New Jersey case prompts further review of Wilfs’ financial commitment
The Minnesota Vikings franchise and the public authority that will own its new home are working to break ground on the downtown Minneapolis stadium later this year. But Gov. Mark Dayton’s call for an inquiry into the team’s finances is complicating an already difficult set of negotiations over final agreements for the use and financing of the stadium.
On Tuesday afternoon, the Minnesota Sports Facilities Authority (MSFA), which will own the $975 million stadium, announced that it’s delaying votes on the use and development agreements beyond the Aug. 23 meeting. The delay comes after Dayton called last week for the MSFA to investigate the finances of team owners Zygi and Mark Wilf in the wake of a New Jersey judge’s ruling that they had committed fraud and breach of contract and had violated the state’s civil racketeering laws in a case stemming from an apartment development dispute.
Michele Kelm-Helgen, the chairwoman of the MSFA, said the authority has hired the head of Minneapolis law firm Dorsey & Whitney’s securities enforcement and litigation division to conduct due diligence on the litigation’s “potential impact on their financial contribution to the new stadium.” Dorsey will work with the forensic accounting firm FTI Consulting in performing the due diligence.
The pursuit of the Wilfs’ financial records adds time to what was already an ongoing negotiating process over the final terms of the team’s $477 million contribution to the stadium project.
Kelm-Helgen suggested to Capitol Report on Monday that the target date of Aug. 23 for voting on the agreements might be postponed. “There is nothing magical about that date other than it’s our next board meeting,” she said. The subsequent MSFA news release indicated that an additional future meeting will be scheduled.
“We do not expect this to affect the overall project timeline, as progress continues between the Minnesota Vikings and the MSFA,” Kelm-Helgen wrote.
In 2012, state lawmakers passed public subsidies to accompany the team’s financial contribution. The state is responsible for $348 million, which was supposed to be generated from the proceeds of electronic pulltabs. But that revenue stream has badly underperformed initial projections, causing state lawmakers to craft alternative sources of funding in the 2013 session. The city of Minneapolis is on the hook for $150 million.
Negotiating final agreements
Before construction can begin, the MSFA and the Vikings must conclude agreements on the use and development of the stadium. The former will spell out the terms of the team’s lease as a tenant of the facility; the latter establishes the financing that the team will use to pay for its share of construction costs. Both agreements are still being negotiated, Kelm-Helgen told Capitol Report.
A third piece of the stadium deal, the environmental impact statement, is available in draft form on the MSFA’s website.
Dayton, who championed the Vikings stadium issue throughout the legislative process in 2011 and 2012, has taken a hard line toward the Wilfs since the judge’s ruling in the New Jersey civil suit.
Dayton called the details of the case “far from the legal standards for doing business in Minnesota,” and asked the MSFA to investigate whether “all of the representations made by the team and its owners are truthful and accurate.”
The team responded with a statement that their funding for the project isn’t in doubt.
“The Vikings have spoken with Gov. Dayton’s representatives and the Minnesota Sports Facilities Authority and have assured all parties that this civil lawsuit will have absolutely no impact on the stadium project,” the statement said. “The Vikings’ guarantee of $477 million in private financing has gone through two years of review and due diligence by our public partners. We have engaged several leading financial institutions to finance this project, and the funding is secure.”
Team plans for seat licenses
One of the more controversial aspects of the team’s financing plan involves revenue from personal seat licenses (PSLs). To obtain a PSL, individuals and corporations pay a one-time surcharge to select their season tickets.
The team has been seeking to make revenue from PSLs part of the development agreement, and the 2012 legislation allows them to do so. Despite the language contained in the stadium bill, however, Dayton has been a vocal critic of PSLs. He has contended that they sully the conception of the “People’s Stadium” that he used to brand the project when it was debated in the Legislature. In a letter to the Wilfs last November, Dayton said the PSLs would make the new stadium a venue for the fortunate people who can afford to buy them.
Kelm-Helgen acknowledged that the stadium legislation authorizes the team to use PSLs for financing of the stadium. But she added that any agreement containing PSLs will need to be accompanied by a set of ground rules.
“I will say… if we were to do it, it would have to be done with some very specific limitations and provisions of the highest price, the average price, how they would be sold, how much time people would have to pay them off and that sort of thing,” she noted.
Bob Hume, Dayton’s deputy chief of staff, said Dayton understands the legislation allows the team to use PSLs. Outside of Dayton’s call last week for the authority to scrutinize the team’s finances, Dayton doesn’t plan to actively engage the MSFA on the terms of the agreements.
“He’s been very vocal about his feelings on the PSL language going back quite a ways,” Hume said. “Generally he has faith that the stadium commission will strike the best deal possible for the state and for fans.”
The work that’s currently being done to design the stadium is being paid for with $50 million in up-front money from the Vikings franchise. That money will carry the project into the November/December time frame, Kelm-Helgen said. After that, the team’s financing will need to be in place and the state will need to sell bonds.