Monday, August 10, 2009

Indianapolis Star Warns of "Fallout" if Hotel Tax Is Not Increased; Swallows CIB Spin Hook Line and Sinker

Today the Indianapolis Star editorializes about the CIB hotel tax increase repeating as fact the same lies that have been peddled by CIB bailout proponents from Day 1:

A yes vote helps the CIB find ways to properly operate and market the Indiana Convention Center, Lucas Oil Stadium and Conseco Fieldhouse. Those and other Downtown venues are cornerstones of a hospitality trade that accounts for
more than 60,000 jobs in the region.

A vote in favor of the tax increase -- a move supported by the local hotel association -- would raise about $4 million.

Although this is a fraction of the estimated $45 million deficit the CIB faces next year, the higher hotel tax would leverage another $17 million a year. The General Assembly tied $9 million in loans for the next three years to the council's decision on the hotel tax. An expanded Sports Development Taxing District, the source of another $8 million a year, also is linked to the hotel tax.

What would be the fallout if the council rejects the proposal? The city might well suffer from a reduction in the number of events staged at the convention center and the stadiums. The budget for marketing and promotion, important in competing with other cities for events, likely would be slashed. As a result, the infrastructure this community has spent decades building, from a first-class airport and convention center to world-class sports arenas, could end up dramatically underused.

It's important to remember that visitors to the city, rather than residents, pay the hotel tax. That fact should temper any fears council members harbor over a political backlash. In fact, if the hotel tax increase is denied, city leaders may have no choice but to turn to other broader taxes to make up the CIB deficit. The political repercussions of that scenario likely would be disastrous, and rightly so.

The premise used by the Star in its editorial - that this tax increase is all about the City's hospitality industry - is a bald-faced lie. These tax increases (the hotel tax sets the stage for other tax increases) are about excessive subsidies for professional sports, not the city's convention business. It all started with the construction of Lucas Oil Stadium and the CIB giving away almost all the revenue from the building, leaving the CIB in a $20 million annual hole just for the operating costs at the stadium.

Now it continues with the CIB agreeing, without so much as holding a vote, to pick up $15 million in operating expenses on Conseco Fieldhouse, a building in which the Pacers get 100% of the revenue.

The Star's editorial does prompt questions, however:

Why does the Star gloss over the fact that the CIB deficits are due almost entirely to excessive sports subsidies?

Why does the Star ignore the many academic studies which show that investment in professional sports is a bad investment?

Where is the Star editorial against the $15 million annual gift to the billionaire Simon brothers? The CIB has apparently decided to make by picking up the Pacers' operating expenses on Conseco Fieldhouse (and lied to council members that the CIB had dropped the idea leading up to the committee vote), even though doing so is not contractually required and the Pacers have no leverage to demand the change for another 10 years at least.

Where is the Star editorial demanding an investigation into how the CIB got into this mess and demanding reforms, including that Mayor Ballard ask for the resignation of Bob Grand who is President of the CIB while also attorney for the Simons? Undoubtedly Grand's presence played a role in the CIB agreeing to give the Simons $15 million more of tax money every year for operating costs.

Where is the Star's editorial demanding that the Pacers open their books up to an audit before the CIB hands the team $15 million more per year?

Where is the Star's disclosure that it has money invested in these downtown ventures and it is a creditor who could be out money should the CIB not get its tax increases.

Where is the Star's discussion of how raising taxes on the hospitality industry will negatively effect the amount of tourism/convention business we can attract to this city?

Where is the Star's discussion of how these "visitor taxes" actually hit hard local businesses and low wage employees? Why doesn't the Star address the fact that most cars are rented by local residents, not "visitors."

Why is the Star repeating as true such lies as the 60,000 (often cited as 66,000) hospitality worker figure that is dependent on these tax increases being passed. That figure is a CENTRAL INDIANA figure. Many if not most of those people have jobs far outside of downtown Indianapolis and are not dependent on the CIB venues for their job.

The Star can't even get the politics of the issue correct, assuring council members that voters will make a distinction between "visitor" taxes and other types of taxes when they go to the polls. I can't recall of any time when voters have made distinctions between types of taxes. When it comes to voters, a tax is a tax is a tax.

The Star also provides the disinformation that local political leaders will use other types of taxes ("broader taxes") to make up the CIB deficit. Until the Indiana legislature says otherwise, local leaders do not have the authority to use things like property taxes to bailout the CIB.

Someone, I believe Gary Welsh at Advance Indiana (click here to see his take on this issue) has called the CIB bailout a Ponzi scheme. That is an apt description. The CIB requires a constant infusion of tax dollars to keep its corporate welfare schemes going. The way you stop Ponzi schemes is to cut off the money. Tonight the Indianapolis City-County Council should send a message to the CIB that enough is enough and taxpayers will not have to pay any more for these giveaways to sports billionaires.


jabberdoodle said...

VEry good points here. Although I'd say you have to recognize that the CIB's deficit spending began with the great contract Goldsmith gave to the Pacers for Conseco Fieldhouse and that the fiscal policies of the CIB are an abject failure given that we owe $70 million on the Hoosier Dome that cost $55 million to build and which no longer exists.

I am totally mystified as to why the Councillors - both for and against a bailout (or this bailout) -- are not demanding an investigation of the CIB so we can determine where the problems are and can target a fix.

I'll leave the political calculus to you. But, when does Indy get the financial benefit from all of the tax money we have poured into downtown. The hospitality workers are ill paid and ill treated by the hoteliers who now hide behind them to get more tens of millions of tax money. Why haven't the Councillors tied a bailout with better treatment of the folks the bailout is supposedly aimed at. Maybe because it is pure fiction that its to save thier jobs.

Paul K. Ogden said...


It is pure fiction that this is about those jobs, i.e. the welfare of lowly-paid hospitality workers. They are pawns being used by the corporate elites to extract more moeny from the taxpayers.

My understanding of the tax increases/increased borrowing is that this is just about treading water, not increasing downtown convetion business.

The tax dollars are just getting poured down a big black hole, i.e the CIB.

Downtown Indy said...

Indeed, jabberdoodle. I keep wondering: if we've been at this 'economic benefit' thing for 30 years and STILL can't make it without regular tax increases to offset the mounting debt, where exactly IS that 'benefit'?