U.S. Bank Stadium is officially open, and thanks largely to gamblers, taxpayer money is flowing in to pay for it.

Tax revenues from pulltabs and other charitable gambling, the original source of money to cover the state’s contribution to the $1.1 billion public-private partnership — the largest in Minnesota history — are soaring. That’s a reversal from just a few years ago after botched projections forced the state to tap corporate taxes to help pay for the project.

The turnaround gives state officials enough money to both pay the stadium debt and start replenishing the project’s reserve fund, once projected to reach zero. And there is further optimism in Minneapolis, where sales tax revenues committed to the stadium starting in 2021 have been growing faster than expected.

“The system is working right now the way we designed it to work,” said Myron Frans, the state’s commissioner of management and budget. “It’s exceeding our expectations, but we’re not through the potential years where we might need more money.”

The state’s share of the project is $348 million — or about $616 million, including interest over three decades. Minneapolis is covering $150 million over the same period, plus about $7.5 million a year for operations and maintenance — or about $631 million accounting for interest and inflation.

Initial plans to introduce iPad-like electronic pulltabs and use the ensuing new tax windfall to cover the state’s stadium share proved misguided several years ago when additional tax proceeds didn’t immediately materialize. To cover the difference, the state imposed a one-time tax on cigarette inventories and required some out-of-state corporations to count more income in Minnesota, closing a loophole estimated to be worth about $20 million a year.

State officials haven’t tracked the precise impact of closing that loophole, but they now redirect $20 million in corporate tax revenue toward the stadium. The gambling taxes have generated about $20 million this year, still not enough to cover debt payments on their own, compared with the $35 million originally projected.

‘Chugging along’

A lot of the growth in charitable gambling tax revenue is still due to paper pulltabs. But the electronic games are seeing a boost. Electronic pulltabs comprised about 6 percent of total sales last year, compared with 2.4 percent the year before.

An improving economy and lower gas prices are two likely factors for a record year of charitable gambling sales, said Tom Barrett, executive director of the Minnesota Gambling Control Board.

“Minnesota is by far and away chugging along like no other state when it comes to the activity,” Barrett said.

Unlike casino gambling, charitable gambling generally occurs at local bars and involves civic organizations and youth support groups selling paper tickets that players pull open to reveal winners. After paying out prizes and taxes, the proceeds are donated to support youth hockey leagues, parks, scholarships, food shelves and other community activities.

“Our customer base really just loves their paper,” said Suzanne Slawson, gambling manager for the Blaine Youth Hockey Association, which introduced e-games at several bars but later pulled them due to poor performance. Slawson said that people are playing “pretty heavy” after the recession and that she has noticed more young adults attending bingo games — another form of charitable gambling.

But there’s a consequence to the growth. More charities now find themselves paying the top state tax rate, which Al Lund of Allied Charities of Minnesota said is putting a squeeze on their local missions.

“The mood of our members is, ‘We’re sending so much into the state and we have so many needs locally, we just don’t understand why we’re doing all this work to send all that money to St. Paul when that’s not why we started these clubs,’ ” Lund said.

His group would like to see the stadium deal restructured to help lower the tax rates.

Minneapolis taxes

The remaining public share of the stadium costs will be covered by sales tax revenue in Minneapolis, a portion of which become available after debt is paid on the city’s Convention Center in 2020. They include a citywide sales tax, downtown restaurant and liquor taxes, and a hotel tax.

In addition to supporting U.S. Bank Stadium, the tax revenue will be needed in the future to pay for expenses at the Convention Center and the Target Center. But sales tax growth has exceeded expectations enough that city officials are eyeing ways to spend surpluses. City finance staff members will be recommending that $1 million be used to jump-start a long-term road and park repair plan, for example.

Former City Council Member Gary Schiff, the most vocal critic of the stadium financing deal during its passage, said tax growth should be used to combat gentrification in the city.

“If we can build a billion-dollar home for the Vikings, we should be able to provide affordable housing for the homeless,” he said.

Sales tax revenues are notoriously volatile, so officials intend to reassess annually before committing the money to other areas. But last year’s sales tax haul was about 9 percent higher than projections made during the stadium debate.

“We were still kind of dragging ourselves out of a recession, so … people were a little more conservative at that time,” said Mark Ruff, the city’s chief financial officer. He noted that major events such as the 2018 Super Bowl and a thriving downtown bode well for sales tax revenue in the future.

Still, some long-term considerations aren’t resolved. One provision of the stadium bill could raise the city’s contribution if the taxes perform well, but Frans said the precise mechanics of that depend on a future agreement. “There are different ways to fine tune this going forward that I think will accurately reflect what we need,” Frans said.

 

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