Fans and Public Left Uninformed on True Cost of Publicly Financed Stadiums

When the Minnesota Vikings trot out their proposals for a new stadium--a ritual in which they engage two or three times a week--they are fond of citing the most flattering talking points, even if they are not necessarily very flattering. The talking points include the Vikings' fallacious statement that they are content with a closed-air stadium, their claim that they are willing to contribute $250 million to the stadium venture, and their insinuation, if not outright contention, that they are not attempting to leverage Los Angeles, either through their own offices or the orifices of their many minions on radio and television, and in print, to expound upon the inevitable rapture should the good people of Minnesota not cave to the team's ludicrous demands.

There is, of course, utter silence on all matters outside of these talking points that in any way reflects negatively on the Vikings' efforts at a pure and plain money grab.

For many fans, the issue of whether to build the Vikings a new stadium is clear. "Build the stadium already," they cry. "What are we talkin'? A couple pennies here and there? Build the damn thing and quit whining." Other equally eager fans relish in citing funding for numerous other public ventures--the Walker Art Center, the Guthrie Theater, Target Center, Excel Energy Center, Target Field, and, for the more thinking fans, even the elements-ravaged Metrodome. All of which, of course, ignores whether any of those investments brought or will bring to the paying public a return equal to their investment.

Can a Vikings' stadium be built that meets the reasonable edict of meeting the Vikings' desires ("needs" is an absurd and overused term that the Vikings have foisted upon the all-too-pliant public in this discussion) and the public's reasonable expectation of a financial return consistent with its investment level? Absolutely. But history does not favor such an outcome.

The problem for cities, as most fans either ignore or simply do not understand, is that the money that the city or public entity contributes to such a venture as building a new football stadium is borrowed money. That means that the public must repay the money and at significant future cost.

What is the cost to a city for bonding such a venture? That depends on how much the city borrows, at what rate, and over what time period. In that sense, the bonding experience should be familiar to Vikings' fans, many of whom, presumably, have similar loan arrangements with their home mortgages. And if, in this environment, those very fans cannot relate to how bonding a stadium construction can put a municipality in substantial financial arrears, there is little hope for that fan base--and considerable possibility that those very fans will pay far more than they ever imagined possible when the bill ultimately comes due.

There are numerous examples regarding public funding of professional stadiums that illustrate the dangers of public funding of such large projects (and, yes, those dangers extend to public funding of non-NFL ventures such as the Guthrie).

In Arizona, the City of Glendale is facing bankruptcy because of its miscalculation in securing funding for its wide-ranging sports district, the epicenter of which is the Phoenix Coyotes' ice rink. To undertake the construction of its sports complex, Glendale borrowed $500 million. Over three decades, assuming it pays off its debt, Glendale will repay just over $1 billion on that loan--nearly $3500 for every resident of Glendale, and rising as those residents leave the City.

Glendale had planned to finance the debt by relying on revenues from the Coyotes, who have declared bankruptcy and could leave Phoenix in the near future, and on receipts from the two other cornerstones to the complex project--neither of which has materialized due to the financial difficulties of associated contractors.

While the City of Glendale suggests the general and great problems associated with bonding ventures by municipalities that are often out of their element when negotiating with specific professional entities, the problem is magnified when cities are beguiled by the promise of NFL riches that really mean riches for the NFL and but a team name and color upon which the municipality may hang its hat.

The debt issue is crippling to states, particularly when revenues are declining as precipitously as they have been in recent years. But making matters worse is the fact that most cities, in an attempt to make their arrangements with the local club more palatable to the less enthused residents of their state, hide the even more burdensome costs to the city and state, generally in the form of forgiven taxes--yes, those very taxes that the ardent build-a-stadium-at-all-costs fanatics most favorably cite in support of their generally and otherwise woefully uninformed take on the stadium issue. In New Jersey, for example, residents still owe $110 million on the old Giants stadium; the State has nevertheless deemed it appropriate to grant the Giants and Jets sweetheart lease arrangements at the Meadowlands.

If the Vikings were honest and forthright, the stadium issue in Minnesota would not be an issue. The Vikings and the NFL would sit down with representatives from the relevant municipality and work out an agreement that provides a meaningful financial return to the municipality and to the team, with the team not profiting without venturing a corresponding financial risk. That, of course, is not how the Vikings want to play things. Instead, they continue to lament their "lack of revenue" and their "need" for public funding without a meaningful public stake in the final product.

That's not how it ought to work. Unfortunately for the Minnesota tax payer, it is how it has played out across the country. Maybe Minnesota will prove its claim to an educated population, however, and stand as the aberration.

Up Next: The Coaching Carousel.

Snyder and Vikings Hurting Vikings' Stadium Cause

The Minnesota Vikings' Metrodome lease expires after the 2011 season. Even if construction on a new stadium were to begin today, that stadium likely would not be ready for use until the 2013 NFL season.

Since well before Zygi Wilf took over ownership of the Vikings at an estimated cost of $625 million, the Vikings' organization, led by Lester Bagley, has, along with the NFL's vast network, helped bankroll and otherwise perpetuate the NFL's stadium-building cottage industry. The Vikings and the NFL share a common interest in this regard and that interest is two-fold. Both want to continue to increase the value of NFL teams, thereby creating leverage for both the league and team owners, and both want to have the public, rather than teams, on the hook for stadium expenses if and when there are work stoppages.

For purposes of the current CBA discussions, the Vikings and the NFL are playing from well-behind in the leverage game. Ownership groups in Jacksonville, Buffalo, San Diego, and Oakland want out of their current arrangements and are willing to sell to relocators. That makes some sense for each--particularly the relatively new Jacksonville franchise and the always moving Al Davis Raiders. It also makes some sense for seemingly mired and relatively cash poor Bills. For San Diego, as for the Vikings, it makes sense only as a bluff, however.

Like San Diego, the Vikings have an established, loyal (some say too loyal) fan base. Unlike San Diego, however, Minnesota, and Minneapolis and Hennepin County, in particular, have routinely rallied to the Vikings' rescue--even though the team is making money hand over fist. In recent years, public assistance has arrived in the form of forgiveness of millions in taxes and the gifting to the Vikings of naming rights to the Metrodome.

The Vikings, of course, conveniently omit these public gifts, as well as revenue sharing revenue from the league's top-earning teams, from discussion regarding team revenues, opting, instead, to note that in terms of stadium revenue, the team ranks near the bottom of the league. That issue has been addressed on this site numerous times in the past with the basic retort being that the Vikings' claim, while true, tells not even one-tenth of the revenue story for the team; much of that revenue comes in the form of television revenue and merchandise sales. Much more will come in the form of franchise fees, if and when a team finally returns to Los Angeles, a city that cares far less about the NFL than the NFL wants it to care.

Lack of transparency on known money issue, coupled with the workings of other owners around the NFL, rightfully raise public questions regarding the Vikings' intentions, commitment to the team after a stadium is built, and need for public assistance. In the end, the question ought to be whether the public-private relationship makes financial sense for the the public entity. But the Vikings' owners, and other NFL owners, like Washington's Dan Snyder and Dallas' Jerry Jones, have laid substantial groundwork to undermine that message and to frustrate an endeavor that ought not be viewed through either the Vikings' or the public entity's (pick any) current lens, but through a lens suggesting a significant benefit to all involved with all cards laid on the table for public consumption. That course remains open for the Vikings to take, but is unlikely to emerge as long as the NFL and the team are mired in the tired, pre-cable television threat that the team will move to a market open only to new franchises.

Up Next: Vikings Move Laterally on Coaching Hires.