Potential of higher car rental taxes drawing fire

People who come to Indianapolis for business, ball games or other reasons could pay more for their visits if local officials decide to raise taxes on car rentals and professional sports tickets early next year.

A package that state legislators passed in 2009 to bail out the agency that operates the city's stadiums and convention center allows the City-County Council to increase the taxes, but it must act during the first two months of 2013.

If the council does act, taxes on car rentals could rise from 15 percent to 17 percent and the admissions tax on Colts and Pacers tickets could increase from 6 percent to 10 percent, The Indianapolis Star reported.

The idea is drawing the ire of the local hospitality industry, which for years has complained about creeping tax rates on hotel rooms, rental cars and meals that they say burden their customers and make Indianapolis one of the highest-taxed U.S. cities for visitors.

The Indianapolis Colts and car rental agencies in particular say they're opposed to any increases.

"It would annoy customers more, especially when you factor in that … we have to include all taxes and pricing" in Internet quotes, said Charlie Mullen, co-owner of Indianapolis-based chain ACE Rent a Car. "So it drives up the pricing of the car. It's just getting outrageous."

The city's NFL franchise doesn't want its fans to have to pay any more, either.

"It would be unfair to our ticket holders, particularly in these economic times, to be hit with an additional tax on the tickets — and not just for us, but for all the events" at CIB venues, said Dan Emerson, the Colts' vice president and general counsel. "It would be sending the wrong message."

A spokesman for the Pacers said the NBA team had no comment.

The proposal is part of ongoing budget talks between the council and Mayor Greg Ballard that also could include a new agreement with the Pacers.

Ballard said most visitors don't focus on taxes. "For the average customer who comes downtown for a convention, they ask what the overall cost of the experience is," he said. "And there's no disputing that this downtown is built up largely on visitor taxes."

The Capital Improvement Board estimates the full tax increases would bring in $6.9 million a year. The board's operating budget for next year is $63.9 million. Before the General Assembly approved the bailout in 2009, the board's cash reserves had dropped to $26 million.

The 15-percent car rental tax rate contributed to Indianapolis being ranked No. 8 on the Global Business Travel Association's list of the worst 10 cities for travel taxes in 2012. The group also considered Indianapolis' 9-percent tax on food and beverages and its 17-percent tax on hotels.

John Livengood, president of the Indiana Hotel and Lodging Association and the Indiana Restaurant Association, said he's more concerned about the car rental tax than the sports tax. It makes sense for fans who use sports facilities to help support the agency that operates them, he said.

But a higher car rental tax "would discourage people from coming to Indianapolis and spending money," he said. "That tax, like the hotel tax, is a disincentive for people to come here."

But despite the city's high travel taxes, Indianapolis hasn't been hurting for tourism.

A study released last week by Visit Indy estimated the economic impact of the tourism industry increased 10 percent last year to $3.95 million. An estimated 22 million visitors came to Indy, most of them for leisure activities.