A workaround tucked in Minnesota statutes means the deep-pocketed group planning a professional soccer stadium in St. Paul will get a multimillion-dollar sales tax break on construction materials even without specific legislative approval.
Sales tax relief was one of two requests stadium proponents sought to add to a tax bill, now under review by Gov. Mark Dayton. Lawmakers included the heftier piece — a property tax exemption on the stadium site, roughly 10 acres near University and Snelling avenues and Interstate 94.
The owners of Minnesota United FC soccer club, who are bankrolling the $150 million-plus facility, told legislators they needed the two tax breaks to justify their investment. But the project met with criticism from some, particularly in the Republican-led House, over how much the state should give.
Skeptics cited “stadium fatigue” after the Legislature recently approved similar tax breaks for the Minnesota Twins’ ballpark and the Minnesota Vikings stadium, which also netted substantial public money. Still, lawmakers ultimately signed off on a property tax exemption for the soccer site, a former bus maintenance facility off the tax rolls for decades.
Wrapping a sales tax exemption into the tax bill along with the property tax break would have given stadium developers an easier pathway to upfront cost savings. But Minnesota law allows contractors to move forward with construction and get a sales tax refund later, according to St. Paul Mayor Chris Coleman.
The back-end refund puts a tailwind behind construction on the 20,000-seat stadium, expected to start this summer in time for a 2018 opening. It follows the same framework used to build CHS Field, the St. Paul Saints ballpark that opened last year in the Lowertown neighborhood.
Estimates put the sales tax exemption for the soccer facility between $3 million and $5 million. The property tax relief would be worth much more — especially if surrounding redevelopment driven by the stadium meets expectations, officials have said.
Dayton is expected to decide in the coming days whether he’ll sign the broader tax bill. He has not taken issue with the property tax exemption and on Monday praised a series of other provisions in the legislation, including a student loan tax credit.
Still, he jabbed at some parts of the bill, including a provision that repeals an automatic increase in taxes on tobacco products. Dayton had harsh words for the measure, but did not say whether it would be enough to derail the tax package. He is also weighing a special session to resolve transportation and bonding bills.
“I respect the fact that Gov. Dayton needs time to review the bills,” Coleman said in a statement. “I am grateful for his continued support of [a] property tax exemption for the soccer stadium site, which has been tax exempt for many decades.”
A spokesperson for the governor declined to make additional comments Tuesday. A representative for Minnesota United FC said the team and the owner group would not discuss the legislation until Dayton decides on the tax bill.
If he strikes down the legislation, the big-ticket project could be in trouble. Bill McGuire, the former UnitedHealth Group CEO who leads the owner group, told senators in March that there would be “a high possibility, if not a probability” that the lack of a property tax exemption would scuttle plans.
Now, the city and the owner group remain in a holding pattern as they wait on the last major piece of their development plan.
The stadium site, on a stagnant stretch of University and Snelling avenues, has long been a redevelopment priority for St. Paul. The city had struggled for years to galvanize interest, until the addition of a Major League Soccer stadium fast-tracked an overhaul of the area.
“This is a catalytic opportunity for St. Paul and a huge potential moment for our state,” Coleman said.
After plans for the soccer facility surfaced, New York-based RK Midway — the owner of 24.5 acres surrounding the stadium site — said it would transform its aging Midway Shopping Center and large parking lots into new commercial and residential uses.
Stadium supporters have predicted the proposed facelift could multiply property values by more than 10 times.