Study says Convention Center could be funded by increase in food and beverage tax, capturing sales tax revenue or existing tax increment financing optionsConvention Center Exec Summary
July 9, 2018-The Northwest Indiana Regional Development Authority (RDA) has released the executive summary of the Convention and Visitor’s Center market demand study. The study was conducted by Convention, Sports & Leisure International with the assistance of Sycamore Group according to the summary. The executive summary does not discuss the potential cost of a convention center and, despite laying out income and expense projections, never mentions construction costs in any of those analyses. In a 2011 article in the NWI Times, Speros Battistatos of the Lake County Convention and Visitor’s Bureau (Now the South Shore Convention and Visitor’s Bureau) estimated the cost at $55-70M. Given the RDA’s history of cost overruns and lack of fiscal responsibility, the cost could easily exceed $500M.
According to the study, several key challenges stand in the way of a successful convention center in Lake County:
- Key challenges of the Lake County destination (and a primary reason for non-local event planners’ disinterest) include its non-centralized location (within the state)
and the number of event planning groups are primarily oriented in and around the Indianapolis metropolitan area.
- Based on responses of potentially interested event organizers, it will be important to position a new convention center in Lake County with strong highway/ transportation access, and near restaurants and nightlife options.
The study suggests that the center must have 225 hotel rooms within walking distance and another 1100 hotel rooms within 1/2 mile in order to be successful. The study suggests that the conference center could bring result in an additional 47,549 hotel rooms being booked in the first year (approximately 130 rooms per night average). According to the summary, operating expenses would be approximately $2.3M per year while operating revenues would be approximately $1.8M for a total annual deficit of $500,000.00. According to the report, both expenses and income would remain steady for 20 years.
The study suggests two possible methods for financing the convention center:
“While there are multiple revenue sources which could potentially be used to help support capital expenditures related to a new convention center in Lake County, realistically, two revenue streams are the most feasible: (1) a new Food & Beverage Tax; and (2) existing TIF revenues (assuming the final site is in a TIF District). The analysis used to arrive at these two revenue streams (1) excluded property taxes as a primary source of security; (2) excluded public sector revenues (such as water and sewer fees) restricted to other uses; and (3) assessed the relative ease in creating or accessing the revenue stream and a lack of prior claims to the revenue streams.
(1) Food & Beverage Tax. Under existing law, Lake County’s fiscal body may authorize a 1% Food and Beverage Tax by ordinance without additional legislation from the Indiana General Assembly. Once the tax is adopted, “The entire amount received from the taxes imposed by a county under this chapter shall be paid monthly by the treasurer of state to the treasurer of the northwest Indiana regional development authority.” Funds must be deposited in the ‘development authority fund’ and may be used for legally authorized purposes, including economic development projects in Lake County. LSA’s 2018 fiscal impact statement for HB 1099 (which did not pass this session) included Food & Beverage Tax revenue projections for each county in Indiana, based on the collections of the current counties and municipalities that impose the tax. For Lake County, LSA estimated $9.4 million in revenues for calendar year 2019 and $9.8 million in 2020. It should be noted that if Lake County implements the Food & Beverage tax and desires to use those revenues to secure a bond issue, bondholders and rating agencies may require a backup source of funding, at least until the County has several years of actual revenues from this source.
(2) Existing TIF Revenues. There are currently 54 different Tax Increment Financing districts within Lake County. For calendar year 2015, the most recent year for which data is available online, the Indiana Department of Local Governments reported revenues of $66.47 million from all 54 TIF districts, based on an incremental assessed value of $1.657 billion. Individual TIF district revenues vary widely, with 8 districts reporting no revenues in 2015 while the Whiting Allocation Area reported
$15.46 million and two districts in Hobart reported revenues of over $4 million each. If the site selected is in an existing TIF district that has capacity (i.e., available revenues), those revenues would become available for this project.
(See Exective Summary, Page 7, above)
The study also mentioned capturing the increment in sales tax-that is any future increases in sales tax which occur within a specified area. Hal Slager rammed a “hot pile of garbage*” bill through the Indiana General Assembly in 2015 which, for the first time, directed sales taxes within transportation districts to go to the RDA. A similar provision for a convention center district would arguably further strain scarce school funding resources.
It is crucial to note that the study cites a figure of $66M per year collected via tax increment financing districts within Lake County for fiscal year 2015. Despite collecting $66M in 2015, redevelopment areas spent $85M in 2015 and had bonds totalling over $482M outstanding. Thus, it seems that there is no money in existing redevelopment districts to fund a convention center. That leaves the passage of a new food and beverage tax as the primary option for supporting a convention center. The data is presented below:
LAKE COUNTY TIF District Summary for Calendar Year 2015
(Typically submitted by April 1, 2016)
|Number of TIFs||54||0||54|
|Number of Parcels||15,874||0||15,874|
|Gross Assessed Value||$4,202,183,052||$4,202,183,052|
|Net Assessed Value||$3,673,775,991||$3,673,775,991|
|Base Assessed Value||$2,016,693,898||$2,016,693,898|
|Incremental Assessed Value||$1,657,373,958||$1,657,373,958|
|Cost of Bonds Associated with TIFs||$482,144,238||$482,144,238|
*Munster Republican Town Councilman Joseph Simonetto referred to Hal Slagers House Bill 1144 as a “hot pile of garbage” bill on several occasions.