It Costs $50 million / year to Borrow $650 Million Dollars #wilfare

Zygi Wilf wants to build a $1.1 billion stadium with other people’s money. That’s a good deal if you can get it, but not necessarily a good deal for those doing the giving.

As of now, the Vikings stadium #wilfare plan seems to involve the state borrowing $650,000,000 on Zygi Wilf’s behalf to build a stadium for him where he can profit from charging for parking in a 21,000 car parking lot, stadium naming rights, box seats, etc.

The Vikings talk about the return the state receives from being blessed with an NFL franchise. However, it looks like less of a blessing when quantified in a spreadsheet.

The consulting firm the Vikings have worked with to explain the the Vikings’ economic impact is called CSL. Back when the Vikings were attempting to wrangle $300 million out of the state and $350 million out of Ramsey County, CSL ran some numbers that showed that the Vikings would generate a positive return for the state over 40 years. The assumptions that went in to that report were interesting, including the 40 year lifetime of a stadium. That’s odd, considering that the Vikings have never played for longer than 30 years in a stadium to date, and are only willing to sign a 30 year lease for a new stadium. CSL also gives the Vikings credit for all of the sales tax revenue generated at the stadium, which is very generous since it assumes that NONE of that money would have been spent on anything else taxable in the State of MN sans Vikings.

Back at that time, my take was that $300 million in state borrowing was a bad idea for the state, and $350 million in borrowing was a downright disgusting idea to force upon Ramsey County residents.

But, plans have changed. The state has proven to be unwilling to let Tony Bennett screw Ramsey County residents for Zygi Wilf’s benefit. This leads to the state also being in the position of coming up with $650 million on its own.

Cost of Borrowing $650,000,000

#vikings own web page says new stadium and retention of team will generate $26m/yr. Stadium subsidy costs around $50m.

As David Brauer pointed out on Twitter, it costs at lot more than $650 million to borrow $650 million. Anyone who’s every owned a house knows that they’ve essentially paid for their home twice by the time they’re done making mortgage payments. It’s no different with stadium financing.

I decided to graph that out to see how it looks.

First, let’s stick with CSL’s assumptions that the Vikings’ economic impact to the state comes in the form of taxes on salaries together with sales tax revenues at the stadium:

State Revenue Gain/Loss from $650m in Financing (CSL Assumptions)

Those purple columns are pointing down because the Vikings would be a net loss for the state every year for 25 years. After that, the state would start to get back a bit more than it puts in, but would end up losing $455 million on a $655 million investment over 30 years. That’s what the Vikings’ assumptions look like against $50 million/yr in debt payments.

But, as I mentioned above, the Vikings’ assumptions are very generous. Clearly, the vast majority of entertainment dollars spent at Vikings games would still be spent in the State of Minnesota if there were no Vikings games. That’s not new revenue for the state, so shouldn’t be counted in an honest debate.

Granted, the Vikings do bring some people into the state, including 206 Vikings season ticket holders from North Dakota. For my assumptions, I’m knocking the Vikings’ contribution to sales tax revenues down 90%, meaning I believe that 90% of the money spent at Vikings games would be spent in the state with or without the Vikings being here.

Here is what that looks like compared to CSL’s stats:

Gain/Loss from State Borrowing $650 million for Vikings Stadium

The purple columns are CSL’s assumptions from the previous chart while the red columns are what I assume will be the state’s cumulative losses should the state actually decide to borrow $650,000,000 to help Zygi Wilf build a $1.1 billion stadium for 10 games per year over 30 years. As I see it, at the end of 30 years, we would have lost around $670 million on our $650 million investment.

Granted, we would finally own the stadium debt-free at that point, but as we saw with Sen. John Marty’s attempt to sell the Metrodome to the Vikings for one dollar, a 30 year old stadium isn’t worth much. Can you imagine reaching the end of a 30-year mortgage on your home only to be told that your home is worth less than $1? That’s the kind of deal the Vikings want the State to enter into with them.

This is a major financial hole we could dig for ourselves, leading to a variety of bad financial decisions to fill. Considering the already existing holes in our budget, it’s pretty clear why this is not a high priority for the state.

If you’d like to play around with these numbers, here is a link to them in a spreadsheet, or view them below.

19 thoughts on “It Costs $50 million / year to Borrow $650 Million Dollars #wilfare”

  1. But, as I mentioned above, the Vikings’ assumptions are very generous. Clearly, the vast majority of entertainment dollars spent at Vikings games would still be spent in the State of Minnesota if there were no Vikings games. That’s not new revenue for the state, so shouldn’t be counted in an honest debate.

    As a resident of another state, statements like this make me cringe. We are being told just the opposite. We are advised to borrow enough to buy our own stadium, and entice a NFL team to bless us. If we do this, that most all of the money will come here. The revenues and fans will come from other states too stupid to spend north of half a billion to keep their team. In addition to all the marketing studies that prove this, simple economic facts also support this conclusion. This money has to come from elsewhere, otherwise some of our smart local businessmen would have already captured it.

    It beggars belief that anyone other than con men and bankster types would claim that borrowing to ante half a billion in a zero sum game of musical chairs makes sense. Thus it must not be so, as people like this are in jail, rather than making decisions.

    Send these Vikings our way and we will be glad to write a big blank check for whatever they want.

  2. Read with relative interest your diatribe about the Vikings stadium issue…Perhaps you might share with your “reader”..and people like me who happen upon your blog and having nothing else to do…what the difference is in this Stadium and the Twins Stadium……..? I have always been curious how the Twins did it compared to the Vikings.

    Also, what is the difference from any other NFL franchise who either has or is vying for a new stadium save the so called publicly owned Packers? Of course the Owner wants to get richer..and he wants the community to provide funding…why wouldn’t he?….(or she for that matter)… Perhaps you don’t know about the Browns…but pretty much the same circumstances existed..then they left town….after they were gone, the public outrage was so hot, they built a new stadium…..and the Browns haven’t been the same since….I lived there at the time….it was like night and day… before they left, the press and the libs all felt funding a stadium for an already wealthy owner was unacceptable…. day after he takes a powder with his team…they wanted to kill him (Art Modell)…he couldn’t go back to Cleveland and attend a game for the death threats..

    Not being much of an accounting expert, I didn’t see anything relative to the additional income to the state via new employee tax revenue and jobs for the Arden Hills sight….seems to me, they’d be constructing new hotels, restaurants and other businesses in Ramsey County that must have “some” benefit to the public and the fans…sure, some of the downtown businesses would go away..but given the team only plays a few games a year here….the net gain would (it seems to me) be unquestionable…but since I apparently can’t handle the “deets”…what do I know?..just one guys opinion….

  3. I’m not a resident of another State…I lived and worked in Cleveland for a year and a half during that debacle… and saw the hypocricy of the local representatives…dodging the issue and vying for votes….when it was popular to be against it..they were..then when it became a rallying cry, they all changed their views…I suspect “cringe” isn’t the word as much as handwringing…

    How much did we spend to subsidize the new Guthry Theater?…again, how much for the Twins? Who paid for the Gophers stadium?..

    If your not a fan of Professional Football then you can use whatever statistics and handwringing expressions you like….

    J. Edgar Hoover was famous for taking a set of facts, creating charts and graphs to create an entirely new set of facts……

    The fact is, if your not a fan, then you will oppose such things..and if you are, then you will support them…..

    Cringing isn’t necessary..it’s an overreaction to a simple viewpoint.

  4. “J. Edgar Hoover was famous for taking a set of facts, creating charts and graphs to create an entirely new set of facts……” Like, Ed, if the old G-man were alive today he’d just say he was “thinking outside the box.”

  5. @Rat, I’ve decided to block you from commenting. It’s just too much to deal with someone who’ll allude that I’ve “created an entirely new set of facts” without pointing out an example of how I changed facts. That’s just rude.

    In my opinion, you haven’t contributed anything of value to this conversation.

  6. QUOTE: “How much did we spend to subsidize the new Guthry Theater?…again, how much for the Twins? Who paid for the Gophers stadium?”

    – Guthrie Theatre: $25m
    – Target Field: $392m
    – TCF Bank Stadium: $288m

    I don’t think it is fair to say that because the State/City subsidized one venture in the past that it should subsidize (or continue to subsidize) another. Each proposal ought to be viewed individually on its own merits.

    QUOTE: “The fact is, if your not a fan, then you will oppose such things..and if you are, then you will support them”

    I don’t believe this to be true statement. I believe that the Guthrie Theatre, Target Field and TCF Bank Stadium shouldn’t have been subsidized with taxpayer money. Yet – I am a sports and theatre fan. I love watching the Twins and Gophers, and attend their games on a somewhat regular basis. My brother has no interest in sports, yet he is a supporter of the Vikings proposal.

    The stadium issue is a curious beast that has no real hard-line party affliation [i.e.: I’m more liberal and oppose it whereas my brother is conservative and supports it].

  7. Technically, TCF Bank Stadium only took $137 million of direct state money. $288 million was the total, final construction costs.

    The Vikings have a pretty good “me too” argument, but unfortunately such arguments aren’t the most persuasive on their own.

  8. It’s okay if you want to “block” me..I was simply pointing out that anyone can take any set of numbers or facts and skew them to make any point they wish. It’s Debate 101…

    Essentially blocking someone is saying..”oh, you disagree with me…I’m not listening to you”…. a basic liberal tactic…also using the “it’s not fair” line….childish..when you don’t have a legitimate response cry foul…..

    Apparently YOU can’t handle the deets..

  9. @Ted Rogers…maybe you should read more than this one posting before you pass judgement on the stadium issue or The Deets.

    In addition to The Deets and many other sources who have pointed out the craziness that is the NFL model of holding fans and their communities hostage forcing them to build them monumental boondoggle stadiums in return for 10 days of entertainment a year…I recommend you also read about the larger world.

    Try this blog for a good summary of how communities are being ripped off by the powers that be–
    http://real-economics.blogspot.com/2011/11/ideological-blinders.html#more

    And then maybe you and Rat can come back with a better perspective with why the state of MN and Twin Cities should or should not become the next Cincinnati…which built a stadium for their dear Bengals and now can’t cut enough out of their city/county budgets to afford it.

    If this is a game to you, fine…pay for your own game; I’m not playing.

  10. So, Ted Rogers also trolls under the name “Rat” (only can’t keep it straight which name he’s using), posting inflammatory BS without any evidence or sources to back it up. Then calls Ed childish for deciding to block him.

    Right… way to keep it adult Rat. Ted. whatever….

  11. I think Ted is confused — he’s not being blocked (obviously, since his posts are still appearing). “Rat” is the name of the poster being blocked for very specific reasons, not because of his opinion on the stadium issue. Ted probably did not catch or understand the “@Rat” opening to Ed’s comment.

    I think you’re okay, Ted, as long as you remain civil (although it would behoove you to drop the “typical liberal” insults and perhaps read up on Ed’s other posts on this issue before trying to engage him in conversation — a lot of your points have already been addressed quite thoroughly in previous posts).

  12. I don’t troll..and I don’t use the name Rat..you will kindly note that I use my full and correct name and don’t hide behind “code” names…although I’m sure there are folks in this world that have used the name Rat to describe me….I fail to see how using the term “typical liberal” truly is provocative or insulting…..I’m an atypical Conservative..proud of that fact and don’t hide from it….that’s always confused me..why folks want to be insulted when referred to as liberal…that said….

    Not sure what “Chaz” issue is…other than anger….I don’t think “Chaz” needs to defend anyone..I’m sure the author of the “facts and figures” is more than capable of defending himself..if needed..but there was and is no attack….

    This isn’t as much a financial issue as a philosophical one..those that oppose public funding for a sports franchise of this magnatude …and those that do support such a project ….The financial information is used to make the case…and the usual run of the mill hate the rich guy for getting richer off everyone else’s back argument…is the icing on the cake.

    I happened upon this blog and simply comment on the “facts and figures” aspect of this argument….I support a stadium because I am a fan. One can make “Cincinnati” comparisons all day long…but you could make Dallas and Cleveland and Indianapolis arguments just as well….I could care less if Wilff gets richer……thats what he does….as far as the politics of it all, it is hypocritical beyond words….the previous comment that opposition is largely from the left and support is largely from the right is in my view quite accurate…However, because a liberal Governor is pushing the stadium, the conservatives are by and large opposing it…If it were a Conservative Governor, the liberals would oppose it…

    In the end, my entire point was this….it doesn’t matter…if the Vikings leave the State because they couldn’t get a stadium deal done, within weeks after the uproar dies down, their will be a new drive from new politicians who see the opportunity for votes and a new stadium will be built and a “new” Vikings franchise will start all over again…and for what?….the same argument the current Governor is making…it’ll create jobs and be a wonderful source of income for the State and blah blah blah…

  13. Ted,

    If you’re an atypical conservative, I would hope you could recognize an atypical liberal when you see one. Otherwise, I’m not sure if you’re really as “atypical” as you thought. (Ed is definitely atypical, whatever he is.)

    I think it’s pretty clear that Minnesota is fairly evenly divided politically (split election results for 13+ years), yet most Minnesotans oppose large amounts of public stadium funding. This is not a coalition built on liberals or conservatives.

    To answer your earlier questions:

    Q: “what the difference is in this Stadium and the Twins Stadium?”

    A: First of all, there was plenty of opposition to the Twins stadium too, probably shared by many of the same posters here (myself included). How did it pass? The Twins did not ask for state funding at all, they got the biggest non-state government partner they could in Hennepin County, and they did it during better economic times. The Vikings are striking out on all three of those, although the economic timing isn’t all their fault. It’s not an easy formula, but it shouldn’t be easy to get $650 million in taxpayer funds for anything — even public “boondoggles” like light rail lines take many years to get funded. And their benefits don’t go disproportionately to a private business.

    Q: “Also, what is the difference from any other NFL franchise who either has or is vying for a new stadium save the so called publicly owned Packers?”

    The differences are probably similar to the Twins ones noted above (funding partners and economic conditions). Add in a near-record total cost, a record inflation-adjusted public cost, and a string of out-of-town ownership and you’re probably set.

    Q: “if your not a fan, then you will oppose such things..and if you are, then you will support them”

    A: Recent data suggest that most Minnesotans follow the team in person or on TV (myself included), yet most Minnesotans also oppose the current plan. Like your liberal/conservative fallacy, this is very much not a black-or-white issue among fans either. Now, if general government funding was a little more stable these days, and/or the Vikings were making a more modest request in line with other new NFL stadiums in similar markets, you would probably see a starker contrast in opinion. And a stadium deal would almost certainly be done by now.

    Q: “Not being much of an accounting expert, I didn’t see anything relative to the additional income to the state via new employee tax revenue and jobs for the Arden Hills sight”

    A: Construction jobs are temporary and not unique to building a stadium as opposed to some other project. Much of the construction money (design, materials, etc.) would also be flowing out-of-state. And once built, stadium and stadium-related jobs almost all involve very limited hours and very low pay.

    “seems to me, they’d be constructing new hotels, restaurants and other businesses in Ramsey County that must have “some” benefit to the public and the fans. sure, some of the downtown businesses would go away..but given the team only plays a few games a year here”

    Why would there be a boon of new hotels, restaurants, etc. if the team only plays there 10 days per year? And how would this business activity be “new” when it would almost certainly be displacing business activity elsewhere?

    “the net gain would (it seems to me) be unquestionable”

    Net economic gains generally come from increases in population, education, and productivity. You’re going to have to look mighty hard to imagine any of those effects coming from a new Vikings stadium in Arden Hills, much less total $650 million in positive public impact. Even the complete loss of the Vikings, according to the team’s latest “but for” numbers, would not cost the public as much as building this stadium in Arden Hills.

    The projected economic impact of this stadium may indeed be unquestionable, but not in the way that you think.

  14. A thoughtful and interesting answer….deserving of research and an equally thought out response…however opinionated it might be…more to come..

  15. “Feds open SEC probe into Miami Marlins stadium deal

    The U.S. Securities & Exchange Commission has subpoenaed records from Miami-Dade County and Miami over the deal to build a new ballpark for the Marlins.”

    http://www.miamiherald.com/2011/12/02/v-fullstory/2529191/feds-open-sec-probe-into-miami.html

    Two former SEC attorneys who reviewed the subpoenas for The Herald said government investigators are likely looking at whether the city and county did proper due diligence into the Marlins’ finances, and whether there was any influence peddling to local politicians.

    “There’s always the issue of pay-to-play. They want to know whether there were unlawful contributions,” said William Nortman, a Fort Lauderdale attorney and former SEC regional administrator. “Don’t forget, there was a lot of controversy over the building of this in Miami. They are examining how this came to be. They want to know whether inappropriate payments were made.”

    This deal has a bad smell. Taxpayers take it in the a#$ for $2 Billion. Still feeling like the taxpayers should bend over for the Viking’s owners?

    Long before the deal to build the Marlins a new ballpark in Little Havana was cemented with a county commission vote in March 2009, the deal was ridiculed as lopsided, with critics complaining that elected leaders kowtowed to a wealthy ballclub owner threatening to leave town. In the end, the Marlins got their way.

    The 37,000-seat, retractable-roof stadium ended up being a top-heavy deal for the county, put on the hook for $347 million in construction bonds, a $35 million loan to the Marlins, and $12 million for incidentals such as road repairs. The city’s end of the deal is $94 million worth of parking garages, $13 million toward construction, and $12 million for other improvements.

    The county will have to dish out more than $2 billion over 40 years to pay back the principal and interest on the bonds, which were sold under poor market conditions.

    The ballclub — which receives virtually all revenues, from concessions to ticket sales for everything from ballgames to soccer matches to concerts — was required only to spend $120 million at the end of construction, on top of repaying the loan to the county in $2 million yearly installments that would serve as rent.

  16. I didn’t take the time to calculate the NPV of the cash flows.
    It is a large negative number. Some if not all of the bonds were G.O. bonds. The taxpayers know where they stand on this deal.

  17. All along I’ve wondered at the complete lack of private funding for the stadium, but now it couldn’t be more clear–
    –no private group outside of the NFL/team itself would EVER make a dollar on these stadium boondoggle deals without public funding.

    It was the case even when the Metrodome was built, but at least then it was close enough to reality based financing that private groups could step up and invest while writing off the excess as a community-building PR/advertising expense…now they don’t even pretend…now it is so excessive no private funding group could even make a pretense of arguing financial or civic value.

    Even fans are realizing this now, too late for Cincinnati and Miami…only time and pitchforks will tell if it is too late for Viking and 49er backers (who can call them ‘fans’ anymore?).

    In a reality-based political world, these proposals wouldn’t see the light of day and would be laughed off the table in the smoke-filled backroom.

  18. Again with the Cincinnati comparisons????….. Let’s hope you all get your way and the Vikings leave Minnesota….then some other guy will start a different blog decrying the lack of public support and all the benefits of a stadium…and new politicians will get elected on a “building the stadium” issue….and we’ll start all over again….only this time..we’ll get to start over with a new Vikings Franchise owner…players…etc…etc…

    Sorry..you folks might be right..who knows…but in being right..your also short sighted….signing off the Deets detail…

    And we haven’t been in a reality based political world in my lifetime…..maybe it has something to do with who is getting elected….

  19. Cincinnati and Miami are great examples of what the NFL is doing, that is why they are mentioned here. There are others mentioned too…like the Packers, 49ers, Giants/Jets, and other stadiums, take your pick and make your case but right now your only argument is fear-based and after this last decade of fear-based policymaking I think you need to dig deeper.

    Things have changed in the last 10 years and last 3 years especially as jobs dried up and housing values collapsed and 401k/investments lost value and austerity policies became all the rage…until frankly the last thing I want my state’s money going toward is the NFL’s latest boy-toy boondoggle entertainment stadium.

    There are literally dozens of infrastructure projects that would create more and better jobs, and virtually ANY other project would be money better spent to improve the MN economy instead of the NFL economy. Start over with another NFL fleecing franchise if the Vikes leave–WHY THE HECK WOULD WE DO THAT?

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