Dayton administration unveils ‘secret’ stadium finance plan

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    May 16, 2013 MPR’s Tim Nelson discusses stadium finance

So long electronic gambling taxes, hello cigarette taxes and additional corporate income taxes.

That’s Governor Mark Dayton’s plan to close the revenue gap in the Vikings stadium financing plan.

The tax earmarks were laid out  today  by revenue commissioner Myron Frans in a House-Senate Tax Conference Committee, to be included in this session’s omnibus tax bill.

It’s actually a two-step plan.

The first step would redirect a one-time cigarette excise tax on current tobacco inventory. Money from that payment, estimated at $24.5 million, would be put in the stadium “reserve” account. That’s the once planned-for $35 million rainy day fund that the finance department, Minnesota Management and Budget, has been slashing away at since last fall in its budget projections.

The second part of the plan is an adjustment on  “unitary sales revenue.”  It would close what the state considers a tax “loophole” that lets some businesses count some of their sales revenue outside of Minnesota.

Here’s how revenue commissioner Frans explained it:

Myron Frans (MPR Photo/Tim Nelson)

“We want to say that if you have $15 million in sales in Minnesota, you should pay tax on all that $15 million in sales. What people are doing is they’re trying to put their sales outside of Minnesota, these corporations where there’s no direct contact, and avoid paying Minnesota income tax based on all of their sales.”

Technically, the revenue department says that the change will apply to companies that AREN’T located in Minnesota, but have a corporate connection (or are part of a “unitary sales” group) and have sales in Minnesota. Those sales will be counted toward Minnesota corporate taxes in the future.

It’s projected to raise about $20 million extra a year.

That lines up with the estimate earlier this year from charitable gambling operators. They figured they could chip in $8 to $10 million annually to the stadium fund — although they were originally projected to be nearly twice the $30 million expected debt service on the stadium. Now, there should be enough money to pay the mortgage.

Both the cigarette excise tax and the “unitary sales revenue” provisions were already part of the plan for this year’s tax bill. The only change is that they’re now being earmarked for the Vikings stadium.

“We would have made these changes anyway,” Frans said.

That drew a rebuke from Republicans, who said the plan was a violation of Gov. Mark Dayton’s vow not to use general fund money to pay for a new stadium.

“Absolutely it is,” said Senator Dave Thompson, (R-Lakeville) who said the stadium funding will be coming from the same pot of money that pays for schools and health care.

Frans defended the plan.

“These are new revenues coming into the state for the first time, and the same thing is true of the new electronic gaming situation,” he said. “That was a new revenue source, and it all goes into the general fund. It’s just that the Legislature designates some of those funds to be used for certain purposes.”

Senator Julianne Ortman (R-Chanhassen) said the last-minute fix was a poor substitute for the years of negotiation that went into the stadium plan.

“We had user fee proposals, we had, you know, outdoor heritage proposals. There were better ways to fund this Vikings stadium, and we could have ask the owners themselves to be the guarantor of the costs if the pulltabs didn’t deliver,”  Ortmann said. “So there were much better ways to fund a Vikings stadium.”

Here’s the handout on the plan: