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Indiana’s alcohol tax would be doubled and hospitality taxes would be raised again under a Statehouse
plan designed to bail out the financially struggling group that runs the
professional sports stadiums in Indianapolis.
Sen. Luke Kenley (R-Noblesville) wants to add about 2 cents to the price of a shot
of liquor and a penny to the price of a 12-ounce beer, starting July 1.
Kenley’s plan would also provide money from sports fans, the city of
Indianapolis, the NFL Indianapolis Colts and NBA Indiana Pacers.
“I feel like it’s a good blend,” said Kenley, who planned to announce
his proposal at a legislative hearing this morning.
The Indianapolis Capital Improvement Board expects to be $47 million short in
its operation of Lucas Oil Stadium, the home of the Colts; Conseco Fieldhouse,
home of the Pacers; Victory Field, home of the Indianapolis Indians; and the
Indiana Convention Center. The board plans to cut expenses about $10 million,
and Kenley wants the Pacers and Colts to each pitch in $5 million a year.
But that would still leave the board $27 million short. That’s about $4 million
more than the combined annual salaries of the Colts’ two highest-paid players,
Dallas Clark and Peyton Manning, according to Foxsports.com, and equal to the pay of the Pacers’ three top-paid
players, Troy Murphy, Mike Dunleavy and Radoslav Nesterovic.
Kenley said the city would raise $15 million by increasing its ticket tax on
events at the stadiums, increasing its hotel tax and raising food and beverage
taxes. The state would pitch in $14 million by increasing alcohol taxes and
allowing the city to take sales taxes at a new downtown hotel.
The hospitality sector vehemently opposes any
increase in taxes. John Livengood, executive director of the Restaurant &
Hospitality Association of Indiana, told the IBJ last month that a potential
increase “keeps me up at night.”
Marion County hotel guests already pay 16 percent in
sales taxes – a 9-percent innkeepers tax, plus the 7-percent state sales tax.
An increase in the innkeepers tax would push the combined rate to a level
matched in the Midwest only by Cincinnati.
Counting the state sales tax, local restaurants now pay 9 percent in sales tax.
A push to 10 percent would trail only Chicago as the highest rate in the
nation.
Taxpayers in Marion and surrounding counties already pay considerably for
Indianapolis sports and convention facilities. More than $140 million has been
raised for the CIB by area restaurant and hospitality taxes over the past three
years alone.
Doubling the alcohol tax statewide could bring in an extra $40 million a year,
cash that would be funneled to cities and towns based on their population. The
money would be used for local economic development projects, Kenley said, but
Indianapolis’ share of about $8 million would go toward the Capital Improvement
Board.
“We think that’s a fair way to do it,” Kenley said last night.
“You always approach the idea of raising taxes with trepidation.”
Indiana alcohol taxes are currently set at $2.68 per gallon of liquor, 47 cents
per gallon of wine and 12 cents per gallon of beer.
Brad Klopfenstein, executive director of the Indiana Licensed Beverage
Association, said doubling those taxes may not seem like a lot. But he said
bars that now charge $3 for a beer are more likely to charge $3.25 a glass, not
$3.01. The price hike could decrease sales at the 700 bars his organization
represents, he said.
“When you’re talking about a discretionary product, any kind of price
adjustment will have an effect on consumption,” he said. “We are an
easy target, but one of the few industries that has an excise tax. Maybe they
should look at the asphalt industry or the orange juice industry.”
Kenley noted that not everyone has to pay alcohol taxes.
“This is a voluntary exercise,” he said.
Indianapolis Mayor Greg Ballard said he would prefer not to raise food and
beverage taxes in the city, but called Kenley’s proposal a good starting point.
“This is about downtown Indianapolis,” Ballard said. “We must
maintain this economic engine.”
Kenley hopes to sell the plan to lawmakers from outside the city in part by
emphasizing how important downtown Indianapolis is to state tax revenue.
“Part of our contribution here is based on protecting our return on
investment,” he said.
Kenley said he would take public testimony about the proposal this morning and
hoped to have his Senate Appropriations Committee approve the bill the same
day. The proposal could be changed as it moves through the Statehouse.
Republican Gov. Mitch Daniels said Tuesday that he was letting the legislative
process work.
“I’m certainly listening and my sense is a workable plan is starting to
come together,” he said. “It’s very important that this problem be
solved.”
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