SBJ/May 14-20, 2012/Facilities

Suite tax concept plays part in Vikings deal

Minnesota lawmakers’ tax on suite holders to help finance a new Vikings stadium would be a first in the NFL, and represents another option for teams and officials facing the increasingly complex task of funding a new facility.

A bill to build a $975 million facility to replace the Metrodome in downtown Minneapolis, which was passed last Thursday and sent to Gov. Mark Dayton’s office for his signature, contained a 10 percent user fee on suite sales as a backup public funding source for the project.

The Vikings’ pursuit of a new home has resulted in multiple designs, including this recent one.
Rendering:
AECOM
SportsBusiness Journal research shows none of the other 31 NFL teams impose user fees for suites.

Considering the pushback from the public sector to finance sports facility development, especially in Minnesota, where the Vikings have struggled for more than 10 years to build a new stadium, suite user fees provide a valid option to pay for these projects.

“If not user fees, some kind of creative financing tied to those who have the benefit from watching the games [in person],” said Bill Dorsey, chairman of the Association of Luxury Suite Directors, an industry group of major league premium seat sales executives.

At the 30-year-old Metrodome, where the Vikings’ lease expired after the 2011 season, the team generated an estimated $5 million in yearly suite revenue, which was “dead last” in the NFL “by a lot,” Dorsey said.

The dome’s 80 suites were priced at $60,000 to $160,000 annually, with less than 100 percent occupancy, said Dorsey, who received that information directly from the Vikings. There were no user fees for suites, said Steve Maki, the dome’s director of facilities and engineering.

In a new stadium with 150 suites, Dorsey’s best guess was that Vikings’ skybox income could jump as high as $50 million a year, depending on pricing, the number of founders suites, length of terms and escalator clauses.

Using that number, user fees could generate up to $5 million a year toward paying off construction debt.

As the legislation took shape, the Vikings were reportedly opposed to user fees because they felt those taxes would cut into their suite revenue. Under the NFL’s revenue-sharing formula, teams share suite ticket income with other clubs but keep 100 percent of the cost to buy a suite.

Lester Bagley, the Vikings’ vice president of public affairs and stadium development, did not return a phone call and an email for comment.

In other NFL markets, teams and municipalities collect admissions taxes on tickets alone that run as high as 12 percent in Chicago, said sports consultant Marc Ganis, a Chicago resident. In many cases, however, those taxes are not reserved for facility development, said ticketing executives with NFL teams.

The Green Bay Packers are one exception. The Packers do not attach user fees to suites at Lambeau Field, but they do have a user fee for the right to purchase season tickets in the seating bowl, plus a 10 percent stadium ticket tax, said team spokesman Aaron Popkey.

All those funds go to the Green Bay/Brown County Professional Football Stadium District to help pay off bonds and pay for stadium improvements.

Construction is under way on a $143 million expansion at Lambeau Field, and the Packers, in conjunction with the stadium district, will tie a user fee to those 6,700 new seats, Popkey said. The fee will be determined in the coming weeks, he said.

Twelve years ago, when Lambeau Field underwent a $295 million renovation, user fees were $2,000 a seat. Those fees will increase for the new nonpremium seats installed high above the south end zone, Popkey said.
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