House panel weighs property tax break for stadium

A proposed property tax exemption on the $150 million-plus pro soccer stadium slated to rise in St. Paul made its way into the Minnesota House, where lawmakers on Wednesday questioned the benefits for nearby small businesses whose tax burden is likely to rise.

The discussion in the Tax Committee’s property tax division marked the first time legislators in the Republican-dominated House weighed the bill, whose counterpart debuted in the DFL-controlled Senate last month. The proposal would keep the soccer stadium site off property tax rolls and grant a sales tax exemption on construction materials.

Tax relief is a condition of the massive development, which in addition to a 20,000-seat Major League Soccer stadium is expected to bring a slew of new development to a long-stagnant stretch of St. Paul’s Midway neighborhood. The site is near Snelling and University avenues, north of Interstate 94.

Stadium proponents predict a Midway overhaul could multiply property values by more than 10 times, thanks to an influx of new housing and commercial projects. That forecast represents a huge benefit to St. Paul’s tax base, but several lawmakers questioned whether mom-and-pop outfits will be able to cash in.

“I think overall this will be a good project for St. Paul and certainly is going to help grow the values of the neighborhood,” said Rep. Jerry Hertaus, R-Greenfield. “This increase in [property] values is going to put an added property tax burden on small businesses, which is going to threaten their survival.”

Owners of the Minnesota United FC soccer club, who agreed to bankroll the facility, say they need tax breaks to justify their investment. While the stadium itself is confined to a roughly 10-acre former bus maintenance facility, about 25 acres around it will dramatically change after the soccer facility opens.

New York-based RK Midway, which owns the surrounding land, has outlined plans to redevelop Midway Shopping Center strip mall and large parking lots into new housing, offices and retail. RK Midway latched onto the stadium project, which surfaced last year, as its long-awaited catalyst for change.

Rick Birdoff, who runs RK Midway, said earlier this year that new development would include enough space to accommodate all of his current retail tenants, who together fill 330,000 square feet of existing retail space. Still, significant changes to local market dynamics could affect their options.

Existing Midway tenants include a mix of local, regional and national retailers. Birdoff did not attend Wednesday morning’s hearing and could not immediately be reached.

St. Paul Mayor Chris Coleman, however, told legislators that the landlord would not terminate leases early, and that several Midway retailers – including Big Top Liquors – had expressed interest in becoming part of the redevelopment.

In addition, he said, the city would closely monitor job creation and retention efforts as part of the Midway transformation.

“We are very mindful of the potential disruption to businesses, but we are also mindful of the potential solutions,” the mayor said.

The Midway Chamber of Commerce last year threw its weight behind the stadium project, echoing the city’s case that it will bring badly needed investment to a section of the city hungry for growth. In reality, the area’s makeover started with the Green Line light rail route, which cuts down University Avenue within blocks of the proposed stadium site.

Chris Ferguson, who sits on the chamber’s board, acknowledged Wednesday that some turbulence will almost certainly come with the stadium project. But he pointed to a slew of businesses now thriving along the Green Line corridor, despite hits to business before the route opened in 2014.

That success can be replicated by businesses piggybacking on the soccer stadium, Ferguson told lawmakers. Birdoff’s vision for the area surrounding the soccer facility presents a compelling case for shouldering challenges during construction and heftier property taxes down the line.

“Tax increases are one thing, but for most small businesses, taxes are not the No. 1 line item,” Ferguson said, pointing to more foot traffic and higher visibility near the soccer stadium as worthwhile tradeoffs.

Minnesota United FC owner Bill McGuire, who is leading the stadium effort,has said he doesn’t expect trouble sealing tax breaks. Still, some lawmakers – particularly in the House – have complained of “stadium fatigue” after sizable state investments in the $1.1 billion Minnesota Vikings stadium and the Minnesota Twins’ $545 million Target Field.

Rep. Tim Sanders, DFL-Blaine, and Rep. Rena Moran, DFL-St. Paul, on Wednesday pitched the tax breaks as routine. Both the Vikings and Twins facilities scored similar benefits. Soccer stadium backers tried to nail down tax relief last session, but that campaign crumbled amid late-session wrangling over other issues.

The full House Tax Committee will consider the proposed soccer stadium legislation at a Thursday morning hearing. Members of the Senate Tax Committee voiced strong early support for the provisions.