Dayton turns to smokers to fill Vikings stadium funding gap

  • Article by: JIM RAGSDALE , Star Tribune
  • Updated: May 17, 2013 - 8:53 AM

Higher cigarette tax, closed loophole for businesses would make up for e-gambling shortfall.

hide

Gov. Mark Dayton

Photo: Brian Peterson, Star Tribune

CameraStar Tribune photo galleries

Cameraview larger

A bailout of the $977 million Minnesota Vikings stadium by smokers and businesses was proposed by Gov. Mark Dayton on Thursday as a hedge against the limited success of electronic gambling games that were supposed to help build the sports palace.

The proposal was part of an overall agreement among Dayton and DFL legislative leaders on the tax bill, which included raising the cigarette tax, raising the income tax on higher-income Minnesotans and expanding the sales tax to a few business services. Total new revenue to be raised by the tax bill is $2 billion, legislative leaders said.

The stadium funding was part of the final tax deal. Revenue Commissioner Myron Frans said the state’s $348 million share could be guaranteed by raising the cigarette tax on existing inventories to obtain $24.5 million of revenue in the first year. That would be coupled with a long-term, $20 million-per-year capture of revenue from what Frans described as the closure of a corporate “tax avoidance loophole.”

The new plan is needed because electronic pulltab and bingo games selected last year to pay for the state’s portion of the downtown Minneapolis stadium have fallen far short of projections. The cigarette revenue would give the project an immediate boost, Frans said, while the corporate tax change would be available in the future, should game revenue continue to underperform.

“We believe it’s reliable, it’s consistent and we know over time it’ll be there,” Frans said.

The plan was accepted in principle by those legislators writing the tax bill, a key element in bringing the session to a close by its midnight Monday deadline. But it was immediately attacked by Republicans, who said it violated the principle of building the stadium without taking money from schools, nursing homes and other beneficiaries of the state’s general fund. Corporate income taxes and cigarette revenues typically flow to that fund.

“It is money that could otherwise go to schools, to health and human services and the like,” said Assistant Senate Minority Leader Dave Thompson, R-Lakeville. “So, once again, because the projections were wrong, because the administration didn’t understand the funding mechanism for the stadium, the taxpayer’s going to be on the hook.”

Final deals being struck

The stadium announcement is part of the deal making in the final days of the session, which included a late dust-up over Rochester’s prized Mayo Clinic expansion project, new offers in a standoff over transportation funding and an agreement on major taxation issues. Meanwhile, the Legislature began passing and sending to Dayton the first major budget bills.

The cigarette revenue for the stadium is based on Dayton’s proposal to more than double the tax, from $1.23 per pack to $2.83 per pack by July 1. That revenue would go to the general fund to help pay for a range of state programs, but Frans proposed using the one-time revenue from a tax on existing inventories for the stadium. That money would replenish the stadium’s reserve fund and cover any current shortfalls, he said.

The corporate tax revenue would serve as a $20-million-per-year backup source, Frans said. In essence, the change would increase corporate income taxes for many companies with sales inside and outside Minnesota.

Frans said these companies are “avoiding paying their full Minnesota income taxes” by legally reporting some of their Minnesota sales in other states.

He said the new revenue could be used for other budget needs unless it is not needed for the stadium. “It’s hopeful we’ll never ever need to use this other mechanism,” Frans said.

The Minnesota Chamber of Commerce opposes the change, said Beth Kadoun, director of tax and fiscal policy for the business group. “It is certainly not an avoidance,” she said of current practice. “It is tax law that’s been used in many states and in Minnesota for many years.” She said the change “can discourage future investments in Minnesota.”

Vikings Vice President Lester Bagley called the new plan “a viable, long-term solution to the electronic-pulltab shortfall.” While some legislators argue that the team should increase its $477 million contribution, Bagley said “it looks like the state is honoring our agreement from last spring.”

Details in tax bill

Dayton, House Speaker Paul Thissen and Senate Majority Leader Tom Bakk announced the tax agreement, which in addition to the cigarette tax increase included:

• An income tax hike on the top 2 percent of Minnesota wage earners, with a top rate of 9.85 percent.

• No new tax on liquor, and no surtax to accelerate repayment of the state’s debt to public schools.

• No sales tax on clothing, but an expansion of sales taxes to limited business services and goods.

“We’re on the cusp of an important course correction in our state’s history,” said Thissen, DFL-Minneapolis.

Discussions continued on ways to pump more money into state roads and bridges. Dayton, who opposes a gas tax increase, has offered instead to borrow $300 million for highways.

The governor’s transportation package still includes at least a half-cent increase in the metro sales tax for transit. The $300 million would come from state trunk highway bonds.

Mayo Clinic controversy

In the one-step-backward department, frustrated legislators threatened to scrap a plan to send millions in state tax dollars to Rochester to support Mayo Clinic’s downtown makeover. They were patching the deal up late Thursday.

The “House and the Senate have literally moved … heaven and earth to accommodate the Mayo proposal,” House Taxes Committee Chairwoman Ann Lenczewski announced during Thursday morning’s tax conference committee. “I will share my frustration. I’m comfortable waiting until next year.” Later, however, leaders said they hoped to resolve the dispute and keep the project on track for this year.

Mayo spokesman Karl Oestreich said by e-mail that “discussions continue as part of the conference committee negotiations. We’re confident that [Destination Medical Center] will be part of the final legislative package.”

The House and Senate have sent the governor their first budget bill, a measure covering jobs and energy programs. It would reduce the unemployment tax on businesses, spend money on economic development and create a solar standard for utilities. The measure also offers St. Paul loan forgiveness for the Xcel Energy Center and gives incentives to Minnesota-made solar equipment. Later Thursday, legislators also passed a less controversial budget plan to fund public safety programs.

Staff writers Jennifer Brooks, Pat Doyle, Baird Helgeson and Rachel E. Stassen-Berger contributed to this report.

Jim Ragsdale • 651-925-5042

  • Session countdown: 4 days

    • Gov. Dayton, DFL leaders reach agreement on tax bill.

    • Plan to send millions for Mayo Clinic’s downtown Rochester makeover in jeopardy.

    • House, Senate say they cannot bridge gap on increasing minimum wage. B1

  • get related content delivered to your inbox

  • manage my email subscriptions

ADVERTISEMENT

Chicago 17 FINAL
Detroit 34
Philadelphia 33 FINAL
Dallas 10
Seattle 19 FINAL
San Francisco 3
Cleveland 11/30/14 12:00 PM
Buffalo
Washington 11/30/14 12:00 PM
Indianapolis
Tennessee 11/30/14 12:00 PM
Houston
San Diego 11/30/14 12:00 PM
Baltimore
NY Giants 11/30/14 12:00 PM
Jacksonville
Cincinnati 11/30/14 12:00 PM
Tampa Bay
Oakland 11/30/14 12:00 PM
St. Louis
New Orleans 11/30/14 12:00 PM
Pittsburgh
Carolina 11/30/14 12:00 PM
Minnesota
Arizona 11/30/14 3:05 PM
Atlanta
New England 11/30/14 3:25 PM
Green Bay
Denver 11/30/14 7:30 PM
Kansas City
Miami 12/1/14 7:30 PM
NY Jets
Edmonton 0 FINAL(OT)
Nashville 1
ULM 54 FINAL
Robert Morris 71
Santa Clara 57 FINAL
Tennessee 64
Oklahoma 59 FINAL
Butler 46
Austin Peay 79 FINAL
Brown 58
Princeton 56 FINAL
Texas-El Paso 62
Coastal Carolina 67 FINAL
Chattanooga 78
Kansas 76 FINAL
Rhode Island 60
Wisconsin 68 FINAL
Georgetown 65
FIU 53 FINAL
USC Upstate 68
Long Island 54 FINAL
Stony Brook 73
San Diego 71 FINAL
Xavier 82
Illinois 88 FINAL
Indiana State 62
Cal State Fullerton 67 FINAL
Wright State 62
Western Ky 62 FINAL
Saint Josephs 59
Michigan State 77 FINAL
Rider 45
UCLA 56 FINAL
North Carolina 78
Long Beach State 73 FINAL
Western Mich 55
Marquette 72 FINAL
Georgia Tech 70
Stephen F Austin 73 FINAL
Prairie View 61
UAB 47 FINAL
Florida 56
Rice 71 FINAL
Mercer 77
San Jose St 56 FINAL
Washington 78
Washington St 43 FINAL
UC Santa Barbara 71
Baylor 71 FINAL
Memphis 47
LSU 23 FINAL
Texas A&M 17
(6) TCU 48 FINAL
Texas 10
Northern Ill 10:00 AM
Western Mich
Nebraska 11:00 AM
Iowa
Western Ky 11:00 AM
(19) Marshall
UCF 11:00 AM
So Florida
Houston 11:00 AM
SMU
Akron 12:00 PM
Kent State
Ball State 12:00 PM
Bowling Green
Buffalo 12:00 PM
Massachusetts
Toledo 12:00 PM
Eastern Mich
Arkansas 1:30 PM
(17) Missouri
Navy 2:00 PM
South Alabama
(13) Arizona State 2:30 PM
(12) Arizona
Stanford 2:30 PM
(9) UCLA
(21) Colorado State 2:30 PM
Air Force
Virginia 7:00 PM
Virginia Tech
East Carolina 7:30 PM
Tulsa
North Texas 11/29/14 11:00 AM
TX-San Antonio
Old Dominion 11/29/14 11:00 AM
Fla Atlantic
(16) Georgia Tech 11/29/14 11:00 AM
(8) Georgia
Kentucky 11/29/14 11:00 AM
(24) Louisville
So Carolina 11/29/14 11:00 AM
(23) Clemson
West Virginia 11/29/14 11:00 AM
Iowa State
Rice 11/29/14 11:00 AM
Louisiana Tech
Michigan 11/29/14 11:00 AM
(7) Ohio State
Purdue 11/29/14 11:00 AM
Indiana
Illinois 11/29/14 11:00 AM
Northwestern
Cincinnati 11/29/14 11:00 AM
Temple
NC State 11/29/14 11:30 AM
North Carolina
Syracuse 11/29/14 11:30 AM
Boston College
Louisiana 11/29/14 11:30 AM
Troy
Utah 11/29/14 12:00 PM
Colorado
Texas State 11/29/14 1:00 PM
Georgia State
Idaho 11/29/14 1:00 PM
Appalachian St
Wyoming 11/29/14 2:00 PM
New Mexico
New Mexico St 11/29/14 2:00 PM
Arkansas State
UAB 11/29/14 2:30 PM
Southern Miss
(4) Miss State 11/29/14 2:30 PM
(18) Ole Miss
Notre Dame 11/29/14 2:30 PM
USC
(10) Michigan State 11/29/14 2:30 PM
Penn State
(22) Minnesota 11/29/14 2:30 PM
(14) Wisconsin
(5) Baylor 11/29/14 2:30 PM
Texas Tech
Florida 11/29/14 2:30 PM
(1) Florida State
Rutgers 11/29/14 2:30 PM
Maryland
San Jose St 11/29/14 2:30 PM
San Diego St
Tennessee 11/29/14 3:00 PM
Vanderbilt
Kansas 11/29/14 3:00 PM
(11) Kansas State
Connecticut 11/29/14 3:00 PM
Memphis
BYU 11/29/14 3:30 PM
California
ULM 11/29/14 5:00 PM
Ga Southern
Middle Tennessee 11/29/14 6:00 PM
Texas-El Paso
Hawaii 11/29/14 6:00 PM
Fresno State
Wake Forest 11/29/14 6:00 PM
Duke
Pittsburgh 11/29/14 6:00 PM
Miami-Florida
(15) Auburn 11/29/14 6:45 PM
(2) Alabama
(3) Oregon 11/29/14 7:00 PM
Oregon State
Utah State 11/29/14 9:15 PM
(25) Boise State
Washington 11/29/14 9:30 PM
Washington St
Nevada 11/29/14 9:30 PM
UNLV
UCF 12/4/14 6:30 PM
East Carolina
Hamilton 11/30/14 5:00 PM
Calgary
Hartford 43 FINAL
Furman 53
Clemson 77 FINAL
Ohio State 86
Idaho State 53 FINAL
San Diego State 68
East Carolina 58 FINAL
(22) Syracuse 69
Santa Clara 0 Cancelled
Texas-El Paso 0
Florida State 68 FINAL
Washington 80
Wichita State 39 FINAL
Fla Gulf Coast 56
Wisconsin 44 FINAL
(1) South Carolina 67
Kansas State 0 Cancelled
LSU 0
BYU 73 FINAL
BYU-Hawaii 52
Charlotte 58 FINAL
Montana 67
Illinois 77 FINAL
(9) Kentucky 71
Central Michigan 61 FINAL
Richmond 56
Oklahoma 68 FINAL
South Florida 83
Princeton 72 FINAL
Wake Forest 55
(19) Oregon State 85 FINAL
Butler 53

ADVERTISEMENT

question of the day

Poll: Will the Gophers bring home The Axe?

Weekly Question

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

Connect with twitterConnect with facebookConnect with Google+Connect with PinterestConnect with PinterestConnect with RssfeedConnect with email newsletters

ADVERTISEMENT

 
Close