Monday, September 07, 2009

Did Anyone Think To Ask Indy's Hospitality Businesses To Pay For ICVA?

The Star has a completely one-sided story today by Bill Ruthhart and Erika Smith extolling the virtues of the ICVA and how important it is that we continue to dump tens of millions of dollars in public funding into the nonprofit's efforts to promote conventions. The ICVA complains that its $11.4 million is paltry compared to other cities. It wants $3 million more in funding (it originally sought $5 million more), which apparently it thought it was going to get if the hospitality industry rallied behind the nearly $25 million a year tax, spend and borrow bailout plan the Indianapolis City-County Council foolishly and recklessly approved last month.

As a consequence of the bailout plan, Indianapolis now finds itself boasting the highest hotel tax in the nation at 17%, not the 10% rate indicated by the Star report, which does not factor in the City's 7% sales tax. The ICVA is upset that the CIB is not boosting its contribution to the organization with the added revenues. The CIB has been doing what's called belt-tightening because of the higher costs of maintaining Lucas Oil Stadium. At the end of the day, however, the CIB's nearly $100 million budget for 2010 continues its long-term trend of spending more and more each year. The ICVA is now making the same arguments we heard over and over about the need to increase funding to pay for the new stadium, added costs for which it had not bothered to find funding prior to constructing the new stadium. Similarly, the ICVA bemoans the lack of funding to market the expanded convention center. "Without additional funding to hire more salespeople, experts say, the ICVA could have a tough time booking enough conventions to fill the bigger Indiana Convention Center," the Star reports.

The Star story makes no mention of the $400,000 the ICVA is paying out to its executive director, Don Welsh. Do they actually think paying him more money is going to produce any better results than he got in a similar job in Seattle? Welsh's number one objective is to see how many additional six-figure employees he can add to the ICVA's payroll. The Star's explanation of Welsh's strategy: "The money would pay for marketing campaigns and to add seven employees, including three national sales managers and a new senior vice president of sales. About $750,000 of the funding would be used to discount the convention center's fixed price rates during slower times of the year."

About $750,000 is being requested to "discount the convention center's fixed price rates during slower times of the year?" That's a lie. The costs of bringing a convention to Indianapolis is higher than many other cities because of the cost of hotel rooms, not because of the convention center rates, which compare quite favorably to other cities. That's why the ICVA must spend money to discount those rates. With the highest hotel tax rate in the nation now, the ICVA knows it will have to devote an even larger portion of its budget to buying down rates to lure conventions to come to Indianapolis, which lacks the scenic amenities or warmer climates of competing cities.

The major thrust of the ICVA's argument for an increased budget begs the question of why Indianapolis' hospitality industry isn't stepping up its paltry contributions to the ICVA's budget. "The ICVA argues that market research shows for every $1 spent in marketing and selling the city's convention space, the CIB will receive nearly $2 in additional tax revenue and the state $5 in tax receipts, the Star reports. "The data is irrefutable. There is no questioning the value of the funds that go to the ICVA," said Paul Okeson, chief of staff for Mayor Greg Ballard. "Finding the additional money for the ICVA is the right thing to do -- there's no debating that. The question is where do we get the money from?" Okay, so if each $1 spent increases tax revenues by $2, then that must mean it comes from higher spending at hotels and restaurants by conventioneers. So why isn't the hospitality industry stepping up to help generate these certain new revenues for their industry?


Downtown Indy said...

At every turn, these projects that are supposed to be great financial boosts to the city always come down to lots of handwringing and sob stories about where to get the money to pay for them.

I see a pattern here: They are NOT the financial boosts their proponents claim they are.

This latest tearjerker serves to underscore the utter boneheadedness of giving away the farm on LOS. The reason we get no money from these deals is the deals always require us (the rubes) to give away all or most of the revenue to 'them' (the slickers).

They do this knowing full well it will be a relatively easy task to burden the taxpayer with another 'small' tax increase down the road.

It won't be long before the 'X is cheaper in Indianapolis than other comparable cities' argument ceases to be valid. THEN what will they do?

dcrutch said...

Continued CIB vested-interest versus taxpayer representation, a recent hike in hospitality taxes, and now continued front page news of funding shortfalls.
What does it take to get concessions before we have to turn out the lights and board 'em up?

Jon said...

Downtown Indy and dcrutch are both correct, at every turn we are subjected to some sob story about why we haven't done enough for our poor CIB or ICVA. It doesn't matter how much money is extorted from the hotels, restaurants and taxpayers it will never be enough to support these enterprises. The CIB waited three days after the increase in hotel taxes were announced before they cried it's a stop gap we need more.