Field of Schemes new post Seattle arena's tax exemption would cause other property owners' tax bills to rise

Exactly who would pay how much in Chris Hansen's proposed $500 million Seattle arena project remains a moving target — see the long discussion in comments here — but one more piece of the puzzle has fallen into place, with the revelation that moving the arena off the property tax rolls would increase property taxes on other Seattle property owners:

In a blog post Wednesday afternoon, [Seattle City Council member Richard] Conlin said some of the previously announced details of the arena deal “do not quite live up to the hype.”

Conlin then takes on the challenge of explaining Washington tax law, noting that once the city and county purchase the completed arena, it will be removed from the tax rolls, but its value (minus the land) gets added to the city’s total assessed valuation and slightly increases the amount every property owner will have to pay. The city estimates that amount to be about $2 to $3 per year per homeowner.

It's important to note that this property tax rise (which would total about $15 million, according to Conlin) isn't an added subsidy or an increased cost for taxpayers — the property tax break for Hansen would still be worth the same thing, it's just that property owners would be taxed to make up the shortfall, instead of the city having to raid the general fund.

The overall calculus for the Seattle arena now looks something like this: The city would give up $107 million in admission, property, sales, and other taxes on the arena, some of which would be new (admission tax almost entirely), some of which would be cannibalized from existing city entertainment spending (sales tax in particular). They'd make at least some of that back from increased sales taxes on any new arena-patron spending downtown — whether it'd be enough to break even depends on a ton of assumptions about where fans would be spending their money otherwise, something the hopefully Conlin and the rest of the council have economists working on as we speak. The county would lose a few million in arena tax money, but again gain something from outside-the-arena spending (though not much, since it's unlikely many fans would be coming from outside the county). The state would gain something if Seattle property values and consumer spending rise on the whole, which is an open question. And surrounding communities would lose something from whatever spending would get shifted to Seattle as a result of people again having basketball to drive downtown to go see.

All of this would undoubtedly add up to a small public cost — $53 million in subsidies doesn't just get spontaneously generated out of thin air — but there are enough moving parts that it's hard to tell exactly who would end up holding the short end of the stick when the music stopped. And in any event, even $53 million is a pretty low price to pay, as these things go, toward a $500 million arena, and possibly an amount that Seattleites are willing to spend to secure an NBA team. Still, a million here, a million there...

Meanwhile, one easy way of estimating the impact on spending of the arrival of the neo-Sonics in Seattle would be to run the clock in reverse, and see what happened to tax receipts among all the different Seattle-area government agencies when the old Sonics left town. So far as I know no one has done this, but if anyone can point me in the direction of the right financial figures, I'm willing to give it a shot.

from Field of Schemes http://www.fieldofschemes.com/news/archives/2012/06/4976_seattle_arenas.html