While the Vikings, Governor Dayton, and even Mayor Rybak often refer to Minneapolis’ proposed contribution to Zygi Wilf’s bottom line as a $150 million deal, the city’s CFO, Kevin Carpenter, revealed that the total cost to the city over 30 years would actually be $675 million dollars.
How can that be?
1. $150 million toward construction costs.
2. More than $225 million toward operating costs and capital improvement costs. Minneapolis has committed to not only help build the stadium with a $150 million contribution, it’s also agreed to split the costs of operating the stadium over 30 years. This will start at around $7.5 million/yr with an estimated 3% increase per year over time. So, at least $300 million with inflation.
3. Accruing interest on our new debt while we pay off the convention center debt. That gets us to more than $375 million, which is far short of $675. What makes up the gap? Interest. How does one run up interests costs to nearly twice the cost of borrowing $150 million? I picked up some information in that during some hallway discussions during the City Council hearing on the issue tonight. As I now understand it, it’s because Minneapolis would borrow $150 million (and start paying interest on that chunk of change) years before it can start paying it back.
The Convention Center debt isn’t scheduled to be fully paid off until 2020, which makes it hard to use the money paying off that debt to pay down the additional $150 million obligation the city would be taking on far before 2020 were the current Vikings stadium bill to pass this year.
If you’ve even owned a house, made your first house payment, then noticed how little impact it had on the principle, imagine how much interest you’d have to pay if you decided to wait a few years before sending in your first check. It would be like a bank saying to you, “we know you’re good for it, so we’ll just keep tacking on the interest until you’re ready to pay . . . and you WILL pay.”
I believe that’s the combination that gets us to $675 million.
4. Beyond that, there is also the little issue with acres of taxable downtown property shifting to tax exempt status. (Not even tax increment financing, where the property tax rates would be locked at current rates. Zygi won’t have to pay a dime of property taxes on the building the the largest footprint of any building in the city.) During tonight’s hearing, Cam Gordon had someone run the numbers for him on the property tax giveaway that the land shift would create. (I got the impression that this particular gift to Wilf hadn’t been considered by the city council before I brought it up while testifying at the hearing, and appreciate that Cam Gordon decided to dig into it a bit.)
His researcher’s analysis found that the land that would become tax exempt currently generates more than $400,000 in per year in property taxes. The programs funded by those taxes, the cops they pay for, the streets they pave, will still need funding, which means that the city’s remaining property tax payers will have to make up the difference.
Is it just me, or is $675,000,000 far larger than the $10 million figure that’s supposed to trigger a city wide referendum?
The Sandy Colvin Roy factor: if I had to pick one community within the city that had a large representation of support for honoring the city’s charter, it would be Longfellow. I heard people testify from 46th Ave S, 48th Ave S, 31st Ave S, 44th Ave S, and 40th Ave S for sure, and I’m sure there were more. These Minneapolis residents live in Ward 12 which is represented by Sandy Colvin Roy. Colvin Roy has stated that she wouldn’t vote against the charter, but her voting tonight suggests that she may be willing to go against the charter amendment that passed with 69% of the vote in 1997, against people who showed up to ask her to honor the charter amendment. Time will tell if she’ll listen to the will of the city’s voters, honor the city charter, and respect the wishes of her constituents.