Lisa Elliott
Laura Logsdon
Nathan Miao
Nick Swaggert
David Thorpe
The Hennepin
County/Minnesota Twins' proposal for Target Field was approved by the State
Legislature and signed into law in 2006. The proposal allowed Hennepin County
to finance its share by issuing tax-exempt County revenue bonds payable with a
.15% county sales tax increase. While a general
sales tax is a less equitable tax, it has been highly adequate and fairly
feasible and efficient.
Efficiency
Tax efficiency is measured by individual behavior and overall
economic performance changes. In 2006, Hennepin County calculated it would need
$20.4 million annually to pay off its ballpark bonds. But in fact, the county
collected more than they expected from the .15% sales tax increase: $29.1 million[i] in 2008 and 27.3 million[ii] in 2009. The public library
system and youth sports programs receive some funding from the excess tax
revenue, making people question what the impact[iii] will be to these programs when the ballpark’s
bond is repaid and the .15% sales tax is eliminated. Thus the tax’s efficiency
may differ from the short-run to the long-run.
Equity
As a broad-based sales tax, the Twins
stadium tax tends to have a low impact on behavior responses, placing the
burden of the tax on consumers. General sales taxes are considered regressive
because they tax all people the same regardless of income, so the effective tax
rate decreases as income increases. In addition, the Legislature approved the
tax increase without a voter referendum, eliminating the voice of the public on
this issue. While the stadium tax is made less regressive because it does not
apply to most basic goods and services such as food and clothing, it remains a
less equitable type of tax than other options[iv].
Adequacy
Hennepin County is repaying the
debt for Target Field faster than anticipated, in part due to decreases in variable
interest rates. [v]
Additionally, the county used conservative revenue projections[vi]
for the tax which has served the county well in the recession. Extra revenues are being saved for
capital improvements to Target Field, as well as ahead-of-schedule debt service
payments. The tax’s broad base and low rate contribute to its stability.
Finally, the nature of the lease and contract with the Minnesota Twins helps
reduce extra reliance on the tax, since the Twins’ annual rent goes to the
capital improvements fund and the team operates, maintains, and makes some
improvements with its own money.
Feasibility
Overall the stadium tax is
evaluated as technically feasible. It’s low visibility and ease of collection
make implementation of the tax go relatively unnoticed in the large scheme of
tax obligations. However, initially there was strong public opposition to the
tax making it less feasible in reality[vii].
Comparative Jurisdictions
The Minnesota Vikings occupy the
same tax jurisdiction as the Minnesota Twins but engaged in stadium
negotiations many years later making them a great case study to juxtapose with
the Twins stadium deal. The major
source of revenue generation for the city of Minneapolis is a reallocation of
the current “convention center” tax and will not include and new taxes. The state of Minnesota plans on paying
for their share of the bonds with expanded revenue through the use of new electronic
charitable gambling.
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