Columnist Lee Schafer provides short takes on economic incentives and choices, business strategy and performance, market moves, what business leaders are saying and doing and other topics that pique his interest.

Schafer: How much does Dayton understand stadium financing?

Posted by: Lee Schafer Updated: September 17, 2013 - 2:50 PM

Governor Mark Dayton has once again objected to the Vikings selling expensive personal seat licenses to fund the team’s portion of the new stadium’s costs, and once again it’s fair to ask whether he just doesn’t get how stadiums are financed or whether the politics of public funding for a stadium requires a more than normal amount of posturing.

To recap, the stadium financing legislation requires the team to come up with $477 million.   A personal seat license, also called a stadium builder’s license, is the one-time purchase of the right to buy tickets for given seats.  They are expensive, up to $80,000 in recent sales in San Francisco.

A seat license is hardly novel, and the adoption in 2011 by the National Football League of its so-called “G-4” financing program cemented personal seat licenses as a key financing vehicle. It’s clear that seat license proceeds are part of any NFL team’s plans from the beginning of any stadium project.

As reported, the NFL will provide up to $200 million in financing from its G-4 program for the Vikings stadium, but, much like the public’s deal with the team spelled out in the legislation, the NFL’s financing also requires a “private contribution.”

Money through the NFL will come in three pieces, called “tranches” in NFL documents.

Two of the tranches, totaling $150 million, are loans to be guaranteed by the Vikings’ controlling owner but the $100 million piece gets repaid by dedicating game-day proceeds that ordinarily would go to the visiting teams.  They are dependent as well on a private contribution.

The last tranche is what’s most interesting. It requires a private contribution of $100 million to the project, and if so the league will advance an amount equal to 50 percent of the private contribution, up to $50 million.

There is no indication in the league’s document that this is a loan at all, which makes it a grant. The thing is, the only money that counts as a private contribution on this tranche are personal seat license proceeds or the issuance of equity.  That means the team cannot borrow the money and call that a private contribution.

That makes the optimum amount to raise from seat licenses at least $100 million - which is a lot if, as the governor insists, prices for any PSLs are to be kept to "an absolute minimum." 

By putting PSL’s specifically into the document as a qualifying private contribution, the NFL and its teams have all agreed that this is how new stadiums will get financed.

The governor did sign the legislation that created a more-or-less conventional NFL stadium financing framework – including language on seat licenses. Now insisting Minnesota’s stadium has to be financed differently than the rest of the league’s new football palaces is, to be generous, a curious position to take.  

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