From Indy Tax Dollars:
Readers will remember a recent post we called "Untitled" because we chose not to use profanity. Yesterday's front page headline - "City's sports venues in the red" - has us sputtering again.
The Capital Improvement Board (CIB) compares to a group of school children - primary grades - who spend all their money in a candy shop then are bewildered that they don't have money for the bus ride home. (Or maybe it was planned. "The building is there. We can't just let it stand idle.")
How is it possible that educated adult men and women did not consider the fact that a much larger building, with a much more sophisticated type of operation, was going to cost more to run. And do they really think the taxpayer ought to be on the hook because the basketball team has a lousy season?
The following is a partial repeat of a post we made two years ago on how to handle costs..
We suggest a variation on the TIF approach, which we would call RIF, that is "Revenue Increment Financing." Here's how it would work.
Some time ago advocates of the stadium/convention center project told us the deal would bring into the city an additional (incremental?) $2 billion over a 10-year period. That's $200 million per year of new money.
We believe it is a fair assumption that the original impact of at least 75% of that money would be at the level of downtown service/retail, for-profit commercial businesses in a definable area focused on the stadium. That area would be determined to be an RIF district.
We already know how to set up such districts for sales and income taxes. If the CIB could get its act together to provide accurate future expenditure estimates, it should be a simple matter to determine a share of these expenses to charge to each business in the specified district. Per our assumption above, a base amount of $150 million, the cost to each of these businesses surely would be a modest amount, particularly when considering that every other business and individual in the city is already subsidizing them.
After all, under TIF, the entire property tax increase is diverted from municipal funds.
There is one caveat. Our proposal assumes that the $2 billion estimate of revenues is somewhere near the truth.
3 comments:
There is no guarantee that the presence of the COLTS or Pacers brings much new business to, let's say for examples sake, the Comic Book Store (Downtown Comics) on Market Street.
Neither the taxpayers, nor local businesses, should be footing the bill for this. It needs to come from the sports teams themselves OR from ONLY the people who purchase the product (tickets). Anything else is a distortion in the market price for this entertainment product.
Taxing a downtown business through the assumption of increased economic activity, increases everyone.
Everybody please take a moment to think about the Indianapolis Motor Speedway and how we seem to not have these issues with Tony George's operation. I have heard that IMS even pays for the additional police coverage.
Sean, you make an excellent point about the tangibility of value.
Obviously, we're in full agreement that neither the taxpayer nor business generally should be footing the bill. But it must be true that a major part of any increased economic activity benefits downtown service/hospitality places most immediately. If the tax is on the INCREMENT, the comic book store has little to fear. If a restaurant does $50,000 MORE business on game weekends, the tax would apply only to that amount. If the restaurant wants to raise prices for those weekends, then you have in effect a tax on the ticket holders, or at least those who come downtown to enjoy the festivities. It all still depends on whether we've been told the truth about the financial boon usually credited to "the city."
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