Sunday, May 27, 2012

Q: When is an Expenditure not an Expenditure?

Post and photo by the Hawthorne Hawkman.

In all likelihood this will be the last post dedicated to The People's Boondoggle until elections come around, as the gang of seven and the NFL have succeeded in trampling over the Minneapolis city charter.  At this point there would be only one obscure way to overturn the legislature's and council's votes on the topic.  It's possible, however unlikely, that the Minnesota Supreme Court could rule the appropriations bonds needed for financing to be unconstitutional.  Even then, there are several ways to work around such a ruling--like allowing a different entity to issue the bonds and then having the state cover that department's operating expenses.  A lawsuit is always a possibility, but from my reading of various aspects of the issue, I think the governor and mayor have that angle pretty well sewn up.

However, Council Member Cam Gordon did seek a legal opinion on whether a vote for the stadium would violate a Minneapolis CM's oath of office.  He was quite eloquent in the Minneapolis Issues Forum, where he said...

We had a long committee meeting today that ran roughly from 10 am to 2 pm and by the slimmest of possible majorities the Council Committee approved the new local special stadium financing law by a vote of 7 to 6. Early on in the discussion it was made crystal clear for everyone in the room that the "Charter Limitation, Requirements Do Not Apply" section went well beyond the Viking Stadium alone. It essentially will change the City Charter to allow any and all sales taxes to be used for sports facilities, or any capital improvements, without needing to go to the voters for approval even the project costs or borrows more than $10, $15 or even $100 million. This is significant because normally our charter can only be amended by a majority vote of the people or by a 13-0 affirmative vote of the City Council. Tomorrow, thanks to the power provided by the state legislature, it will be done by a 7 - 6 vote of the Council. It is worth noting that the 1997 Charter amendment passed with 70% of the vote back in '97. That's more than 62,000 people who voted for it. That's more people than have voted for any candidate or ballot question in any Minneapolis municipal election in almost 20 years. It looks like tomorrow 7 people (and 8 once it is signed by the mayor) overrule and disenfranchise those 62,000.

Also today a second major problem with the plan became clearer to me. Among the many details that makes the Vikings stadium deal a bad deal for Minneapolis is the lost potential property taxes from the stadium site itself.

Earlier this month we learned that with the new expanded site eleven property tax paying addresses would become tax exempt. That will result in the City, State, County and School will losing a total of $476,000 a year.

It is worth noting that we currently get some property taxes from the Target Center basketball arena. The Timberwolves actually make annual payments of $1,381,656.10 on the arena valued at about $32 million. Another 178,266.29 in property taxes comes from the Health Club paid by Lifetime Fitness and another $1,291.39 from the Arena sign that is also paid by the MN Timberwolves.

The stadium itself will be worth somewhere around $975 million. According to the Minneapolis Assessor, a building valued at $975 million in today's market, using today's formula would pay roughly $41 million in property taxes. That's $41 million per year. Now, that's property tax relief! That amounts to 41 million that the rest of the property owners in Minneapolis would not have to pay and would be "growing" our tax base which is probably the best thing we can do to control and lower property taxes.

I realize that the Metrodome has also been off of the property tax rolls since its construction. But the continued loss of this property tax revenue is yet another subsidy for the Vikings and their owners, and should be added to the overall cost of this deal.
The legal opinion CM Gordon sought can be found here.  In it, the attorney lays out the case for why the city charter should indeed apply.

First, the state may enact general or special legislation--general applying to all or many districts statewide, and special applying to one or a few specific locales.  The stadium bill is clearly a piece of special legislation.  Under the Minnesota constitution, a special law can be rejected by a city, and it can be modified or superseded by city charters.

Interestingly enough, there is a part of the bill that could actually be interpreted as unconstitutional.  Article 12, Section 1 of the constitution prohibits the state from enacting any special law "exempting property from taxation."  Yet Article 1, Section 21 of the stadium bill does exactly that.  "The stadium and stadium infrastructure are exempt from ad valorem taxation by the state or any political subdivision of the state..."

This attorney also challenges the Minneapolis City Attorney's ruling that the charter need not apply because the monies are administered by the state.  That narrow view does not account for the source of the funds in the first place.  The tax comes from a 1986 local sales tax law.  If there were no local law creating this sales tax, there would be no such local funds for the state to administer.

So just to be on the safe side, the legislature (at the behest of seven council members and our mayor) preempted the charter with some wonderfully contradictory language in Article 3, Section 4 of the Vikings bill.  "Any amounts expended...are deemed not an expenditure."

So when is an expenditure not an expenditure?  When it's a stadium.  Let's hope that the stadium's physical foundation is more solid than its legal, political, and fiscal underpinnings.

1 comment:

  1. Ya know, Wilf was all set to build the stadium in Arden Hills. I was Rybak and Johnson that shoved the Minneapolis stadium sites down everyone's throats. They convinced Dayton that Mpls was the only viable option.
    RYBAK AND JOHNSON are the ones to blame for this whole stadium & lack of referendum thing. Rybak has lost my vote - for any office he might run for.

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