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Greetings from the Capitol!
In this issue:
1. Bonding bill enacted
2. Tax relief vetoed
3. Vikings stadium enacted
The dust has settled on the 2012 session that ended in the early morning hours of May 10 after a flurry of activity in the final days. A proposed Vikings stadium package garnered most of the state's attention, but other bills also made their way through the Legislature.
BONDING BILL ENACTED
In the last week of the session a $496 million capital investment (bonding) bill, which funds construction projects throughout the state, was adopted by the Legislature and signed into law by Governor Dayton. Minnesota has traditionally used bonding (long term borrowing) to fund projects that preserve state assets and update our infrastructure. I voted for the 2011 bonding bill that funded approximately $500 million in projects ranging from flood control to upkeep on buildings for the U of M and MnSCU systems. Unfortunately, I could not support this year's bonding bill due to a major flaw in the legislation.
My biggest concern was the inclusion of a $50 million pot of grant money that will be administered by the Dept. of Employment and Economic Development (DEED). Normally, bonding proposals contain a line-by-line itemization of appropriations projects in the bill so we all know how our tax dollars will be spent. The list of projects is developed through the introduction of individual bonding bills (one for each project), which must be vetted through public hearings and the legislative process, allowing legislators and taxpayers to be fully informed on the proposals. The projects receiving committee recommendation are included in the bonding bill. The new DEED grant fund creatively circumvents the Legislature and compromises transparency in the bonding process. We will now have agency officials, who are not accountable to constituents, making appropriation decisions. It has been widely rumored that projects like a new St. Paul Saints ballpark, which was specifically rejected by legislative committees as a bonding project for 2012, could be funded through the DEED grant program, escaping legislative scrutiny.
TAX RELIEF VETOED
Governor Dayton vetoed the Tax Relief and Job Creation Act passed by the legislature a couple of weeks ago. I described the provisions of that bill in a previous email update. The House and Senate Tax Chairs responded by convening a conference committee to "slim down" the package, noting the Governor’s stated concerns, and cut the tax relief measure in half. Unfortunately, this smaller bill was also vetoed by the Governor late Tuesday of this week, despite widespread and bipartisan support for many individual provisions in the bill. The mission of each tax relief bill was to encourage job creation in Minnesota’s private sector economy. Top components which fell victim to the governor's veto pen include:
·Increase in business research and development credit
·One-time increase in "Angel" credit program for investment in new businesses
·One year freeze on statewide business property tax (no inflation increase)
·Extension of historic preservation credit
·Tax Increment Financing to expand the Mall of America (an estimated 7,000 construction and 3,000 permanent jobs)
·Upfront sales tax exemption for purchase of capital equipment by small businesses (50 or fewer employees)
·Tax breaks for hiring veterans
·An internship program designed to help Greater Minnesota retain skilled workers
I remain an ardent supporter of measures to make Minnesota’s tax and regulatory structure more attractive to businesses, further encouraging them to invest, expand and create jobs in our state. Reports continue to rank our state's business climate among the nation's chilliest.
The provisions above would have helped us in this regard, particularly those measures targeted at start-ups and small businesses. I hope these efforts can successfully be renewed next year in the new legislative session.
VIKINGS STADIUM ENACTED
A bill to finance a new Vikings stadium was passed and signed into law this week. A great deal of interest and emotion accompanied the legislative proposal to build a new stadium near the current Metrodome in Minneapolis. I received hundreds of emails from constituents on this topic, both for and against the stadium package. In addition to listening carefully to local citizens on the matter, I spent many hours reviewing the bill sponsored by Representative Lanning, studies on the economic impact of professional sports teams, stadium financing packages from other states, and the revenue estimate of the public funding source for the stadium in advance of the vote. As a Vikings fan, I do believe the team is an important asset to our state, both culturally and economically. However, I concluded the financing package presented for a vote was still weighted too heavily to the benefit of the team’s owners and carries unreasonable risk for the taxpayers.
In original form, the Lanning bill would have had public funds covering 56 percent of the stadium’s costs, and the team/NFL 44 percent, with the team retaining all revenue streams (naming rights, personal seat licensure, etc.) associated with the new stadium. The final conference committee package increased the team’s financial contribution by $50 million, bringing the public/private fund split closer to 51/49 percent, but still has the team retaining all revenue streams. In some last minute maneuvering, the bill provides that St. Paul will receive the additional $50 million contribution, as the legislation gives them money to pay expenses at the Xcel Energy Center.
Most problematic in the package is reliance upon electronic pull tabs, linked bingo and sports tip boards as the primary funding source for the state’s revenue stream to pay for the stadium bonds. There will need to be a 280-percent increase in charitable gaming revenues to meet projections. No other state has a comparable model to get a true estimate of how these games will perform. Iowa tried electronic pull tabs, but ended up raising very little revenue. Even the individuals representing the charitable gaming industry think the revenue estimates are unrealistically high. If the revenues from gaming fall short, the burden for paying the stadium bonds falls on general taxpayers, taking money from other things we fund like schools, nursing homes, programs for veterans, transportation and the like.
There were opportunities to make this a stronger funding package, raising the funds to build a new stadium and safeguarding revenues for other state priorities. I supported racino as a funding source for the state’s revenues to build a new stadium, but this proposal was rejected by the bill authors. I also supported an amendment to finance the stadium through a combination of user fees for those attending the games and a small drink tax. Unfortunately, the amendment did not pass, and the only user fee included in the final package as a potential back up source of revenue is a tax on box suites at the new stadium.
Balancing the state’s funding priorities is difficult, especially in the face of the recession that has gripped our economy the past few years. Devoting half a billion dollars of public funding from a questionable funding source to a new stadium when we may have another budget deficit to address next year, and already owe our schools $2.4 billion in delayed payments, seemed a risky and imprudent decision.
I want to extend my appreciation to everyone who contacted me during this legislative session. Your opinions and suggestions were immensely helpful as we debated some important and difficult subjects. I hope you will continue to share your thoughts on matters of interest to you.
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