Second Ward, Minneapolis

This is the public policy forum of Minneapolis Second Ward (Green) City Council Member Cam Gordon and his staff. We use this space to talk about some of what Cam’s working on, explain his positions, and share a little of what life in City Hall is like. Please feel free to comment on posts, within certain ground rules. See our disclaimer, including ground rules, here: http://secondward.blogspot.com/2006/05/disclaimer.html#links

Thursday, April 19, 2012

City Council Stadium Hearing

The issue of the Viking Stadium will come before the City Council for a Public Hearing on April 24th from 4:00 to 6:30 p.m. in room 317 of City Hall, 350 South 5th Street. Please consider attending if this is an issue you care about.  You can also send in your comments in writing.  You are welcome to send them to me, but the best place to send them to insure that teh Council sees them and that they are netered into the public record is here cityclerk@minneapolismn.gov

In preparation for that hearing and having to vote on this matter, I attended both of the Mayor's community meetings on the stadium proposal held earlier this month. While there I chose to listen rather than participate. It was very interesting and helpful to hear from a variety of Minneapolis residents (and others) who had questions and comments.

I believe that some inaccuracies may have been shared at those meetings. Just in case some people got the wrong impressions from some of the comments made, I wanted to take some time to clear up some details, or at least offer my understanding of these details with a focus on our sales taxes, the stadium proposal and what the City Council would be expected to vote on should the house stadium bill (HF 2810) be passed.

A. There are no sunset provisions for any of the City sales taxes. They do not and would not have to be extended because they have no end date. These do not expire even with the full payment of all Convention Center Bonds, set for 2020. That said, just like with any and all of our taxing authority, the state legislature can change that and some recently threatened to do so just as negotiations were heating up this year about how Minneapolis might be a local funding partner for a stadium deal.

B. The state has not forced us to impose this tax, they authorized us to impose it. The original 1986 statute (https://www.revisor.mn.gov/laws/?id=396&doctype=Chapter&year=1986&type=0) says, the city of Minneapolis may by ordinance impose an additional sales tax of up to one-half of one percent on sales taxable pursuant to Minnesota Statutes, chapter 297A that occur within the city, They City did so.

C. The state does not dictate exactly that these funds can only be spent on teh Convention Center.The City Council has some discretion regarding these funds and every year we approve the taxes as revenue and we vote on how to divide up the funds as expenses within our total ($1.17 billion) annual budget. In fact, in the 2012 budget they make up 5% (or close to $65 million) of the total budget. From this we spend about 4%, (or $48.7 million,) divided up as follows: 68% to the Convention Operations, 17% is contracted out to Meet Minneapolis to promote tourism etc. and 15% goes towards the Target Center (see the 2012 Council Adopted Budget pp 139-140). Additionally, $140,000 from the sales taxes goes to police. Incidentally, in 2012 the debt payments for the Convention Center will be around 20 million and for the Target Center $5 million.

D. The state has actually given us far more flexibility with these funds than we are taking advantage of. First from the original 1986 statute:

Subd. 3. [USE OF PROPERTY.] Revenues received from the tax may only be used:
(1) to pay costs of collection;
(2) to pay or secure the payment of any principal of, premium or interest on bonds issued in accordance with this act;
(3) to pay costs to acquire, design, equip, construct, improve, maintain, operate, administer, or promote the convention center or related facilities, including financing costs related to them;
(4) to pay reasonable and appropriate costs determined by the city to replace housing removed from the site; and
(5) to maintain reserves for the foregoing purposes deemed reasonable and appropriate by the City.


Then amended later in 2009:

Sec. 12. Laws 1986, chapter 396, section 4, is amended by adding a subdivision to read:
Subd. 4. Minneapolis downtown and neighborhood projects. (a) For revenues collected in calendar years 2009 and 2010, to the extent that revenues from the tax authorized in subdivision 1 exceeds the amount needed to fund the purposes in subdivision 3, the city may use the excess revenue to fund any city services. The total amount used in both years for this purpose may not exceed the total amount of aid and credit reductions under Minnesota Statutes, sections 273.1384 and 477A.011 to 477A.014 in calendar years 2008, 2009, and 2010 due to a governor's unallotment or due to statutory reductions.
(b) Beginning with revenues collected in calendar year 2011, to the extent that revenues from the tax authorized in subdivision 1 exceeds the amount needed to fund the purposes in subdivision 3, the city may use the excess revenue in any year to fund capital projects to further residential, cultural, commercial, and economic development in both downtown Minneapolis and the Minneapolis neighborhoods.
(And heres the link to the 2009 Law: https://www.revisor.mn.gov/laws/?id=88&doctype=Chapter&year=2009&type=0 , pretty far down the page, Article 4, Section 12)

Clearly the 2009 amendment already allows us to use surplus funds to be used for capital economic development projects throughout the city, including improvements to the Target Center and even including improvements in the neighborhoods. Indeed, once the Convention Center debt has been paid these funds could support economic development and job creation throughout the city.

E. While the City Attorneys opinion might be worth discussing (and worth strongly disagreeing with as I do) in the end it will be moot because the legislation, as proposed trumps it. If passed as proposed it makes clear that the Charter does not apply. All that is required is 7 votes from the Council. So, even if this passed and was taken to court, I fear a judge would be forced to find that the state legislature and the city council acted within the law because of the authority the state government has over city government.

Here is what the proposed bill says about our fundamental compact, the City Charter:

CHARTER LIMITATIONS NOT TO APPLY.
43.27Any amounts expended, indebtedness or obligation incurred including, but not
43.28limited to the issuance of bonds, or actions taken by the city under this article are not
43.29deemed an expenditure or other use of city resources within the meaning of any law or
43.30charter limitation. The city may exercise any of its powers under this article to spend,
43.31borrow, tax, or incur any form of indebtedness or other obligation, for the improvement,
43.32including but not limited to, acquisition, development, construction, or betterment, of any
43.33public building, stadium, or other capital improvement project, without regard to any
43.34charter limitation or provision. Any tax exemption established under this article shall
44.1not be deemed an expenditure or other use of city resources within the meaning of any
44.2charter limitation.

The scope of this provision is so broad that it appears to allow use of any and all sales taxes to go to any sports facility. In fact it opens the door for massive borrowing in the future to upgrade the Target Center as well as the construction or improvement of any other public buildings, stadiums or other capital improvement project

Despite these facts I beleive that it may still be within the power of the Charter Commission to put this issue on the ballot in November. I intend to research this further.

F. If the bill passes, however, it will need a council majority to be approved. According to state law, these kinds of special, local laws must be approved within 30 days by the local governing body. This is articulated in the house bill as follows:

Sec. 5. EFFECTIVE DATE; LOCAL APPROVAL.
44.4This article is effective the day after the governing body of the city of Minneapolis
44.5and its chief clerical officer comply with Minnesota Statutes, section 645.021, subdivisions
44.62 and 3. Notwithstanding any law to the contrary, the city of Minneapolis and its chief
44.7clerical officer have 30 calendar days following final enactment of this act, to comply with
44.8Minnesota Statutes, section 645.021, subdivisions 2 and 3.


I have a number of concerns about this proposal (some hinted at here and others outlined in previous blog entries), I question the wisdom of taking on this kind of public obligation while we are still working to cover the costs of other venues like the Convention Center and the Target Center, as well as the sports arenas and stadiums owned by other public entities like St. Paul, Hennepin County and the University of Minnesota. Before we take on more major long term financial obligations related to another large publically-owned entertainment venue in this region, I believe we need to not only have much more accurate information, but also a much deeper community conversation about where and why we ought to invest public resources; and we need to develop a practical, coordinated and regional plan for how to own and operate these facilities in a cooperative way.

=====================


The following is most of the new potions of Article 4 of the House Stadium bill as it was approved by the Commerce Committee. This is the section, if passed by the legislature that the City Council will need to approve within 30 days of passage.

The bill could be heard next week in the Government Operations and Elections Committee. If you have any questions or need additional information please contact me. Please continue to share your views with each other, and with your elected representatives


MINNEAPOLIS CONVENTION CENTER

37.21 Section 1. [297A.994] CITY OF MINNEAPOLIS SALES TAX; ALLOCATION
37.22OF REVENUES.
37.23 Subdivision 1. Scope. Notwithstanding the provisions of section 297A.99,
37.24subdivision 11, the provisions of this section govern the remittance of the proceeds of
37.25taxes imposed by the city of Minneapolis under the special law.
37.26 Subd. 2. Definitions. (a) For purposes of this section, the following definitions
37.27apply.
37.28(b) "City" means the city of Minneapolis.
37.29(c) "Special law" means Laws 1986, chapter 396, sections 4 and 5, as amended.
37.30(d) "Tax" means the sales taxes imposed by the city under the special law.
37.31(e) The terms defined under section 473J.03 apply for purposes of this section.
38.1 Subd. 3. General allocation of revenues. The commissioner shall apply the
38.2revenues from the taxes as follows:
38.3(1) the commissioner must deduct the costs of collecting and administering the taxes,
38.4according to the applicable law and agreements between the commissioner and the city.
38.5For revenues from the general sales tax, the commissioner must deduct a proportionate
38.6share of the cost of collection, as described in section 297A.99, subdivision 11;
38.7(2) after deducting the costs in clause (1), the commissioner must deduct refunds of
38.8any of these taxes due to taxpayers, if any;
38.9(3) after making the deductions provided in clause (2), notwithstanding the
38.10provisions of any agreement between the commissioner and the city providing for
38.11collection and remittance of these taxes, the commissioner must deposit to the general
38.12fund the amounts specified in subdivision 4; and
38.13(4) after depositing to the general fund under clause (3) as specified in subdivision
38.144, the commissioner must remit the remainder to the city for the uses provided in the
38.15special law.
38.16 Subd. 4. General fund allocations. (a) The commissioner must deposit to the
38.17general fund the following amounts, as required by subdivision 3, clause (3):
38.18(1) for state bond debt service support beginning in calendar year 2021, and for each
38.19calendar year thereafter through calendar year 2046, proportionate amounts periodically
38.20so that not later than December 31, 2046, an aggregate annual amount equal to a present
38.21value of $150,000,000 has been deposited in the general fund. To determine aggregate
38.22present value, the commissioner must consult with the commissioner of management and
38.23budget regarding the present value dates, discount rate or rates, and schedules of annual
38.24amounts. The present value date or dates must be based on the date or dates bonds are
38.25sold under section 16A.965, or the date or dates other state funds, if any, are deposited
38.26into the construction fund. The discount rate or rates must be based on the true interest
38.27cost of the bonds issued under section 16A.965, or an equivalent 30-year bond index, as
38.28determined by the commissioner of management and budget. The schedule of annual
38.29amounts must be certified to the commissioner by the commissioner of management and
38.30budget and the finance officer of the city;
38.31(2) for the capital improvement reserve appropriation to stadium authority beginning
38.32in calendar year 2021, and for each calendar year thereafter through calendar year 2046,
38.33so that not later than January 1, 2022, and as of January 1 of each following year, an
38.34aggregate annual amount equal to the amount paid by the state for calendar year 2021,
38.35under section 473J.13, subdivision 4, increased each year by an annual adjustment factor;
39.1(3) for the operating expense appropriation to stadium authority beginning in
39.2calendar year 2021, and for each calendar year thereafter through calendar year 2046,
39.3so that not later than January 1, 2022, and as of January 1 of each following year, an
39.4aggregate annual amount equal to the amount paid by the state for calendar year 2021
39.5under section 473J.13, subdivision 2, increased each year by an annual adjustment factor;
39.6(4) for recapture of NFL team advances for capital improvements and operating
39.7expenses for calendar years 2016 through 2020 beginning in calendar year 2021, and
39.8for each calendar year thereafter until all amounts under this clause have been paid,
39.9proportionate amounts periodically until an aggregate amount equal to the present value of
39.10all amounts paid by the NFL team have been deposited in the general fund. To determine
39.11the present value of the amounts paid by the NFL team to the authority and the present
39.12value of amounts deposited to the general fund under this clause, the commissioner shall
39.13consult with the commissioner of management and budget and the NFL team regarding the
39.14present value dates, discount rate or rates, and schedule of annual amounts. The present
39.15value dates must be based on the dates NFL team funds are paid to the authority, or the
39.16dates the commissioner of revenue deposits taxes for purposes of this clause to the general
39.17fund. The discount rates must be based on the reasonably equivalent cost of NFL team
39.18funds as determined by the commissioner of management and budget after consulting with
39.19the NFL team. The schedule of annual amounts must be revised to reflect amounts paid
39.20under section 473J.09, subdivision 13, and taxes deposited to the general fund from time
39.21to time under this clause, and the schedule and revised schedules must be certified to the
39.22commissioner by the commissioner of management and budget and the finance officer
39.23of the city, and are transferred as accrued from the general fund to the NFL team, for
39.24repayment of advances made by the NFL team to the city of Minneapolis; and
39.25(5) to capture increases in taxes imposed under the special law, for the benefit
39.26of the stadium authority, beginning in calendar year 2013 and for each calendar year
39.27thereafter through 2046, there shall be deposited to the general fund by February 15 of
39.28each following year, amounts calculated by the commissioner under this clause. For
39.29each year, the commissioner shall determine the excess, if any, of the taxes received
39.30by the commissioner over the benchmark scheduled amounts of the taxes, as described
39.31in this section. The benchmark scheduled amounts for each year must be based on the
39.32actual amount of the taxes for calendar year 2011 inflated for each subsequent year at an
39.33annual rate of two percent, according to a schedule certified to the commissioner by the
39.34commissioner of management and budget and the finance officer of the city. The amounts
39.35to be deposited to the general fund by the commissioner for each year equal:
40.1(i) zero for the amount of the taxes for the year up to a scheduled benchmark of
40.2$1,000,000, inflated at two percent per year, in excess of the taxes for calendar year 2011;
40.3(ii) 50 percent times the difference, if any, by which the amount of the taxes for
40.4the year exceeds the scheduled benchmark in item (i), as inflated, but not greater than a
40.5scheduled benchmark of $3,000,000, inflated at two percent per year, in excess of the
40.6taxes for calendar year 2011; and
40.7(iii) 25 percent times the difference, if any, by which the amount of the taxes for the
40.8year exceeds the scheduled benchmark of $3,000,000, inflated at two percent per year, in
40.9excess of the taxes for calendar year 2011.
40.10(b) The annual adjustment factor for purposes of this section and the special law
40.11for any year equals the increase, if any, in the amount of these taxes received by the
40.12commissioner in the preceding year over the amount received in the year prior to the
40.13preceding year, expressed as a percentage of the amount received in the year prior to the
40.14preceding year; provided, that the adjustment factor for any year must not be less than
40.15zero percent nor more than five percent.



Cam Gordon
Minneapolis City Council Member, Second Ward
673-2202, 296-0579
cam@camgordon.org
cam.gordon@minneapolismn.gov
http://www.minneapolismn.gov/ward2
http://secondward.blogspot.com/

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