Some people have suggested that there are viable alternative tax scenerios for funding the Medical Mart and Convention Center project. In fact, we’ll probably hear some of these ideas later this morning at the public hearing. I’ve looked at the alternatives and they just don’t add up.
1. Sales Tax – Sales taxes can be raised by the county commissioners at ¼ percent increments without a vote of the people, subject to public referendum. The sales tax is reserved for specific purposes including the state and county general funds. Cuyahoga County’s rate would become 7 ¾ percent if the smallest increment allowable was enacted. While this would be the largest in the state, most of the difference relates to our urban counties public transportation system (1%), which is unnecessary in most adjoining counties. A ¼ sales tax would raise approximately $42 million annually.
2. Food and Beverage Tax – A proposed food and beverage tax on either the central business district (downtown) or the entire county would require a vote of the electors. As an example, a 2% rate imposed on the entire county’s food and beverage industry would raise approximately $18 million annually. All carry out food would continue to be exempted from the new tax by the Ohio Constitution. A downtown only tax would generate only about $1.5 million. Cuyahoga County is the only current county permitted to use such a tax (population must exceed 1.2 million) and the food and beverage industry has historically threatened to oppose such taxes for fear of creating a precedent in other counties in Ohio.
3. Transfer Tax/Conveyance Fee – A tax enacted at the point of sale for real estate in Cuyahoga county would require a change in state law since Cuyahoga County is already at the maximum level permitted. A 100% increase in the conveyance fee in Cuyahoga county would raise approximately $13 million per year although the revenue stream has considerable peaks and valleys due to the current state of the real estate market at any given time. If the State Legislature did choose to grant a county additional permissive use of the Conveyance fee, it would most likely require a vote of the electors based on previous history. However, this particular tax will attract great statewide opposition from the realtors in Ohio for a number of reasons, including a precedent setting argument.
4. New County Bed Tax – Cuyahoga County’s current bed tax of 7.5% (for the City of Cleveland), combined with the sales tax rate of 7.5% is already one of the highest in the country. Some suburbs in Cuyahoga County have a lower rate based on a lower municipal rate than the City of Cleveland’s 3%. An additional county wide bed tax of 2% would raise approximately $5 million annually and would not require additional state legislation or a vote of the people.
5. Redirected Existing Bed Taxes –
- A current city bed tax of 3% could be redirected from its current use to support the existing convention center and generates approximately $4 million annually. However, it is expected that the city may choose to use these revenues for the renovation of the existing center for some alternative use should a new center be located closer to Tower City or some alternative location.
- Rock and Roll Bed Tax – A 1.5% county bed tax currently is used to retire debt on the Rock and Roll Hall of Fame. When these debts are retired in approximately 2013, the $4.0 million could be redirected to an alternative use, including a new Convention Center. This would not require a vote of the electors.
- An existing county bed tax of 3% that funds the operations of the Convention and Visitors Bureau raises approximately $8 million annually. Redirecting this tax would result in a CVB with no marketing capacity to support the hospitality industry.
[NOTE : Utilizing all new and potentially redirected bed taxes would raise approximately $20 million when all revenues from the Rock and Roll bonds were actualized. Until that time, aggregating all bed taxes would raise approximately $16 million annually. Without the redirect of the city’s bed tax that would likely be needed to capture the potential of the existing convention center, the total would be reduced to $12 million annually. An additional county bed tax of 2% would also result in one of the highest bed taxes in the US.]
6. Additional “Sin Taxes” – Any increase in additional sin taxes at any level would require state legislative action and a likely public vote similar to the recent vote to increase the tobacco tax to fund the arts levy in Cuyahoga County. Most of these taxes are currently scheduled to retire the Browns stadium projects (after paying off Gateway debts for 15 years) and are not available until well into the next decade.
7. Property Tax – A 1 mil increase in the county property tax would raise approximately $28 million annually and would require a vote of the electors. This tax, however, is the sole revenue source for schools throughout the county as well as for libraries, metroparks, the Port Authority and human services.
The Plain Dealer also analyzed the alternatives here.
President and CEO
Greater Cleveland Partnership