Tennessee senator says Knoxville stadium would cannibalize tax money, mayor replies “But it’s newwww!”

The Tennessee Smokies stadium sales tax increment financing bill, which would siphon off $65 million in future sales taxes to build a new stadium in downtown Knoxville for a minor-league baseball team to local rich guy Randy Boyd, took another step forward last night, passing the state house’s finance committee. The night before that, though, the bill got a hearing in the state senate ways and means committee, and there was a bit of a dust-up over exactly how tax increment financing works:

[State Senator Bo] Watson expressed concerns the develop would encourage local people, those who already shop and dine in the region, to go to the new site instead, and bring less revenue to the state.

“Minor league baseball is more regional. So people who are coming to the games now, they’re eating at restaurants that the state is now collecting sales tax on. You’re going to simply transfer them to one area to another area, so at the end of the day the state loses tax dollars because we’re collecting even less in this zone than we would be collecting if they were in the other part of the city,” Watson said.

That’s the substitution effect, even if Watson didn’t quite explain it as clearly as he might have. (The idea in a nutshell: If you just substitute sales tax collections in one place for collections in another place, that doesn’t actually leave you with extra money to hand out to the Invisible Fence guy.) It too often gets overlooked in development deals, so it’s nice to see someone raising it as an issue here.

Knox County Mayor Glenn “Kane” Jacobs, though, had an answer for Watson’s argument:

“It’s one of the most prime locations in Knox County. It produces no money in sales tax. No money whatsoever. So whatever that it does produce will be an increase,” Mayor Jacobs said.

Um, no. I mean, yes, the stadium site itself would produce more tax revenue, but that’s not the same as saying the state would get more tax revenue overall — especially when the Smokies would just be moving from the suburbs to the city. The only way it would increase state tax revenue would be if more people came to visit from out of state, which is certainly possible, but $65 million worth of people? That would require a study, but admittedly it’s far easier just to point at a plot of land and say, “Empty! Let’s make it not-empty!” and leave it at that.

I wish I could tell you more about the bill’s chances in the state senate, but aside from a quote from the TIF district bill’s sponsor, Sen. Becky Duncan Massey, that the stadium would be a “transformational economic development project,” the local news outlets don’t have much on what the other 36 senators think. (Republicans hold a 30-8 advantage in the chamber, but Watson, Jacobs, and Massey are all Republicans, so this clearly isn’t breaking down along partisan lines.) I’ll see what I can do to find out more; in the meantime, if anyone wants to be Field of Schemes’ Tennessee legislative correspondent, let me know.