It’s Wednesday, but many of us are still smarting from last Sunday’s thrashing of the Vikings by the Eagles in Philadelphia. No matter, there’s always next year, something we can say about Case Keenum in 2018 as we said about Joe Kapp in 1970 and with sundry other Viking quarterbacks for the 48 years between those two.
Now we turn to hosting the Eagles and Patriots and thousands of others. The business shot in the arm to Minneapolis and the state more generally should be substantial. Here’s an article describing that from a past Super Bowl host: https://www.cnbc.com/2016/01/29/super-bowl-benefits-host-city-but-by-how-much.html. Two years ago, Super Bowl XLIX (49 for non-Latinists) was played in Glendale, Arizona. The game and its various activities and events over two weeks produced a gross economic impact of $719.4 million for the entire state, according to a study from Seidman Research Institute and the School of Business at Arizona State University. The gross economic impact is defined as the direct amount of spending by visitors and organizations arriving from outside the state to participate in or create events directly related to the Super Bowl, as well as the indirect and induced impacts of those expenditures, often described as “ripple effects.” Resident and local business spending was not included. Here is where you can learn more about those effects: http://seidmaninstitute.com/project/super-bowl-xlix/. So Minneapolis isn’t Glendale (Phoenix), especially in February, but it does help us understand the magnitudes in terms of revenues. What about costs? Skeptics point to millions of dollars in local and state government on police and administration, and to the indirect costs from crime to traffic snarls to workers lost to “sick” days. Here’s a skeptic’s view provided by folks at Reason TV: https://www.youtube.com/watch?v=dBgpbTcpDEo. For Super Bowl LII, perhaps the biggest cost has already been incurred: US Bank Stadium’s half-billion dollar public investment. Is it all worth it? The NFL (and local politicians) will tell you “yes” while local taxpayer watchdog groups will tell you “no.” No matter your answer, both sides will tell you that the next two weeks will be busy, very busy in Minneapolis. So let’s be good hosts –Minnesota nice– no matter the net economic impact.
While we’re talking about costs, how about the costs of government shutdowns for business. Here’s an article from Politico on that topic: https://www.politico.com/agenda/story/2018/01/21/why-the-government-shutdown-actually-costs-money-000624. We just experienced a long weekend of federal government shutdown. But even when government closes for only a few days, it can cost private business and the government. When government shuts down, it not only doesn’t pay its non-essential workers, but it doesn’t pay its non-essential bills. And that’s a problem if you are a business supplier to government. There is a federal law permitting businesses to get interest on any unpaid bills. It’s called the Prompt Payment Act and Cash Management Improvement Act. If the federal government doesn’t pay its bills in 30 days from demand, then interest kicks in, but the interest is based on the Fed Funds Rate, and that’s really low right now –only 2.625% per annum. Here’s the interest rate history under the law: https://www.fiscal.treasury.gov/fsservices/gov/pmt/promptPayment/rates.htm. That’s not much of a penalty for government and it’s not much of an incentive for private businesses to continue supplying if a shutdown looks probable. So many don’t, thus magnifying problems for government agencies. In three weeks, we have another moment where Congress and the President need to agree on budgetary issues or see another shutdown. Business executives may be Democrats or Republicans, but if their companies serve as suppliers to the federal government, I’m guessing their partisan orientation will matter little. They just want government to work…and pay its bills.
There’s another big city in North America that starts with an “M” and is even colder than Minneapolis. Answer: Montreal. And Montrel matters in the coming month. Here’s why as reported in a Fox business article: http://www.foxbusiness.com/politics/2018/01/23/nafta-do-or-die-pivotal-round-talks-begins-in-montreal.html. Quite pivotal talks among the US, Canada and Mexico will likely determine whether the Trump Administration decides to renegotiate and renew the North American Free Trade Agreement (NAFTA) linking the three countries, or withdraw and discard its various trade- and investment-related terms that have done so much to benefit all three countries…and our state. That’s right. Minnesota has been a big winner under NAFTA. Here’s the likely rub in upcoming negotiations in Montreal: Canadian agriculture generally, and the dairy industry more specifically. When originally negotiated in the late 1980s and early 1990s, Canada got a carve-out for milk (and milk-based protein) producers, which has made it difficult (but not impossible) for US/Minnesota dairy farmers to break through as new suppliers. Since then the US has protested Canada’s system of tariffs and export limits designed to protect the domestic market. Trump calls it a “disgrace” and a basis for wholesale withdrawal from NAFTA. Let’s hope he doesn’t carry out his threat. Canada is Minnesota’s most important trade partner –like an 11th province according to this 2016 Minnpost article: https://www.minnpost.com/politics-policy/2016/07/11th-province-considering-state-minnesota-s-special-relationship-canada. We do $20 billion in trade annually, about twice as much as Wisconsin and a little more than half of what New York State does but with more than three times as many residents. We export about $5 billion to Canada: largely manufactured goods like medical technology from 3M or Meditronic or packaged consumer goods from General Mills or Cargill; but also taconite from the North Shore; and yes, we export all sorts of agricultural products to Canada, including milk! Here’s a 2016 report on Minnesota agricultural exports from the State Department of Agriculture: https://www.mda.state.mn.us/food/business/~/media/Files/food/business/economics/agexportprofile.ashx. Canada is the number 1 or 2 or 3 export market for virtually every agricultural export from the North Star State. Canada is the number 2 export market after Mexico for Minnesota dairy exports that totaled more than $300 million in 2014. That’s NAFTA at work. Montreal is a cold place in January and February. Let’s hope that encourages cooler heads. Minnesota business, especially agri-business, will be a big loser otherwise.
Other than the Vikings loss, the only recent event that has led to more hand-wringing may be the decision by Amazon to cut the Twin Cities from contention for its “second” headquarters project, something the online seller of any and all things says will generate billions in direct, indirect, and induced economic activity –I just heard those words somewhere else. I like Star Tribune business columnist Lee Schaefer’s take on this: http://www.startribune.com/why-would-amazon-snub-the-twin-cities-in-headquarters-contest/470588523/. it’s not that the Twin Cities lack any of infrastructure, business-environment or broader quality-of-life factors. We have them all in spades…especially compared to cities that did make the cut like Columbus, Ohio or Nashville, Tennessee. This is about one thing: money. Lots of it. We’ve seen the incredible amounts that some states will throw at “hot” companies promising the Moon. Supposed fiscal conservatives in neighboring Wisconsin came up with $3 billion in incentives to bring Taiwan-based Foxconn Technology Group to the state with a promise to build a flat-panel manufacturing plant that will employ “thousands” for “multiple generations” according to Governor Scott Walker. Read more about that justification here: http://fortune.com/2017/09/18/wisconsin-incentives-foxconn/. There are multi-billion dollar incentives for Amazon coming from several places that made the cut –check out the New Jersey $7 billion proposal as an example: https://www.wsj.com/articles/newark-offers-7-billion-in-incentives-to-lure-amazon-1508191648. This is gutsy…or crazy…or maybe a bit of both. In any case, it’s about money. And that’s not been the Minnesota approach recently. We compete by providing a great environment for businesses to grow and a level playing field for them to compete. I think that’s the biggest reason that Minnesota and the Twin Cities host so many corporate headquarters, including retail giants and Amazon competitors Best Buy and Target. So I’m sure getting cut from the contestant list for Amazon’s second headquarters is bad. I think it’s better to invest more in public schools, parks, infrastructure, good government, and a cleaner natural environment. Those investments do more to attract and retain great business headquarters in the long run.
Listen to the segment here!