Monday, December 7, 2009
Barry / Media When Will Convention Center Supporters Abandon the Misleading Claim That Only Tourists Will Pay for It?
Posted by Bruce Barry on Mon, Dec 7, 2009 at 4:09 PM
This assertion is in one sense seriously misleading, and in another factually inaccurate. It's misleading because paying for the MCC will compel the city to find new funding for existing obligations that aren't going away. As Nate Rau reported in The Tennessean over the weekend, a large chunk of the tourist taxes that will go to service convention center debt--$14 million--is currently funding other things in the city budget, and for the most part these are not expenditures that can simply be eliminated. The biggest chunk ($7.4 million) is a Predators subsidy that the city is contractually obligated to pay. Another large piece ($2.8 million) is a public transit subsidy that this mayor is unlikely to dissolve, and there are other untouchables as well, such as police overtime for special events.
Asked about this little $14 million-per-year hiccup by Pat Nolan on NewsChannel 5's Inside Politics last weekend, Metro finance director Rich Riebeling admitted that the city is "going to have to find another source to finance those projects." When Nolan pressed him on how this will play out in next year's city budget, Riebeling said with a wry smile that "we've got a long time before we start the budget process." Clearly the administration is hoping that taxpayers won't grasp the cause-and-effect link between convention center approval now and costly budget maneuvers later.
Beyond the misleading aspect just described, the claim that tourists alone will pay for the convention center is patently false because the revenue sources we like to label as "tourist taxes" are also paid by locals. Granted, visitors will pay most, but local individuals and businesses do book and pay for hotel rooms and rental cars--the things being taxed to pay for MCC. Locals will spend dollars at a new convention center and accompanying hotel, where sales taxes are being redirected into paying MCC debt. And the so-called tourist development zone, which will generate funds for MCC from incremental sales tax growth that outpaces the county as a whole, will inevitably funnel money from locals spending retail dollars within the zone.
Yes, visitors will fork up most of the cost, but between the displaced $14 million that must now be found elsewhere and the non-trivial contributions of locals to the "tourist" revenue streams, it's evident that Nashville taxpayers will be on the hook for millions of dollars per year to get the new center built and running. That fact by itself argues neither for nor against the project on its merits. After all, if a new convention center is worth doing for the city's economy, then perhaps it deserves ongoing taxpayer support.
A forthright case for a new convention center would be built on a premise of taxpayer support rather than a transparently misleading denial of taxpayer obligation. Sadly, MCC advocates apparently don't believe they can prevail through honest argument and arithmetic.
Comments (32)
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How deeply can Nashville gouge visitors before they finally say, "Enough is enough. See 'ya."
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This analysis doesn't include the increased tax revenue that the Music City Center will generate or the increased tax revenue the Medical Mart will generate. Odds are, those two will more than cover $14 million.
I would still vote for the new convention center even if it meant that a portion of the goods and services that I spent in downtown went to pay for the partial debt service. I believe that most folks who utilize downtown would as well, but the vocal minority are residents who don't even go downtown or understand the economics of job creation.
This analysis doesn't include the increased tax revenue that the Music City Center will generate or the increased tax revenue the Medical Mart will generate. Odds are, those two will more than cover $14 million.
Clearly incorrect.
New tax revenue that the economic impact of MCC might yield would mainly (if not exclusively) take the form of sales taxes, and that money is already committed. Any increase (over and above county-wide growth) in sales tax collections within the tourist development zone (TDZ), which was drawn expressly to capture new tax activity created by the presence of MCC, will be plowed straight into servicing MCC debt. Same goes for all sales tax generated at MCC itself and at a headquarters hotel (the so-called MCC campus sales tax redirect revenue).
The financing scheme for MCC is predicated on these revenues being available for debt service, so clearly they will not be available to compensate for the soon-to-be-missing $14 million. I suppose if TDZ and/or campus redirect revenue comes in at $14 million/year over expectations then you would have a point, but even Dean and Riebeling and their eager-to-please consultant-forecasters are not making such an extravagant (read: preposterous) claim.
From a sales tax perspective, the medical mart has the same issue -- it will lie in the TDZ and any incremental sales tax it generates will therefore likely be TDZ revenue that feeds MCC debt service only.
It is conceivable that the medical mart, as a private facility, could generate property taxes (if, say, we sell them the existing convention center, putting it back on the tax rolls). But that possibility is nullified by signals Dean and Riebeling have sent that they would offer a TIF deal to the medical mart developers, which would mean no significant property tax collections on the thing for years.
And let's not forget that the medical mart, lovely through it sounds, is a highly speculative venture at this point. It has in place no arrangement for lease or purchase of existing NCC with the city, no mart tenants, and no secured financing. I happen to think the idea of the mart is an intriguing possibility for the city and worth further exploration, but to use this whisper of a project as a bankable assumption for a near-term MCC financing vote lies somewhere between fanciful and delusional.
grant,seldom have i ever read such a smug comment.surely you must be one of mcneelys boys?
i think most everyone understands the council has a shoplifter in their ranks,how many more members feel they have the same entitlement to loot the treasury?
grant,build the god damned center yourself.
wonder how many one handed politicians we would have if they tried to pick pockets?
All revenue projections so far have been intentionally conservative and all have assumed zero revenue from the current convention center. It is far from inconceivable that the revenue generated in the TDZ that includes the MediMart could bring in enough extra to cover this $14 M.
It's very interesting that the Scene runs speculation like this, but it never said a word about the misleading push calls the convention center opponents ran. Emily Evans and her goons even called for recall elections against council members that support the project. Could the Scene have an aganeda? Maybe provide cover for a certain at-large council member?
Can you point me to your source material for claiming Emily Evans called for recall elections for Councilmembers who support the project? I generally support the MCC, but I'm pretty sure your claim is false.
Eric,
Its not that Grant needs to build the center himself; but it does seem interesting that the Mayor is so bent on developing this project using only public money.
What is the downside to letting an interested private party invest their own money to develope a complex that will be mutually beneficial for the city and the investor? It seems that if a group thought it was a good enough idea to invest their own money the Mayor would get a convention center and the taxpayers wouldn't be left holding the whole bag.
At least one of the current property owners has expressed an interest in working with the city on the MCC, but they have been met with condemnation proceedings. Wouldn't it be prudent to meet in a board room rather than a court room to see if this project is even worth attempting?
It is far from inconceivable that the revenue generated in the TDZ that includes the MediMart could bring in enough extra to cover this $14 M.
You are free to imagine that, but since no specific financials or pro formas on the medical mart have been made public, there is no concrete basis for drawing such a conclusion. The working TDZ revenue projections in the new HVS Consulting analysis in year 6 of MCC operation are $9 million without a hotel and $11.6 million with a hotel. So, to suggest that the mart would bring in enough additional revenue to cover the $14 million is to believe that the mart would more than double TDZ revenue. That seems like fantasy.
It's very interesting that the Scene runs speculation like this.
To what "speculation" do you refer? My post here is a fact-based analysis that relies on the concrete statements and projections that have been put out there by the administration and by MCC advocates.
I don't believe it is fantasy that the Medical Mart and other business generated in the TDZ will cover the $14M. Remember that projections are another hotel will be built in the TDZ within four years. I guess you speculate that the revenues won't cover the $14M, and I speculate that they will.
As for the calls, I have had three friends tell me that they received these push calls that asked them if they would support recall elections against members of the Metro Council that support the Music City Center project. Kevin Sharp, who heads the opposition along with Emily Evans, told the Tennessean that they have funded these calls; therefore, Emily Evans has called for recall elections against her Metro Council colleagues.
FloydR: Unless you are a personality known by a real name and identity to regulars on this comment board (and not to me), I must say that it is easy and gutless to hide behind a pseudonym while performing hatchet jobs on the reputations of CMs who have been on just about every issue that I can think of above reproach, even when open to criticism.
How hard it must be to expose your actual identity and stand by your words in public. Unless I have missed my guess about such trollish behavior, I am inclined to write you off as a mercenary for convention center forces.
As for your insinuation about how Megan Barry might vote, I would frankly be shocked if she voted against Karl Dean.
Floyd has been around only on convention center news items so the label of "mercenary" is probably appropriate. Emily Evans has always been one of the most forward thinking and intelligent representatives in our government. I wish she was my council representative. But in Floyd's game of 6 Degrees of Separation every one who disagrees with his view (or his bosses view) is a Gaylord stooge. I know I have been accused of being a Gaylord stooge even after blasting Gaylord and every other tourism business.
Emily Evans did not fund any calls. A link to a story with a quote would have to be provided otherwise you are just muddying the water. In order to play 6 Degrees each degree would have to be real, not imaginary.
Mike, I have been a regular at the Tennessean and on other blogs for years. In fact, I read your blog and know that you are an adamnant opponent of the new convention center.
I would not call Emily Evans above reproach. Just ask anyone involved in the Harding Academy fight. For one, she is known to hold a grudge.
To me, her opposition to the Music City Center is based in nothing more than her hatred of Mayor Dean because he defeated her candidate for mayor. She is probably even deluded enough to think she will run against Dean in 2011.
As for the calls, I stand by my claim. Three different people, all of whom I trust, said they received calls asking if they would support recall elections against Metro Council members that support the Music City Center.
One other note on the TDZ tax collections: we should remember that the Medical Mart will be selling very expensive medical equipment, all of which will be subject to our state and local sales taxes. I would like to see an estimate, but in my mind, I belive the Medical Mart will dramatically increase sales tax collections in the TDZ.
Check it out. Moost is back from vacation. How was the boat?
With the Medical Mart thrown in, this is a smart business move for Nashville. Let's build on our two strongest industries, health care and tourism.
Let's do it.
the medical equipment will not be eligible for local sales tax because it will be delivered presumably to other states. In many cases the non-profit or government-owned status of a majority of hospitals would mean no sales tax even if they were located in Tennessee.
If you wanted to build the two largest and strongest industries in Nashville you would have to skip over a lot of others to get way down to tourism. State labor and economic statistics places hospitality/tourism well outside of the top 10 in Davidson. First is healthcare, 2nd is education, 3rd is service, 4th is manufacturing, 5th is retail, 6th is food, 7th is transportation, 8th is entertainment (music and theater and sports)... Don't see a whole lot of interest in "investing" in those other forgotten industries. Of course they usually don't go around asking the government to build them things with tax money from other people. That is limited to sports teams, hotels owners, and meeting planners.
I have heard the script used by Nashville Priorities in their polling and it certainly never mentioned anything about recalling council members. Folks may have gotten phone calls from some source, but based on what I heard, they weren't connected to the NP polling initiative.
Listen to Moost spout the talking points from Tom Ingram, Lew Conner, and me.
Work hard, my little Moost. You may help me get that judgeship I so deseperately crave (and Lew promised me if I would do Gaylord's bidding).
Don't see a whole lot of interest in "investing" in those other forgotten industries. Of course they usually don't go around asking the government to build them things with tax money from other people.
This statement is patently false, Moost. "Service," "Retail," "Food," "Transportation," and "Entertainment" (as you list them) will all benefit from the new business generated by the Music City Center. "Health Care" will benefit from the Medical Mart, and at least some of "Education" will benefit from the increased tax revenue.
Only someone drastically ill-informed would attempt to argue that "Education" never asks for tax dollars, but let's set that aside. These other industries all support the construction of the Music City Center. Ask some leaders in the industries.
We all know Gaylord and Emily Evans are desperate to kill this project, but at least try to be honest in your opposition.
Then try to explain to us why a Belle Meade Council member and a corporate CEO that gets $4M a year in compensaton and angered his shareholders by taking trips to NASCAR races in his corporate lear jet oppose creating jobs for Nashvillians.
Moost,
You will probably get your chance to vote for Evans at some point in the near future. She is clearly got ambitions and to her credit has always stayed on one side of the fence. Problem is not enough agree with her, so while the "forward thinking" people continue to do nothing but "think" the rest of us are actually moving the city forward.
How can these two statements be attributed to the same writer in the same story?
"When Will Convention Center Supporters Abandon the Misleading Claim That Only Tourists Will Pay for It?"
"Yes, visitors will fork up most of the cost"
One statement indicates that all costs will be carried by tourists. The other indicates that only a portion will be. It is not that nuanced. Seriously we should be spending more on education and reading comprehension instead of on Saddam's last presidential/tourism palace.
"most" is more than "a portion" Schools are funded by property taxes, this project is not, seriously learn the difference.
" but the vocal minority are residents who don't even go downtown or understand the economics of job creation."
It appears that YOU are the one who doesn't understand economics.
Government doesn't "create" jobs - or anything else. All government does is redistribute wealth that has already been created by the private sector.
The first dollar that government ever spent on anything came from a tax on wealth that had already been created by the private sector. The same is true for the last one it's spent and every single one in between.
All government does is engage is wealth transfer payments. And any benefit to the transferees is completely offset by an exactly equal detriment to the transferors.
You need think about it. Despite the emails, the overwhelming evidence showing global warming is happening hasn't changed.
"The e-mails do nothing to undermine the very strong scientific consensus . . . that tells us the Earth is warming, that warming is largely a result of human activity," Jane Lubchenco, who heads the National Oceanic and Atmospheric Administration, told a House committee. She said that the e-mails don't cover data from NOAA and NASA, whose independent climate records show dramatic warming.
"The first dollar that government ever spent on anything came from a " goverment printing press.
What you think about news - GOPers Hold 'Prayercast' to Ask God to Stop Health Reform ?
Wanna hear your opinion
I think anyone that is new to the Nashville area is always shocked that the most valuble real estate in the downtown area looks like a wasteland and a junk yard.
Any redevelopment of this area will be a fantastic boost the Nashville economy on many levels. The actual jobs created will help stimulate a lot of the peripheral support industries and the mere visual representaion of a major project taking place will install a renewed consumer confidence which again will trickle down to boost the cities economy.
As a realtor in Nashville, having a conference center that would be attractive to users from all over the country, can only onloy have a beneficial effect on the real estate value and sales in Nashville as more people become aware of the appeal of Nashville and the surrounding areas.
Overall I'm looking forward to seeing this area being redeveloped and effectively giving the city of Nashville a facelift.
