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The Vikings Stadium's Payoff

The Vikings Stadium's Payoff

The results are almost in. Will U.S. Bank Stadium deliver on its promises?

Scott Lipets and family have held Vikings season tickets since 1964. The Minneapolis accountant used to sit in row 27, midfield at the Metrodome. Wanting to secure similar seats in U.S. Bank Stadium, Lipets was prepared for a price increase. Lipets was also prepared to pay the one-time fee for a seat license.

When it came time for Lipets to transition to U.S. Bank Stadium, he learned that his seat is now a “club” seat, with all-inclusive food and beverage, and an array of other amenities, and that the Vikings would be relocating ex-Metrodome season-ticket holders by zone, not seniority. By sitting on the less-desirable visitor side, Lipets was in Zone 2.

“I had assumed that 52 years of seniority would put me among the first,” to choose new seats, Lipets recalls. But when his turn came, he was surprised to see little availability in seats comparable to those he had held at the Metrodome. “I assume that because the seat license was $6,000 more on the home side that a lot of those [Zone 1] fans shifted to visitor side.” (The team says there was no widespread downgrading.)

He could only find seats in the second deck, row 7. Feeling unappreciated and frustrated, facing a $600 annual price increase per season ticket, inferior seating, and a one-time license payment of $3,500 per ticket, Lipets did what any self-respecting NFL fan would do.

He wrote the check.

When Gov. Mark Dayton said in 2013 that “as far as I’m concerned, $1 for a personal seat license is $1 too much . . . but we had to make a deal and we had to get the owners of the team to agree to a deal,” he was expressing America’s paradoxical frustration with professional sports economics.

But he was also articulating the perceived economic importance of pro sports when he concluded, “I think this is a good deal.” And so, apparently, did most ticket-buying Viking fans.

When the final chapters are written on the development of U.S. Bank Stadium (USBS)—90 percent sold out for the upcoming season as of early July—the moral of the story will be that no one liked the price increases or the seat license fees, and skepticism remains about the capabilities of Teddy Bridgewater. But Vikings fans wrote the checks because such is the appeal of the NFL and a shiny, amenity-rich stadium after 30-plus years in the Metrodome.

0816-VikingsStadiumPayoff_S02.jpg Scott Lipets—a Vikings season ticket holder for five decades—was frustrated over the seat relocation process and increased costs, but in the end decided to take what he could get and will be at U.S. Bank Stadium for the season opener. Photo by Pete Crouser.

Selling It Out

When the Minnesota Vikings set out to price and market what would become U.S. Bank Stadium, they had a specific mandate. “The NFL is a made-for-TV sport,” says Lester Bagley, Vikings executive vice president for stadium development. “We need to compete with the couch and make Vikings games an immersive experience.”

It was not uncommon for skeptical legislators, Minneapolis City Councilmembers and other social justice pundits to describe the stadium finance plan and the costs to fans and taxpayers as beyond the pale, a rip-off, unsustainable. Though the team obviously didn’t concur, it, too, had a certain wariness.

“This was all new for us. We had concerns about what the market would bear,” says Vikings CMO Steve LaCroix, given that ticket prices were increasing substantially across the board (Lipets’ roughly 40 percent, for example). The team studied the experiences in other NFL markets, and the new stadia locally. He says the concerns “were erased very quickly” by demand.

LaCroix is unable to offer an average increase at USBS, but anecdotal reports indicate 25 to 50 percent is not uncommon. (Many of those increases are for seats that are newly packaged with club access and food and beverage, unlike stand-alone Metrodome seat pricing.)

At press time, six weeks before the first Vikings home game, LaCroix says premium seats marketed to affluent individuals and to businesses sold robustly, as did the relative bargain inventory: “Club seats sold quickly, top and bottom pricing tiers.” The seats that remain are midpriced, mostly in the end zones.

Diehard fans still on the sidelines, fuming over it all, can take solace in the knowledge that football fans are not alone. “Sure, it’s all tilting to high-income people. Yes, the new stadia are pricing people out,” says University of Michigan sports management professor Mark Rosentraub, “but remember, the producers of Hamilton are getting $350 a ticket, too, and they are not wringing their hands.”

From the inside, stadium backers are gleeful. “Looking at our calendar of events, we will meet or exceed our [revenue] projections,” says Minnesota Sports Facilities Authority chair Michele Kelm-Helgen. (MSFA owns the facility and oversees all non-football operations at USBS.)

Looking beyond the stadium’s massive glass doors, her view is even rosier: “We’ve been most focused on economic development in the area and we’ve already proven a stadium can spin it off.” Kelm-Helgen tallies a billion in development underway in Downtown East attributed to the stadium and its amenities, double the public investment in the football field.

State investment fixed at $498 million.

Highest rent in NFL—$8.5 million—to cover capital upkeep.

Guaranteed payment to taxpayers of $6.75 million a year from stadium operator SMG, then revenue sharing with taxpayers on all non-football revenues.

Cost per seat: $17,155—nearly twice that of Wild and Twins, and among highest in NFL (NY MetLife Stadium, SFO Levi’s are more).

$1 billion in outside investment in Downtown East.

80% of season-ticket base has renewed.

6K seats left to sell, 1K with seat license, 1K 10-game season package, 4K affordable single-game tickets.

Affordable ticket clause: 3,250 tickets to be sold at 80% of lowest-priced seating tier (5% of available seating).

$8.8 million annual naming rights (media estimates)

A Financial Statement With Holes

Even though the MSFA has a regularly updated public budget for U.S. Bank Stadium, the Vikings’ contribution is regarded with some skepticism, as much of it relies on revenue streams only available to the Vikings because of the public investment. The Star Tribune’s Lee Schafer reported last year that of the NFL loan programs providing some of a $200 million estimated contribution to the team, one requires the Vikings to sell personal seat licenses (PSLs; also known locally as “stadium builder licenses,” or SBLs) to the fans, while another was contingent on securing taxpayer funding for a stadium.

Factor in $100 million in seat licenses, $75 million estimated in naming rights, and $200 million from the NFL, plus miscellaneous non-team contributions, and the Vikings’ out-of-pocket cost looks to be about $225 million, or $275 million including the portion of the NFL loan that is repaid by the team.

How the team is generating those funds is unclear. “We don’t know much at all about NFL teams’ financial situations,” says Moody’s vice president/senior analyst John Medina (Moody’s did not work on USBS). “They keep them very private. Their leverage may be in a holding company. We don’t see the owners’ financial guarantees” to lenders.

One common financing method is for ownership to borrow against “contractually obligated income” like naming rights and multiyear suite rental contracts, says Craig Skiem, a Twin Cities stadium development consultant who has advised the MSFA. The Vikings would not detail specifics of the team’s $602 million contribution to date.

A Win-Win?

The other big unknown in stadium projects is their capacity to generate economic benefits for the communities where they are built. The Metrodome’s upside for downtown Minneapolis was long thought to be marginal. But there have been home runs.

“The public sector made a fortune in San Diego’s Ballpark District,” which transformed a blighted and unloved section of downtown, says Rosentraub. “So when it works out, it’s an investment, not a subsidy.”

“You use sports to anchor a real estate development,” he continues. “Typically, the NFL doesn’t have enough events to create the economic activity and deliver the value alone. But venues with complementing real estate have proven to be good public investments.”

And that has been the goal in Minneapolis this time around. “Stadium investments do not create economic activity in a vacuum,” says R.T. Rybak, mayor during the birth of the USBS plan. “It’s a recipe for a windswept plain of parking lots.”

The key player, says Rybak, is a parking ramp mandated in the state’s stadium legislation. It motivated Wells Fargo to relocate 5,000 jobs to Downtown East. “I’d note that parking ramps, not Target Center, set off the boom on the west side of downtown as well,” says Rybak, “Peripheral parking has been great for Minneapolis,” he says, because once people get out of their cars, they walk past stores and restaurants—and sometimes go in.

Still, the argument will be made that because most of Wells Fargo’s relocated jobs were already based in Minneapolis, the public investment is merely engendering a transfer of economic activity from one part of the city to another. Former City Councilmember Paul Ostrow even contended that the project created no new permanent jobs for the city.

Michigan’s Rosentraub says there are flaws in the economic transfer argument if the public investment can transform chronically troubled areas. “Cities are not financed on a regional level by and large,” he says, “so what happens in [a suburb] doesn’t necessarily benefit the city—Detroit is the best example of this. I tend to think of the economic-transfer thesis as a false academic argument.”

Another surprise to national observers is that the team remains in downtown Minneapolis.

“The trend has been if you’re trying to attract financing to move to a different municipality” within your market to extract investment from the county or municipality that stands to benefit, explains Moody’s Medina. This was the recent tactic of both the San Francisco 49ers and the Atlanta Braves, and for quite a while the Vikings seemed headed for the old Twin Cities Arsenal site north of St. Paul.

0816-VikingsStadiumPayoff_S03.jpg Stadium Builder License by the Numbers

75% of USBS seats require an SBL.
6,000 season seats available without an SBL.
Average SBL: $2,500 per seat; 80% priced $3,000 or under.
Maximum SBL price: $9,500.
USBS SBL prices among the lowest of recent NFL stadia.

A Rare Rejection

The Vikings say they benefited from the community’s experience with Target Field and Xcel Energy Center, as most local fans understand the amenities and opportunities of a modern stadium.

The USBS experience “won’t be like Target Field, in that baseball has a completely different pace of game,” says LaCroix. “Fans don’t wander and gather to the same extent in NFL, so we are layering in a lot of unique elements within the seating areas,” such as special club lounges, and food and beverage options.

Fans seem to have responded. To date, 80 percent of the team’s season-ticket base has ported their seats over from the Metrodome, which is near the team’s renewal peak (90 percent in the Brett Favre years). Not everyone is making the trip, though.

Minneapolis resident Lori Mittag has been with the Vikes for 30 years as a season-ticket holder, at times sharing a full row at the Metrodome with another family. She says she sat with the “real fans, not the folks [at midfield], who hate it when you stand and want you to be quiet.”

She let her seats lapse at TCF in 2015, but was prepared to return for USBS’ inaugural season. “The sales center was very impressive. I accepted the idea of the seat license as an asset,” Mittag recalls. “But then I thought that you have to put a good product on the table for [the seat license] to hold its value, and that hasn’t been the case much of the last 30 years.”

As her thinking evolved, Mittag says the license felt like “I was paying for the stadium twice.” It wasn’t that she couldn’t afford it, Mittag says, but that she felt it should be enough to pay for her tickets and contribute as a taxpayer. She didn’t want to be like those Vikings fans “who don’t have a pot to pee in, but are such diehards they will find a way to buy in, come what may. I just decided I had my limits.”

Based on the numbers alone, the Vikings can take solace that Mittag’s view has remained an outlier.

License to Cheer

The SBL (or PSL, for personal seat license, as it’s most commonly called), got its start in the mid-1990s as several teams developed (or redeveloped) NFL stadia, explains MSFA consultant Craig Skiem. They are essentially a fan contribution to construction of the stadium, but are typically accounted for as a component of the team contribution.

At U.S. Bank Stadium, the SBL program is managed by the Minnesota Sports Facilities Authority. SBLs will raise up to $125 million, of which $100 million will pay for stadium construction; any extra will cover the costs of administering the SBL program. “It’s a closed system,” explains Vikings CFO Steve Poppen.

A seat license is tied to a specific seat and gives its fan-owner the right to buy their seats for all events delineated in the PSL agreement. Their value can rise and fall with market forces, and the PSL can be resold on an open market, not via teams or stadium agencies.

Fans were given two years prior to stadium opening to pay for their SBL in interest-free installments. After that, they had the opportunity to finance them over an additional five years at 8 percent interest, an option mandated by the MSFA. Though not a market rate for a collateralized loan, 8 percent is “in line with other cities” offering PSLs, says MSFA chair Michele Kelm-Helgen. The Vikings expect 25 to 30 percent of SBL buyers to borrow by the time all SBLs have been purchased.

A complementary way to look at PSLs are as prepayment for “the present value of future ticket price increases,” says University of Michigan professor of sports management Mark Rosentraub. “In most markets you’re not going to be able to sell PSLs and then raise ticket prices much over the next few years. Not in a market like Minneapolis” you won’t. The pitch, says Rosentraub, is that “this stadium is so spectacular I’m going sell you a piece of it.”

PSLs are ubiquitous at newer NFL stadia (only two recent ones, in Phoenix and Indianapolis, did not use them). Many universities, such as the University of Minnesota, require annual donations with season tickets, “which is similar [to PSLs] in the end,” says Skiem.

“What changed the dynamic was the Dallas [Arlington, Texas] and New York and San Francisco buildings,” says Skiem. “They had a substantial increase in the PSL component”—$500 million to $700 million, he says. Given that NFL stadia all have roughly the same capacity, that meant seat license pricing five times what Vikings fans paid. “The Vikings program,” says Skiem, “is fairly typical of recent medium-market teams.”

What is different is that, unlike most PSL programs, which give holders right of refusal on all stadium events, plus presales and even discounts on non-NFL events, USBS’ program is less generous.

“You want to design it,” says Rosentraub, “so that it gets you a guaranteed ticket for every event held,” which helps sustain PSL value. Kelm-Helgen says the Minneapolis SBLs were structured without those benefits because in a publicly owned facility it seemed inappropriate that Vikings season-ticket holders have special entitlements at non-Vikings events.

Despite this, “demand for the NFL product is constant,” says Rosentraub, “so a decline in value is unlikely” when holders decide to resell their SBLs, which cannot happen until after the 2016 season. So currently it’s impossible to establish any sense of the resale market.

That market, say experts, can ebb and flow with factors as specific as the team’s fortunes and as broad as the state of the economy.

“My suspicion is our SBLs will increase in value due to the lower price point,” says Vikings’ stadium czar Lester Bagley. He and all those associated with the program discourage thinking about PSLs as an investment or using them as one.

Adam Platt is TCB’s executive editor.