The Soccer Stadium Should Pay Taxes

Soccer ball on money A belated congratulations to our local soccer team for gaining admission into Major League Soccer. The Minnesota United FC are one of twelve professional sports teams based in the Twin Cities:

  • Minnesota Twins
  • Minnesota Vikings
  • Minnesota Timberwolves
  • Minnesota Wild
  • St. Paul Saints
  • Minnesota Lynx
  • Minnesota Vixen
  • Minnesota Swarm*
  • Minnesota Machine
  • Minnesota United FC**
  • Minnesota Lady Slippers
  • Minnesota Wind Chill

* The Swarm recently announced that they’re moving to Atlanta ** The Minnesota United FC will switch leagues, from the NASL to the MLS, in 2018. The Twin Cities are one of twelve metro areas in the country with a team in each of the four major professional sports leagues (MLB, NFL, NHL, and NBA). Besides Denver, we are the smallest metro in this elite set. In addition to our professional teams, we have roller derby, the NCAA Division I Golden Gophers, and lower-level college and high school sports. When it comes to the variety and quantity of sporting events, the Twin Cities really knock the cover off the ball by shooting under par and punching above their weight. No fan can complain about a shortage of sporting events. But some professional teams are complaining about a shortage of stadium subsidies:

Minneapolis might say to us, ‘We don’t want you here.’ And then we’ll have to assess our options and figure out where is there a community that wants us. That’s important. It’s important that the community wants us to be there.

— Nick Rogers, president of the Minnesota United FC.

My attitude is the same as Council Member Andrew Johnson’s: I’m in favor of a new soccer stadium, as long as it’s completely privately financed. The confusion arises from Mr. Rogers’ implied assumption that if Minneapolis must give tax breaks to the stadium to show that the city wants it. This assumption is wrong. It’s impossible for a city to give tax breaks to every establishment that belongs in the community.

If you look around the city, you’ll see that many establishments necessary for everyday urban life also pay property taxes. Grocery stores irrigate our food deserts, and provide the literal sustenance for our lives. And yet, the Uptown Cub Foods pays $158,000 a year in property taxes. Coffee shops facilitate knowledge spillover and cross-pollination of ideas (as they have since the Renaissance), and caffeine rejuvenates our workforce. And yet, the Spyhouse in Northeast pays $95,000 a year in property taxes.

Live music is what brought me up to the Cities when I was a teenager in a small farming town in southern Minnesota. We have the best music scene for thousands of miles, and I can’t imagine Minnesota boosterism without The Replacements, Prince, Doomtree, or some other artist. Still, music venues are businesses, and they chip in their fair share to make the city run smoothly: First Avenue pays $139,000 per year in property taxes. Why should the owners of First Avenue pay $139,000 per year on a property assessed at $3 million, and the very rich owners of Minnesota United pay a similar amount on property worth 50 times as much?

How is that fair or smart? I’ve heard people say, “Can we at least acknowledge that having a soccer stadium downtown would be nice?” Sure! And it’s nice to have grocery stores, music venues, and cafes, but these businesses should still pay taxes. Can we acknowledge that we don’t have to give multi-million dollar tax breaks to things just because we like them? We have to tax things we like. If we don’t, we’ll be in the sticky situation of balancing the budget on the taxes levied solely on pedal pubs and vape shops.

A lot of research shows that stadium subsidies are bad investments. As streets.mn writer Nate Hood says, downtowns are good for stadiums, but stadiums aren’t necessarily good for downtowns. This can seem counter-intuitive, because we see stadiums go up, and then we see people shopping, and we think, “Of course, stadiums spur economic growth.” But economists have been studying the effects of stadiums and found their economic effects to be negligible.

Victor Matheson, an economist at the College of the Holy Cross, studied stadiums across the country to see if sales rose after the projects were built, or if they declined when the games stopped for strikes or lockouts. “There was simply not any bump at all,” Matheson said. Economist Dennis Coates says, “[Subsidized stadiums] don’t make any money. They just generate new spending in one location by taking it from another.” Then there’s the crooked appearance of the deal.

Bill McGuire is a friend of Council Member Lisa Goodman’s, and donated money to help her win an uncontested city council race. Mr. McGuire was the CEO of UnitedHealthGroup (until he retired with close to a billion dollars in stock options amidst an investigation by federal prosecutors and the IRS) when Council Member Linea Palmisano worked there. So we have a group of very rich people (including Bob Pohlad and Wendy Carlson Nelson) requesting $3 or $4 million dollars per year in tax breaks from city council.

Neil deMause at the stadium finance blog Field of Schemes has the right questions: “If a new stadium doesn’t make money, why should anyone build one? and Why are you spending $100 million on an MLS franchise anyway if it’s such a terrible deal?

The City of Minneapolis, Hennepin County, and the State of Minnesota are investing heavily in the area. The Cedar Lake Trail is a popular bike path that will soon have a $2 billion dollar light rail extension running next to it. Development will happen — it’s only a question of what and how soon. Transit-oriented development is a good thing because it grows the tax base. When you exempt desirable transit-accessible land from paying property taxes, you’re pretty much defeating the purpose of building a train in the first place. The exemption only makes sense you think that no one would like to build — and pay property taxes on — something near a train station, a baseball field, and a farmer’s market in downtown Minneapolis. And if you believe that, I’ve got a stadium to sell you.


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5 Responses to The Soccer Stadium Should Pay Taxes

  1. Sam Newberg
    Sam Newberg June 1, 2015 at 3:19 pm #

    So to split a pretty big hair, apparently (according to this MinnPost article: http://www.minnpost.com/politics-policy/2015/05/amid-private-talks-minneapolis-officials-minnesota-united-takes-case-soccer-), no other stadium in the state pays property tax, but those are all owned by a public entity, whereas this soccer stadium would be owned privately by the team. Not that an agreement for Minnesota United to lease its stadium from a public entity like the Minnesota Ballpark Authority would solve your argument, Scott.

  2. Adam Miller
    Adam Miller June 1, 2015 at 4:24 pm #

    The trouble with stadium economics is you can’t really cite the generalization as though it’s controlling in all instances, and one reason why is right there in the quote of Mr. Coates:

    “They just generate new spending in one location by taking it from another”

    For a city, the where matters. A dollar spent in Blaine is of no use to Minneapolis whereas a dollar attracted from someone who would otherwise spend it in Blaine is not only beneficial to Minneapolis, it’s a shift that likely doesn’t show up in the macroeconomic analysis.

    Another example is studying whether a Super Bowl benefits Miami and then concluding Minneapolis would similarly see no marginal hospitality and lodging spending on the first weekend in February.

    Anyway, that’s not to argue that stadiums are good investments, its just that its not always as definitely bad as is sometimes made out.

    “Development will happen — it’s only a question of what and how soon.”

    And that’s yet another post I need to write, but suffice it to say I’m not sure that this is true. I don’t think development is inevitable, as there are meaningful physical barriers separating this area from the surrounding redevelopment. And I think missing a window of opportunity can mean long term stagnation (see, Downtown East and the Gateway).

  3. Matt Steele June 1, 2015 at 4:53 pm #

    Great post, and agree.

    To Sam’s big split hair: If that precedent is set, then do a sale-leaseback of the land to a non-profit trust or a local government. I could see that as a way to get around property taxes. Because then any future sale or reuse of the land would serve the public interest.

    Otherwise Minneapolis needs to be firm in its position that it will not cede tax revenue in perpetuity. It would, in essence, raise everyone’s property taxes as it would increase municipal liabilities (police/fire protection, infrastructure, etc) without an increase in tax base.

  4. mplsjaromir June 1, 2015 at 4:59 pm #

    I completely agree with the points the author has made.

    An argument could be made that if a stadium genuinely makes an area more attractive by using the surrounding land in an ingenious way, public assistance may be warranted.

    From what has been presented it seems to be a basic proposal. Use a functioning parcel of land and turn it into a stadium. The land MN United desires could be used in a number of ways, no reason to take it off the tax rolls. At least Target Field squeezes the most out the land it occupies and creates useful physical and psychological connections. Connections that a purely market driven development would not have produced.

    Cities need to realize that the era of feeling sorry for themselves is over. People want to be downtown. Cities do not need to give away stuff in order to have development. Remain strong Minneapolis pols, you have what they want, not the other way around.

    • Adam Miller
      Adam Miller June 1, 2015 at 5:10 pm #

      Maybe I’m fantasizing, but it seems like they could have proposed something much more ambitious, with the stadium being just part of a larger redevelopment proposal including upgrades to the Farmer’s Market and building some housing and retail. Seems like a full blown redevelopment of the area might have had an easier time finding a path toward some public support.

      And now is when I remind myself that I really don’t know anything about city politics, zoning, or property development.