Vikings stadium proposal isn't for the "people"
Within months of purchasing the Minnesota Vikings for $250 million in July 1998, Texas billionaire Red McCombs was angling for a new stadium to replace the Hubert H. Humphrey Metrodome.
Never mind that the 16-year-old indoor structure had been built at the behest of the Vikings, that the team had a lease in place that obligated them to remain at the Dome for another 13 seasons, and that rookie sensation Randy Moss was leading the Vikings to a near perfect 15-1 record that brought them within a missed field goal of their first Super Bowl appearance in 22 years.
Instead, McCombs focused his efforts on demonizing the home field as obsolete and arguing that the team needed a new stadium to be competitive.
By the following May, McCombs, who made his initial fortune in the used-car business, was telling a gathering of Minnesota auto and truck dealers that the Vikings were going to need a "facility fix," comparing the Metrodome to a "car dealership that hasn't been renovated while its competitors in the marketplace have modernized."
One month later, the Metropolitan Sports Facilities Commission unveiled a renovation plan to add concession stands, increase the number of luxury suites, and convert 6,400 of the Dome's 63,000 seats into the pricier club variety.
McCombs rejected the plan, insisting that only a new, 68,500-seat stadium with 150 corporate suites and 8,400 club seats would meet the Vikings' needs. Club officials also began to hint about not being able to "keep the Vikings in Minnesota," a sharp contrast to McCombs's earlier statement, upon being introduced as the new Vikings owner, that "we have no plans to move this team whatsoever."
And all of this before the 1999 NFL season was even underway.
Six years later, having failed to win legislative support for a stadium plan that had morphed into an ambitious $1.5 billion, 740-acre mixed-use development in Blaine known as "The Preserve at Rice Creek," McCombs cashed in his chips and sold the Vikings to a group headed by New Jersey-based real estate developer Zygmunt Wilf. The price? A cool $600 million, representing an incredible 140 percent return on investment—or $50 million per year for the seven seasons that McCombs owned the team.
Had McCombs held onto the team for another three years, he might have reaped an even greater windfall, based on the $839 million valuation that Forbes put on the Vikings on the eve of the 2008 season. In fact, a study by University of Chicago economists Kevin Murphy and Robert Topel found that "between 1998...and 2008, the average NFL team increased in value from $288.1 million to $1.04 billion, or 360 percent."
Simply put, NFL teams are cash cows. Billionaires regularly vie to become part of pro football's exclusive enterprise, a monopolistic juggernaut that enjoys the most lucrative broadcast rights in all of professional sports, and by virtue of a league-wide salary cap, controls labor costs so that all teams—from small-market Green Bay to metropolis New York—can compete on relatively equal terms for the best players.
The NFL's annual broadcast revenue is approximately $4 billion, which essentially covers the $120 million annual payroll for each team. This allows for income generated from advertising, concessions, licensed goods, luxury suite rental, premium seating, etc., to be devoted to other things, such as bonuses to attract key free agents, a beefed-up coaching staff, front office perks, stadium enhancements, marketing, and promotions.
Bottom line: Increase the local revenue and the owner not only reaps greater profits, he also sees exponential growth in the value of his franchise. This enormous upside explains why Zygi Wilf, with a net worth of a mere $300 million or so, wasted little time in launching a new stadium campaign shortly after his investment group acquired the Vikings.
During the 2006 legislative session alone, Wilf shelled out $750,000 in lobbying and advertising expenses. In subsequent years the team poured another $2.5 million into efforts to win public funding for a new stadium. This past fall, the Vikings spent $350,000, of which more than 80 percent was devoted to the team's slick "Preserve the Legend" advertising blitz aimed at building support for the "people's stadium" that Gov. Mark Dayton has been touting.
Unfortunately for Wilf, those efforts have yet to produce the stadium of his dreams, and as opposed to McCombs's experience, the current Vikings' ownership group has actually seen a decline in the franchise's value over the last few years (the team is now estimated by Forbes to be worth $796 million). For a successful developer like Wilf, that 5 percent drop in value is more an annoyance than anything else, as is the relatively paltry 4.2 percent annual return on investment he would realize if the Vikings were sold tomorrow.
What probably irks Wilf the most is that his team has the NFL's third-highest debt to equity ratio, trailing only the New York Giants and Jets. How much risk that debt load might pose for Wilf and his partners is unknown, but obviously the lure of greater revenue streams and a potentially sizable bump in the team's market value makes whatever the Vikings spend on lobbying mere chump change.
Myth #1: Only a Billion-Dollar Stadium Will Do
If the corporate goal is to dramatically enhance your team's bottom line at public expense, the obvious solution to an "inferior" facility is an upgrade to one with "modern amenities." What would such a venue look like? To quote the Vikings' chief financial officer, Steve Poppen, "a stadium that met the personality of Minneapolis; not extravagant, but also not something that you'd be embarrassed of."
What Zygi Wilf and company "require" is the NFL equivalent of the Taj Mahal: a Minnesota version of Indianapolis's Lucas Oil Stadium, the opulent temple constructed for the hometown Colts that opened just prior to the 2008 NFL season. At the time, it was the most expensive football stadium ever built, but the building's whopping $720 million price tag has since been surpassed by the $1.2 billion Cowboys Stadium that opened in 2009 and the $1.6 billion New Meadowlands Stadium, now known as MetLife Stadium, that opened in 2010.
Lucas Oil Stadium, the site of this year's Super Bowl, is an enormous, spaceship-like glass-and-brick structure, covering over 1.8 million square feet (twice the size of the Metrodome) and rising nearly 300 feet against the city skyline. Thanks to the state-of-the-art retractable roof and moveable "window wall," the building "can be opened to truly give the spectator the feeling of being at an outdoor stadium." Weather permitting, of course.
The 63,000 seat, seven-level, multi-purpose facility is replete with every amenity money can buy, including seven locker rooms, 1,000 flat-screen plasma TVs, more than 160 concession stands, 1,400 toilet fixtures located strategically in several corridors, and the crown jewel: 137 luxury suites, where the going price of rentals ranges from $40,000 to $235,000.
To hear the Vikings tell it, however, their proposed version of this building is "a very modest stadium that has a lot of potential; we...'skinnyed' things down and tried to make it fit Minneapolis." At least this is the line that CFO Poppen fed the Legislature when he testified in December at a joint hearing of the Senate's Tax and State Government committees.
What the Vikings don't talk about is why only an extravagant $830 to $895 million facility (excluding infrastructure) will meet their current demands. After all, the New England Patriots have four Super Bowl appearances and two NFL championships to their credit since the $340 million Gillette Stadium opened in 2002, while the Pittsburgh Steelers have managed to win two of the three Super Bowls they've appeared in since becoming tenants of the $281 million Heinz Field, which opened in 2001. Like Lambeau Field in Green Bay, both of these structures are open-air facilities.
NFL stadiums have skyrocketed in price over the past decade because no one other than club officials exerts control over the size and scope of a project. The team simply gives the prospective host community a price, then sits back and watches the elected officials scramble to find the money.
In Minnesota, it's been no different. Governor Dayton, Ted Mondale, Minneapolis Mayor R.T. Rybak, and other headline-seeking politicos have been running interference for the Vikings, and nobody is attempting to broker a deal in the people's interest.
Myth #2: There's No Private Funding Solution
"Austerity" may be the buzzword in Europe and Washington, D.C., but when it comes to financing a new stadium, no revenue source is ever off limits. And come the end of the process, it's almost always the public that pays the freight.
There are some notable exceptions. Patriots owner Robert Kraft, who acquired both the team and its outdated stadium for $172 million in 1994, spent years trying to win public support for a new facility. Like the Vikings, he pitted various communities against one another, pursuing a "three-state" strategy that involved the cities of Hartford, Boston, and Providence. After fierce neighborhood opposition in all of the locations, combined with overstretched state budgets, Kraft eventually decided to foot the construction costs himself. (The state of Massachusetts provided infrastructure improvements valued at $72 million.) Kraft later developed land he bought adjacent to the stadium into the $350 million Patriot Place entertainment complex. Today the Patriots are valued at $1.5 billion.
Not every team owner has deep pockets like Kraft's, but that didn't stop the San Francisco Giants from building AT&T Park, universally regarded as one of the finest outdoor baseball venues. In the mid-1990s, after four failed public referenda, the team's new ownership group decided that the only way forward was to partner with the community. The Giants spent two years meeting with local leaders, business executives, and residents to develop a private financing model, which led to an unprecedented commitment of business resources and fan participation that enabled the team to raise enough money to build the $315 million project largely on its own. (The public ended up providing a $15 million tax abatement and transit improvements costing $80 million.)
Twenty Fortune 500 companies are headquartered in Minnesota, and last year they produced revenues in excess of $439 billion. They include United Health Group, Target, Best Buy, 3M, Medtronic, and General Mills—companies that generated more than $268 billion in annual revenues. Given that it is these same corporations that lease the luxury suites, buy the premium seats, and overwhelmingly use sporting events to entertain clients or reward employees, why shouldn't they be expected to provide the cash to pay for the Vikings' new digs?
After all, it was the leaders of the business community, under the auspices of a group known as the "Minutemen," that raised the funds to build Met Stadium in the 1950s, paving the way for the Washington Senators to become the Twins and the NFL to award an expansion football franchise that became the Vikings.
Of course, today's business leaders are no dummies. They have no interest in padding the Vikings' bottom line. That's why their efforts, such as those of the reconvened Home Field Advantage group in Minneapolis, are focused on developing a uniform message that will allow the business community to "speak with one voice" to the Legislature.
Myth #3: The Vikings Are Making a "Sizable Investment" in a New Stadium
For more than a year, virtually every media outlet in town has reported that the Vikings have pledged a $407 million (since increased to $425 million) "contribution" toward either a $1.1 billion stadium proposal for Arden Hills or a new building on the Metrodome site, now projected to cost $975 million.
The reality is something quite different. As noted by Mike Kaszuba in the Star Tribune last November, the Vikings' actual contribution would be around "$225 million, maybe less."
But even that figure is misleading. Kaszuba cited information from the Metropolitan Sports Facilities Commission that estimated that the sale of personal seat licenses and a loan from the NFL would bring in $175 million, leaving the team to kick in the rest. However, in that same article, Kaszuba also mentions that the "Vikings would be expected to net up to $8 million a year from stadium naming rights and another $3.2 million annually from Arden Hills parking revenue."
Got that? In other words, the Vikings would actually have no real money at risk in the project.
Here's how the scam works: The Vikings reach a deal with the state and Minneapolis (or Ramsey County) to build a new stadium. The state and the other government entity agree to put in $600 to $650 million—likely the amount necessary to cover the stadium's "hard" construction costs, though this number remains fluid as details of the plan change. The state and/or municipality sells 30-year bonds to finance the project, to be repaid with money from an unnamed source—gambling, for now—but more realistically some kind of tax (the current proposal calls for redirecting the Minneapolis sales tax to cover a portion of the construction and operating costs). Actual cost to the taxpayers, taking into account the interest that will have to be paid on the bonds: about $1.2 billion.
Meanwhile, the NFL, under its recently announced G4 loan program, lends the Vikings $200 million interest-free to be repaid over 15 years from the proceeds generated by the sale of premium seating—the extra dough the team can collect for fancier club seats, of which the Metrodome has none. (Ordinarily, premium seat revenue would have to be shared with the other 31 NFL teams, but when applied to stadium costs, that requirement is waived.) The Vikings redirect the $75 million they are expected to realize from the sale of personal seat licenses, leaving a $150 million gap.
Even if Wilf had to borrow that money, the team's annual interest payments would come to about $5 million per year, far less than the $11.2 million annual revenue stream from stadium naming rights and parking fees. (If parking revenue is not part of the package, the team still nets $3 million on the deal.)
To recap: Taxpayers are on the hook for 30 years of bond payments while the Vikings get to cover their share of the overall project by redirecting revenue streams that would not be available to them without the construction of a new stadium.
Myth #4: Stadiums Create Jobs
The Vikings claim that a new stadium will "support 13,000 full- and part-time jobs, including 7,500 construction jobs, over a three-year construction period."
These numbers come from a 2009 report prepared for the Metropolitan Sports Facilities Commission by Conventions, Sports and Leisure International (CSL), a Minneapolis-based consultant that has also done work for the Vikings.
While that alone does not make the numbers suspect, the fact that the firm did not conduct an independent market study suggests that the word "support" is really code for "we're making some really broad assumptions here based on unverified information."
In other words, the numbers are highly inflated, misleading, or both.
Mortenson Construction, the likely stadium contractor, calculated that a stadium project would require 4.25 million work hours to complete. While that seems like a very large figure, when you divide it by 2,080 hours—the equivalent of one year of full-time work—the number of construction jobs created would actually be 2,043.
Since this project will take three years to complete, the only way that 4.25 million hours can translate into 7,500 jobs is if most of these jobs are of a much shorter length than one year, a fact confirmed by data supplied from Mortenson indicating that the average number of hours per worker will be 567, or about 14 weeks.
Building a stadium is also a terrible public investment, given that each full-time equivalent job would cost a staggering $475,000 to create—five times the much-criticized $93,000 per job cost of President Obama's stimulus plan, and laughable in comparison to a recent U.S. Department of Commerce study that found investments by its Economic Development Administration in infrastructure projects cost taxpayers on average between $2,000 and $4,600 for each construction job created.
The other job estimates are equally dubious, at least in terms of how people normally look at regular employment. For example, the Vikings and the Metrodome employ fewer than 200 people combined, many of them part-time, yet the original CSL report attributed the number of jobs related to stadium activity as totaling 3,400. What the report is mostly describing are all those seasonal positions related to game day activities: the vendors, parking lot attendants, off-duty cops working security, ushers, etc.
For some of those people, the extra income might allow them to make ends meet or put away money for their kids' education. But is that work deserving of a $1.2 billion government subsidy?
Myth #5: Without a New Stadium, the Vikings Will Leave
The ultimate trump card in any stadium gambit is the threat to leave. In fact, it's generally the only card the team has to play, particularly after the economic arguments have been demolished and the emotional appeals exhausted.
The reality is that there is minimal risk of losing the Vikings, primarily because there are several other teams—Buffalo, San Diego, Oakland, Jacksonville, and St. Louis—in markets smaller than Minneapolis that also want greater revenues and stadium fixes. Or, as Forbes put it bluntly in a 2006 article: "[C]leverly leaving the Los Angeles market devoid of a franchise since 1995 has given small and mid-market teams with shoddy ownership...the leverage they needed to coax taxpayers into building them new stadiums."
Even if the L.A. ruse wasn't transparent on its face, the numbers simply don't add up. The state of California and the city of Los Angeles have no money to support stadium construction, leaving private firms like the Anschutz Entertainment Group (AEG) to fill the void.
AEG wants to build a $1.1 billion open-air stadium in downtown L.A. (at a cost that could reach $1.5 billion once traffic and environmental concerns are factored in), but to make such an investment work, the company would need to retain virtually all of the stadium revenues—parking, concessions, advertising, suite rentals, etc.—plus the $700 million that Farmers Insurance has pledged over 30 years for naming rights.
With the team limited to whatever booty AEG is willing to share, there's no upside to the Vikings leaving Minnesota to become a tenant at Farmer's Field. Any potential buyer of the team would face a similar predicament.
The only party that would benefit from a franchise in Los Angeles is AEG, provided they could acquire a stake in the team at a substantial discount. Given how much value a new stadium can add to a team's worth, there would be no incentive to partner with AEG—unless the owner was in dire financial straits.
On top of that, the league's overall broadcast revenue will climb to nearly $7 billion per year by 2014, increasing each NFL team's annual take to approximately $218 million, almost double the current amount. Only a fool would be willing to share that kind of treasure.
Myth #6: There's No Other Option
In 1997, after the Minnesota Twins triggered an escape clause in their lease and wrongly guessed that the Legislature would award them a new stadium, the state was in a perfect position to strike a bargain on terms far more favorable to the people than to the Twins' wealthy owner, Carl Pohlad.
Unfortunately, former Gov. Arne Carlson allowed the Metropolitan Sports Facilities Commission to negotiate back-to-back sweetheart deals that gave the team the option on lease renewals, thus opening the door to protracted yearly negotiations that wore out frustrated legislators and resulted in the Target Field capitulation in 2006.
Although the Vikings have followed a near-identical approach to the Twins, bringing forward no meaningful proposals during the past 13 years, rejecting a partnership with the University of Minnesota at TCF Bank Stadium, and deliberately choosing to play out their lease, the end result need not be the same.
Seventy-five percent of NFL teams play outdoors, including those located in chilly climes like Buffalo, Boston, Cleveland, Chicago, Philadelphia, and Kansas City. The last time the Vikings made it to a Super Bowl, they played at frigid Met Stadium, where Old Man Winter proved as much an advantage as the decibel-rich Metrodome. Frosty Lambeau Field certainly hasn't hurt Green Bay's success.
A stadium similar to Lambeau or the Patriots' privately owned Gillette Stadium would likely cost $400 to $500 million in today's dollars, but with $200 million from the NFL's G4 loan program, the option for personal seat licenses, multiple in-stadium advertising opportunities, and possibly $240 million in naming rights, the Vikings should already have the resources they need.
The team can spend $30 million to acquire the much-ballyhooed Arden Hills TCAAP site, allowing Wilf to pursue a lucrative venture similar to what Robert Kraft achieved in New England for his Patriots. Or, they can save land acquisition costs and persuade the Legislature to sell them the Metrodome for a $1, a proposal that's been around for years.
If that's not enough of a sweetener for the team, they should take their lobbying act to the corporate suites of Minnesota's Fortune 500 companies.
Get the This Week's Top Stories Newsletter
Every week we collect the latest news, music and arts stories — along with film and food reviews and the best things to do this week — so that you’ll never miss City Pages' biggest stories.
- A terrible Minneapolis park deal just got $2 million worse
Sat., Sep. 19, 12:00am
Sat., Sep. 19, 7:00pm
Sun., Sep. 20, 12:00pm
Sat., Sep. 26, 2:30pm
- Why you should never run over a kid while flying a confederate flag
- Minnesota has eighth most expensive cigarettes