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February 12, 2006

Is a referendum really required by law?

So, I finally read Nick Coleman's recent piece of crap concerning the Twins and their never ending quest for a new stadium. As far as Coleman columns go it was exceptionally weak. I know, this in iteself is shocking, but stay with me for a second. Nick wants the people to vote whether or not we should build a new stadium. Yes, the same people that vote down school referendums. Yes, the same people that were NOT given the chance to vote for the Xcel Energy Center, the Mall of America infrastructure, the Guthrie, the Minneapolis Convention Center, and the Metrodome itself. Would any of these things have been built if it was given to the people to vote on? No, absolutely not. Is Minnesota a better place because of these amenities? Yes, it absolutely is.

But I'm not writing today to flip out on the genius that is Nick Coleman. I'm here to look at the actual Minnesota law that supposedly requires a referendum.. We've all heard John Knight (where has he gone to? it seems he can't stand the heat in the spotlight) and Laura Lehman from Citizens for a Stadium Tax Referendum moan and groan about the requirement for a referendum. Let's take a look at what the Minnesota legislature actually says about this.

From a document entitled "Local Sales Taxes in Minnesota" from the House of Representatives comes this snippet:

Summary of the Local Sales Tax Provisions in Minn. Stat. ยง 297A.99

Local Taxes Subject to the Statutory Provisions

The statutory provisions apply to all local sales taxes authorized after June 2, 1997, unless the enabling legislation specifically exempts the local authority from these rules by reference.

Hennepin County isn't proposing to circumvent the law, as they have been accused of. The referendum requirement on local sales taxes was just added in 1997--and it includes a specific provision ALLOWING a local sales tax to be enacted without a referendum. Just like recent sales taxes enacted in Minneapolis, St. Paul, Bloomington, and Rochester, all of which were imposed by local ordinance.

Let's break it down even further. According to a 2004 report from the Minnesota Department of Revenue (page 21):

[T]he uses to which local sales tax can be put should be limited to large projects that would otherwise not be able to be funded by other means. These projects should have broad benefit and encourage multi-jurisdictional cooperation. Projects that cross boundaries or will be utilized by surrounding communities are examples of proposals that meet this criteria. While this may sound like another name for "regional benefit," the focus here should be on the scope of the project and the inability to fund it from other sources.

According to the Department of Revenue, what Hennepin County is proposing to do is completely within the boundaries of the local sales tax statute. On page 23 of this same report there is this little tidbit:

The local sales tax is best used as a mechanism for financing large, special, multi-jurisdictional capital projects.

In addition, the Governor's bipartisan 2004 Stadium Screening Committee determined a local sales tax was an appropriate mechanism to fund the local share of a stadium project. And speaking of governor created committees, after extensive debate the Stadium Screening Committee voted 18-1 that local taxes should fund stadiums and that they should NOT be subject to a referendum requirement.

To me, the law and the legislature are clear. Local sales taxes are an appropriate funding mechanism for the Twins stadium, and a referendum, while certainly encouraged, is NOT required. So, I wish anti-stadium folk would quit saying it is.

Finally, a local sales tax, such as Hennepin County is proposing, is a dependable and predictable revenue stream that allows the County to issue tax-exempt debt (thereby saving the public money). In addition, because the money is predictable, the interest rate on the loan should be lower thereby saving taxpayers even more money. In the Denver area, they used a .1 percent sales tax to finance Coors Field and they were able to retire 20-year bonds in less than 10 years. How soon will Hennepin County be able to retire the debt on a new Twins stadium? That is unknown, of course, but I doubt it will take 30 years.

And to wrap this up, when a new Twins stadium is built people will be giddy. Who in their right mind will wish that we hadn't built it? It will be the jewel of downtown Minneapolis and people will flock to it. How do I know? No one wishes we didn't build the Xcel Energy Center, no one wishes we didn't build the Metrodome. And these were both built with taxpayer money. I don't see Nick Coleman complaining about the Xcel Energy Center and the half-cent sales tax that pays for it. Why? Because it has been proven to be a good idea.

Posted by snackeru at February 12, 2006 10:52 AM | Stadiums


Great research! Would that any of the elected officials for or against the Ballpark have that type of command of the issues. It occured to me the other night as I was composing my own repsonse to Nick Boy that it is possible that more than one third of those who buy a taxable iten in Hennepin County do not live there. They would be left out of a referendum.

Posted by: Mark Oyaas at February 12, 2006 2:56 PM

I posted this same information on the Minneapolis Issues list which is a hornet's nest of anti-ballpark zealots. Let's just say the information was not well received.

The key point, and you stated much better than I did on the Mpls-Issue list, is that the County isn't proposing to circumvent the law. The law that established need for a referendum envisioned a scenario where a local unit of government could establish a sales tax without a referendum. The County is pursuing what it is allowed in the statute.

Posted by: freealonzo at February 13, 2006 7:55 AM

Once again the beacon of truth and intelligence that is the Greet Machine has shown us the way. Your knowledge on this issue is impressive as always. Well done!

Posted by: Cheesehead Craig at February 13, 2006 8:39 AM

Great article and I do love your diligence on this matter. I just do not understand the zealous and self righteous indignation of those who oppose the idea of a publicly funded stadium. Again, if you don't want it, fine, but people lose their minds on this issue. To me, you have to keep reminding folks of the Northwest Airlines bailout, and all the other projects you've listed that were approved without referenda and over the objections of the "mindless majority" of Minnesotans. The Guthrie probably didn't make private individuals that much money, but the M of A sure did! As for legislators in our wonderous state that have to be whacked with telephone polls...the majority of anti stadium zealots must worship John Marty. I wonder if Jesus told him that a stadium would help him get into heaven if he'd be in favor. What a tool. Sorry for the rhetoric but I am so tired of this self righteous windbag. Keep on em, Greet Machine. Kill, kill!! Laughs.

Posted by: CosmoK at February 13, 2006 9:18 AM

Why do you waste your time responding to Coleman? It's like wasting one's time responding to Katherine Kersten -- their sole purpose is to stake out an extreme position and get people riled up (and reading the Strib!). Save your energy.

There may be an unavoidable referendum on this issue, and it's called an "election year." Too bad T-Paw didn't force this through last year -- not only do they have to come up with $30 million more, they might need to negotiate a "sweetener" to sell it to the undecided voter this fall. And I don't see the Twins budging, unfortunately.

If anybody's interested, I decided to start posting a series of my stadium thoughts over on TwinkieTown.com. They've got a nice discussion-friendly setup over there, and I'd like to hear your feedback. I know most of you are probably sick of the issue, but I hope you're just sick of the extreme posturing that goes on in the Star Trib. I hope to create a more moderate discussion (and spare Shane from my rants here!).

Posted by: spycake at February 13, 2006 3:39 PM

As Darth Vader might say, impressive - most impressive. I notice, however, that you leave a pretty significant part out of your analysis - specifically, what's required in order for the local authority to be able to put the exemption into their enabling legislation. Your suggestion appears to be that the county can simply say 'hey, we're exempt because we say we are' and that's that. In fact, if you read the entire statute (there's a great summary at http://www.house.leg.state.mn.us/hrd/pubs/localsal.pdf), you find lots of info about what a local government must do to be able to impose a local tax under that statute.

Even more astonishing is that the summary also notes all of the local tax issues that have been passed in Minnesota since the 1980s, and makes it very clear that, even before the statute was passed, local governments still almost universally sought referendum approval of tax issues rather than unilaterally imposing them. There's only one local tax since 1992 - well before the statute you mentioned - that didn't use a referendum as its approval mechanism, and that tax was...wait for it...the City of St. Paul's tax for the Xcel Energy Center!

As for some other of your specific points...

- The Minneapolis, St. Paul, Rochester, and Bloomington tax issues were not new general-issue sales taxes, but either limited-issue taxes (state statute gives cities the authority to impose up to a 3% tax on lodging in their jurisdiction without state or voter approval), or extensions on already-approved tax issues done in accordance with the terms of the voter-approved issue.

- That 3% exception for lodging taxes is the crux of the pro-stadium argument that 'you don't need a referendum'. However, the exception doesn't apply to a ballpark, and certainly not the Hennepin County plan, because

a) the tax isn't just on lodging, but is a general sales tax, and
b) a ballpark doesn't fall into 'tourism promotion', which pro-ballpark folks eagerly argue themselves when trying to justify why Hennepin County should foot the bill in the first place - most of the folks who will benefit already live in Hennepin County, goes the argument, so why not let them pay for it and let the rest of the state off the hook?

- Yes, Denver paid off their sales tax in ten years, because they were fortunate enough to pass it right at the beginning of the largest sustained economic expansion in US history. Wanna take a bet on whether that's likely to happen again?

- Lastly, saying that 'people' will be giddy when a new Twins stadium is built is again evasive. If the number of people who want a stadium were a majority, or even a particularly influential minority, the stadium would already be finished by now - we've had stadium debates and proposals every single year for over a decade now.

Finally, our illustrious governor is showing his 'leadership' of the situation by being the first to re-raise the specter of contraction, and provoking a furious round of back-pedaling by Dave St. Peter in the hopes of minimizing the damage. It seems perfectly clear that Pawlenty doesn't want a new stadium now any more than he did as House Speaker - it's just that these days, he realizes that he also doesn't want to be the one seen as responsible for it not getting done.

Enjoy the 2006 season of Twins baseball, because there's a slowly increasing chance of it being our last.

Posted by: David Wintheiser at February 13, 2006 6:32 PM

I find myself in the weird position of somewhat agreeing with DW. I agree that the County can't unilaterally say we don't want a referendum in order to impose this sales tax. That still has to be given by the Legislature in the enabling legislation. However the main point is that the county is well within it's rights under the 1997 statute to ask for the waiving of the referendum in the enabling legislation. This is a big difference as many of the ballpark opponents seem to think that the County is pulling a fast one on the voters just by asking for the exemption for the referendum. I think if more people are aware that no referendum is something the statute considered and allowed, it helps make the case.

Not sure I agree with the contraction issue. If contraction is really on the table and really includes the Twins, I think this helps motivate that vast majority of people out there who are ambivilant about a ballpark. Let's face it, it's hard to argue that the Twins are going to relocate, there just aren't that many viable markets out there for them to move to. However if MLB may contract the Twins, well that could get someone's attention. Especially if this time it's not Uncle Carl's idea to contract. That's probably why Dave St. Peter was backpedalling, he doesn't want to see the Twins as leading the contraction charge - they already went down that road, it didn't work. Contraction this time needs to come from MLB.

Posted by: freealonzo at February 13, 2006 7:55 PM

But there's a chance that the only three local tax proposals to bypass referendum in a 15 year period will be for sports stadiums. It doesn't really matter if the wording for a potential bypass exists -- the fact that it's only bypassed for pro sports facilities (at the insistence of the teams) seems a little shady by itself.

I really think that the Twins shouldn't be so afraid of a referendum. If they put forth a good proposal, make some minor public concessions in negotiation, and let the people vote, they might eke by now -- there's enough people that want this solved once and for all. It's a little discouraging, though, that the Twins' "last, best" proposal is barely the equal of the least impressive stadium proposals around the country. The current proposal should have been the starting point back in 1996, not that "Pohlad gets his money back with interest" crap. And their Plan B? Don Beaver. Plan C? Contraction. No wonder the referendum has become unpalatable.

Posted by: spycake at February 13, 2006 8:12 PM

I just received word that the referendum was approved, as it should be. I'm not a sports fan, but I'm not against sports. I just think like every other entertainment business that it should pay it's own way. If a business cannot support itself and needs a handout, then there needs to be a good reason and the majority should decide on the issue.

Posted by: Chris Nielsen at May 1, 2006 11:37 PM

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