Columbus arena hurt by lack of ticket tax, Hartford arena hurt by presence of one?

Columbus’s Nationwide Arena, the privately built and publicly bailed-out home of the Blue Jackets, is running out of money unless the county rides to the rescue with a citywide tax on sports and entertainment tickets:

The initial proposal outlined in January was for the city to levy a tax of 3 to 8 percent on tickets to arts, cultural, entertainment and professional sporting events within the city limits and for Franklin County to contribute sales-tax revenue.

Together, those sources could generate $15 million to $20 million a year, with $4 million being earmarked for the arena and the rest going to artists and organizations that the arts council supports.

Basically, what’s going on is that the county funded the arena bailout, including future renovations, with a casino tax, and Columbus residents just haven’t been gambling their money away like everyone had hoped. And while initially the county arena authority proposed just a tax on tickets at the arena, that’s expanded to a tax on all tickets anywhere in Columbus, and arts groups and their supporters are understandably miffed about the prospect of having to be taxed in order to fund a competing entertainment option just because the Blue Jackets needed to make more money.

(Ticket taxes, as has been covered here ad infinitum, tend to come out of the pockets of those selling tickets, not buying them, as they’re already charging the maximum that the market will bear; though there’s some argument that a citywide ticket tax would hit ticket buyers a bit harder, since they wouldn’t be able to avoid it by going to see some event other than hockey.)

So we have the specter of Don Brown, executive director of the Franklin County Convention Facilities Authority, saying of a money-losing arena, “To keep that magic happening, we have to keep reinvesting in the arena itself.” Magic!

Plenty of other local governments have funded their sports venues with ticket taxes, of course, among them Hartford, Connecticut — where the public operators of that city’s arena want nothing more than their ticket tax to go away:

The overseers of the XL Center in Hartford say the venue is feeling the sting, in more ways than one, from a 10 percent state admissions tax that kicked in six months ago.

The levy has played a role in the 16,000-seat arena striking out on as many as a dozen events, mainly concerts, that it bid on, according to Michael Freimuth, executive director of the Capital Region Development Authority (CRDA), XL Center’s management overseer…

The problem, Freimuth said, is that the tax curtails a show’s potential profit margin “by such a degree that it results in the building losing actual events and the subsequent revenues.”

Connecticut’s is a statewide tax (though some venues have gotten exemptions, including the Hartford arena at times in the past), so it’s not entirely clear what the arena managers or concert promoters are griping about — it’s not like they can get out of the tax by just going to, say, Bridgeport. Though I suppose griping is how concert promoters get better deals — Freimuth told the Hartford Business Journal that “They say ‘you just took my margin down, split it with me,'” which indeed sounds like something a concert promoter would say.

The lesson here is: You can’t get blood from a stone, or much more money from a concert industry that has other options, especially when you’re a market like Columbus or Hartford that big-name acts can just skip if they aren’t feeling the profits. Though if you’re a concert promoter, you totally can try to get a state to cut your taxes to boost your profits by threatening to blacklist them. And if it seems like letting sports teams and promoters play states off against each other in a bidding war to the bottom is bad public policy, yeah, maybe Congress should have listened to David Minge.

5 comments on “Columbus arena hurt by lack of ticket tax, Hartford arena hurt by presence of one?

  1. A question for Neil (or anyone else who would know)…is the Mohegan Sun arena subject to that tax, or does the federal government’s authority over the reservation supersede it?

  2. Just so I understand this correctly…

    1. We use public money to build arenas/fairgrounds/concert venues to promote economic development as well as a secondary benefit of ‘quality of life’ for residents.

    2. We do this because asking the attendees to any of these events to pay the full amortized cost of their attendance would make the venue/event non viable.

    3. We run such budget deficits because we spend so much on non-essential infrastructure that we must impose ticket taxes on the venues our tax dollars build for wants rather than needs. (This would seem to run contrary to the argument that venues are economic engines that produce wealth for the region that builds them)

    4. These ticket taxes are blamed for reducing attendance and discouraging event promoters from staging some events… leaving the very buildings we taxed the general public to pay for empty or underused.

    5. Due to the shortfalls in revenues (and thus taxes) generated from these non essential building projects, many communities are now cutting back on funding for actual needs like police, fire fighting, schools and hospitals in order to repay construction financing obligations and operating costs for facilities that were supposed to generate not only enough to repay their own costs but also a positive cashflow for the municipality.

    To quote from Bridges over the River Kwai…… “Madness! Madness!”

  3. So a ticket tax is both the cause of and solution to all of a venue’s financial problems? I’ll drink to that.

  4. Are most ticket taxes a standard per ticket rate, or does anyone do a graduated ticket tax. Say 5% on cheap seats and 35% on the more expensive seats? Maybe the state could get a piece of the aftermarket sales.

  5. Sometimes a certain amount of ticket taxes is authorized but not even the full amount is actually enacted. I haven’t investigated if this has changed in Seattle since they were exploring how to get money to “Save the Sonics” but a 10% admissions tax sounds a lot better to me than fighting over the hotel-motel portion of it (as discussed in your piece on Friday).

    Qwest Field Admissions Tax

    Up to 10% tax on admissions to Qwest Field.

    Currently the rate is 3.1% and is used to pay for Qwest Field Bonds. When the bonds are paid off (2021) the rate will increase to 10% and will be used for Qwest Field Mainenance.

    Safeco Field Admissions Tax

    5% admissions tax at Safeco field (another 5% admissions tax is authorized but is not used)

    The tax is used to pay Safeco Field Bonds. Revenues above bond repayment may be used for unanticipated capital costs. This is an ongoing tax.