Let the Stadium Wars Begin
Years from now, 1996 may be remembered by Twins fans as the calm between storms. The labor tussles that shortened the past two seasons appear at last to be over, but by the time the final pitch is thrown in '96, we'll be deep into stadium tussles. By then Twins owner Carl Pohlad will have announced how much he's willing to contribute to the new outdoor stadium the team has decided it must have.
That number will re-ignite a debate that was put on hold when this year's Legislature decided not to mount a ballot referendum on public investment in a new Twins playpen. Nevertheless, team officials, including president Jerry Bell and Pohlad's son Jim, have been quietly making the rounds of media outlets the past few months, answering questions and laying the foundation for a campaign that will likely kick off later this year and continue into the '97 legislative session. The Twins, perhaps wary of the fiasco that befell flinty Timberwolves owners Marv Wolfenson and Harvey Ratner during the Target Center bailout, have instead chosen constructive engagement.
At times, the Twins' version of perestroika is breathtaking to behold. Bell, for instance, says the team will not argue that a $200 million public subsidy will actually pay for itself. "We feel we could make that argument, but we won't," he says. "We are simply saying this is a good thing for the community, an amenity that will make it a better place to live."
But beneath the friendly-sounding candor lies a threat. The Twins in all likelihood will be able to exercise an escape clause in the Metrodome lease; the question of their moving elsewhere after the 1998 season may well turn into a game of chicken the likes of which we haven't seen in Minnesota since the Northwest bailout in 1992.
Sports franchises around the country have laid increasing claim to the public purse in recent years, often over loud public objection. In the stadium wars, "by any means necessary" seems to be the operative rule. In 1994, Wisconsin Governor Tommy Thompson, a Republican who built high approval ratings by posturing about crime and cutting welfare, spent some of his political capital ramming through a subsidy for a new Milwaukee Brewers stadium. First, Thompson tried to sell voters on a special lottery to fund the ballpark; they refused by a margin of nearly two to one. Thompson then cobbled together a plan whereby the state legislature imposed a special sales tax on the five counties surrounding Milwaukee. Piecing together a coalition of Republican loyalists and Democratic unions coveting construction jobs, Thompson's troops won a battle one veteran lobbyist called "one of the fanciest pieces of parliamentary maneuvering I've ever seen."
The Wisconsin Senate was the final hurdle. On the final evening of a special session, the Senate twice defeated a $160 million subsidy for a new $250 million retractable-roof stadium. But shortly after 2 a.m., the GOP Senate leader, who had voted against the plan, emerged from a meeting with the governor, moved to reconsider, and, at 5 a.m., the $160 million subsidy scheme passed with the same one-vote margin by which it had lost twice. The senator now faces a recall election, but the Brewers have their money.
Michigan Gov. John Engler was more brazen. He didn't even ask his legislature when he committed $55 million to replace beloved Tiger Stadium. Michigan has a gambling compact with Native tribes in the state that includes a casino tax; the Legislature earmarked the money to state-wide economic development. Through his executive authority, Engler decreed that the money go to the Tigers, and the Legislature never got a chance to vote on the matter.
In Minnesota, Arne Carlson has blown hot and not-so-hot on a new Twins stadium. But there are indications that the governor is keeping his powder dry for 1997, when legislators will be past the election and the stadium issue will be fully engaged. This winter, a group of elected officials dropped by the governor's office to lobby for a half-cent sales tax hike for mass transit (which would take the place of the current property tax levy). "We were told by a very senior member of the governor's staff that he didn't want to use the sales tax, he was saving it for next year," says one official, who is a Carlson supporter. "It was clear he meant for the Twins' stadium."
How sweet are these deals from the team owner's standpoint? In most cases, pretty sweet--though the terms of the deals are massaged a little before they reach the public. In Michigan, the turning point in the stadium debate was an effective public relations campaign climaxed by Tigers owner Mike Ilitch's offer to pay $145 million of the $240 million open-air stadium himself--a larger share than was pledged by other recent beneficiaries of subsidized stadium deals, such as the Seattle Mariners (just $45 million of $320 million) or the Arizona Diamondbacks ($69 million of $327 million). "But he made no guarantees and may put in no cash," says Kim Stroud, a board member of the Tiger Stadium Fan Club group that fought the new park. "He's merely using some of the revenue generated by a stadium the public is paying 100 percent for up front."
In Milwaukee, the situation is even more egregious. On paper, owner Bud Selig will contribute $90 million toward the proposed $250 million retractable-roof stadium scheduled to open in County Stadium's parking lot in 1999. But $40 million of Selig's contribution will come from stadium "naming rights" purchased by a local corporation. (In Arizona, such rights fetched $55 million from Bank One; General Motors has expressed interest in Detroit.) The rest of Selig's share will come from a $50 million loan given him by the state economic development authority. But Selig's prospective loan payments will be offset by another $4 million annual public subsidy to keep the stadium "maintained," even though most owners who have a stadium built for them then pay operating costs out of profits. In the end, it appears that Selig will never have to fork out a penny for his "private contribution."
What's more, legislators also gave Bud a plum unheard of even in the cozy world of stadium subsidies. The Brewers will get credit for 36 percent ownership of a stadium in which they have no cash investment, allowing team owners to depreciate $29 million against windfall profits over the next 30 years. Since the bulk of those taxes would have been paid to the federal treasury, you and I will help subsidize Bud.
According to a study by Milwaukee magazine, Wisconsin taxpayers will pay $688 million over 30 years for the ballpark; the Brewers' payments (counting interest) will amount to $157 million. In Cleveland, which used taxes and a lottery to finance Jacobs Field, the public will pay $500 million for the ballpark and infrastructure; the Indians, $168 million.
Here in Minnesota, the Pohlads--whose net worth has been estimated by Forbes at $845 million--are slightly more flush than Selig, whose only substantial investment is the Brewers. But Jim Pohlad hints that his family's contribution will resemble the more savory aspects of the Selig model. The poker-faced Pohlad carries himself with all the aplomb of an accountant--his chosen profession--but is comfortable mixing it up with a reporter. Early in our interview, he turned the tables by asking me how much his family should pay for a new stadium. When I responded, "All of it," he emitted what, for an accountant, qualified as a guffaw.
But a privately financed stadium is not preposterous. Legislators and owners in two communities have stared down owners, who have then offered to finance their own stadiums. San Francisco Bay Area voters turned down four successive stadium subsidies; finally, last December, Giants owner Peter Magowan announced he would spend $240 million on his own waterfront ballpark. And in Boston, Massachusetts legislators avoided tar and feathers last year by refusing to subsidize a successor to its 84-year-old icon, Fenway Park. This winter, Red Sox owners declared they would pay for a $200 million ballpark themselves. But then the Red Sox--profitable, debt-free, and venerated--cannot play the relocation card. States like Wisconsin, which lost the Braves in 1966, have capitulated to public subsidies. Minnesota is almost sure to follow suit. The question is how much, and how it will be funded.
"Well," I said to Pohlad, "If you won't pay for the whole thing, then $150 million." That earned a firm and serious headshake No. A figure of $100 million produced a cagey pause. "It won't be that much," Pohlad finally said, but his manner was much easier. The official figure will probably be close to that.
Quickly, though, Pohlad added that the private money "could come from many sources"--luxury box payments, pricey mezzanine seating, naming rights, and other revenues produced by the new stadium. Bill Lester, executive director of the Metrodome, says asking after revenue streams misses the point. "Who cares where the money comes from?" he says. "The important thing is how low we can get the public subsidy."
It's an attitude shared by many public officials. But one might ask why taxpayers need to involve owners at all if they throw nothing real into the deal. After all, the private gains are monstrous: The Atlanta Braves, who stand to pay a mere $23 million for a new baseball stadium funded largely by the Olympics, will watch their franchise value double from $122 million to $226 million, according to SportsValue, a newsletter published by New York-based Financial World. Although Braves officials called the study "meaningless," SportsValue detailed its calculations based on a lease deal in which the team will receive 100 percent of the revenue from luxury suites--by itself nearly $6 million a year--plus all stadium advertising monies, 92 percent of parking revenue, and additional millions produced by 5,372 club seats. Such estimates may be speculative, but the relationship between a new ballpark and a club's value is real: In 1993, the year after Camden Yards opened, the Baltimore Orioles sold for $173 million--after fetching just $70 million four years earlier.
In February 1994, Carl Pohlad made headlines when he told a WCCO-AM audience, "You can buy [the team] for $70 million." Let's say the public did. Despite bullish predictions that a retractable-roof stadium can be built for $250 million--at present, Arizona's $327 million project is the only one beyond the drawing-board stage--let's be fiscally safe and plan a roofless stadium costing $300 million. Throw in $70 million to buy the Twins, and the taxpayer is out $370 million, but owns an asset worth as much as $150-$170 million. The total public indebtedness would be around $200 million; taxpayers would also capture annual profits, and those naming rights, from new First Bank Field.
What about Plan A? The Pohlads kick in their $95 million or so, the ballpark would still cost $300 million, so the public tab is $205 million with no way to offset the investment. And the Pohlads keep any profits as well as the tens of millions in franchise appreciation.
"One problem," cautions the Metrodome's Lester. "Winnipeg."
Those who followed the National Hockey League Winnipeg Jets' flirtation with the Twin Cities earlier this year may recall that the Manitoba provincial government lost nearly $40 million after it agreed to cover any Jets operating loss in return for minority ownership of the team. On the other hand, the Canadian province did not have control of the club or a revenue-rich new stadium. Opponents of public ownership also claim that Major League Baseball would not allow public ownership because it requires a controlling ownership group. But consider the structure of baseball's newest team, the Arizona Diamondbacks.
According to the Arizona Republic, the managing partners who actually run the Diamondbacks' day-to-day operations contributed just $1 million of the total $108.5 million equity in the team. Other investors, known as limited partners, paid the rest and thus own 99 percent of the team.
Here, Minnesota taxpayers would be the limited partners, and could hire a private individual or individuals as managing partners to run things. The Arizona deal heavily incentivizes the managing partners to pay off the limited partners, who are promised a 5 percent return on their original investment until it is paid off. Then, the managing partners get 25 percent of the annual profits with the limited partners still receiving 75 percent.
The general partners are paid a generous salary--in Arizona, either $2 million or 3 percent of the annual revenue, whichever is greater. The Diamondbacks' public offering predicts first-year revenues of $82 million, which would translate into $2.46 million for the managing partners. But the Diamondbacks also project $21 million in first-year profits for the limited partners--cash that could generously offset Minnesota taxes if public ownership became a reality here.
All right, so assume it doesn't. The cash flow prospects suggest one reason why the publicly unflappable Pohlads might want to hang on to the team while the stadium debate plays itself out. Jim Pohlad, ever amenable, insists that "the important thing for us is that we don't want to keep funding losses. We'd like to operate on a break-even basis and ultimately get the cash we put in back."
Assuming legislators bite the bullet, Bell paints a happy vision of a financially safe and therefore competitive team in a modern-day ballpark. Longtime season ticket holders will not be bumped upstairs by big cigars purchasing the latest modern scourge: the private seat license, a one-time fee of hundreds or even thousands of dollars just for the privilege of buying a good seat. Bell also claims that subsidizing the whole plan, while enormous as a lump sum, is digestible in bites.
He says a 1 percent liquor tax in the seven-county metro area could pay for the public's chunk of a $250 million stadium. But a study of Minnesota excise taxes, such as liquor levies, shows them to be highly regressive; the poorest 10 to 30 percent of Minnesota households pay seven times as much relative to their income as the richest 10 percent of households. The other suggestion, a one-tenth of 1 percent metro sales tax, would raise $27-$30 million a year, easily enough to pay off the ballpark. Here, the tax is only slightly better: The poorest households pay about 2.5 times what the rich do, while middle incomes pay twice as much.
In interviews and before legislative committees, the Twins president has drawn one early line in the sand: "We must have a retractable roof." Some in Twin Cities media have taken up Bell's demand in the name of the families from Fargo and Winona who trundle into town for a weekend and ought not have to deal with acts of God such as rainstorms. Such arguments ignore the success of Cleveland's Jacobs Field, with that city's bitter weather, or Baltimore's Camden Yards, which draws a substantial part of its fan base from Washington, D.C.'s Virginia suburbs, nearly two hours away.
Candidly, Bell acknowledges that the plucky long-distance fan is not the real reason the Twins want a roof: Cash flow is. "What we need is for fans to buy tickets in advance, not wait for a nice summer day and then walk up to the gate," he says. ("We've done a great job with the Metrodome of selling people on the idea that you can't play baseball here in April and October," says Lester with a trace of irony.) The quicker the Twins get your money, the more they earn in interest--surely a pleasant thought to a banker and his family.
Whatever the driving force behind a retractable roof, the Twins--and Metropolitan Sports Facilities chair Henry Savelkoul, who has also been outspoken on the issue--might literally be selling the public blue sky.
Savelkoul has touted the virtues of Arizona's retractable top, the only one in a new, cheaper generation of retractables that is more than architect's sketch. (All retractables work against the actuality of Toronto's Skydome, an overbuilt leviathan whose price tag topped $600 million U.S., or Montreal's Olympic Stadium, whose lid is stuck in the closed position.) Savelkoul paints a picture of a compact, affordable, unobtrusive top that will barely obscure the Camden Yards-like appeal of a natural grass, retro-modern ballpark.
The reality, so far, is quite different. For starters, the Diamondbacks' new Bank One Ballpark currently checks in at a hefty $327 million even if you throw out the building's planned Olympic-size swimming pool, and that's $75 million more than the top price discussed for a new Twins field. Second, the atmosphere appears hardly Camden-like. The roof sits heavily on top, blocking the cityscape so effectively that designers have devised an inelegant solution: massive panels that flop down behind the outfield seats to let the surroundings in. And the lid, which sits just above the highest seats, fits like a rectangle over a diamond, throwing some seats into what looks like perpetual gloom.
What's more, no one knows if it will work: Racing toward a 1998 completion date, the stadium is being designed on the so-called "fast track" process, in which later components of the stadium are designed while the first are being built.
Savelkoul has also seized upon the fact that the ballpark, with roof closed, requires no air conditioning, merely a cheaper "air movement" system. One can hear echoes of the claim a dozen years ago that the Metrodome, half-buried in the earth, would require no cooling. One local architect who has seen the Phoenix design says it will not work here: "In Arizona, you block the sun and you block a lot of the heat. Here, you also have the humidity to contend with. Any Minnesotan who's bought an air conditioner after using a fan knows that."
While Bell has put a $40 million price tag on the must-have roof, the truth is, no one really knows how expensive it will be. Jim Pohlad does not sound as absolute about the roof as Bell. "Everything is negotiable," he demurs. But such open-mindedness is not without cost. The Twins have hinted they might lower their contribution if their new playpen lacks a top--although the public subsidy might also shrink if stadium costs drop dramatically.
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