Minnesota Vikings: Looking at the Long Term Numbers in the Stadium Debate

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Minnesota Vikings: Looking at the Long Term Numbers in the Stadium Debate

To start this article off, let me say that I am not a supporter of public financing for a new Minnesota Vikings stadium. However, I fully understand that the government will have to fund a significant portion of the construction, and I accept that as a reality.

Even though I don't like the idea of it, I'm going to breakdown why the stadium proposal needs to get passed, and why it makes sense with or without additional revenue from the state.

Note, this article does not touch on the portion of the stadium that is to be funded by the City of Minneapolis.

All numbers discussed below come from [1] Forbes 2010 NFL Team Valuation Report, [2] the 2010 Metropolitan Sports Facilities Commission Annual Report, [3] Official Stadium Plans and other sources where noted.

Current Revenue

To start off, let's take a look at exactly what the Vikings bring into the state revenue-wise. In the 2010-11 season, the Vikings' average ticket cost was $75. [1] With 63,720 seats in the Metrodome, this brings in a revenue of $4.779 million per game.

At a minimum, there are 10 games (two preseason and eight regular season) played at home each season. Therefore, the annual ticket revenue is $47.79 million per season.

The state of Minnesota charges a 10 percent admission tax on Metrodome ticket sales, so this means that the state's annual tax revenue from ticket sales is about $4.779 million. The Vikings are also charged a 9.5 percent rent fee on each ticket sold, so that revenue was $4.54 million in 2010. Other rent was $0.749 million, so the total rent amount is $5.289 million. [2]

Tom Dahlin/Getty Images

Looking at concession sales, the Metrodome had $8.211 million in concession revenue in 2010. [2] This is taxed at the regular sales tax rate of 6.875 percent. This would be $0.565 million in tax revenue. Other income from advertising revenue, parking and charges for services added up to a total Metrodome operating revenue of $19.895 million for 2010. [2]

 

Future Revenue in a New Stadium

Assuming that the tax rates don't change in a new stadium, we can then put a fairly-accurate guess into what the revenues should look like for the new stadium. The new stadium plans would have 65,000 seats with up to 7,500 club seats [3], so the average ticket price would likely increase.

Based on the assumption that the new average ticket price would be around $100, we get a revenue of $65 million and an admission tax of $6.5 million annually. Add an average yearly ticket cost increase of three percent and over 30 years, that would be a total income of $309.24 million from admission taxes. Do the same numbers with the rent fee, and that's $293.78 million over 30 years, or $603.02 million total for admission tax and Vikings rent.

The additional concessions in the new stadium would also increase revenues. Assume a small increase of up to $12 million annually, again with a three percent annual increase. Assuming the same annual sales tax rate over the next 30 years, that would be $825,000 in the first year, and $39.25 million over the 30-year period with the three percent annual increase.

Nick Laham/Getty Images

Getting into player salaries, in 2011 the Vikings had a salary cap number of $123 million. The state of Minnesota imposes a 7.95 percent state income tax rate on people earning more than $75,000. Fair to say, all players on the Vikings will be taxed at that rate.

Now, they only earn that income during home games. However, the away-team players also pay that rate when playing in Minnesota, so calculating the tax revenue from players should even out, since the Vikings play 10 away games and 10 homes games per season, the visiting teams even out the taxes that the Vikings don't pay when playing away (hopefully that made sense). So, $123 million in player salary equals $9.656 million annually in player income tax.

Increasing team salary at the rate of about three percent per year, over the 30-year lease of the new stadium, it can be expected to bring in $459.39 million in income taxes to the state.

In the stadium-building plans, around $300 million is apportioned to labor costs [3]. With the state income tax of 7.05 percent for the average construction worker, you can estimate that $21.15 million will come right back to the state. This reduces the overall cost to the state from the $398 million down to $376.85 million. Financing for the state's portion, assuming a small interest or bond rate of again about three percent, would come to $15.89 million annually for 30 years, or $476.7 million in total.

 

Revenue vs Cost in the Long Run

So just from the basic numbers, as I'm sure there are things I've missed, over the 30-year plan for the stadium, the cost to the state will be around $476.7 million. The revenue breakdown estimate is about $603.02 million from admission tax on tickets and Vikings rent payments, $39.25 million from sales taxes on concessions and about $459.39 million in income taxes from players for a total revenue of $1.101 billion.

There are costs and revenues that are not included in those numbers, but it's fair to say that the state will not lose money in the long run.

There are many costs that I have not included in my numbers. These are rough estimates only. Specifically, I did not touch on the portion that will be funded by the City of Minneapolis. Annual operating costs would be paid for by the Vikings and the City of Minneapolis, so the state would not have to pay any of that. Annual contributions for stadium improvements again would be paid for by the Vikings and Minneapolis. Other incomes I did not include in the article include hotel, restaurant and extra downtown attendance revenue that would increase tax revenue from the state.

What These Numbers Mean

These numbers reflect the difference between having a team in Minnesota and not having a team in Minnesota. If the Vikings were to stay in the Metrodome indefinitely, the numbers would only be slightly lower. This is one of the main problems in the current stadium debate.

While the team, as it stands, is profitable for the state, there is not a significant difference in state revenue from the building of a new stadium. There is a large upfront cost to this, though in the long run it would likely be fully made up. The most profitable option for the state would be for the Vikings to stay in the Metrodome indefinitely.

But at this point, that is not a realistic option. If a stadium is not built for the Vikings, they will leave. It may not be in 2013 or 2014, but there is no way that the Vikings will play in the Metrodome for any longer than they have to.

Owner Zygi Wilf may not move the team himself, but he would certainly not be opposed to selling the team to someone who will if a stadium is not agreed upon in the next few weeks.

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