"Among the many discussions that come up about the stadium bond issue we seem to see a common thread about property taxes being used as opposed to sales taxes to fund the stadium.
We could fund this with a tax on rooms or general sales tax – but in the NSS report it was clear these things were discussed, and deemed not appropriate for the stadium. NSS even concluded that an additional 3% on room taxes would make Wilmington’s room tax the highest in the state if it went up to 9%.
The convention center is funded this way with room occupancy taxes (ROT) going into a fund that the city has opened for this purpose. The fund started, and built up until the construction project was completed. Then it started dispersing it’s funds to cover the cost of the bond and interest and any operating losses. It was felt by the CC supporters that eventually the CC would become self sustaining operationally (meaning the ROT would pay for the bond and interest, and profits from shows would pay for salaries and other operating costs)
The problem is that the CC has not performed as well as anyone anticipated. In fact it has lost a large amount of money over the years to included 2010 as indicated by the CAFR of 2010 pg 113:
This shows the CC fund at only $302,000 dollars.
Now lets look at 2011 CAFR and we see an explanation of the CC and parking deck funds (for the CC)
Convention Center; principal payments due annually on June 1 in installments ranging from $1,010,000 to $3,825,000 beginning June 1, 2017 through June 1, 2038. (average $2,417,000)
And the parking deck:
portion of the parking deck adjacent to the Convention Center; principal payments due annually on June 1 in installments ranging from $425,000 to $700,000 through June 1, 2028; (average $550,000)
The combined installment payment is averaged out to $2,960,000 per year
(By the way Surf City Tom – I also found this on page 87 “the City entered into a three year contractual agreement beginning November 1, 2010 with SMG, LLP (SMG) for the operation of the City’s Convention Center Facility (Center) for a management fee of $100,000 per year.
Under the agreement, the operations of the Center are maintained in a separate non-incorporated organization”)
Now in 2011 the CC fund level dropped to $158,553 after a transfer of ($5,292,990) out of the special purpose fund set up to collect ROTs. In other words – the CC continues to gush monies with no end in sight. And we pay $100,000 in fees to SMG to get this type of result.
Why is this important for the stadium? Well with a bond like we have before us now – the city just pays back a fixed amount each year. We only get $500,000 from them and Mandalay keeps all revenues but if a sales tax were to be used and sales went down the city would have to fund the stadium through general revenues to make up for reduced sales tax receipts. This is what they are facing with CC – when the fund runs out the required monies needed to make the bond and interest payment would come out of the general fund. That is why they didn’t use a sales tax to fund the stadium – people that didn’t want to buy something to support the stadium could drive revenues down to where the city would have to rob from the general revenues funds to pay for it. The property taxpayers were the biggest group they could tax – they couldn’t lose money on it because RE is back up in value and climbing again AND the point could be made that by taxing the collective property owners the cost would be much lower per person which is exactly what the pro side is arguing. It is at its core socialism – government building provided by the “collective” so that a very few could benefit."
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