Finding funding for proposed soccer stadium is complex

When Bill McGuire announced plans to build a Major League Soccer stadium in downtown Minneapolis, Hennepin County was seen as a possible funding partner.

Several of the county's top officials have wondered whether a countywide sales tax now paying for the Minnesota Twins' Target Field could also be used to help pay for a $150 million soccer stadium that the former UnitedHealth Group chief executive wants to build.

But the obstacles, according to legislators, county officials and an examination of records, are daunting. The roadblocks can be traced partly to a set of obscure, late-night hearings that occurred at the State Capitol four years ago — and which significantly decreased the likelihood of using the Target Field sales tax for a soccer stadium.

"I think there's some expectation that we would" use the ballpark tax, said Dave Lawless, the county's chief financial officer. "I think people have thought about it. [But] there has not been a proposal that's really been walked around the county at this point."

McGuire has scheduled a meeting at the Capitol Tuesday with key legislators, including Sen. Tom Bakk, the Senate majority leader. McGuire has yet to reveal publicly his plans to fund the proposed new stadium, which was the cornerstone of a successful bid to receive an MLS expansion franchise. McGuire's partners in the soccer venture include the Pohlad family, owners of the Minnesota Twins, and Glen Taylor, owner of the Minnesota Timberwolves and Star Tribune.

Though Lawless declined to speculate how hard it would be politically to change state law to use the ballpark money, the tax is hardly the only avenue open to McGuire. He could opt for a series of lesser public subsidies — asking that property taxes and sales taxes on construction materials be forgiven, as an example — or could simply privately finance the stadium.

Since the law authorizing public subsidies for Target Field was adopted in 2006, the countywide sales tax has provided a tempting stream of money. Tax revenue has been generated faster than anticipated, partly because of an improving economy, and created what critics termed "extra revenue" that could be used for other projects.

In 2009 alone, the 0.15 percent countywide sales tax — which was passed after legislators excused the county from having to first hold a citizen referendum — raised $25.9 million. Lawless now said that strong revenues and low interest rates have allowed Hennepin County to prepay $52.3 million of its debt, potentially enabling the county to fully pay its debt 10 years before the original 2037 ending date.

The $555 million Target Field project was built with $260 million from the county for the park, and another $90 million from the county for surrounding infrastructure.

But in 2011 — a year after the opening of Target Field — legislators worried over what Hennepin County might do with any "extra money", and moved in to insure themselves a say in how the funds might be used in the future.

The restrictions were pushed by Rep. Ann Lenczewski, DFL-Bloomington, a frequent critic of public subsidies for stadiums who hoped to capitalize on the Legislature's wariness to publicly fund more stadiums. Though she did not know at the time her efforts might impact a soccer stadium, Lenczewski is convinced the limits put in place have now further handcuffed the county to divert extra Target Field tax revenue to another stadium project.

Her assessment has recently been backed by Minnesota House researchers.

"If the county wishes to use any moneys from the [ballpark] tax for the costs of planning for or constructing a soccer stadium, a change in the law would be required," the analysis said. "These [amounts required to ... prepay the bonds] increase the security of the bonds and thereby benefit the bondholders. As a result, [we] don't believe that they could be re-purposed without adversely affecting the bondholders' legal interests."

Lenczewski said her aim at the time was twofold: To make sure the countywide tax was eliminated when the county's ballpark debt was paid, and to cap a little-known fund for capital improvement reserves related to the ballpark at $1 million per year.

"The catch [is] the County Board gets to decide what's an 'adequate reserve,' " Lenczewski said during a 2011 hearing on the proposed restriction. "You [could] have $700 million [in reserve, and say] you need to build a new stadium. Now, I'm not saying any county commissioner would ever do that — but you could do it."

County officials opposed the restrictions during the May 2011 hearings, saying they were unnecessary and were already covered by the original 2006 legislation. Those testifying at the Legislature included Hennepin County Commissioner Mike Opat, who led the public subsidy push for Target Field and as a current County Board member is a lead supporter of McGuire's bid to build a soccer stadium near the baseball stadium in the North Loop.

"I don't think any of us who supported the ballpark have any design or ambition to keep the tax on indefinitely," Opat told legislators in 2011. "We never made that argument over here."

Mary Beth Davidson, the county's lead lobbyist at the time, was more direct to legislators. "I would implore you to please not pass this," she said.

In 2011, Lenczewski said, her main worry was not a soccer stadium but a new football stadium for the Minnesota Vikings. "A future Legislature could come along [and use this to] do a Vikings stadium," she said of the countywide sales tax money. The Vikings however obtained their own public subsidy package in 2012 for a $1 billion stadium now being built on the other edge of downtown Minneapolis.

Sen. Warren Limmer, R-Maple Grove, joined Lenczewski in 2011 in pushing for the added restrictions, especially those aimed at making sure the tax ended.

"I believe there's no expiration date in law right now for the sales tax," Alexandra Iverson, a county budget official, said during the 2011 hearings. "Our assumption is that it expires when the [ballpark] bonds are paid off, and that looks right now [to be] in 2037."

Replied Limmer: "I don't think it expires at all. Even if bonds are paid off, there's no end date."

Before legislators adopted the new restrictions Bill Schreiber, a county lobbyist, told them that there was too much distrust of Hennepin County officials and their intentions. "There have been elections for all of those county commissioners, and no one lost their election" over the controversy surrounding the ballpark tax, he said.

Mike Kaszuba • 612-673-4388