Monday, July 11, 2011

Repealing the Admissions Tax: Understanding the scale of the problem

Broad Street: Downtown on a Saturday Night

If we as a city are going to have a conversation about the need to repeal the Admissions Tax, then it is important at the outset to understand the scale of the problem. In short, we need to understand the present benefits of the admissions tax (which are quite small) and measure that benefit against the potential future benefits of a repeal and the consequent growth of a arts business and creative entrepreneur community in Richmond.

Some opponents to Admissions Tax repeal are concerned about the need to replace the lost revenue that would result from the repeal of the admissions tax, so in this post let's examine how much revenue the admissions tax brings in. Once we understand the size of the problem we can propose possible solutions.

According to Richmond's Adopted Biennial Fiscal Plan for Fiscal Years 2010 and 2011, the admissions tax has historically brought in about $2,000,000 or less in gross revenue for the City of Richmond. Consider the following data extracted from that plan:
Actual FY2008

Adopted FY2009

Adopted FY2010

Approved FY2011
If you average these amounts taken from the City of Richmond's own budget you come up with an average of roughly $1,730,285, but let's be conservative and use the higher figure of $2,000,000. According to this same budget plan, the City of Richmond has budgeted for tax revenues from all sources of $415,998,687. If we compare our figure of $2,000,000 average revenue from the Admissions Tax to Richmond's total budgeted tax revenues for FY2011, we see that the Admissions Tax by itself accounts for less than one-half of one percent of the city's budgeted tax revenues (0.4808%). This total does not include the city's revenues from other sources that are not considered taxes (i.e. fees, fines, rents, etc.), so the Admissions Tax actually represents much less than 0.4808% of the City of Richmond's annual revenues.

We can see then from the outset that the size of the hole in Richmond's budget created by the repeal of the Admissions Tax is not a very large one. The repeal of the Admissions Tax will not tear a giant hole in Richmond's budget; on the contrary, it should be very easy to offset this loss of revenue. In the short term it should be possible for Richmond to plug the small gap in lost tax revenue from repealing the Admissions Tax. One possibility is that the city could use $2-4 million of its recent $60 million windfall to provide a 1-2 year bridge in funding.

In the long term, the revenue lost from the repeal of the Admissions Tax should be replaced several times over by increased collections of the meals, hotel, sales and real estate taxes. After two years, the increased amount of tax collected from these other sources should more than offset the tiny amount of revenue the city will lose as a result of repealing the Admissions Tax.

1 comment:

F.T. Rea said...

J.C., again, you've done a nice job.

Of course, the amount of money taken in by the City is important to know, but there's another number we need to know. We don't know how much it has been costing to collect the admissions taxes from the various and sundry venues that have been subject to it.

While the gross has averaged $1.7 million, has it cost the City just $1,000 to collect it? Or, has it cost $100,000? Or, maybe much more?

To date, City Hall has not been forthcoming on this angle. Questions along this line have been blown off. So I have to wonder: Does this mean they don't know? Or, might it mean as much as half of the revenue get used up on administrative costs?

Maybe that bridge doesn’t have to be as big as some would think.