CHICAGO — Lawyers for Minnesota and for a group of citizens challenging the legality of the state's $468 million appropriation-backed bond sale for the Vikings football stadium faced a Thursday deadline to make their case for a Minnesota Supreme Court review.
The state pulled from the market the bond sale that had been scheduled Monday and Tuesday due the filing a few days earlier of a legal challenge in the form of a writ of prohibition in which three citizens asked the Minnesota Supreme Court to block the sale.
Bond proceeds were to fund what the state government and Minneapolis agreed to pay toward the $975 million stadium. The state is covering up to $350 million of the borrowing and the city will repay up to $150 million under the 2012 legislation approved by lawmakers and signed by Gov. Mark Dayton.
The Minnesota Supreme Court set a late Thursday afternoon deadline for both sides to submit a memorandum on law on jurisdictional and other issues.
The group of citizens is challenging the city financing scheme that allows Minneapolis to repay its share beginning in 2021 by redirecting a portion of its existing 0.5% convention sales taxes and hospitality taxes.
Their challenge argues the financing is an unlawful use of public funds due to the city's dedication of sales taxes for a state debt. They believe the state package served as a means to circumvent city charter rules limiting public funding for professional sports stadium in the absence of a public vote.
Lawyers for Minnesota Management and Budget Commissioner Jim Schowalter fired back earlier this week asking the court to dismiss the challenge. They argue the plaintiffs' similar arguments laid out in a lawsuit against the city were previously dismissed by a local court and that the legislation does not impose any local taxes but simply authorizes the city to do so.
The state also argues the court should dismiss the action because the plaintiffs waited until just before the bond pricing to maximize its "destructive" impact given that the legislation was approved in 2012.
The litigation places "a material cloud over the bond sale by creating doubt regarding the issuance of the bonds, such that they are not reasonably marketable," the state's filing reads.
The filing also contends the state Supreme Court is not the proper jurisdiction as argued by the plaintiffs who cite language in the legislation. The state said the language naming the high court as the proper jurisdiction for any review of the bonds was included in case it decided to pursue what's known as a validation process on the use of an appropriation pledge. The state opted not to because it did so for its 2012 sale of appropriation-backed tobacco refunding bonds with a similar legal structure.
The state asks the court to require the plaintiffs to post a $49 million bond to compensate it for economic damages should they fail. "The consequences of this delay are grave and potentially irremediable," the state filing reads. The bond sale delay jeopardizes land acquisition deals in the works, stadium construction, and opens the state to interest rate risks. A groundbreaking occurred last month and the team hopes to play in the stadium at the start of the 2016 season.
RBC Capital Markets is bookrunner on the deal with JPMorgan and Wells Fargo Securities as co-senior managers. Public Financial Management Inc. is financial advisor and Kutak Rock is bond counsel.
The 65,000-seat stadium is being built adjacent to the team's current home, the 31-year-old Hubert H. Humphrey Metrodome.
