Thursday, February 10, 2011

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.


bmc13 said...

VG, you've been awfully quiet about the happenings of the past few months. Are you ok?

vikes geek said...


I'm good. Thanks for the inquiry.