Thursday, August 15, 2013

Minor detour

Ever since the MN Legislature and Gov. Mark Dayton approved public funding for a new Vikings stadium in May 2012, the project has been fraught with peril.

My good friend Mark Heuring broke it down Wednesday on how the revenue from e-pull tabs (revenue which was expected to cover the state's $327 million share) is looking even more dire.

Now it appears legal troubles facing the ownership group could possibly delay construction.

With groundbreaking on a new Minnesota Vikings stadium only weeks away, final approval of key development agreements has been put on hold to allow the state to conduct a more extensive background investigation into the team’s owners.

The Minnesota Sports Facilities Authority, the public body overseeing the nearly $1 billion project, said Tuesday that it has retained Peter Carter of the Dorsey & Whitney law firm to lead a “due diligence” review of Vikings owner Zygi Wilf and his family’s real estate business. Carter has tried cases involving racketeering and performed similar investigations for some of the nation’s largest firms.

The review group, which will also include FTI Consulting, an international forensic accounting firm, will scrutinize Wilf family litigation in New Jersey and perform “extensive background checks” as well as review the NFL’s investigations of owner applications, the authority said in a written statement.

The deeper background check stems from a finding last week by a New Jersey Superior Court judge in a long-pending lawsuit against Wilf and the family’s real estate business. The judge said the family was guilty of fraud, breach of contract and violations of the state’s civil racketeering statute in connection with a real estate partnership.

If you're opposed to taxpayer funded stadiums like I am, I would temper any excitement about the possibility this project does not move forward. While it's true the Wilfs have to pony up $477 million of the nearly $1 billion stadium, their financing mechanisms are pretty well set in stone (unlike the state of Minnesota's). Right off the bat the Vikings have already secured a $200 "loan" from the NFL. I use quotation marks around the word loan simply because it's one the Vikings ownership group does not have to repay directly. It's a "G-4" loan, which is actually repaid from the visiting team's share of club seat revenues in the new stadium. In addition, the ever controversial revenue derived from "personal seat licenses" (a paid license that entitles the holder to the right to buy season tickets for a certain seat in a stadium) is approximately $40 million. Finally, naming rights of the new facility will also be quite lucrative, with estimates reaching $210 million (The San Francisco 49ers recently negotiated a $220 million package for naming rights to their new stadium). Add it all up and the Wilfs essentially have covered 450 of the $477 million for which they're responsible.

Given that Gov. Dayton felt duped by the Wilfs regarding PSLs as well as suffering the embarrassment of relying on weighted data touting e-pull tabs, I can't imagine he's as enthusiastic about the new facility as he was 15 months ago. Little matter, since this "due diligence" review of the Wilfs' real estate business seems little more than an attempt to assuage the concerns of the citizens.

The project is going forward whether we like it or not.


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