Despite much evidence that most Minnesotans don’t want tax money to go for a new Minnesota Vikings stadium, the odds seem to be in favor of a deal that would involve more than half a billion dollars of public money.
If a new stadium can’t be rejected, for once and for all, there is a second-best alternative suggested by the work of Willard Cochrane, a great University of Minnesota ag economist who died Monday. Just buy off the team’s owners!
Like other owners, Zygi Wilf and his partners want a publicly funded stadium in order to increase their own net profits. This would transfer wealth from the public to a small group that has already seen the value of their asset, the Vikings, appreciate by 40 percent in their first five years
Minnesota Governor Mark Dayton, along with Vikings’ owner Zygi Wilf, speaks during a press conference about a deal reached among legislative leaders for a new Vikings stadium on Thursday, March 1, 2012, at the state Capitol. (Pioneer Press: Ben Garvin) (Pioneer Press: Ben Garvin)of ownership, at least according to Forbes magazine.
The cartel-like status of the NFL lets them threaten to move the team elsewhere. Naturally, many Minnesotans would hate to see that happen, although some more than others. The key questions are about how credible that threat is, what the value to the public of having the team here is, and just how much this public is willing to pay to keep the team here.
There certainly are benefits. Many Minnesotans love football, and having a professional team based here means something to fans. Having an NFL team adds to the cultural life of the metro area and, at least marginally, may make it easier for businesses to attract key employees. Games draw people from other cities and states, who would not come here otherwise, to the benefit of local hospitality businesses.
And, given high player salaries and Minnesota’s progressive income tax, the state gets more tax revenue from the team’s reported $150 million payroll than it would from the same sum paid out to lower-income people.
That these benefits exist is clear, but their total value is highly unclear and highly subjective.
Moreover, it is hard to estimate the credibility of the threat to move the team. Some claim the likelihood is zero, and some see it at 100 percent. Who knows?
If taxpayers in various jurisdictions have to shell out half a billion dollars or more, what will the public get? We will have a stadium, although recent U.S. history, including that of our Metrodome and Houston’s Astrodome, shows that such facilities depreciate rapidly. And any stadium is of little value without a team.
Some of the money will directly increase the net worth of Zygi and his partners. They will have an increased revenue stream that they did not have before, and the team will be much more saleable.
However, the increase in the owners’ net worth plus the market value of the stadium itself likely will add up to less than the cost of the taxpayer subsidies. Society will have less value than it did before after real resources are used to construct a new stadium.That is an economic inefficiency, and that brings us to Willard Cochrane.
Cochrane advised presidential candidate John F. Kennedy on agricultural policy in 1960. “The farm problem” had been a knotty political issue for 30 years. We were partway in the transition from having one-third of the entire population who were in farming at the beginning of the Depression to the 1 percent in that field we have today.
New technology was boosting productivity, and an overvalued U.S. dollar made U.S. farm products artifi- cially expensive in world markets.
Franklin Roosevelt’s New Deal instituted price supports for key crops. These continued into the Truman and Eisenhower administrations. The government set a price and stood ready to buy up whatever quantities of excess production were needed to keep prices at that floor. Enormous stocks of surplus production filled bins across the country. It was enormously wasteful to produce crops for which there was no use.
Cochrane saw that it would be cheaper to simply pay farmers not to produce on some of their acres. Yes, this seemed stupid to many people, but it was a lot less wasteful than the existing system. So Kennedy made it part of his platform, and it gained him votes that usually went for Republican candidates. The policy was far from economically optimal, but it was less bad than the status quo.
We ought to take a page out of Cochrane’s book. What cash payment would Wilf take in lieu of a new stadium? Ask him to sign a contract binding any Vikings owner to keep the team here for another 20 years in the Metrodome in exchange for an annual bribe. It might stick in some people’s craw, just as payments to farmers to let land lie idle did, but it might save society resources that could be put to better uses. And the amount of the subsidy to wealthy owners would be clear to everyone.