clean up what was a mistake many, many years ago," the mayor told a City Council panel last week.
What the plan would do
Rybak wants to divert some of the city's Convention Center taxes to pay Target Center debt and shift ownership of that and the new Vikings facility to a separate stadium authority. Those taxes would also finance a $150 million renovation of Target Center that Rybak and team officials say is needed for it to stay competitive.
Minneapolis currently uses tax-increment financing to support much of its obligation to Target Center. As property taxes rose in certain city-designated districts near the downtown arena, the city set aside some of that tax revenue to pay for the arena's debt and some of the capital costs. Yet much of the capital costs, and all of the operations subsidies, are paid by taxpayers throughout Minneapolis.
Financial projections released by the city last week showed that money generated from the tax-increment districts will not be enough to cover Target Center's costs. Projected property tax savings from alleviating the city's Target Center obligations would be about $5 million a year, topping more than $10 million annually after a decade -- but those figures are based on "fluid" assumptions, said Kevin Carpenter, the city's chief finance officer.
Costs of maintaining the arena are expected to rise sharply in the 2020s, according to city financial projections, but those numbers likely would change depending when and if the larger renovation plan is enacted.
The city's analysis also assumes operating subsidies will jump to more than $2 million a year starting in 2025, when both the management contract and the Timberwolves' lease expire.
Some Minneapolis council members say that any creation of a regional sports agency to oversee Target Center should also include the Xcel Energy Center. This week, St. Paul Mayor Chris Coleman spoke out against aid for Target Center over concerns that it would undercut his city's arena.
Minneapolis Council Member Robert Lilligren said he receives more calls from residents outside Minneapolis who tell him, "You've got to do what it takes to keep the Vikings" than from those in his own city. His constituents, he said, are against any public financing for such a deal.
"There are parallels," he added, "between the Target Center situation and what a future City Council might find themselves in with the new Vikings stadium."
Staff writer Eric Roper contributed to this report. Maya Rao • 612-673-4210
© 2014 Star Tribune