Jan. 15 (Bloomberg) -- Minnesota asked the state’s top court to throw out a challenge brought by Minneapolis residents to a planned sale of $468 million in bonds to help finance a new stadium for the National Football League’s Vikings.
Led by former mayoral candidate Doug Mann, the residents sued in state Supreme Court on Jan. 10, claiming the bonds that were to be sold starting Jan. 13 unconstitutionally rely on city sales tax to pay the stadium debt. Minnesota postponed the sale after the court challenge was filed.
“The stadium legislation violates no portion of the Minnesota Constitution,” defendant Jim Schowalter, commissioner of the state Department of Management and Budget, said in an opposition brief filed with the court yesterday.
The case puts a “material cloud” over the sale, damaging the bonds’ marketability, and should be thrown out because the petitioners acted in bad faith by waiting until the eve of the sale to file it, maximizing its “destructive impact,” Schowalter said.
Groundbreaking began last month on the $975 million structure, which the Minnesota Vikings franchise has sought since the roof of the Hubert H. Humphrey Metrodome collapsed in 2010 under the weight of snow. Local officials expect the venue to generate development in downtown Minneapolis and provide a destination for national events such as the Super Bowl.
An initial plan for state financing fell apart before work began after lawmakers realized the original funding source wouldn’t generate enough revenue. The proposed stadium bonds are backed by a pledge of state appropriation payments, which are automatically built into the budget, though they can be reduced or repealed by Minnesota lawmakers.
Standard & Poor’s and Fitch Ratings both give the debt a AA grade, their third-highest level, and one step below the state’s general obligation bonds. S&P said in a report today its rating and outlook on the bonds is unaffected by the legal challenge, citing the opinion of Minnesota’s bond counsel.
The city is obligated to pay debt service on its share of a principal amount of $150 million plus interest, while the state’s liability is limited to payment on as much as $348 million of bonds plus interest, the residents said.
“I’m seeking to get the city of Minneapolis off the hook for this obligation to pay debt service on the state-issued bonds,” Mann said this week in a phone interview.
The case is Mann v. Schowalter, A14-0029, Minnesota Supreme Court (St. Paul).
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