The great Salt Lake City tax tradeoff

Children play stick hockey in front of the Delta Center in Salt Lake City, which is intended to be the home of a new NHL team next year.

Children play stick hockey in front of the Delta Center in Salt Lake City, which is intended to be the home of a new NHL team next year. Chris Gardner via Getty Images

In a few weeks, the city council will be voting on a 0.5% sales tax to support economic development downtown. But it’s not the money that is drawing all the attention, it’s what the city is giving up.

On June 11, the Salt Lake City Council held the latest in a series of public hearings about a proposed 0.5% sales tax increase within the boundaries of the city. The proceeds are intended to raise about $54 million a year to subsidize the financing of a major reconfiguring of the Delta Center. Currently home to the NBA’s Utah Jazz, the center needs substantive updates to accommodate a new hockey team next year. The NHL approved the sale of the Arizona Coyotes to the owner of the Jazz and tech billionaire Ryan Smith in early April. The money will also be used to help build housing, restaurants and other amenities in the area. A final vote will take place this summer.

Despite decades of research that show pro sports franchises often don’t boost local economies as much as promised, proponents of the deal still argue it will be a boon to downtown Salt Lake City, particularly in revitalizing several distressed neighborhoods.

But what makes this deal different from all the other stadium financing deals passed this year and in years past is that about 75% of the new revenues would go directly into the hands of a private sector entity, the Smith Entertainment Group.  

Broad support for this economic development deal has emerged from elected officials at the state and local levels. In fact, it wouldn’t be possible without the support of the state legislature and Gov. Spencer Cox, who signed a bill in March that permits the city council to increase the sales tax.

The deal, though, has its opponents, who have cited several concerns. The main one is a lack of government oversight of taxpayer money and how it will be used by a private entity. At a city council meeting on May 21, one attendee commented, “Based on public comments by the mayor and members of the city council, it looks like adoption of the zone and the related sales tax increase is a done deal. We all know at this point who will benefit from this action. It certainly won’t be the residents of Salt Lake City, who will be required to invest in development concepts about which they know very little…”

Several opponents of the deal have complained that too few details have been made clear as the city council has considered its stance on the issue. Said one state government insider, “The lack of transparency has been appalling. There’s a website that has a flashy computer-generated image of the district, but no information about the cost or the timeline. It’s all fluff to generate excitement and emotion.”

Other observers simply believe the deal is not good tax policy. According to David Brunori, senior director at RSM US LLP, a tax consulting firm, “They’re imposing a tax to support a private enterprise, and you have to ask yourself whether this is what taxes are supposed to do. People think they’re paying taxes to support police, fire, sanitation and transportation—things that everyone can use. But while the fans will get a nice stadium, and it’s an enhancement for the economy near the stadium where hotels and restaurants will be built, if you’re on the other side of Salt Lake City, I don’t know how much you are going to benefit. The real beneficiaries are going to be the owners of the sports franchises.”

As some critics of the plan have pointed out, sales taxes are regressive and typically place a heavier burden on lower-income individuals as opposed to wealthier people.

That said, the sales tax increase is almost certain to pass. Leaders of both parties in the state—including Democrats who have leadership positions in the city and Republicans who control the state legislature and governorship—are in favor of the deal.

And taxpayers generally don’t seem overly concerned about it, according to Rusty Cannon, president of the Utah Taxpayers Association. “We’re always confused as to why taxpayers in Salt Lake City seem to be quite OK with nearly any tax increase proposal.”

Localities in Utah already have a number of small, designated sales taxes in addition to the ones levied by the state. Salt Lake City, for example, has a 0.5% sales tax for a correctional facility. Add in the 0.5% for the stadium, and Salt Lake City’s overall sales tax would go to 8.25%, which would be the highest of any large city in the state.

John Valentine, chairman of the Utah Tax Commission, has publicly expressed fears that ultimately this aggregation of taxes for specific projects is going to have a negative effect on Utah’s overall tax base, leaving the state and its localities in trouble when it comes to paying for basic services. "Some of the projects that we’ve passed in the state are eroding the tax base by sales tax diversions and tax increment financing," he said in an interview with FOX 13 News.

Valentine indicated that if the state and its localities continue to go down this road, he “would be concerned that the government can’t do the functions that they’re required to do without raising the taxes because they’re diverting the taxes for other things."

It’s difficult to ignore the fact that the city and county aren’t yielding their typical oversight of the use of tax revenues. As the Utah government insider told us, “There won’t be an open procurement process. There won’t be an open meeting on how the money is spent. There won’t be records access. And that’s a problem.”

What’s more, the Smith Entertainment Group has a fair amount of leverage. “They are under no obligation to keep the Utah Jazz in Salt Lake City and owner Ryan Smith has said publicly that he’s looking at other locations for his basketball team if things don’t work out in Salt Lake City” explains Phil Dean, chief economist at the Kem C. Gardner Policy Institute at the University of Utah.

This is classic Negotiating 101. While there’s no reason to doubt that Smith has a sincere dedication to the future of downtown Salt Lake City, there’s no question that having other places interested in the Utah Jazz and a new hockey team gives him a strong hand to play as he’s been working through the details of the plan.

There’s a great deal more complexity here. But it seems highly likely that the sales tax increase will be a reality before long, and the ramifications—good or bad—remain to be seen.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.