Monday, April 02, 2007

Misinformation and Lies Win — ISC Withdraws Track Proposal

"We just don't see any point in beating our head against the wall any more," said a resigned Grant Lynch, vice president of International Speedway Corporation (ISC), in discussing the news that the Daytona Beach, Florida speedway developer was shutting down its efforts to build a NASCAR-style speedway in Kitsap County.

It is a clear victory for for the purveyors of misinformation and blatant lies — not to mention a complete and total lack of political cojones on the part of our elected officials. I believe it is a very sad commentary on the state of our county and our legislature when what amounts to 12 or so people can organize a disinformation campaign so effective it intimidates our public officials to the point of pure cowardice.

Phil Rockefeller, Sherry Appleton, Pat Lantz, and Larry Seaquist have proven they don't deserve to represent us. However, instead of having the humility to be ashamed for their gross inadequacy as representatives, they'll be doing a victory dance as they vote to raise our taxes again — when they could have funded what they'll make US pay for from the revenue the speedway would have generated.

We got what we voted for... Elitist Cowards.


  1. The disinformation was thick on both sides of the table on this one. Whoever shouts the loudest wins in politics, and I'll touch on this again later.

    That said, I'm not sad to see the ISC go. They offered New York a much sweeter deal than we ever got.. why is that? They offerend to pay for the full cost of the proposed track in Staten Island, but were only willing to pay for half of this one. No thanks.

    If they were really serious about putting a track here, they would've done more to really sweeten the deal, and they wouldn't have withdrawn their proposal without mentioning what changes they objected to. They're a business, and the bottom line for them is that they can make more money doing this somewhere else.

    Now, I don't think that the idea was a bad one. When I first heard about the possibility of a track here, my first thoughts were about traffic and the mess it'd make. But I watched the hearings on TVW, listened to what both sides were saying, and now I think it could've been a good opportunity for the area, if both sides could have come to an agreement, which obviously didn't happen.

    The worst part of all this, though, is going to be the shouts of victory from the maniacs who are against growth and development in any way, shape or form (you know who I'm talking about!). Democrats will always have trouble overcoming our granola eating, Birkenstock wearing, long haired stereotype because of the radical fringe members like them. Reading their claims of how this went down as a "victory for the people/environment/etc" is going to SUCK. :)

  2. Until you have a real EDC with about 7 members on the BOD...with P&L experience...the County will remain on the edge of financial disaster...the track would have been super if it was PART of a "Plan A" for economic growth...Kitsap never seems to figure this out...very sad

  3. In response to Ian...
    They did offer NY a better deal — but then, NY is the single largest media market on the planet.

    On the other hand, Kitsap County is, well... Kitsap County — small time thinking, small time leadership, with no grasp of the "real world" outside of NOlalla and Painbridge Island.

    As far as sweetening the deal, all Kitsap had to do was say what it wanted. ISC was willing to address all its concerns, but the frustration expressed repeatedly by ISC officials was that Chris Endresen refused to deal in specifics. She opposed the track from the outset and as the single most powerful person in the county, flexed her political muscle to steal this opportunity away from the taxpayers, and organized labor, as well as the fans.

    I agree about the shouts of victory. It proves we are governed NOT by the people, but basically by the same 12 or so usual suspects who object to ANY change and intimidate our so-called "leaders" into submission.

    For the taxes we pay, we deserve better.

  4. In Response to Jere...

    I couldn't agree more. What's even worse, is that the new Kitsap Economic Development Alliance, except for Jan Angel and Cary Bozeman, is run by the very people who worked against NASCAR. The board is comprised of the mayors of all four cities, and council members from them, all as well as the commissioners. None of these people have ever signed the FRONT side of a paycheck, and if the first general board meeting is any indication of their thinking, the entire organization is little more than a waste of time and energy. These people are COMPLETELY clueless about what economic development IS — much less how to accomplish it.

    You sure can't accomplish any semblance of economic development by chasing away $400 million corporations begging to locate in your area.

    The simple fact is, Kitsap County needs to post a sign at its borders reading " Closed For Business."

  5. Lary, you claim that lies and misinformation were used, but you cite nothing to support your claim.

    You also claim: "As far as sweetening the deal, all Kitsap had to do was say what it wanted."

    Well, here is a specific for you to chew on and see if you can find a way to claim that ISC went along with a specific local request for change in the bill.

    Read Section 603 of the original bill, then read the substitute bill that came out of the first Senate committee. The change was the result of the specific request made to that committee in its public hearing by SKFR Fire Chief Senter. I know, because I watched it on TVW.

    Then read the revision to Section 603 proposed by ISC at the Senate Ways and Means Committee hearing.

    ISC wanted to eliminate what had been changed in that first committee, since it would have cost them some money. Rather than agreeing to payments in lieu of property taxes, ISC wanted to negotiate around a much lower payment in lieu of leasehold excise taxes.

    That's a specific, Lary. It was specifically requested by a local government official, but ISC didn't want to accept the change. What do you have to say about it?

  6. Micajah,

    I wasn't sure of the facts where this was concerned, so I forwarded your post to Grant Lynch of ISC. His response appears below. He also references a table that was attached to his response. I tried to copy and paste it here, but it is a formatted Word document that becomes gibberish because the formatting wasn't retained when I did that because of the space limitations here. If you want to send me an email address (yeah, I know you want to hide your identity from me, but just go get a Hotmail or Yahoo address for crying out loud) I'll be happy to email it to you. You will find the contents very interesting, I'm certain.

    Here's Grant's response...

    I think she is referring to the amendment that Gordon Walgren put on the bill that would have basically changed the current state law.

    Currently if a lessee has a contract to utilize public property they have to pay a leasehold excise tax because they are using public property for a private purpose or monetary gain.

    We had met with Gordon and the head of the Fire Chief’s and told them we were willing to work something out with the local Fire Districts or any other taxing districts. They evidently decided that they wanted us to pay full property taxes on land we would not own.

    Doesn’t make any sense to me but she is right that it would have cost us more money.

    The law was put in place to protect the taxing rights of special taxing districts such as the Fire District but with the understanding that someone who does not own the property and could never get any value from developing or selling the property should not have to pay property taxes for that property.

    But, they should have to pay something.

    I have attached some very interesting numbers from Kansas that shows what happened there after we opened. The retail businesses that are creating this property and school tax stream are also paying down their STAR bonds so fast that they will be paid off very early (2012. 13) or so.

    Then the Unified Government will start receiving around 60 to 70 million in sales taxes each year.

    As usual with our opposition they are half informed and do not let facts or current Washington laws get in the way of their statements.

    It is very ironic that the 26th will call for public dollars to help SKIA but fought so hard to let a company with millions to commit to public infrastructure that would have made SKIA a reality, fade away.

    Oh well.

  7. Grant Lynch says: “As usual with our opposition they are half informed and do not let facts or current Washington laws get in the way of their statements.”

    Well, let’s test his assumption that I am an ill-informed person who doesn’t let facts or existing state law get in the way of what I want to say.

    Property owned by a “municipal corporation” like the proposed “public speedway authority” is exempt from ad valorem property taxes.

    However, under existing state law, GWS as lessee of that PSA property would have to pay leasehold excise taxes based on the market value of the leasehold interest.

    Mr. Lynch’s organization wanted to change current law (which he boorishly claims I ignore) to get a deal similar to what was given to the Mariners and Seahawks – in essence, a deal which would leave GWS with no tax liability at all for the “public” parts of the speedway facility.

    Mr. Lynch wanted to change the current law to avoid paying any of that leasehold excise tax to the state or the local taxing districts on any part of the speedway facility other than private corporate spaces. Section 602 of SB 6040 proposed the change in existing state law that Mr. Lynch wanted, namely an exemption from the leasehold excise tax.

    RCW Chapter 82.29A contains the existing laws which GWS wanted to change to suit its purposes.

    When property owned by a municipal corporation is leased to a person who would not be exempt from property taxes if that person owned the property, the leasehold excise tax must be paid by that person.

    The leasehold excise tax would be no more than 12 percent of the taxable rent. The state has a 12 percent tax, and payment of the local 6 percent leasehold excise tax results in an offsetting credit against the amount owed to the state.

    The taxable rent is ordinarily to be set in a way which represents the market value of the leasehold interest.

    However, a person may attempt to persuade the legislature to set the taxable rent at a figure which is much lower than market value. RCW 82.29A.010(2) allows taxable rent to be the “contract rent” which is “negotiated or renegotiated in accordance with statutory requirements regarding the rent payable.”

    This person would then put in something like Section 601(2) of the ISC legislative proposal:
    “(2) The lessee shall pay reasonable rent and assume risk, legal liability, and responsibility for costs associated with maintaining and operating the facility. As used in this subsection, ‘reasonable rent’ is solely intended to fund the reasonable annual operating expenses of the public speedway authority, including a reasonable operating expense reserve.”

    With this provision, taxable rent would not be connected to market value at all. It would, in fact, be a small fraction of market value rent.

    Why do this, when Section 602 of the ISC legislative proposal exempts all the speedway facility (other than private corporate office spaces) from the entire leasehold excise tax?

    Isn’t a complete exemption better than paying the leasehold excise tax based on a taxable rent that is far less than market value?

    Yes, of course, a complete exemption is better; but it might not survive the legislative process.

    And, besides, it might prove useful later on to have a small leasehold excise tax liability resulting from the “reasonable rent” limitation on taxable rent.

    For example, if a local taxing district succeeded in changing the GWS proposal’s language in Section 603 from the original “may agree to make payments in lieu of property taxes” to “shall make annual payments in lieu of property taxes,” there is a fallback position.

    The “may agree” language was similar to existing RCW 35.82.210 which applies to housing authorities that are exempt from taxes.

    It looked good in the original proposal, except that the taxing district would have no bargaining power when the PSA was merely authorized to agree to pay some amount rather than required to pay a specified amount.

    And, the original Section 603 would result in a payment, if any, which would compensate the taxing district for only the special benefits conferred on the PSA. It would not have the effect of requiring the payment of anything resembling leasehold excise taxes on the market value of the leasehold interest.

    It’s little wonder that a fire district might try for something better. And, other taxing districts who depend on property taxes and leasehold excise taxes for much of their revenue might also try for a change – since they would not ordinarily provide special benefits to the PSA which would be a basis for payments in lieu of taxes.

    Instead of fighting for the “may agree” language which everyone knew left the fire district and other taxing districts with zero bargaining power, GWS could let the “shall” language change remain and simply switch from “in lieu of property taxes” to “in lieu of leasehold excise taxes.”

    Then, no matter how the local negotiations turned out, the most GWS would have to pay is 6 percent of a small fraction of the market value of the leasehold interest.

    That’s similar to how it worked out, isn’t it? When Grant Lynch’s organization quit, they were trying to avoid a requirement to make payments equivalent to what would be paid by a person who isn’t given a sweet deal like that given to the Mariners and Seahawks.

    Lynch claims that GWS shouldn’t have to pay property taxes on property GWS doesn’t own, but that is his attempt to avoid the actual issue.

    The issue is how to set the amount of taxes (or payments in lieu of taxes) which GWS ought to pay in light of its obviously valuable leasehold interest. The property taxes that would be paid by a privately owned and operated speedway wouldn’t be significantly different from the leasehold excise taxes based on market value rent.

    If Lynch doesn’t like that standard for setting his corporation’s share of the tax burden, let him come up with another way of setting it based on the actual market value of his leasehold interest.

    He apparently would rather put up a smokescreen by claiming that it just isn’t fair to expect GWS to pay the equivalent of property taxes on property it doesn’t own. It’s a smokescreen, not an argument based on facts, since the leasehold interest would clearly be a valuable thing – which under current law would require payment of a substantial amount of leasehold excise taxes.

    Lynch also ignores the fact that having a lease term of at least 50 years while paying a small fraction of market value rent even though half the cost of construction was paid with the “landlord’s” money is as close as you can get to actual ownership. To say that it is not ownership is to argue a distinction that makes no meaningful difference when talking about the fair tax burden for the lessee.

    GWS ought to pay the equivalent of property taxes, that is, leasehold excise taxes to all taxing districts within which the speedway facility is located based on a taxable rent which is based on the market value of the leasehold interest – with no part of the facility exempt from this leasehold excise tax.

    Why do I say this? Because I understand more about our local tax structure than the “half informed” Grant Lynch who doesn’t let existing facts or law get in the way of what he says.

    Our county gets a significant part of its tax revenue from property taxes. Our school districts get about 18 percent of their total operating revenue from the local levy (and virtually all the funds needed for capital expenditures like building a new school). Our library, port, and fire districts depend almost entirely on property taxes.

    When a property is exempt from the ad valorem property tax, the county and other local taxing districts need the leasehold excise tax revenue to take its place.

    Otherwise, the local tax burden remains on the shoulders of people other than GWS, and the promise of the proposed economic development loses its luster.

    Mr. Lynch’s organization made a big mistake by trying to avoid paying the equivalent of property taxes.

    They might have had a lot of people who suddenly recognized their own special interest in having a speedway that took a big part of the property tax burden off their own shoulders.

    At a cost of $2 million to $3 million a year in local taxes, they might have had a lot of people who did more than sit on the sidelines watching occasionally to see how things were going with the speedway proposal. Those people would have seen that the immediate benefit to them of having a speedway was important enough to make it worthwhile to tell their government officials to make it so.

    But, Lynch and his organization wanted to limit their state and local tax burden to almost zero.

    Their “payments in lieu of leasehold excise taxes” based on their “reasonable rent” would have been approximately $60,000 a year, assuming their rent resembled what is paid for the use of Qwest Field.

    Grant Lynch can talk all he wants about the big “revenue streams” in other places with other tax structures, and it doesn’t matter at all. He can say all he wants about the other development that might have followed the speedway, but that is one step removed from the question at hand – namely the speedway itself – so it matters little. He needed to first make the “bird in the hand” look attractive enough to move public opinion before he could get far with a less certain promise of “two birds in the bush.”

    He needed to be talking about the taxes GWS would pay to the county and local taxing districts and how GWS as a “good neighbor” was happy to take on its share of the local tax burden, but he couldn’t – because Lynch and GWS refused to pay local taxes on the “public” (revenue generating) part of the speedway facility.

    So, which one of us is “half informed” and unwilling to let facts or existing law get in the way of our statements?

    I say it is Grant Lynch who perfectly fits his insulting description of the person he assumes I am.

    He might eventually get the sweet deal he wants, but he could have had a suitable deal with a lot less effort if he had learned more about the local tax structure and agreed to pay a fair share of the local tax burden.

  8. According to the Kitsap Sun:

    [Lynch] cited an amendment that was added to the bill that made it out of the Senate’s Agriculture and Rural Economic Development Committee. The amendment would have required Great Western Sports, the ISC subsidiary that would have operated the track, to pay the equivalent of full property taxes to the local governments.

    While he acknowledged the amendment did help push the bill beyond that committee, it was "totally unacceptable to us."

    Since paying taxes is totally unacceptable to Lynch's organization, they need to find a place where it won't matter that they pay no taxes.

    In Seattle and King County, the tax base is much richer and broader because of all their commercial and industrial property. They can easily shrug off an exemption from the leasehold excise tax, as they did for Qwest and Safeco fields.

    That's not the case in Kitsap County, where we are more like a "bedroom community."

    For us, economic development needs to bring with it more than just dollars and jobs. It also needs to add to our property tax base and take some of the burden from homeowners.

    It's too bad that Lynch and his people didn't understand this.

    Next time you correspond with him, tell him one more thing. Don't come to a new area claiming to want to build a speedway without saying at the outset how much they want the government to pay and how little they want to pay in taxes. Let everyone know at the beginning, then they may not be disappointed to find out that their wishes cannot be fulfilled once everyone finally finds out what they really want.

  9. Obviously, you've done some homework on this, and your point about the tax base being much broader in King County is well taken.

    However, much of your interest seems to center around the money the fire district will lose. This is pretty much a moot point because the speedway would have had its own fire department and equipment. In fact, during a major fire in Kansas City a few years ago, at the request of the local department, ISC rolled out its people and equipment to help get what would have otherwise resulted in a huge disaster under control before that happened.

    And just in case Larry - You wouldn't want NASCAR fans living next door to YOU - Seaquist is reading this, I believe that falls under the heading of "Good Corporate Citizenship."