Aug 1, 2018

Target Center and Minneapolis Celebrate 30 Years of Stadium Subsidies

Anne Philpot Research Assistant, Michael D. Farren Research Fellow

Last month marks the 30th anniversary of the Target Center’s groundbreaking. The facility has been home to the Twin Cities’ professional basketball teams, the Timberwolves and Lynx, plus short-lived arena football and roller hockey franchises. But over those three decades, taxpayers have been the losers, sinking increasing amounts of public money into a facility that creates private profits.

The Target Center opened in 1990, but just two years later, the Timberwolves' owners faced financial problems and called on Minneapolis to bail them out. Prompted by the threat of a move to another city, Minneapolis bought the arena for $72 million in 1994, barely five years after spending $23 million in public money to subsidize construction.

Perhaps unsurprisingly, the city later faced mounting debt when stadium revenues did not meet projections, leading officials to subsidize $1.5 million in operating losses every year in addition to the $5 million annual debt payment.

More recently, the city caved to the owner’s demands once again—this time using sales taxes to underwrite $74 million of the Target Center’s $140 million renovation, which was unveiled in 2017. The agreement came at the same time as the new Vikings stadium deal in 2012, which gave the football franchise another $498 million in public money in addition to other operating cost subsidies.

The misuse of public funding to benefit professional sports teams doesn’t just happen in Minnesota—it’s a nationwide epidemic. Most recently, Las Vegas offered the largest ever stadium subsidy—$750 million—to bring the NFL’s Raiders to town. Other cities have seen their teams walk away for much less: the Seattle SuperSonics to Oklahoma City, the Los Angeles Rams to St. Louis (and back again), and the Montreal Expos to Washington DC.

These negotiations follow a pattern we should see through by now: Franchise owners claim a facility is obsolete and that the team cannot stay competitive without a state-of-the-art environment. They threaten to move to a new city, citing undisclosed and generous offers which might or might not be real.

Next comes an arbitrary deadline to force a sense of urgency. Public officials then cave under the pressure of fans and corporate special interests, only to find that the goalpost has been shifted mid-project and the taxpayers are on the hook for the increase. This cycle repeats so frequently that the Target Center is already eight years older than the average NBA arena.

Team owners will always seek to maximize profits and “keep up with the Joneses” around the league. It makes sense to lobby for government subsidies if there’s a chance of success. Meanwhile, politicians get to claim that they’re doing something to help the local economy—even though independent economic research disagrees. The large body of academic research finds that stadium subsidies only benefit team ownership and don’t contribute to broad economic development, increased tax revenue, or improvements in social welfare.

Economist Mancur Olsen might argue that this situation occurs because organized and powerful interests like team owners and politicians have a strong reason to fight for the spoils of a subsidy, while the people who pay the price—taxpayers in general—are less organized and less motivated because the per-person cost is relatively low.

Two Minnesotans have a plan to escape this rigged game. Economist Art Rolnick, a senior fellow at the Humphrey School of Public Affairs at the University of Minnesota, and former Minnesota Representative David Minge have both suggested that Congress tax stadium subsidies at a rate of 100 percent, completely removing the incentive for teams to lobby for handouts.

As ludicrous as this idea sounds, it also solves another problem: Minnesota state legislators repeatedly denying local residents the chance to vote on sales taxes that pay for stadiums. This happened during the construction of the Twin’s Target Field in 2006, as well as renovations of the Target Center and US Bank Stadium.

If team owners paid for the cost of their own stadiums and arenas, maybe groundbreakings—and anniversaries like this one—would actually be a cause for celebration.

Photo credit: AP/Shutterstock

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