Members and Associates,
Below is an article in regards to the new stadium that was in the Star Tribune this past Saturday. I was interviewed for the article. Below are comments that I sent to Eric after the article was published.
I have also been in contact with the Vikings, asking them if we could sit down and talk about stadium funding and asking for their support in finding a way to both fund the stadium and help charities get much needed tax relief at the same time. After two e-mails to the Vikings I was called by one of their contract lobbyists. I was told that the Vikings were busy and that they may be able to sit down come fall.
Good article. Thanks for you taking the time to talk to me about it
Our frustration is that our (non-profit philanthropic groups) slice of the total pie keeps getting smaller and smaller while those that profit from our efforts (either for profit companies or government) grow their slice of the pie; even though you are correct that the total dollars are bigger. We take the risk and do most of the work (some bars help with the management).
Our expenses (cost of games, rent and wages account for 50% of the money we put in the bank) and taxes (which can be as high as 36%, but average 22% annually for our collective group) increase annually, but those increases come directly out of our mission dollars. We cannot pass cost increases on to patrons; we have to eat them, which mean less money for the missions.
In an apples to apples comparison with a business paying the corporate tax of 9.85% (where deductions are allowed), our tax rate would be as high as 72% (tax would be .36 cents on .50 cents net income), since we are allowed no deductions of any kind.
We both know that no individual or company would stay in MN if that was their tax rate. I struggle to understand why not for profit organizations that serve and protect, clothe, feed, care for the sick, elderly and veteran have been singled out for such unfair treatment. Any additional money that we can get to the bottom line will go to mission work.
The vast majority of our members do what they do for the love of their community and the love of their organizations. It is not their day job; it is what they do after work. I know of no others that would do what we do for as little as we get out of it (4.6 cents of every dollar touched and dropping).
On banked income of $437,000 the Aliveness Project in Minneapolis paid the city of Minneapolis (they take a cut) and the state of MN a total of $122,000 with only $73,000 getting to their mission after expenses. The Northeast Lions club banked $1.26 million, paid the city and state $420,000 with only $149,000 getting to their mission after expenses. I could go on and on with examples like this from the Gambling Control Board website (http://mn.gov/gcb/assets/fy15-financial-city.pdf).
Fill the general fund or fill the stadium fund with charitable gaming taxes, but we ought not to be charged with doing both. We will continue the pursuit of fairness in our tax structure with shameless persistence until we have achieved that goal.
Taxes to pay for now-open U.S. Bank Stadium rebound, thanks to gamblers
Eric Roper, Star Tribune
U.S. Bank Stadium is officially open, and thanks largely to gamblers, taxpayer money is flowing in to pay for it.
Tax revenues from pulltabs and other charitable gambling, the original source of money to cover the state’s contribution to the $1.1 billion public-private partnership — the largest in Minnesota history — are soaring. That’s a reversal from just a few years ago after botched projections forced the state to tap corporate taxes to help pay for the project.
The turnaround gives state officials enough money to both pay the stadium debt and start replenishing the project’s reserve fund, once projected to reach zero. And there is further optimism in Minneapolis, where sales tax revenues committed to the stadium starting in 2021 have been growing faster than expected.
“The system is working right now the way we designed it to work,” said Myron Frans, the state’s commissioner of management and budget. “It’s exceeding our expectations, but we’re not through the potential years where we might need more money.”
The state’s share of the project is $348 million — or about $616 million, including interest over three decades. Minneapolis is covering $150 million over the same period, plus about $7.5 million a year for operations and maintenance — or about $631 million accounting for interest and inflation.
Initial plans to introduce iPad-like electronic pulltabs and use the ensuing new tax windfall to cover the state’s stadium share proved misguided several years ago when additional tax proceeds didn’t immediately materialize. To cover the difference, the state imposed a one-time tax on cigarette inventories and required some out-of-state corporations to count more income in Minnesota, closing a loophole estimated to be worth about $20 million a year.
State officials haven’t tracked the precise impact of closing that loophole, but they now redirect $20 million in corporate tax revenue toward the stadium. The gambling taxes have generated about $20 million this year, still not enough to cover debt payments on their own, compared with the $35 million originally projected.
A lot of the growth in charitable gambling tax revenue is still due to paper pulltabs. But the electronic games are seeing a boost. Electronic pulltabs comprised about 6 percent of total sales last year, compared with 2.4 percent the year before.
An improving economy and lower gas prices are two likely factors for a record year of charitable gambling sales, said Tom Barrett, executive director of the Minnesota Gambling Control Board.
“Minnesota is by far and away chugging along like no other state when it comes to the activity,” Barrett said.
Unlike casino gambling, charitable gambling generally occurs at local bars and involves civic organizations and youth support groups selling paper tickets that players pull open to reveal winners. After paying out prizes and taxes, the proceeds are donated to support youth hockey leagues, parks, scholarships, food shelves and other community activities.
“Our customer base really just loves their paper,” said Suzanne Slawson, gambling manager for the Blaine Youth Hockey Association, which introduced e-games at several bars but later pulled them due to poor performance. Slawson said that people are playing “pretty heavy” after the recession and that she has noticed more young adults attending bingo games — another form of charitable gambling.
But there’s a consequence to the growth. More charities now find themselves paying the top state tax rate, which Al Lund of Allied Charities of Minnesota said is putting a squeeze on their local missions.
“The mood of our members is, ‘We’re sending so much into the state and we have so many needs locally, we just don’t understand why we’re doing all this work to send all that money to St. Paul when that’s not why we started these clubs,’ ” Lund said.
His group would like to see the stadium deal restructured to help lower the tax rates.
The remaining public share of the stadium costs will be covered by sales tax revenue in Minneapolis, a portion of which become available after debt is paid on the city’s Convention Center in 2020. They include a citywide sales tax, downtown restaurant and liquor taxes, and a hotel tax.
In addition to supporting U.S. Bank Stadium, the tax revenue will be needed in the future to pay for expenses at the Convention Center and the Target Center. But sales tax growth has exceeded expectations enough that city officials are eyeing ways to spend surpluses. City finance staff members will be recommending that $1 million be used to jump-start a long-term road and park repair plan, for example.
Former City Council Member Gary Schiff, the most vocal critic of the stadium financing deal during its passage, said tax growth should be used to combat gentrification in the city.
“If we can build a billion-dollar home for the Vikings, we should be able to provide affordable housing for the homeless,” he said.
Sales tax revenues are notoriously volatile, so officials intend to reassess annually before committing the money to other areas. But last year’s sales tax haul was about 9 percent higher than projections made during the stadium debate.
“We were still kind of dragging ourselves out of a recession, so … people were a little more conservative at that time,” said Mark Ruff, the city’s chief financial officer. He noted that major events such as the 2018 Super Bowl and a thriving downtown bode well for sales tax revenue in the future.
Still, some long-term considerations aren’t resolved. One provision of the stadium bill could raise the city’s contribution if the taxes perform well, but Frans said the precise mechanics of that depend on a future agreement. “There are different ways to fine tune this going forward that I think will accurately reflect what we need,” Frans said.