Minneapolis City Council Minnesota Vikings Stadium Deal aka "How to extort $150 million"

  • Blog Post by: Lenny Russo
  • March 23, 2012 - 6:41 PM

This post corrects a previous post that stated that Target Center was built solely with public money.  Target Center was actually built with private money, but it was later purchased by the City of Minneapolis which continues to subsidize its operation.

With the Minnesota Vikings stadium deal appearing to be on life support at the Capitol, the Governor has been working overtime to help sway a reluctant Minneapolis City Council to sign a letter of support that would be used to move a recalcitrant Legislature to vote in favor of the bill.  The sticking point for the City Council appears to be a provision that would allow for $150 million in tax revenue to be redirected to a renovation of Target Center as well as some help for the Minneapolis Convention Center.  The City Council will not support extending downtown hospitality taxes which are set to sunset without the Target Center provision.  The Legislature won't act without an assurance that the City Council is on board.

Let's set aside for the moment two other sticking points. The first of which is the need for a deal to be cut with nonprofit organizations that will undoubtedly suffer from the competition that the proposed electronic pull tab revenue to be used as stadium funding would create.  The second is a lack of a backup plan that wouldn't include the general fund to cover any unanticipated funding short falls.  It's bad enough that the plan calls for creating unfair competition with nonprofit organizations in order to raise enough money to subsidize a billionaire owner in a multibillion dollar industry, but the Minneapolis plan as put forth by the City Council also calls for creating unfair competition between Target Center and the Xcel Energy Center in St. Paul.

Let me state that I do believe it is in general a good idea that all entities have at least some skin in the game.  Large venues such as the Vikings Stadium are usually much better projects when private and public entities collaborate on the details, but this is not the case when we are speaking about Target Center.  Target Center was originally built and owned by the Timberwolves at a 2012 inflation adjusted cost of $184 million.  Minneapolis issued $80 million in bonds in 1995 to purchase the arena as way of keeping the Wolves in town, and it has continued to subsize the private management of it to the tune of $1.5 million a year.  It consequently does not need to turn a profit which enables it to bid for entertainment bookings at a much lower price than the Xcel Energy Center.  Xcel was built with an 86% of total cost private money investment, and it remains a private entity,  As of today, the Minnesota Wild still owe $32 million on the original note that financed the construction of that facility.  Minneapolis owes somewhere in the range of $50 million to $55 million on Target Center.

As a product of both private and public cooperation, the Xcel Energy Center is far superior to Target Center.  It has been lauded as one of the finest facilities of its kind in the country.  The same has never been said of its older Minneapolis cousin.  While the seating capacity of Target Center is larger, the overall quality of the arena falls far short of the Xcel.  Consequently, prospective entertainment bookings almost always go to Target Center, first in order to get the lowball price and then to use that price to negotiate a sweetheart deal with Xcel.  The Xcel always lowers the asking price in order to gain the bookings.

That scenario does not take place in other metropolitan areas of similar and even larger size.  For example, Milwaukee has one arena.  I have been quoted figures that claim that Bradley Center generates three times the profit when booking a performer than the Xcel due to the lack of competition.  The Bradley Center is home to the Bucks, Marquette University, and the Milwaukee Admirals of the AHL and the Milwaukee Mustangs of the AFL.  It was also at one time the home field for the Milwaukee Wave of the MISL.  The Los Angeles Lakers and the Los Angeles Clippers share the same arena as do the New York Knicks and the New York Rangers.  For some reason, the Twin Cities seem to feel that two arenas are needed, one for the Timberwolves and one for the Wild.  That is unheard of anywhere else in the country.  Arenas in large metropolitan areas across the country do not have competition from similar arenas within their own markets for entertainment bookings.

So the Minneapolis City Council wants another $150 million to throw into that monstrosity called Target Center, or they won't back the Vikings Stadium proposal that is being discussed in the Legislature.  First the west metro yanked the rug out from under the east metro by putting what is essentially an even worse deal for taxpayers on the table, and now they want to extort another $150 million dollars to shore up their previous boondoggle,  Once again, they want to do this at the expense of taxpayers and the east metro.  If they succeed, they will essentially throw the Xcel Energy Center into peril, and they will stifle St. Paul's ability to attract people to a newly revitalized downtown.  As a result, the Xcel is asking for $150 million of their own in response to the Minneapolis proposal.  They see it as their only way to survive.

Some members of the Minnesota House of Representatives would like to rub some more salt into St. Paul's wounds.  St. Paul and the St. Paul Saints have asked what is in comparison a meager $27 million in bonding money for the construction of the proposed regional ballpark.  The new ballpark would not only be the home of the Saints, but it would also be used for college and amateur baseball tournaments.  It would contain an art gallery for Lowertown artists, and it would offer three opportunities for large public art installations.  It would have a public plaza, and it would have green space that could potentially be used for a community garden.  The entire project would cost $54 million, and it would be built on land that is so polluted it can't be used for anything else.  The total cost is about a third of what Minneapolis wants for the Target Center renovation.  The public contribution would be less than a quarter of that.  The Saints would contribute $10 million, and St. Paul would cover the balance.  The city will own the ballpark. 

While the Saints contribution to the facility could be seen as small in view of what the Wild contributed to the Xcel, they would pay all the yearly maintenance and utility costs.  The city would receive the revenue generated by the additional bookings.  In the winter, the field would be flooded for public ice skating and outdoor hockey tournaments.  By capping their contribution at $10 million, the Saints will be able to maintain the family friendly accessibility in terms of ticket prices that they currently offer their fans.  The most expensive ticket for a Saints game this year will be $12, and there are many $5 seats available.

In what we have come to see as business as usual when Minneapolis and St. Paul are competing for the same piece of pie, the House of Representatives has offered $2 million of the $27 million needed for  the project.  This is after Minneapolis was given Target Field for the Twins at great taxpayer expense.  Now Minneapolis is asking them to approve funding for a billion dollar football stadium and a $150 million renovation of an obsolete basketball arena.  Is it any wonder that those of us in the east metro feel slighted?  Where is the balance and equity when the state considers how best to aid in the development of the Twin Cities metropolitan area?  In addition, what kind of message does this send to billionaire professional sports team owners?  It seems the message is this:  If you contribute almost the entire cost of the construction of your facilities as the Wild did, then you are idiots.  It would be smarter to holdout for deals like the Twins and Vikings have where around 40% or less of the facility cost is borne by the team.  Otherwise, you will eventually find yourselves at a competitive disadvantage.

The solution is actually a pretty simple one. The Target Center should be torn down, and the land should be put up for sale to private developers who could return it to the public tax rolls.  Minneapolis should help a potential developer fund the demolition and reduce the public liability.  The Timberwolves should play their games at the Xcel and share the facility with the Wild as is done in other cities.  The taxpayers win; the Xcel is more profitable, and the Timberwolves get the more up to date facility they deserve.  As a result, St. Paul is spared an evisceration at the hands of Minneapolis and the Minnesota Legislature, and Minneapolis can propose a Vikings stadium deal that might actually make some sense.







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