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Just give him the keys to the treasury

2012 February 11
by Dennis Coates

According to a report online at Forbes (and citing a report from the Minneapolis Star Tribune), Minnesota Vikings owner Zygi Wilf has rejected three different offers from the citizens of Minnesota regarding a stadium for his team. The rationale for rejecting the latest offer is that it is not as viable as the earlier proposals. Apparently rather than sweetening the deal, Minnesotans decided to take a step toward rationality in their third offer.

The latest proposal replaced an intention to fund the plan via sales taxes with user fees at the stadium. In discussions of paying for public services, the benefit principle of taxation has a prominent place; the people who benefit from a service are the people who pay for it. Indeed, user fees for stadium usage are a step toward having individual consumers pay for the services they get from the stadium. This includes the fans of visiting teams who go to Minnesota to see their team play, so some part of paying for the stadium is exported to football fans from around the country. What could be better to a Minnesotan than having Packer, Bear, and Lions fans helping to pay for the home for the Vikes? By contrast, if you don’t derive benefits from the stadium, you don’t attend events there and you don’t pay for the facility.

Use of the sales tax, on the other hand, makes all citizens pay for the stadium, even those who never attend games in it. This, of course, includes people who never watch games played there on television or listen to them on the radio, and even those who dislike football. In other words, funding the stadium with sales taxes is redistributive, taking money from non-users to provide benefits to users, and, if one believes that beneficiaries of a good should be the ones to pay for it, unfair.

Of course, under the sales tax approach, the ability of the Vikings to generate revenues from the stadium is greater than it is under the user fee. Suppose the typical fan is willing to pay $100 to attend a game, if the stadium is paid for by the general sales tax increase, little of the $100 willingness to pay is siphoned off for stadium financing because ticket purchases are a tiny fraction of all sales. On the other hand, if the user fee is imposed, it falls entirely on ticket purchases, taking a much larger share of the $100 willingness to pay than would happen under the general sales tax. In short, the user fee is not viable to the Vikings because it leaves less of the fans’ willingness to pay for them than does the broad-based sales tax increase.

It will be interesting to see if Minnesota circles back to one of its earlier proposals. Alternatively, the state could just offer Mr. Wilf the keys to the state treasury to get him to stop his flirtations with Los Angeles and commit to staying in Minnesota.

2 Responses
  1. Steve W permalink
    February 16, 2012

    Please keep the keys locked up. Taxes are already ridiculously high in Minneapolis (sales/state income/property)

  2. Phil permalink
    February 21, 2012

    Really great article, it reminds me in a sense of a pure public good where those who pay will all benefit and even if you consume less a Packer fan could take your spot and you still would receive benefit as they help pay for the stadium.

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