December 20, 2009

Newark: If Devils won't pay rent, tax 'em

The New Jersey Nets may or may not relocate temporarily to Newark on their way to Brooklyn, but apparently there could still be an increased ticket tax at that city's Prudential Center. The Newark city council voted last Wednesday to explore a 5% ticket surcharge on all events at the Rock, which would raise an estimated $3.9 million a year for the city treasury.

Teams signing leases on new buildings typically include a clause ruling out such after-the-fact tax increases, precisely because it's such an easy back-door way for local governments to try to recoup some of their costs once concrete has been poured — and indeed, the Devils' lease says it can deduct any ticket taxes from its rent. However, as Joan Whitlow notes in the Newark Star-Ledger, the Devils have been withholding rent for their entire three years at the Prudential Center:

Newark ponied up more than $300 million to build the arena. The Devils have not paid rent for two years, going on three. The first year the team said the arena was not ready in time. Yes, the city was slow on some of its road and infrastructure work, but those things were ready for opening night. The Devils, however, were in charge of arena construction and Newark spent extra on fire patrols and other safety measures because of work the Devils did not get done. In any case, "not finished" certainly didn't apply to the second year's rent.

A ticket tax, then, could at least be a way of breaking the rent deadlock. (And for fans who are worried: Most economists agree that ticket taxes come mostly out of teams' pockets, not fans', since ticket buyers are only willing to pay a certain face value, taxes included.) Given the Newark city council some credit: They learn from their mistakes.