Several key supporters of a new Twins ballpark say a stadium plan embraced by state lawmakers may be more difficult to enact than previously envisioned. Rising interest rates could inflate the cost of borrowing money for the project and require greater contributions from the team or a host community. And St. Paul Mayor Randy Kelly has told legislative leaders that the plan still contains a number of unknowns that could derail the project.
Earlier this week the Minnesota House approved a ballpark plan on an 80-52 vote. The House has been openly hostile to stadium legislation in previous years, and the lopsided "yes" vote caused jaws to drop in some corners.
But just days later, the plan may have hit a snag. The package, modelled on a proposal from Gov. Jesse Ventura's administration, works on the simple borrow-low, invest-high principle of arbitrage.
It foresees the state borrowing money at a low, 6.5-percent interest rate while, at the same time, investing funds at an anticipated 8.5-percent yield. The two-percent rate spread is expected to generate enough earnings to repay the stadium construction costs over 30 years.
Sen. Dean Johnson, DFL-Willmar, says those low interest rates have already crept upwards, perhaps enough to wipe out a quarter of the hoped-for spread.
"It's not a deal-breaker, but it's a situation that we want to make absolutely sure that we have a sound financial deal, and we can defend it to our colleagues and most importantly to the governor and to the people of this state," Johnson said.
Johnson is the chief sponsor of a Senate alternative that relies on new state taxes and surcharges to help fund the stadium. Johnson says, however, that the House plan would likely form the basis of any compromise, specifically because it avoids using statewide taxes.
"To the extent that it entails some varying risk for the county, we'll accept that."
- Hennepin County Commissioner Mike Opat
But both plans would allow a host city to raise bar and restaurant taxes - subject to a referendum - to help fund the new facility. And the fluid interest rate underlines the uncertainties and potential risks that city might face. Although the House package insulates the state from financial risk, it anticipates the host community will pledge its new tax revenues to the ballpark.
Ken Kriz, a public finance expert at the University of Minnesota's Humphrey Institute, says if the Twins were to default on their end - because of a strike, team relocation, or an upredictable market - it could put a host city in a sticky spot.
"The city would be potentially placed in a situation where they'd have to let the bonds default. Or they would have to potentially raise this menu of taxes. That's an economic cost to the city for an asset which wouldn't be providing any economic development incentives or impacts," he said.
The plan does require several safety valves, including a long-term lease, a guarantee from the team to plug funding gaps, and a letter of credit to back up that pledge. But policy-makers acknowledge some risk remains for local taxpayers.
Hennepin County Commissioner Mike Opat has been leading the charge for a stadium in Minneapolis. He says governments routinely assume manageable risks.
"The state is clearly backing away from any risk. And that's fine. We are just asking for permission to make a proposal and keep baseball in Minnesota and in Hennepin County. And to the extent that it entails some varying risk for the county, we'll accept that," Opat said.
On the other side of the river, St. Paul officials are also eager to host the Twins. Mayor Randy Kelly has sent a letter to legislative leaders asking for some negotiating room when it comes to hammering out a final offer.
Martha Fuller, who has been following the debate for Kelly, says, for instance, the size of the team's upfront contribution and the total cost of the ballpark shouldn't be written into law.
"It would be helpful to have some flexibility in terms of the final bond structure in order to make it most feasible for a host city and the team to work out their business arrangement," she said.
Kelly, in his letter, says so far the team has been reluctant to discuss specifics of the plan. Fuller says without Twins input it's difficult to guarantee any legislation would, in the end, prove effective. Twins President Jerry Bell did not return phone calls seeking comment.More from MPR