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House proves a tougher sell for stadium tax breaks

Karlee Weinmann//April 14, 2016

House proves a tougher sell for stadium tax breaks

Karlee Weinmann//April 14, 2016

Tax-wary House lawmakers on Thursday continued to question tax relief tied to the $150 million-plus Major League Soccer stadium planned in St. Paul, taking a decidedly different tone than their counterparts in the Senate.

For the second day, Minnesota House members peppered St. Paul Mayor Chris Coleman and Bill McGuire, the leader of the deep-pocketed investor group bankrolling the 20,000-seat facility, with questions about the project’s viability and its reliance on tax exemptions.

The soccer stadium deal is markedly different from others in recent years whose substantial public money requests dulled the appetite for sports projects. The privately financed facility would sit on a site that is already tax-exempt, a former Metro Transit bus maintenance facility near Snelling and University avenues.

In an unfamiliar twist in stadium debates, the Senate Tax Committee last month signaled strong support for the tax exemption plan and hailed the project as a major win for St. Paul. Two community members voiced concerns then about the stadium’s payoff, but the testimony did not seem to sway lawmakers in the DFL-dominated chamber.

Still, general skepticism over the initiatives tinged Thursday’s discussion in the Republican-dominated House’s Tax Committee.

With a $1.1 billion Minnesota Vikings stadium rising in downtown Minneapolis, state Rep. Bob Barrett, R-Taylors Falls, asked why the Minnesota United FC soccer club couldn’t play there, noting that other pro soccer teams use their local football facilities. McGuire said the most successful franchises have their own stadiums.

Others questioned the financial impact on the state and other cities.

Based on existing estimates of the stadium’s taxable value, state analysts estimate it would forego a total of $2.7 million in property taxes in 2018, its first year after completion. The proposed sales tax exemptions would add up to $3.5 million over their two-year life.

Several representatives from suburbs in the seven-county metro area suggested the tax relief proposal would create further imbalance in the state’s Fiscal Disparities program, which takes taxes gained from commercial and industrial development and distributes them around the Twin Cities. St. Paul is already a major beneficiary.

“It’s one thing to exempt a property from its own city’s property taxes, but the Fiscal Disparities pool impacts every other community in the metro area, and so I think that’s an important consideration,” said Rep. Jenifer Loon, R-Eden Prairie.

Thanks to a high concentration of universities, government offices and churches, roughly one-third of St. Paul’s property is currently tax-exempt, according to city estimates. Some lawmakers balked at adding the 10-acre stadium site to that tally despite what proponents say is a steep upside to the project.

The facility is expected to anchor a massive redevelopment of the surrounding 25 acres, currently home to the Midway Shopping Center and expansive parking lots. New housing, offices and retail envisioned for the site could multiply property values by more than 10, Coleman said.

Long-range benefits to St. Paul’s tax base outweigh any near-term burdens, the mayor said. He echoed his earlier pitches for the facility, saying that without a major catalyst like the stadium, the area would likely remain untouched for years – or potentially decades – to come.

Midway Chamber of Commerce executive director Chad Kulas urged legislators to support the stadium on Thursday, citing “overwhelming support” from the local business community. Meanwhile, some House Tax Committee members offered gentle praise for the redevelopment prospects.

Rep. John Lesch, DFL-St. Paul, was the panel’s most outspoken advocate. He cited soccer’s rising popularity, and said that eventually investments like the stadium would amplify St. Paul’s contribution to the regional economy.

But extending a line of questioning that began in the property tax division on Wednesday, Rep. Steve Drazkowski, R-Mazeppa, delivered a sharp rebuke.

Any new development that floods Midway around the stadium will have to pull from somewhere else, he said, likening the strategy to the carnival game Whack-a-Mole. He leads the property tax-focused group that on Wednesday disputed whether small businesses could afford to stay in the area.

“You look at it superficially and say this is going to be wonderful and we’re going to have a little Disney World here and people are going to come from all over the place. … You’re not creating new wealth, you’re basically rearranging it,” he said.

The city will own the stadium after it’s built, but needs the exemption because property taxes would likely apply to a facility whose primary use is private.

Lawmakers did not take action on the bill, which would need to be rolled into a comprehensive tax package. But halfway through this truncated legislative session, there’s little clarity on when, how or if that legislation could come together.

While Republicans and DFLers remain at odds over how far to go in terms of tax relief, other high-profile bills – notably transportation and bonding – remain in limbo and on the front burner. Rep. Greg Davids, the prominent tax-cut advocate who chairs the House Tax Committee, gave a murky forecast this week.

After a Wednesday hearing, he provided little reassurance to a lawmaker who pressed for a tax bill status update. Davids shrugged. For now, he said, he’s mired in meetings with the governor and the Department of Revenue.

“I wish I had an answer and I will let the committee know as soon as I know something,” Davids said. “It’s going to go fast when it goes, but we don’t know when it’s going yet.”

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