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On Tuesday, the Jacksonville city council approved partial funding for a $63 million project that would construct the world's largest scoreboards as well as renovate and upgrade the end zone sections of EverBank Field. The bill was lobbied by the Jacksonville Jaguars, the primary tenant of the city-owned stadium, and even saw Jaguars owner Shad Khan willing to spend $20 million of his own money towards the upgrades.
Once the bill was passed, there naturally was complaining about the use of "taxpayer dollars" on upgrades for the stadium, even getting the city council named as the "worst in sports" by ESPN's Keith Olbermann.
"The Jaguars are 1-8," Olbermann said on his popular ESPN segment. "And before their mercy win over the Titans on Sunday, they had lost 22 of their previous 24 games, yet the city will now tax it's hotel guests 2 percent so it will pay for $43 million of the new $63 million scoreboards insisted upon by owner Shad Khan."
"Instead of you know, using $43 million on ... the city," Olbermann quipped.
Olbermann, as he's wont to do, perfectly exemplifies the gross misunderstanding of how not only city funds work, but how the new scoreboards at EverBank Field will be funded. The city is not just now taxing hotel guests a 2 percent fee, it's been doing so since 2009 (dating back even further in some form or another since 1984), when the city amended bill 2009-817E, more commonly known as the "bed tax".
The fund was established to help the city of Jacksonville maintain and upgrade it's sports facilities. As described in the actual bill, the development tax authorizes the city to use the funds to "acquire, construct, extend, enlarge, remodel, repair, improve, or maintain one or more convention centers, stadiums, exhibition halls, arenas, coliseums, or auditoriums."
The bill also states that the "sports complex", which comprises of EverBank Field, Bragan Field and Veteran's Memorial Arena "contribute significantly to convention development, economic development and the City's quality of life," and that it is in the city of Jacksonville's best interest to provide dedicated funding for their upkeep and maintenance.
Where the confusion comes in, is that people like Olbermann, seem to not understand what these funds can and cannot be used for. While the fund is literally paid with tax dollars, it's not putting a burden on local Jacksonville tax payers, but on people who travel to Jacksonville for various events including but not limited to events that would utilize the scoreboards. In the view of the city council, and the rules of the bed tax bill, it is being used to improve the city of Jacksonville.
The bill explicitly states that the bed tax funds can only be used to maintain these entities, which in turn, helps improve the city of Jacksonville. The funds cannot be used to improve roads. The funds cannot be used to pay police or fire fighter pensions. The funds cannot be used for "Meals on Wheels". The funds cannot be used for anything other than maintaining and upgrading facilities in the "sports complex".
"The city of Jacksonville will ultimately pay for the new improvements to EverBank field, AKA Jacksonville Municipal Stadium, via a "bed tax" – what this bed tax does is allow Duval County to levy up to a six percent tax to hotel rental rooms," a source with knowledge of the bill told Big Cat Country. "Two percent of this tax is used to fund tourism and marketing, two percent is used to pay off the debt service to the Prime Osborn Convention Center, which was exhausted a while ago, and then this two percent was placed in a newly established Sports Complex Capital Maintenance Fund and two percent is used to pay off the debt service to the stadium."
Now that we understand what the city is using to pay for the new scoreboards and why they can't use the money to stop closing libraries, we can get into how the city is generating the $43 million it's paying out, because they don't have $43 million sitting in an account to freely spend.
The city of Jacksonville is going to use revenue bonds to pay for the initial construction of the upgrades, so that they can be done in a timely fashion.
"Revenue bonds are a type of municipal bond, remember Jacksonville is a municipality, that is supported by the revenue from a specific project, such as toll bridges or stadiums. They are municipal bonds that finance income-producing projects and are secured by a specific revenue source, Jacksonville hotel room rentals," a source with knowledge of revenue bonds told Big Cat Country. "Notice that nowhere does it say local taxpayers are paying for the issuance of these bonds – that’s because that involves a totally different kind of bond. Furthermore, an agency that is run solely on tax dollars, such as something like a public school or library cannot even issue revenue bonds, since these entities would be unable to pay off the bond using revenues from a specific revenue source – that’s why those things (schools) are paid for with tax dollars."
"The bond where you’d be individually taxed is called a general obligation (GO) bond, and they are backed by the credit and "taxing power" of the issuing jurisdiction instead of revenue from a project," a source told Big Cat Country.
"They are issued with the belief that a municipality will be able to repay its debt through taxation. No assets are used as collateral. Jacksonville is not using GO bonds for this project."
The bill itself, 2013-0694, states that the city will finance the project without dipping into the general fund or increasing the tax burden on local tax payers. It also notes that any overage costs on the project will not be paid by the city, but by the Jacksonville Jaguars and the city's contribution shall not exceed the $43 million in funding.
The bonds themselves will be repaid with the bed tax as well as revenue generated from events held at EverBank Field, including but not limited to Jaguars games, the Florida-Georgia game, the TaxSlayer.com Gator Bowl and other events held at the facility.
With the announcement of the project, the Gator Bowl Committee has already stated that a neutral site college football game could be announced within the next six months, which will just be one more revenue stream for the stadium, and in turn paying back the bonds that the city approved. There's also the likelihood that Fulham FC, owned by Shad Khan, plays a friendly in EverBank Field during the summer leading up to the 2014-2015 Barclay's Premier League season, as well as possibilities for more events once construction is completed.
When you sit down and research where the money is coming from, what it can and cannot be used for, and how the city of Jacksonville views the "sports complex", namely EverBank Field, it makes sense as to why they would approve the revenue bond funding for the upgrades.
So when people like Olbermann ask, "Why don't they use this money on something else?" you can in-turn knowingly respond, "They can't."
They're not stealing your property tax money.
While it's funded with "tax money", in the literal sense, it's not funded with Jacksonville resident's tax dollars and it's not tax money that can be freely spent on just anything. In theory, when Keith Olbermann comes to Jacksonville to cover an event and he stays at the Omni, he's paying for the scoreboards.