Why should KY taxpayers support building a luxury resort in Red River Gorge? | Opinion
We’re hearing a lot about waste, fraud and abuse these days, particularly from the billionaires with chainsaws running rampant through Washington, D.C. But those problems are apparently not found in any of the multi-million contracts awarded to Elon Musk, or the tax cuts that will favor the nation’s richest 1 percent.
No, waste, fraud, and abuse apparently only occurs in programs that help people, whether they are children with malaria in Africa, or low-income folks in Kentucky who need Medicaid in order to get life-saving health care.
I was thinking about this here in Kentucky in relation to House Bill 775, a bill to change the way we lower the income tax rate to zero, but also includes some fancy tax giveaways, known as tax increment financing or TIFs, which allow projects to get back tax proceeds to help their bottom line.
None of the projects are explicitly identified, but two possibilities stand out: A new luxury resort in the Red River Gorge and a music festival in Louisville.
The bill would double current tourism incentives to allow projects to get back 50 percent of sales tax over the next 20 years.
It describes a project eligible for such a rebate to be a “lodging facility” project built in a low-population, relatively high unemployment county. It must be located in a county within a half-mile of a state resort park in a designated National Forest. It must create at least 50 full-time jobs, include an investment of at least $100 million and house at least 100 guests, among other things.
The new resort in the Gorge has been under discussion for at least four years after a slate of investors spent $2.25 million to buy almost 900 acres outside of Slade. The project has supporters and opponents, but it has not yet been able to find a developer. That presumably would change with such a tax sweetener.
The bill’s language also includes language specific to Louisville. One provision would give tax incentives to entertainment events lasting at least three days and having at least 100,000 attendees. The bill would allow these events to get back 50% of the sales taxes on admissions and services — estimated at nearly $3 million per year, according to Louisville Public Media.
What falls under that description? Bourbon and Beyond, a hugely successful music festival that attracted 50,000 people the first time it was held in 2017. It’s owned by Danny Wimmer Presents, a Los Angeles-based production company.
“We’re told for years that the purpose of a TIF is to generate new economic activity that likely would not occur were it not for an inventive,” said Andrew McNeill, executive director of the Kentucky Forum for Rights Economics and Education, a free market think tank.
“Here, we have an example of a very successful event in Louisville that has been happening for a decade, and they just create this tourism development act tweak to share in the tax revenue,” he said. “This is absolutely the definition of corporate welfare — it’s only sweetening the pot of profits that Danny Wimmer Presents is already realizing from a successful event.”
McNeill also has thoughts about the provision for the Gorge resort.
“I’m sure these investors consider themselves capitalists, and if asked will tell you they support free enterprise and free markets,” he said. “Investors assume risk and therefore should benefit from taking that entrepreneurial step, but time and again we see they want to have the taxpayers support the risk without sharing in the profits of the whole enterprise.
“They’re making taxpayers equity partners in this project, but you ask them do the taxpayers get any profit share out of this, the answer is no.”
He’s exactly right. The resort would create jobs, mostly low-paid service positions. But no doubt there will be more agreements about more local TIFs that gives the developers a break on property and occupational taxes. So, does Powell County really benefit? Especially when the free market is building so many cabins and other tourism venues that some locals say they’re being priced out.
The Herald-Leader has written about TIFs for many years because they are so obviously the way that corporate America fleeces taxpayers by forcing them to underwrite costly projects. They started as a good idea — to aid development in brownfield or other blighted areas. Now they’re just giving good money away, mostly to already wealthy folks.
Here in Kentucky, for example, TIFs were used to build the Summit, a fancy mall on farmland, and in a particularly disgusting example, to evict a Morehead trailer park for a shopping center.
HB 775 will probably pass with bipartisan support because politicians of every ilk love cozying up to possible donors.
But let’s be serious: If the Gorge can really support a luxury resort then let it do so without any help from us. That’s how private enterprise used to work in this country until corporate welfare took over.
