Should public money be used to fund a new stadium?

/ 15 March 2012 / jennifer

MPR News, March 15, 2012 –

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Art Rolnick and R.T. Rybak. (Courtesy photos)

Minneapolis Mayor R.T. Rybak promoted his city’s Vikings stadium proposal as a way to create jobs in the hospitality and construction industries during a debate on MPR’s Morning Edition with economist Art Rolnick, who argued the Vikings are resorting to “economic blackmail” to force the city to prioritize sports funding over the needs of low-income residents.

“I think we get a little bit snobbish about where people are working,” Rybak said. “People in this community have become part of the American dream, especially immigrants, because the hospitality industry has given them an opening, and I will fight hard to invest in the hospitality industry.”

The almost-$1 billion Vikings stadium package includes about $736 million in public funding, of which about $150 million would come from the City of Minneapolis. A core question comes up again and again: Should public money be spent to help a private entity build a new facility?

“There is absolutely no compelling reason to give the Vikings a dime if they weren’t threatening to leave,” said Rolnick, a senior fellow at the University of Minnesota’s Humphrey School of Public Affairs and former research director at the Federal Reserve Bank of Minneapolis.

The debate, part of Morning Edition’s ongoing One-on-One series, was recorded Wednesday. An edited transcript is below.

Cathy Wurzer: Mayor, we’re talking about an NFL team. … a wildly profitable entity. Why is spending $150 million in hospitality taxes a good investment?

Mayor R.T. Rybak: Well, first off, it’s not my top priority, but it’s defendable for these reasons. First up, this is not a private facility. The Vikings will use it ten days a year. The 355 others in that year will be used by the public, but the amount of money that’s generated in those will help support that. Now the Vikings are only using it ten days, but they’re paying more than 50 percent of the cost of it. Remember also the way this is funded. The Minneapolis strategy is more complex, but better. The idea is we want to reallocate some of the existing hospitality taxes, extend them out to 2045, and in return, what that will do is the state can take part for the Vikings stadium (and) the city will take part to continue to fund the convention center and to fix up Target Center.

Wurzer: The Vikings are going to be there for just a few games, but really in essence they’re saying to you and to the state, ‘Look, we want to be more profitable. That’s why we want a new stadium.’ So you’re helping some very wealthy people already become wealthier, aren’t you?

Rybak: Well, I understand that, and look, I’m not a big fan of sports funding at all, but for the public right now, when you look at it, I believe that’s a good investment for a couple reasons. Number one, the funding stream we have here is existing hospitality taxes and what’s the best way to reinvest those hospitality taxes. If we could reinvest them in any of the other things that Art and I care more about, early childhood or anything else, that would be great. The legislature won’t let us do that. So under those options that we’ve got right now, I think this is a smart investment because we are using hospitality taxes for a billion-dollar investment in a hospitality industry that has a billion-dollar payroll in this community.

Wurzer: Art Rolnick, the Vikings … are a statewide asset. Jobs are generated. The economy of Minneapolis is bolstered on game days. Why not put up some public money for a new stadium?

Art Rolnick: Well, of course all good companies create jobs and are an asset to the Twin Cities, to Minnesota. We have twenty Fortune 500 companies, some of the best companies in the world. If you really go down that road, you have to ask yourself, ‘Well, which companies do we subsidize?’

But let me put this in a bigger perspective for you. This isn’t just about sports teams. We have had what we’ve dubbed an economic bidding war in this country for decades where one private company pits one state off against another. It puts our local politicians in a very difficult position. You don’t want to lose a 3M. You don’t want to lose the Vikings. You don’t want to lose General Mills … Now what you have to do finally when you’re faced with this as a local politician, you have to ask your question: Should we be subsidizing a private business?

Now the mayor says it isn’t private (and) we’re going to own it publicly. Well, we already have a stadium, which is just fine. We just put on a new roof. There is absolutely no compelling reason to give the Vikings a dime if they weren’t threatening to leave. I suspect this is a bit of a bluff. I don’t know that for sure, but if we knew that for sure, the economics, the public nature of this, there’s virtually no argument I can see that would warrant a dime for the Vikings if we knew they wouldn’t leave.

So let’s make it clear. This is really economic blackmail. These teams are going to come back to us every five years or so, and they’re going to want more. These are public dollars that should be used for education, for reducing crime, for reducing pollution, for building our infrastructure.

Wurzer: And I think the mayor would agree with you on that, right, Mayor?

Rybak: Art and I are in radical agreement on a couple core points. Number one, it’s most important to invest in education and early childhood, which is why Art and I worked together to get $28 million for the Northside Achievement Center. We’re in radical agreement that we should not have government picking winners and losers in the private sectors.

The place where we disagree is on whether, in this specific case, this is a smart investment or not, and I believe it is.

The Vikings will not own the new football stadium. They shouldn’t own the new football stadium. That should be in control of the public, and people may not, and they probably shouldn’t love pro sports teams and the economics of it. I think that is all sick.

But we’ve come up with a good deal here where we’re saying a public building will be able to be used for ten days by a team that’ll create so much revenue there that it’ll support other things. I think it’s great to have a sports infrastructure in a region, as it is to have arts and parks. We’re not a mediocre community. We’re a great community. And we are because people have invested in the public realm. This is the right hospitality investment because it has a billion-dollar payroll.

Wurzer: Art Rolnick, as the mayor just said, there is a billion-dollar payroll here. Does a new stadium bring in money to the local economy, generally speaking?

Rolnick: These stadiums are empty most of the time. If you go around the country, what do you see developing around these stadiums? Parking lots, a few bars, a few restaurants. The last that I looked, I don’t think there’s a shortage of bars and restaurants in the Twin Cities. This is not economic development. That can’t be the answer. If the mayor and I sat down, and I know we’d agree on this because we agree on almost everything, if we had that money and we could invest it the way we wanted, the two of us I know would put those first dollars in high quality early childhood education for all our at-risk kids. With that kind of money, we could create an endowed fund so that all our at-risk children would have a scholarship to go to a high-quality early ed program. Could you imagine the economic benefits of making sure there’s no achievement gap? You can’t find a better economic investment.

Wurzer: Let’s let the mayor respond.

Rybak: Art and I agree that the number one investment should be early childhood … The issue here is really about whether in this case a Vikings stadiums, a new Target Center, a new convention center is the right investment in the hospitality industry. Let’s really look at hospitality in this region. I mentioned it’s a billion-dollar payroll. But just focus for a minute on the person who makes the bed in the hotel, the person who parks the car, the person who is in the back of the kitchen washing the dishes …

It’s an industry that has disproportionately gone to those whose children are those who have the greatest learning gaps in this region. It is incredibly important for us to invest in the hospitality industry, and it’s wrong to think that all you have to do is invest in a kid in early childhood. As critical as that is, it is also important for them to have a future, for their parents to be working …

Wurzer: Those are not very high paying jobs, though.

Rybak: The hospitality industry certainly does not have high-paying jobs. But I want you to stop sometime when you’re in a parking ramp, and you talk to that Somali person who takes your ticket and ask them about how they put their kids through high school and into the STEP-UP summer job program. I know these people. I know the people who make the beds, who have put people to work. And I think we get a little bit snobbish about where people are working.

People in this community have become part of the American dream, especially immigrants, because the hospitality industry has given them an opening, and I will fight hard to invest in a hospitality industry that in my city and in my region matters. The construction industry is also critically important. There are 7,500 people who will be put to work on these projects, and then you can bring that up to about 11,000 if you look at the related industries. Construction is the top part of our unemployment right now, and I’ve never had the privilege of putting 7,500 people to work on a construction project, and I think that’s an important thing.

Wurzer: Art Rolnick, is that a good use of public money?

Rolnick: Let me respond on a couple issues. If we’re really concerned about the hospitality industry and the wages directly, go at it that directly. That is, say you can take the Earned Income Tax Credit and increase it for hospitality workers and low-income workers. It would be much more efficient to do that, and you know the subsidy would be getting to the people you care about.

Most of the subsidy we’re talking about to the Vikings stadium is going to go to the owners and the players and to some of the fans because their ticket prices won’t be as high as they should be. But I want to make a more general point (based on) my experience with Detroit, Michigan, my hometown.

They made similar arguments years ago. They have two brand new stadiums. They have three casinos. It is a Third World economy. It’s going to stay a Third World economy because 75 percent of their kids don’t graduate high school on time or don’t graduate at all. What kind of economy do you think that’s going to be ten, fifteen years down the road?

What’s going to create jobs is educating your kids. Almost every economist I know will agree with that. We’re missing an opportunity by taking dollars that we could spend on education and building more entertainment. That is not the way to create sustainable, strong economic growth.

Wurzer: I want to ask you about the construction jobs, though. The mayor brings up the construction jobs, that these jobs do put people to work who’ve been out of work for quite some time. That’s a big deal.

Rolnick: It’s a big deal. So if that’s your objective, let’s do it directly, and let’s invest it well. I’m going to argue there’s much more important infrastructure than another stadium. We’ve got bridges and roads. We’ve got schools. There’s a lot of other things we could build …

Wurzer: Mayor, I want to ask you, Art touched on this just briefly about stadium and economic growth around that stadium. You could argue that the Metrodome area hasn’t seen the kind of economic development hoped for when the dome was built. So why should we expect anything different with this new stadium?

Rybak: The Metrodome when it was built and the site now are radically different. A lot can happen around this area. A lot more can happen around Target Center. An awful lot can happen when we bring more convention delegates in. And all of that is part of a package that I think will lead to a lot of growth.

Wurzer: Art Rolnick, I can hear some listeners saying, ‘That sounds pretty good.’

Rolnick: I strongly disagree. And again, they said that when the Metrodome was first built, that there was going to be all kinds of economic activity. I just don’t want to pick on Minneapolis. If you go around, city after city, you will find very little economic activity. You’ll find more bars. You’ll find more gentlemen clubs. You’ll find more t-shirt shops …

Wurzer: Both your arguments are well-reasoned … (but) the train is on the tracks, as the mayor has said. In the next few weeks, this bill’s moving through the legislature. It may or may not pass. It might come up next session … I’m wondering why are some of these arguments not resonating with other lawmakers and other policy makers.

Rolnick: So, I have fought this battle, and I haven’t won many, around the country. And I can tell you in virtually every state and in Washington, D.C., the professional sports teams have amazing lobbyists. They’re terrific at the media. They spend an awful lot of money. What does the opposition spend? I can tell you we spend nothing. We’re not organized. They win almost every time.

Rybak: I think we do have politicians who invest in early childhood … Right now, the issue before the state legislature is not that issue, as hard as we fight for it. The issue is whether they’re going to fund this thing or not, and if we have a chance to put this many people to work and invest in a hospitality industry, I will support it.

We need to deal with the art of the possible, which I believe is to pass this bill, and with the opportunities of the future, which I believe is to continue to work on the things Art and I agree on … Almost everything we agree on.

Rolnick: Almost everything, except this one.

(Interview edited and transcribed by MPR reporter Madeleine Baran)

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