Stadium bonds 101

It’s been a nagging question behind many of the leading proposals to pay for a Vikings stadium: If gambling revenues are used to pay the debt service on a new stadium, will anyone actually loan the money?

It’s an important question, because when it comes to bonds, Minnesota’s money actually comes in several tiers: the highest is general obligation debt service, the state’s tried and truest revenue source. Pledged revenue and legislative appropriations come next.

But new gambling proceeds, be they from a racino, a downtown Minneapolis casino or new pull-tabs, don’t really fit any of those categories. Those funds are not a known or guaranteed revenue source because they’d be brand new.

That has bond underwriters quietly expressing their reluctance about betting on gambling. Some suggest gambling revenue would have to be discounted by as much as 50 percent to calculate the available debt service.

That may require “credit enhancement” from the state to make the bonds affordable, which is to say, a pledge that taxpayers will co-sign the stadium mortgage, even if gambling pays the bills.

Part of the testimony at this afternoon’s Senate stadium hearing is supposed to include a presentation from Minnesota Management and Budget on how this might actually be accomplished. So-called appropriation bonds are one solution. They’d have the Legislature paying the debt service with 30 years of appropriations, backfilled by the gambling proceeds flowing into state coffers.

Here’s the one-page explainer MMB will be handing out at today’s hearing:

Minnesota Bond Fact Sheet

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