May 26, 2005

Twins' Stadium Deal

Three Pennies for Every 20 Bucks

by Neil deMause

If your hometown were considering building a new stadium for its baseball team, which plan would you prefer: One that costs you just three pennies in sales tax on every $20 purchase or one that costs $320 for every man, woman, and child in your county?

Before you answer, consider this: They're both the same plan.

The city in question here is Minneapolis, where the Twins' owner, bank tycoon Carl Pohlad, has spent nearly a decade angling for public money to replace the unloved Hubert H. Humphrey Metrodome. (The Twins' ballpark was memorably described by Billy Martin: "I can't believe they named someone like Hubert Humphrey after such a dump.") The latest idea, raising $353 million via a 0.15% sales-tax hike for Hennepin County, where Minneapolis resides, is just the latest in a series of plans, proposals, and crazy schemes put forth over the years to fund a new Twins stadium with public money. In fact, it's not even particularly new; a similar sales-tax hike was proposed by then-Mayor Sharon Sayles Belton back in 1999.

What's different about the current plan, though, is that--contrary to my skeptical prognostications three weeks ago--it might actually have a shot at getting approved. Though the state legislature closed up its regular session on Monday without acting on a Twins bill, it also failed to pass a state budget, which led Republican Governor Tim Pawlenty to immediately call a special session so that the state can pay its bills this year. And while it's still unclear whether a baseball stadium will be on the agenda, most local political observers think that if it is, this year is Pohlad's best chance yet at building a new palace largely on the public dime.

If so, it's a pretty remarkable turnaround. The plan calls for a $478 million stadium, for which Pohlad would put up just $125 million; the Twins' owner could recoup much of his expenditure through the sale of naming rights. (Handing over naming rights revenue to a stadium's tenants has become standard in recent years: The "private" contributions for both the Mariners' Safeco Field and the Brewers' Miller Park were largely paid for by the sale of naming rights to these public buildings.) The rest would come from Hennepin County taxpayers, or anyone who happened to stop for a corn dog while driving through on I-90.

This public-private split--roughly one-quarter private, three-quarters public--runs counter to the prevailing stadium trend, which is for teams to put up a greater share of stadium costs, as state and city officials have become increasingly hesitant to devote scarce public funds to building sports facilities. The St. Louis Cardinals next year will open their latest incarnation of Busch Stadium at a cost of $387 million, more than two-thirds of which will come from the team's corporate pockets. Even George Steinbrenner is pitching a stadium that, if preliminary reports are to be believed, would be almost three-quarters privately funded--though at an estimated $1.1 billion it would be the costliest baseball stadium ever built (no surprise there), so the public's bill would still come to about $300 million.

There are several explanations for this trend, among them the late-90s economic boom, the depletion of local government budgets, and the growing consensus among economists that, as one memorably noted, when it comes to promoting economic development you're better off throwing your money out the window of a helicopter over your city than building a sports stadium. Another major factor is that since 2002, Major League Baseball has allowed teams to deduct stadium debt from their team's finances before calculating revenue-sharing payments.

After some fancy bookkeeping, the upshot is that an owner can effectively get back about 40% of whatever he puts into building a stadium by reducing his revenue-sharing checks to the league. And you don't have to be a rich team to take advantage of this: If the Twins' revenue stream remained small in their new stadium (which they certainly hope wouldn't be the case), they could push their reported revenue even lower by writing off stadium costs, and pocket even bigger revenue-sharing checks from the league.

This helps explain why the Cardinals and Yankees, long stymied in attempts to get stadium legislation passed, are suddenly more willing to bear a larger share of the cost. It also explains why MLB had to drive a hard bargain for the Nationals' stadium in D.C., which if all goes according to plan will be almost entirely publicly funded: Shunting costs to the other 29 teams wouldn't help the Nationals, because their owners are the other 29 teams.

Pohlad, though, is holding out for the sort of deal that was common in the 1990s, with the taxpayers footing the lion's share of the bill. If he's successful, it will be all the more remarkable since Minnesotans have routinely voted down stadium after stadium in public referenda.

So what's changed? First off, the Twins removed their demands for a retractable roof, which might leave fans shivering during Minnesota Aprils, but also lowered the price enough that the county could front the whole public cost without asking for state money. Last year's move of the Montreal Expos to Washington, D.C., may have scared local politicians â€" "If we are going to maintain Major League Baseball in Minnesota, we need to pass this bill," declared Minnesota state Rep. Debra Hilstrom last week--though past attempts to move the Twins to North Carolina, Oregon, or off the baseball map entirely via contraction have amounted to nothing. And perhaps most crucially, Gov. Pawlenty backed off of his commitment to holding a referendum on the stadium plan--something that likely would have killed the deal, as polls show two-thirds of Minnesotans oppose spending public money on a Twins stadium.

And then there's that "three cents on every 20 dollars" line, which was first coined by Mike Opat, the Hennepin County commissioner who concocted the stadium tax, and has since been repeated by every pro-stadium sportswriter in town. The problem is that people make a lot of $20 purchases in their lives, especially over the 30 years it would take to pay off a Twins stadium; with about 1.1 million people in Hennepin County, to raise $353 million it would cost $320 per resident. It just goes to show that player agents aren't the only ones who can get statistics to do their bidding when big money is at stake.

RECENT BASEBALL STADIUM DEALS
Team        Opening year  Total cost   Public share   Public pct.
Padres           2004        $449m        $303m        67%
Phillies         2004        $458m        $231m        50%
Cardinals        2006        $387m        $97m         25%
Nationals        2008?       $581m        $511m        88%
Twins (proposed) 2009?       $478m        $353m        74%

Neil deMause is an author of Baseball Prospectus. 
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