Mayor, entertainment industry clash over proposed taxWritten by Chris Schmidbauer | | email@example.com
When Mike Bell took the oath of office on Jan. 4 to become Toledo’s mayor, he inherited a city under severe financial distress. Since he first set foot on the 22nd floor of One Government Center, Bell and his team have worked to find ways to close the gap on the city’s $48 million deficit. He and his administration’s efforts to balance the city’s budget culminated in the form of the mayor’s budget proposal, which was presented to Toledo City Council on March 1.
One of the items included in the proposal was a tax on entertainment and sporting event tickets, and that has several of the city’s entertainment venues upset.
“When you consider the fact that ticket sales are down across the board during this recession, raising the price of tickets in this environment is a huge mistake,” said Joe Napoli, president and general manager of the Toledo Mud Hens and Toledo Walleye.
The legislation for the proposed tax was sent to council March 5. The bill states that an 8 percent tax should be applied to all admission tickets within the city’s limits. Venues affected by the proposed tax include “indoor and outdoor theaters, cinemas, dance halls, amphitheaters, auditoriums, stadiums, athletic pavilions and fields, baseball and athletic parks, circuses, side shows, swimming pools, outdoor amusement parks and observation towers, race tracks, zoos, science centers, museums and all other similar places,” according to the legislation. The mayor’s office estimates that the tax would bring
$1 million in revenue for the city.
“I think all of us were taken by surprise,” said Ashley Mirakian, director of marketing and public relations for the Toledo Symphony. “We all can appreciate the situation Mayor Bell is in, but anything that would further raise the ticket prices would hurt our attendance, which is already down.”
Many of the entertainment venues have banded to fight the proposed entertainment tax; those efforts have been spearheaded by Napoli and Toledo Arena Sports Inc., parent company to the Walleye and the Mud Hens.
“Joe Napoli and his group have really led the way on this,” Mirakian said. “They have been great about reaching out to all the members who might be affected by this, and it has been really good for us to talk to each other and get on the same page.”
Napoli said that after meeting with the entertainment institutions in the City of Toledo, the consortium came up with a rough figure that 350,000 fewer tickets were sold during 2009.
“That to me is a clear indication that the recession has definitely affected our businesses,” Napoli said.
Napoli said the damage is not limited to ticket sales.
“When you consider that drop in attendance, it also means that there is a drop in other areas as well,” he said. “For us that means a drop in concessions and a drop in souvenir sales, and it has a ripple effect all across the board.”
Toledo Arena Sports Inc. is not the only organization affected by the recession. All of the entertainment institutions in town have felt that sting of economic hardship in the past year.
Ward Whiting, the executive director of the Stranahan Theater, said the theater has not been immune to a down economy.
“Over the past year to year and a half, we have seen a 15 percent decrease in our ticket sales,” Whiting said. “We have also seen a 10 percent decrease in the number of shows that have decided to book a show at Stranahan due to the economy.”
Anne Baker, CEO of the Toledo Zoo, said the zoo was also affected. She said the number of visitors who took advantage of the zoo’s free days increased dramatically last summer.
“People are looking for deals right now, and they are looking for anyway to save a penny in these times,” Baker said. “Adding a tax on to that would just discourage patrons more.”
Debating the tax
Most of the entertainment venues around Toledo have said that such a tax would further decrease ticket sales and have a negative impact on the local economy.
“This tax is just going to make the matters we face worse,” Napoli said.
Toledo Arena Sport Inc. has used the Web sites for the Mud Hens and the Walleye, and its video boards at both Fifth Third Field and the Lucas County Arena, to encourage supporters to voice their displeasure with the entertainment tax. The company has rebranded the tax as a “Family Ticket Tax.”
Napoli said the rebranding is an accurate portrayal of who the proposed tax would affect.
“Eighty-three percent of the people who would be taxed would be families, since they represent the majority of attendants to the sporting and entertainment events,” he said.
“We feel that it is definitely an inaccurate representation of the tax,” said Jen Sorgenfrei, the public information officer for the mayor. “We know Toledo Arena Sports Inc. has to protect their interests, but we are trying to protect the overall community by providing police, fire and other necessary services to the citizens of Toledo.”
Mayor Bell said he understands that while not all of his ideas are going to be popular, they all are going to help fund basic protection that the city provides to its citizens.
“If we have to make severe cuts that will affect our safety forces and that will affect these entertainment venues as well,” he said. “I have said since day one that we have to figure out what is best for the entire city and not what is best for the smaller groups around town.”
According to the state of Ohio, it is estimated that admission tax collections totaled $24.4 million in calendar year 2007. A total of 66 Ohio municipalities (50 cities and 16 villages) levied the tax.
Lucas County Commissioner Ben Konop said he disagreed with the tax proposal, citing a tax would defeat the purpose of Fifth Third Field and the Lucas County arena, which are both owned and operated by Lucas County.
“The whole reason these venues were built is so that families could afford to go to shows and games at both facilities,” Konop said. “There are better ways to close the gap on this deficit without passing it on to the backs of taxpayers who want to enjoy a baseball game or a hockey game.”
Many entertainment venues believe the tax would drive business away from Downtown, which they feel is the antithesis of what the city should be trying to accomplish.
“This puts one more obstacle in our way to attract people to Downtown Toledo,” said Steve Miller, SMG general manager of the Lucas County Arena and the SeaGate Convention Centre. “The point is to bring money Downtown; a tax does not help.”
“If people do not attend a game then that means that they aren’t eating at the restaurants, shopping at the art galleries, or having a drink at the bars before or after games,” he said. “This would be unfair to all of those businesses who have invested in Downtown Toledo if this tax would go into effect.”
Entertainment officials also accused the mayor of not conferring with the institutions prior to the introduction of the tax proposal.
“We found out about this through the media,” Napoli said. “I think in the effort to solve this budget crisis, they threw an idea out there without speaking to the people who would be directly affected by this tax.”
Miller had similar feelings.
“We never were contacted directly by the mayor’s office,” Miller said. “We had to reach out and make that initial contact. Unfortunately we were never given the opportunity to voice our opinion prior to this proposal being introduced.”
Bell said that while the situation could have been handled differently, there was plenty of opportunity for the entertainment industry representatives to voice their concerns.
“I would have loved to have gone out and talked to everyone about this, but I didn’t have that kind of time to speak with everybody who would be impacted,” Bell said. “We have been discussing these issues at several different meetings, and all have been open to the public. So we feel we have been as transparent as we can be, considering the time restraints that the budget needs to be balanced by March 31.”
Since the mayor’s office and the entertainment industry cannot see eye to eye on the proposed entertainment tax, the question is whether some form of compromise can be reached. Initial reception to such an idea has seemed frosty.
“I don’t think a compromise is possible right now,” Miller said. “It may be too early to tell, but I think we are all doing a good job of bringing people to Downtown Toledo to spend money. Any tax, no matter the percentage would be an obstacle to achieving that goal.”
Baker said a tax would lead people to choose venues that would not be affected by the tax.
“I think all this tax would do is drive people to spend their money outside of the city limits,” she said. “There are zoos, movie theaters and arenas that are around here that are not going to be affected by this tax. Why would they patron Toledo venues where they have to pay more?”
Mirakian said any tax would cause music lovers to boycott the symphony.
“We are so reticent to raise prices period, and in fact we lowered our ticket prices last year to entice people to attend the concerts,” she said. “There are plenty of people who would stop coming to the shows if any tax were to go in to place.”
Napoli said such a tax would deepen the deficits of all the entertainment organizations.
“Every organization has said they have had to cut wages, cut hours, or lessen the amount given to 401(k) programs,” he said. “Many of the organizations have said that if they have to absorb this tax they do not know where that extra money is going to come from.”
Bell said he is willing to compromise, but with the understanding that it might mean the loss of jobs at the police and fire departments.
“We can compromise, but that means it starts to affect staffing numbers,” Bell said. “There is no easy solution to fix this. No matter what I do, someone somewhere is going to be affected.”
The latest in this saga occurred March 9 when Lucas County Commissioner Pete Gerken cautioned Toledo City Council that if the entertainment tax were to go into effect, the county would file a temporary restraining order against the city.
Gerken said the county would cite a decision from a 1965 Ohio Supreme Court Case that ruled against Lake County. The case dealt with Lake County’s desire to place a 3 percent tax on greens fees on a golf course that was in the county limits but owned by the Cleveland Metropolitan Park District.
Bell’s administration said this statute does not apply in this case.
“I think Adam Loukx, our city law director, put it best,” Jen Sorgenfrei said. “The case the prosecutor is citing is dealing with entities that have political jurisdiction. The Mud Hens and the Walleye are not entities with political jurisdictions.”
Konop does not share a similar view on any litigation against the city. He feels that any court proceedings would be a waste of resources for both the city and the county.
“I just feel that is wasting tax dollars,” he said. “The whole region is in dire financial straits and this is just spending money that could be spent in other fashions.”
Konop said this matter can be solved through other channels.
“A court proceeding is not the right the way to go. I think this can easily be taken care of through the course of the legislative process,” he said. “I am still firmly against passing this tax, but this sets up an ugly situation for the city and the county. I think we need to sit down and discuss the situation, if this was to pass, and try and avoid any kind of litigation.”
Sorgenfrei said the mayor and his staff agree, but they will pursue any course necessary to make sure the tax is enforced should it pass.
“I don’t think it will get that far,” she said. “But if it is approved and the county was to put a challenge in court, we would reciprocate that.”