Wednesday, February 13, 2013

IMS Subsidy Legislation Will Hit Race Attendees With 10% Ticket Price Hike

The proposed $100 million subsidy for the Indianapolis Motor Speedway introduced in the Indiana Senate this week by State Sen. Mike Young would hike ticket prices for all three race events currently held at IMS by 10%. That's because the legislation will subject ticketed admissions to the track to the Marion Co. Admissions Tax, which the Indianapolis City-County Council just voted to increase from 6% to 10%. Currently, only ticketed admissions to events at facilities financed in whole or part by state and local funds, such as Lucas Oil Stadium, Banker's Life Fieldhouse and Victory Field, are subject to the admissions tax. Ticketed events at the IMS are not currently subject to the tax. [UPDATE: This could be a different admissions tax that is not currently collected rather than the 10% admissions tax. See update for more below.]

A fiscal impact statement prepared by the Legislative Services Agency for SB 91 estimates that the Motorsports Investment District ("MID"), which is defined to include only the IMS, will initially capture $3 to $4 million annually from: state and local sales and uses taxes; individual income taxes; county option income tax; and county admissions tax. The legislation caps at $5 million the maximum amount of state and local tax revenues that may be captured by the MID. What is remarkable is that, even with the addition of the 10% county admissions tax, LSA estimates that all of these taxes combined would generate only $3 to $4 million.

Race day tickets to the Indianapolis 500 range from $40 to $150 with at least 250,000 in attendance on race day. Carburation Day tickets cost $20 and draws nearly 50,000 people annually. Attendance for qualification and practice days is generally lower and ticket prices cost $10 to $15. The Brickyard 400 draws a smaller crowd of at least 150,000, and race day tickets cost $70 to $130. The MotoGP Indy Grand Prix race draws the smallest crowds, and tickets for race day run from $70 to $130. If you conservatively estimated ticketed admissions to IMS events annually at 500,000 and assumed an average admissions tax of about $5, the newly-imposed admissions tax would generate at least $2.5 million annually. Yet LSA is only figuring an additional $500,000 to $1.5 million that would be attributable to state and local income taxes and sales and use taxes. The food and beverage tax in Marion Co. is 9%. If the average person spends $20 while attending an event, that would generate about $3.60 per person in additional taxes. Multiply that by a half million people and you generate about $1.8 million. That leaves very little money that would be generated from state and local income taxes.

LSA's fiscal analysis says the state and local income taxes include employment and wage payments at the IMS and purses paid to race participants. Last year's total purse for the Indianapolis 500 alone was about $13 million. Most of the prize winners don't live in Indianapolis so I question whether they're even paying state and local income taxes on their prize winnings. As I understand Indiana's income tax law, only professional baseball, basketball, football, hockey and soccer players who are nonresidents are required to apportion their income to Indiana based on the duty days they perform here; it does not apply to nonresident race car drivers who come into town for one event per year. That would indicate that the state and local income taxes attributable to the IMS would primarily just cover its employees and the IRL employees based at the IMS. Now it's possible drivers employed by racing teams based in Indianapolis would be paying Indiana income tax; however, the MID only includes the IMS. The racing team's facilities are not located within the MID. While several of the IRL teams are locally-based, NASCAR teams are primarily based in the Charlotte, North Carolina area.

Missing from the LSA fiscal analysis is the actual loss of local revenues that will result from the creation of the MID. It doesn't specify how much of the $3 to $4 million it captures would represent local tax revenues. It appears to me that IMS officials had no choice but to stick it to their fans by agreeing to tack on the 10% admissions tax to events held at the IMS simply to come close to generating up to the $5 million the MID would be allowed to capture under the proposed legislation to fund nearly $100 million in improvements to the track over the next 20 years. The revenue numbers without the admissions tax are abysmal. I'm not sure what's going on there. I wonder just how accurate the analysis is. I'm betting the analyst wasn't given access to the information she needed from the IMS to really pinpoint the numbers. The financials for the IMS have remained a pretty closely-guarded secret of the Hulman family and their top executives. They've always closely- guarded actual attendance numbers, which supposedly reached as high as 400,000 for the 500 in the heydays of the race. After the split between CART and the IRL, attendance continuously dropped until it rebounded somewhat in the last couple of years.

UPDATE: There seems to be confusion over the term "admissions tax." Apparently, there is a different admissions tax on outdoor events apart from the 10% admissions tax that is collected on events held at the CIB's event. This other entertainment facility admissions tax is applied at the rate of 50 cents per ticket and is not currently being collected by the IMS. What the sponsors of the subsidy may be trying to pre-emptively accomplish here is to make sure the smaller admissions tax, not the 10% admissions tax, if a tax is imposed in the future, will apply. If this smaller tax is instead imposed, the potential revenues would be much smaller, totalling a few hundred thousand dollars a year at most. Hat tip to the Star's Jon Murray for clarifying this point.

Here's another interesting find in the bill, as amended in committee, which a Senate Rules Committtee and Appopriations Committee unanimously approved this morning. The public bonds that will be issued for these so-called improvements could also be used to assume prior debt the IMS holds for past improvements on the track. Let's say the IMS owes a bank $50 million. They could use these bonds to make just $50 million in new improvements and use the balance to refinance debt they currently owe for past improvements made to the track. That's the same as putting $50 million directly into Mari Hulman George's pocket the minute these bonds are issued and that debt is assumed. Every lawmaker who votes for this giveaway should be locked up in prison for at least 10 years for a theft of public funds. This sort of private financing of private corporations is specifically prohibited by the Indiana Constitution, but our courts have in a very corrupt fashion just pretended that provision of the Constitution doesn't really mean what it actually says in order to support the gifting of hundreds of millions of public tax dollars to private businesses and their owners. Here's the language contained in SB 91, as amended in the Rules Committee:
Distributions from the professional motorsports development area fund to the authority may be used for the following:
(1) Structures or other capital improvements that are located in the motorsports investment district.
(2) Financing or refinancing structures or other capital improvements described in subdivision (1) or the payment of bonds or leases for structures or other capital improvements described in subdivision (1).
What's interesting is that the Indianapolis Star's State House reporter is reporting that nobody showed up to testify against SB 91 this morning; however, she fails to note that the committee's agenda provided clearly stated that "some public testimony may be permitted at the discretion of the chairman." The senators on the Appropriations Committee who voted to authorize the theft of public monies include its chairman. Sen Kenley, along with Mishler, Boots, Charbonneau, Eckerty, Hershman, Pat Miller, Waltz, Wyss, Talian, Hume, Rogers and Skinner. Not surprisingly, I just saw Sen. Wyss collecting a free lunch over at Sahm's just a few minutes ago.

Someone asked why the corporate income tax is not included. The IMS pays no income tax at the corporate level. It's a pass-through entity. Any income it claims to earn would be reported on Hulman family member's individual income tax returns. Mari Hulman George, Tony Hulman's sole heir, is a resident of Terre Haute. I'm not sure if her son Tony George or any other family members own any shares of the IMS. Mari, of course, showed son Tony the door awhile back. At least he wasn't shot dead in a gun battle with her boy friend like her late-husband, Elmer George, a former vice-president of the IMS until his untimely death the Sunday evening of the 1976 running of the Indianapolis 500. Tony Hulman reportedly wanted Elmer, a washed up former race car driver, to have no part in running the family empire. George died from multiple gun shots fired from a gun held by Guy Trolinger, a farm hand employed by the Hulman family, when Elmer entered the farmhouse in which he and Mari resided. Mari had petitioned to divorce Elmer a few weeks earlier. A Vigo County grand jury ruled that Trolinger's shooting of Elmer during his intrusion into their farmhouse was self defense. Several years later, Mari was arrested at an Indianapolis bar when her drinking companion/boyfriend, Mr. Trolinger, passed out in the bar, and Mari interfered with police and emergency responders who arrived to assist Trolinger.


Flogger said...

I see where Dan Carpenter at The Star has provided his blessing to the IMS Corporate Welfare Scheme. "Speedway has earned a Break", is the title of his column.

Bottom line the reasoning is: Carpenter says, "it is difficult to begrudge the Hulman family the favor it's asking of the legislature." Since the Colts, and Pacers receive a healthy dose of Corporate Welfare the IMS should too, seems to be the jist of the column.

I will not surprised if the other columnists at The Star weigh in on the side of more Corporate Welfare.

Oh well the Horse Racing Industry receives a subsidy.

Most of us are expected to pay our fair share of taxes, without subsidies, and I suspect most small businesses without clout are expected to.

Had Enough Indy? said...

It stretches credibility that the IMS pays less than $5 million per year in income, sales, and use taxes - even without an admissions tax.

Gary R. Welsh said...

There have always been rumors that the IMS reports little or no income on which taxes are paid. It's a family-owned business so that's information that is pretty hard to confirm.