Gentlemen, Start Your... uh... Taxes?

Ty Jacobsen
CDS Community Development Strategies

As December is to Christmas, the month of May is to auto racing.  May is when the countdown begins in earnest toward the Memorial Day weekend and three of the most historic and popular events in the world of auto racing, NASCAR’s World 600, Formula 1’s Monaco Grand Prix, and, especially, the Indianapolis 500.  2016 will mark the 100th running of the 500-mile race at the famed Indianapolis Motor Speedway.  The Speedway itself opened in 1909 and hosted the inaugural Indianapolis 500 in 1911.​  As one would expect from a facility that first opened during the Taft administration, the Speedway has been in a near constant state of maintenance, expansion, and upgrade over the years.   In what had become rather unique in American professional sports, the Speedway had done all of this without ever using government or taxpayer assistance.  That changed in 2013, when the Speedway petitioned the State to be made a special taxing district.  ​

Ty Jacobsen at the Indianapolis Motor Speedway... on the right, not the left

The Indiana state legislature and governor agreed, making the privately-owned track a so-called “Motorsports Improvement District” and enabling it to recoup as much as $5 million per year over a 20-year period from the state sales and income tax revenue that it generates.  This money has thus far been put to use installing high-definition video screens around the track, modernizing several of the grandstands, and replacing the Speedway’s iconic scoring pylon with an all-digital LED version, all in preparation for the grand event of the race’s 100th running.

This action was and remains quite controversial.  The Speedway successfully argued that they create a considerable economic impact in the state of Indiana.  The track is an icon, one of the most defining aspects of the state and the Indianapolis 500 continues to be the world’s largest single-day sporting event, with many of the 250,000+ attendees bringing their wallets across the state line.  They also argued that Indiana’s professional sports teams play in taxpayer-funded facilities and that similar tax reimbursement plans exist at other racing facilities elsewhere in the country and across the world.  The money returned to the Speedway would help it remain modern and competitive in a sports and entertainment landscape far more crowded than the one in which the Indianapolis 500 initially became America’s most famous race.

Opponents cite the questionable principle of the arrangement, that creating a public district for the sole purpose of returning tax money to a private, for-profit group should not be within the role of the government.  Special taxing districts, specifically, are usually for direct public benefit and fund items for public use.  They are created to reinvigorate blighted areas or to fund infrastructure in healthy areas and create an environment that attracts and retains residents and employers.  There is also the concern that, despite this being the Speedway’s first request for assistance in over a century of existence, this will lead to more requests and eventually extensive government subsidization of a professional sport, again not within the role of government.

The Speedway’s argument has been consistently successful across the American sports and business landscape over the past few decades because it lines up with the priorities of those in power.  It will remain that way until those priorities or those in power change.

Links:
Speedway request for tax money could start heated debate
Give Indianapolis Motor Speedway the tax break

About the Author:  Ty Jacobsen is a GIS and Market Analyst with CDS Community Development Strategies.  He has significant experience working with special taxing districts and is an avid auto racing fan who will be in attendance at the 100th Indianapolis 500 on May 29, 2016.  He is pictured above attending the 2011 Indianapolis 500. See the gallery below for more pictures of his visit.