Thu February 7, 2013
As Panthers Seek A Cut, A City Sales Tax Primer
The Carolina Panthers say their 17- year old stadium needs an upgrade and they want taxpayers to pitch in. City of Charlotte officials are busy negotiating behind closed doors to come up with as much as half of the $250 million renovation. They're reportedly looking at doubling the city's tax on prepared foods, such as meals in restaurants. That's not the only local tax Charlotte has used to fund big projects in the past. We asked WFAE's Julie Rose to sort out the sales taxes Charlotte has access to, as this debate over upgrading Bank of America stadium unfolds.
The easiest way to understand sales taxes is to go shopping. And while a grocery store isn't the most exciting spot to shop, it's perfect for this story.
Let's start with something that's not food. Toilet paper, say. When it rings up at the register, it'll be listed with a sales tax of 7.25 percent. Pretty much anything that's not food in Mecklenburg County is taxed at that rate. Most of that money goes to the state, but the city and county's portion of the tax rate is 2.5 percent.
Could any of that be used for Bank of America stadium renovations? Let's check with an expert on the matter: Greg Gaskins, City of Charlotte CFO.
Even though Gaskins works for the city, he's not involved in advocating for or against funding stadium renovations. He's the number cruncher - and he's going to help us figure out how the city spends its sales taxes.
So back to that 2.5 percent on the toilet paper in our cart. The "half" in that two-and-a-half is a tax Mecklenburg County voters approved back in 1999 to build the light rail. Last year that so-called "transit tax" brought in $65 million.
"That is to fund transit - for both capital and operating of the transit system," says Gaskins.
Could it be used for some big, non-transit project?
Gaskins says, "No."
What about the rest of the 2.5 percent general sales tax? The city and county split it roughly. Is there room for Bank of America stadium renovations in the city's half?
"It's used for general operations of the city, which includes police and fire and streets and solid waste services," explains Gaskins.
None of it could be used for some other big project like a stadium, unless we cut those other services Gaskins mentions.
"There's not excess money just sitting there at any point in time to do any kind of gigantic new project," says Gaskins. "So that's the reason if you have a gigantic new project, you have to figure out what additional revenues you're going to raise to do it. I know that sounds second grade-ish, but that's the fact."
While we're at the grocery store, let's probe a little deeper into the city's sales tax coffers.
Bananas, for example. There's a flat 2 percent sales tax on food. The city's portion of that goes into city operations, too (police, fire, streets, sewer).
And we've also got prepared foods - which means anything at the deli counter.
Now, the prepared food and beverage tax is sometimes called the restaurant tax, but it's an extra 1 percent tacked onto the standard 7.25 percent state and county sales tax. Could it be used for Bank of America stadium?
"That money is set aside for the convention center and there's sufficient money to pay the debt and to make future enhancements to the convention center," says Gaskins.
If the city were to spend any of that on Panthers Stadium, it'd have less to use in upgrading and maintaining the convention center. So instead, the city council is looking at just tacking another 1 percent tax on prepared food specifically for Bank of America stadium.
But for the moment, here's what we have as we check out: Three things in our grocery cart, all charged at different sales tax rates. The toilet paper is taxed at 7.25 percent. The sandwich at that same rate – plus the 1 percent prepared food tax. And bananas at the flat 2 percent food tax.
Now, there are a few other sales taxes we need to look at.
When you stay at a hotel or motel in Mecklenburg County, you pay the general 7.25 percent we've already talked about, plus an extra 8 percent tax the city gets to keep. Almost half of it also goes to the Convention Center. Another slice was added several years ago specifically to cover construction of the NASCAR Hall of Fame. That's all it can be spent on.
But there's also a portion that's not earmarked for anything specific other than "tourism." It's the pot of money where the city came up with $8 million for the Knights Stadium. What about the Panthers?
"That's general tourism capital, and no there's not capacity to do another major project out of that," says Gaskins. That fund has less than $10 million to spare.
And the Panthers are asking for far more – possibly as much as $125 million.
So that leaves us the local rental car tax: it's 8 percent. And again, the money goes to pay off debts. In this case, the cost of building Time Warner Cable Arena and the new Uptown museums – like the Mint and Bechtler.
Any extra for football stadium renovations?
"Nope, there's not," says Gaskins.
So here's the deal: The city collected more than $200 million last year from all of the sales taxes we've just explained. And if you want to know where most of it went, just take a walk downtown.
"You can tell by just looking around there's a lot of very nice, new facilities that those taxes have paid for," says Gaskins.
As each new project came come along, the city raised a sales tax to pay for it. This time around, it's the Panthers looking for help gussy-ing up their stadium. And the city council is doing what it always has in these situations: first, decide if it's an investment they want to make, and second, get permission from the legislature to raise a sales tax that'll pay for it.