Stadium project awaits bond ruling

Rep. Joe Atkins, DFL-Inver Grove Heights, and a bipartisan group of legislators would like to reach an agreement with various teams and local units of government to combine the administration of the metropolitan area’s professional sporting facilities under a single umbrella. (Staff photo: Peter Bartz-Gallagher)

Attorney general, governor’s office differ in views of appropriation bonds

Though the ink has long since dried on the Minnesota Vikings stadium legislation, there is still sufficient action on several stadium-related fronts to keep Vikings lobbyists employed for the foreseeable future.

Since the legislation passed, the Minnesota Gambling Control Board has been preparing to put in place the new e-pulltab machines that the state is counting on to produce its $348 million share of the cost of the $975 million stadium.

Sources close to the process say that, for starters, the 2013 Legislature will have to pass at least one technical provision to fix an error in the hastily retooled stadium bill. But two issues are looming large in the aftermath of the deal’s passage, and the fate of the stadium’s financing hinges on the first of them.

The state and the Vikings are currently awaiting a ruling from the Minnesota Supreme Court that may pass judgment on the legality of the heretofore untested “appropriation bonds” proposed to finance the state’s $348 million share of the $1.1 billion construction costs.

The case now before the court does not involve the Vikings stadium but rather the bonds the state used to borrow over $700 million from future tobacco settlement proceeds as part of Minnesota’s 2011 budget deal. Now the state would like to refinance those bonds using less costly appropriation bonds — which are ultimately guaranteed by future general fund revenues. The court is faced with weighing whether the appropriation bonds are effectively the same as conventional bonds backed by general tax dollars and thus amount to unconstitutional deficit spending.

Some fiscal watchers have wondered whether the court would tailor its tobacco bond ruling broadly enough to clarify the status of the stadium proposal as well. But they also note it is possible that a separate case will have to be brought regarding the stadium bonds. One fiscal analyst noted that the outcomes of the two cases could differ: The Vikings project could pass muster, the analyst noted, on the grounds that it involves a specific capital project, whereas the tobacco bond refinancing may run aground because it involves financing continuing state operations.

In a sign of the legal precariousness of the appropriation bond scheme, Attorney General Lori Swanson’s office clashed with representatives of the Dayton administration during testimony in front of the justices last month and in court filings over the tobacco bonds. Swanson’s solicitor general, Alan Gilbert, expressly rejected the administration’s contention that tobacco bond holders bear the risk and that this fact legally distinguishes appropriation bonds from general obligation bonds. Dayton and Swanson are both DFLers.

It’s unclear when the Supreme Court will rule, but the deadline for the state to refinance the initial securitization bonds that were issued in 2011 into cheaper appropriation bonds is Dec. 1.

New stadium authority weighed

Meanwhile, some legislators are hoping to tee up a larger debate about the governance of the Vikings stadium and other Twin Cities professional sports facilities.

Rep. Joe Atkins, DFL-Inver Grove Heights, and a bipartisan group of legislators would like to reach an agreement with various teams and local units of government to combine the administration of the metro area’s professional sporting palaces under a single umbrella. Atkins notes that the facilities currently compete against each other to their mutual detriment. The city of Minneapolis owns Target Center and the city of St. Paul owns Xcel Energy Center; the former is home to the Minnesota Timberwolves basketball team and the latter hosts the Minnesota Wild hockey team. And both arenas compete for live concert events. The public, which is subsidizing the stadiums, isn’t well served by the fragmentation, Atkins said.

“We have our existing facilities competing against one another in the same market and driving down their ability to charge outside conventions to use each facility,” he said, adding that the resulting inefficiencies “just make no sense for facilities in which there have been public investments.”
Atkins said he would like to introduce legislation in 2013, although he said he has not considered the form a combined governing structure would take.

Minneapolis and St. Paul have signaled an interest in a regional approach to stadium governance. Minneapolis Mayor R.T. Rybak has talked in the past about a plan to organize the metropolitan area’s stadiums. St. Paul Mayor Chris Coleman’s communications director, Joe Campbell, said Coleman concurs: “The state can do a better job in a taking a more regional approach to these sorts of things.”
But the idea will be difficult to convert into reality, said Rep. Morrie Lanning, R-Moorhead, who was the chief author in the House of the Vikings bill. Lanning said the idea of combining the facilities was too complex and unwieldy an issue to be part of the Vikings bill.

“I think that idea has some merit down the road as an ultimate kind of preferred route to go,” Lanning said. “But we decided not to go down that road because of how complicated it is.”

In addition to the concerns of the teams and the stadium owners, Lanning said one of the difficulties with the issue is that it could mean the state picks up added financial risk.

“There could be varying amounts of state support that would be required depending on the varying circumstances. And the more state involvement, the more difficult and complicated it becomes,” Lanning said.

“A lot of it is going to depend on the implications for the state and whether the state is, in effect, taking on significant additional responsibilities,” he added.

Budgeting error

While there are many big-time issues concerning the Vikings and professional sports stadiums, there are also some smaller issues that will need to be addressed in 2013 due to the haste with which the conference report was assembled and passed in May.

One is that about $250,000 in fees used to support the Minnesota Gambling Control Board were inadvertently hijacked to pay for new positions at the state Department of Public Safety (DPS) that will police illegal gambling activities that may arise from the e-pulltab operations. Tom Barrett, executive director of the Gambling Control Board, said his agency handles civil matters related to gambling and DPS handles criminal matters. General fund money, not the fees that are collected from charitable gaming, was the intended source of funding for the new DPS investigators, he said.

“We want to make sure we protect the fees, so they go for what the charities paid them for,” Barrett said.