Wake County, North Carolina yesterday approved $46.6 million a year in tourism tax spending — money from a 6% hotel tax and 1% restaurant tax imposed in 1991 — and the beneficiaries are set to include the Carolina Hurricanes and the Raleigh Convention Center, though not yet a proposed Raleigh soccer stadium:
- The Hurricanes would get $9 million a year in tax money for the next 25 years, a present value of about $125 million. The NHL franchise has been looking at an arena renovation cost of up to $200 million, so this would pay for the bulk of that.
- The convention center would get $3 million a year for maintenance, $2.2 million a year for parking and infrastructure, $19 million flat fee for renovations and new land acquisition, and $17.575 million a year starting in the mid-2020s for an expansion and new music venue.
- The North Carolina FC USL team didn’t get its proposed $11 million a year stadium grant, but can still apply for part of the remaining funds, where it would compete against other arts groups.
I know that some of you are thinking about now, “But isn’t the whole point of a tourism tax to promote tourism, so the tax money should be spent on things that will bring tourists to town?” Sure, but then it’s important to ensure that the spending will bring tourists to town, and the return on sports and convention spending is historically really awful in that regard: Sports teams only bring in a tiny sliver of new spending compared to what they cost in subsidies, and conventions are equally dismal.
One solution, if you’re really determined to use tax dollars to encourage people to come to your town, would be to demand some kind of direct repayment from the beneficiaries: Sure, we’ll give you a pile of free cash, but then you need to share the resulting increased revenues with the public treasury. But that doesn’t appear to be what’s going on in Raleigh; rather, the Hurricanes and other operators will keep any windfall revenues, and local government will just sit back and hope that the rising tide lifts their fiscal boat as well.
This whole plan still needs to be signed off on by the city of Raleigh, but at this point it looks like all that’s left to decide is which private interests to funnel tax money to, not whether to do it at all. (It’s possible there are some ways that Wake County could use tourist tax dollars to displace other spending that would then be freed up for broader social goods like schools or whatever, as has been the case in other locales, but none of the coverage has addressed that.) If anyone was wondering why somebody would spend $420 million to buy an NHL team with attendance near the bottom of the league, you may have just gotten your answer.