In an effort to attract more and better acts to Baltimore's aging Royal Farms Arena, the City Council is expected to approve large tax breaks for any major concert or comedy show at the facility.
The council voted 13-1 Monday to give preliminary approval to legislation sponsored by City Council President Bernard C. "Jack" Young that would exempt some performances at the venue from paying the city's 10 percent admissions and amusement tax on every ticket. The gross ticket sales for a single event would need to exceed $500,000 to qualify.
The city's finance department and economists raised concerns that the legislation would allow wealthy acts like Justin Bieber, Rihanna and Garth Brooks to sell concert tickets tax-free — costing Baltimore millions in revenue.
But backers say large crowds at the arena boost the city's economy — and taxes paid on restaurant and hotel bills. They also note that the city-owned arena faces stiff competition in the region.
"This credit will enable the arena to be on a better footing to compete with Merriweather Post Pavilion and the Verizon Center in D.C.," Young said.
Nearly every jurisdiction in Maryland charges admission and amusement taxes. Howard County, where Merriweather is located, charges a 5 percent tax on live concerts. Baltimore and Anne Arundel counties charge 10 percent. The Verizon Center in the District of Columbia pays a 10 percent sales tax.
Mayor Stephanie Rawlings-Blake's administration is opposed to the bill. The mayor, who will step down from office when her term ends in December, has not said whether she would veto the bill.
Baltimore Finance Director Henry Raymond wrote in testimony against the bill that the tax breaks could cost the city $500,000 to $1.2 million annually. Raymond also argued the bill would be unfair to other tax-paying performance venues in Baltimore.
"I don't think it's a particularly good idea," said economist Anirban Basu, who runs the Baltimore-based consulting firm Sage Policy Group. "I don't think this is something that should be rushed. Doesn't it make sense to make the new mayor part of the deliberations?"
The two mayoral candidates on the council — Nick J. Mosby and Carl Stokes — declined to vote for the deal.
Mosby voted against it, while Stokes abstained. The council will cast a final vote next week.
"It doesn't seem like the right approach, to take millions of tax revenue off the table without doing a full financial study," Mosby said.
"I don't honestly believe we're missing any shows at all," Stokes said. "We've got Bruce Springsteen, Rihanna, Jay-Z, Elton John. Who are we missing? I think it's another bill that puts more profit in the promoter's pockets. ... Why should all of the smaller clubs have to pay the tax when the arena doesn't?"
City Councilman Bill Henry said he is backing the bill because it will help the arena book the nights it doesn't have shows, making for busier downtown restaurants and fuller hotels and parking garages, increasing overall tax revenue.
He said he was gathering information to determine how many more events the city would need to attract to generate enough revenue from the city's share of arena profits to offset the tax revenue lost on ticket sales.
"If by reducing the tax we can get more performances by more acts, then we can make more money doing it this way," Henry said.
Young, too, cited the economic impact of large concerts.
"More shows bring in more hotel guests, more dinner reservations, more parking and more shopping," he said. "This is a way to gain tax revenue."
Royal Farms Arena — previously known as the Civic Center, the Baltimore Arena and 1st Mariner Arena — ranks first in the U.S. in gross ticket sales among venues its size, according to Billboard Magazine.
The venue, which seats 14,000, grossed more than $16.8 million on 80 concerts over one year beginning in November 2014.
The arena's 2016 schedule includes concerts by Justin Bieber, Rihanna, Garth Brooks, Luke Bryan, Janet Jackson, Maroon 5 and others. In 2015, the venue hosted concerts by Prince, Motley Crue, the Eagles and Stevie Wonder.
Frank Remesch, general manager of Royal Farms Arena, said a single major event can boost the economy in Baltimore. He said when the Ultimate Fighting Championships were in town, the show generated an estimated $28 million in economic impact.
"I'm trying to get the big events," Remesch said. "We're fighting that big gorilla down the street called the Verizon Center. Give me a swinging chance against these goliaths."
But Stephen J.K. Walters, an economics professor at Loyola University Maryland and a fellow at the Johns Hopkins Institute for Applied Economics, Global Health and the Study of Business Enterprise, said the proposal begs for more study. The council should vet whether potential increases in hotel business will make up for the revenue lost from tax collection.
"Have they studied how many concertgoers arrive from out of town? Do they know how much they spend at local hotels, restaurants, etc.?" Walters wrote in an email.
He said the break would tilt the playing field gainst other city venues.
"Though none are sufficiently large to be competing for these acts, the more big acts the arena books, the more of our entertainment budget they get at the expense of substitutes like Rams Head Live, Pier 6, etc.," Walters said.
Basu said eliminating the ticket tax could work against the city's best interests. The tax revenue could fund construction of a new arena, and bolster arguments that one is needed, he said.
"The city desperately needs a new arena. ... When Baltimore has been able to supply first-class facilities, there have been incredibly good outcomes. One only needs to look at Camden Yards and M&T Bank Stadium," Basu said. "The current arena is uninspired, and people put up with it because the acts are good."