May 29, 2012

Hansen launches new Seattle arena website, claims substitution effect will be 'minimal'

Would-be Seattle arena builder Chris Hansen launched a new website today to promote his plans, plus a Twitter feed and Facebook account and all the other stuff that you gotta have in this day and age. Given the Seattle arena's MOU's revelations about kicking back tax money to the project, the most interesting bit on Hansen's new site is this from the FAQ:

What about substitution of tax dollars -- are these really new taxes?

While there is unquestionably a "substitution" of entertainment dollars in the region that will be spent at Arena events, there is minimal redirection of tax proceeds as the property tax is on the incremental value of the property created, the B&O tax is on businesses that would not exist (NBA/NHL), and the admissions tax does not apply to most other forms of entertainment and the City of Seattle does not collect admissions taxes on Seahawks, Mariners, or Sounders games tickets. Furthermore, the Arena will generate incremental “new” taxes for the City and County from patrons who attend Arena events from outside the City and County borders.

Hansen has a point, especially with regard to an arena-specific admissions tax: If you shift spending from a non-taxed activity (say, the Mariners) to a taxed one (Hansen's revived Sonics), obviously that's new tax revenue. Getting business taxes kicked back is dicier — does this mean that any business moving to Seattle, or opening there, should be granted an exemption from business taxes because if they didn't exist they wouldn't have to pay? — but still at least arguable.

The bigger issue, though, is with what Hansen's site leaves out: The MOU specifically says that all "sales tax ... attributable to the Arena and Arena Tenant Improvements" will be kicked back to pay for arena costs. And for a building that's in the business of sales, that's likely going to be the lion's share of the public costs.

Exactly how much of the public's expense will be a TIF-style subsidy isn't clear yet, and won't be until we have an actual financial plan to analyze, not just an MOU. But it looks more and more like this is going to be where the devil inhabits the details: What's "new" tax revenue, and what's just siphoned off from elsewhere?