Hartford Business Journal

20 Hartford Business Journal • May 28, 2018 • www.HartfordBusiness.com EDITOR'S TAKE Admissions tax should be repealed L eaders who are ill-prepared to handle a crisis often make slapdash decisions that help solve short-term problems but lead to longer-term issues. It's the way our state legislators have governed in Connecticut for far too long and why the state finds itself engulfed in an endless financial crisis. A prime mismanagement example is how lawmakers have handled Hartford's XL Center, which has become a political hot potato in recent years because of its need for hundreds of millions of dollars in renovations. The aging arena's latest problem, however, isn't about state funding, although it remains a major issue. As Hartford Business Journal News Editor Matt Pilon reports in this week's issue, the XL Center is having an even harder time attracting shows and performances because lawmakers recently removed the arena's exemption from a 10 percent state admissions tax. The tax, which applies to certain sporting events, theaters, movies and amusement parks, has been around since the 1970s, but some politically connected venues, including XL Center, New Britain Stadium, and Webster Bank Arena in Bridgeport have received exemptions over the years. That changed in late 2017 during lawmaker's desperate at- tempt to balance the state budget. Most exemptions were eliminated so lawmak- ers can raise a few more dollars to balance the state's books. (The tax raised a total of $15.4 million in fiscal 2017 and is expected to tack on another $2 million this year thanks to the removal of venue exemptions.) The tax, according to Michael Freimuth, executive director of the Capital Region Development Authority, has cut into shows' potential profit margins, making it harder to attract certain acts. In fact, Freimuth says the newly assessed tax has played a role in XL Center missing out on as many as a dozen events it recently bid on, costing it as much as $650,000 in revenues. Now the money-losing XL Center is projecting to lose $3 million this fiscal year, its worst operating performance in four years. Guess who picks up that tab? State taxpayers, of course. (The admissions tax impact itself is expected to cost the XL Center $400,000 annually.) The timing of the tax couldn't be worse. MGM Springfield, a nearly $1 billion casino-entertainment venue, is scheduled to debut in August and will further hurt XL Center's chances of attracting performances. Meantime, CRDA recently put the XL Center up for sale and is looking to entice buyers willing to invest tens of millions of dollars to completely renovate the 43-year-old structure. The tax will certainly make it harder to attract willing investors. What's the solution? I've long favored an equal playing field among businesses so I think lawmakers should repeal the tax in its entirety. One venue doesn't deserve a competitive edge over another. This tax is particularly absurd because it's hurting venues already subsidized by taxpayers. Lawmakers, for example, have agreed to invest tens of millions of dollars in the XL Center in recent years to give the drab facility a facelift so it can attract more fans and events. But now the nuisance admissions tax is having the oppo- site intended effect. And, making matters worse, taxpayers have to foot the bill when XL Center loses money. There is a bigger picture to all of this. It underscores lawmakers' inability to understand tax policy and its economic effects, and it's exactly the reason Con- necticut's economic competitiveness ranks near dead last in the nation. State lawmakers lack a sophisticated tax policy plan that would balance the bud- get and promote economic growth, so they are left panhandling for spare change. That leads to the types of trivial taxes or fees that do more harm than good. The XL Center will continue to be a controversial topic. But Connecticut taxpayers are already major investors in the venue and the only way to ensure it's financially viable is for it to attract as many acts as possible. The admissions tax is counterintuitive to that effort. Let's not trade dimes for nickels. OTHER VOICES Lamont offers more of the same By Chris Powell D emocrats have controlled the governor's office and General Assembly for eight years and polls suggest Connecticut voters are extremely unhappy with the state administration, what with the chronic insolvency, tax increases and oppressive unfunded liabilities. So how will wealthy Greenwich businessman Ned Lamont, the party's nominee to succeed Gov. Mal- loy, address that unhappiness? At the Demo- cratic State Con- vention Lamont didn't address it at all. To the con- trary, he seemed to promise more of the same, figuring that he can win anyway with an unprec- edented degree of mobilization of state government's many dependents, particularly government employees. Accepting the nomination for governor, Lamont acknowledged that state government's finances are awful but pledged not to balance the budget at the expense of state em- ployees, teachers and the poor. But that's where most of the money goes. Who is left? Only taxpayers. Lamont added that in writing the budget he will have "everyone at the table," which sounded exactly like Malloy. Having been "at the table" only to suffer Malloy's two record tax increases, taxpayers might prefer never to sit down again. Not that any Republican candidates for governor have offered a compre- hensive solution to state govern- ment's insolvency, but most of them agree that state employee compensa- tion must be curtailed. So there is no mistaking which side is the tool of the government class and which is not. To quell the Democratic conven- tion's unexpected clamor for more ra- cial and ethnic diversity on the state ticket and the dissatisfaction of many delegates with his choice of former Secretary of the State Susan Bysie- wicz for lieutenant governor, Lamont pledged to create the most diverse administration in state history. He did not pledge to create the most quali- fied, competent, honest, and efficient administration, as no delegates were clamoring for that. For the diversity prattle is mainly cover for more pa- tronage claims. Tribes don't need to run gambling Nobody calls for a special session of the General Assembly when some financial scandal breaks in state government, as when, recently, the state auditors reported that the state Department of Economic and Com- munity Development, which gives tens of millions of dollars away every year, has never learned how to count money or jobs. But when the U.S. Supreme Court invalidated the federal law that pro- hibited states from authorizing sports betting, Gov. Malloy and state legisla- tors quickly announced their interest in a special session to get state govern- ment into the sports-betting business. The governor and legislators imagine annual sports betting tax revenue of as much as $80 million. Just as Connecticut's authorization of Indian casinos 30 years ago pushed most of the rest of the country into casino gambling, the Supreme Court decision will push most states into sports betting, and much faster, since the internet instantly will carry any state's sports betting nationwide. Connecticut and other states will either undertake their own sports betting or forfeit the sports betting of their residents to other states. The sports betting issue facing Connecticut is simply whether state government will accept the claim of its two reconstituted Indian tribes that their casino duopoly arrange- ment with the state gives them exclusivity on sports betting as well. The claim hinges on whether sports betting is to be considered just as much a casino game as slot machines and blackjack. So this is the moment for state gov- ernment to assert its sovereignty, to reject the tribes' claims and start sub- jecting their casino exclusivity rights to regular auction. Those rights well may be worth more than what the tribes long have been paying, 25 percent of their slot-ma- chine revenue. Chris Powell is a columnist for the Journal Inquirer in Manchester. Opinion & Commentary Greg Bordonaro Editor Chris Powell

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