Not right use for pub­lic in­cen­tives

Austin American-Statesman - - VIEWPOINTS -


Austin City Coun­cil’s en­dorse­ment of award­ing mil­lions of dol­lars in state tax sub­si­dies to or­ga­ni­za­tions or com­pa­nies af­ter they have de­cided to stage events in Austin again raises con­cern about pub­licly-fi­nanced in­cen­tives.

Such state in­cen­tive pro­grams have been sold to the pub­lic as an in­vest­ment — a way of at­tract­ing new busi­ness that would gen­er­ate new dol­lars and jobs from com­pa­nies or events that would not have lo­cated in Austin or Texas with­out such con­ces­sions.

But what hap­pened last week at the coun­cil re­gard­ing an award of as much as $5 mil­lion in state tax sub­si­dies to mo­tor sports events looks more like cor­po­rate wel­fare than strate­gic in­vest­ment. Coun­cil Mem­ber Bill Spel­man, who none­the­less voted to go along with the $5 mil­lion award, rec­og­nized the give­away na­ture of it.

“The state is prob­a­bly los­ing money on this,” Spel­man told us. “But as a rep­re­sen­ta­tive of the city of Austin, this par­tic­u­lar trans­ac­tion is very good for the city. We’re get­ting 100 per­cent of the ben­e­fits on this trans­ac­tion.”

Spel­man was one of five coun­cil mem­bers who voted last week to spon­sor the ap­pli­ca­tion by Cir­cuit Events Lo­cal Or­ga­niz­ing Com­mit­tee and Cir­cuit of the Amer­i­cas to the Texas Event Trust Fund in re­im­burse­ments of state sales, al­co­hol, ho­tel/ mo­tel and car ren­tal taxes that a later study would de­ter­mine were gen­er­ated by four mo­tor sports events. The other coun­cil mem­bers who voted to ap­prove the deal are Sh­eryl Cole, Chris Ri­ley, Mike Martinez and Mayor Lee Leff­in­g­well. Coun­cil Mem­bers Kathie Tovo and Laura Mor­ri­son voted no

Un­der the agree­ment, the city would, as Spel­man noted, re­tain all lo­cal taxes pro­duced by the races. And the city would not have to put up any money to draw down state dol­lars from the events fund. On the sur­face, it sounds like a good deal be­cause Austin is able to lever­age state funds to beat out com­pe­ti­tion to lure four ma­jor sports events to Cir­cuit of the Amer­i­cas’ highly touted rac­ing and events venue near El­roy, which has been an­nexed by the city of Austin.

But it be­gins to look a lot less at­trac­tive, given that the events have al­ready an­nounced their plans to come to Austin and, in some cases, are al­ready sell­ing tick­ets for those events. That raises ques­tions about whether Austin was en­gaged in true com­pe­ti­tion for such events and whether tax in­cen­tives are be­ing awarded wisely. Nei­ther the city nor the state should be en­gaged in pick­ing win­ners or losers, nor should tax­ing ju­ris­dic­tions di­vert lim­ited tax dol­lars to en­ter­prises that would lo­cate in Texas with­out such pub­licly fi­nanced in­cen­tives. In the lat­ter case, Texas is los­ing tax money

Against that back­drop, the City Coun­cil’s ac­tions look self-serv­ing.

it would oth­er­wise col­lect to pay for roads, health and hu­man ser­vices and pub­lic ed­u­ca­tion.

Against that back­drop, the City Coun­cil’s ac­tions look self-serv­ing.

The City Coun­cil’s ac­tion to en­dorse lo­cal or­ga­niz­ers’ re­quest for state dol­lars comes af­ter Mo­toGP (one of the ben­e­fi­cia­ries of tax in­cen­tives) an­nounced sev­eral months ago its plan to stage a ma­jor rac­ing event at Cir­cuit of the Amer­i­cas. The event, mo­tor­cy­cling’s equiv­a­lent of auto rac­ing’s For­mula One, is now sell­ing tick­ets for the April 19-21 event.

V8 Su­per­cars, an­other ben­e­fi­ciary, also an­nounced sev­eral months ago its de­ci­sion to stage a race at Cir­cuit of the Amer­i­cas from May 17-19 and is sell­ing tick­ets for that event. The se­ries has been called “Aus­tralian Rules NASCAR.” Sim­i­larly, two other ben­e­fi­cia­ries, the Amer­i­can Le Mans and World En­durance Cham­pi­onships, have an­nounced they would stage events at the cir­cuit next year. Those are the or­ga­ni­za­tions the city voted to help. The ob­vi­ous ques­tion: If they were al­ready coming to Austin, why do they need in­cen­tives af­ter the fact?

It’s a ques­tion that Richard Sut­tle, who rep­re­sents lo­cal or­ga­niz­ers, an­swers by say­ing the money “is re­quired to lure an event we might or might not get, ab­sent that.”

Oth­ers point out that the in­cen­tives es­sen­tially come from tax money gen­er­ated by the events, so if the events chose a dif­fer­ent lo­ca­tion out­side Texas, the city and state would lose out in way of new dol­lars and jobs gen­er­ated by those events.

It’s also worth not­ing that the city awards tens of thou­sands of lo­cal tax in­cen­tives each year to draw down state dol­lars from events trust funds with­out go­ing through the City Coun­cil, so the pub­lic rarely has knowl­edge of those deals in­volv­ing pub­lic tax dol­lars. That is be­cause the city man­ager has author­ity to award up to about $56,000 in lo­cal money with­out ap­proval by the City Coun­cil. We asked for a list of such deals in 2012 and will make that list pub­lic when we get it.

Cer­tainly, there is a place for in­cen­tives when they are used se­lec­tively as true in­cen­tives to lure com­pa­nies or events that would go else­where with­out them or when they come with strings at­tached to pub­lic ben­e­fits.

The city and the state should adopt poli­cies that would re­quire pro­mot­ers to give more than their word that the city and state are com­pet­ing for their events.

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