Tax could help pay for Colts arena

INDIANAPOLIS -- An extra dime for a haircut here and a hundred dollars tagged on to a legal bill there could add up to millions of dollars to fund a new Colts stadium, a top state senator said.\nA proposed 1 percent tax on most services in Marion County would help pay for the stadium and an expanded convention center, said Senate Tax Committee Chairman Luke Kenley, R-Noblesville, on Monday. He said the tax he proposes on all Marion County services except medical and construction work would bring in about $38 million a year for the stadium.\n"This is a broad-based way to pay for this," Kenley said.\nBut Indianapolis Mayor Bart Peterson said the tax would drive business out of the city, and that other surrounding counties would also need to pay the tax for it to work. Kenley's plan also includes a new $5 million annual payment from the Colts, which the team said would leave it uncompetitive in the NFL.\nPeterson said service providers could move across the Marion County line to avoid charging their customers the 1 percent tax.\n"If there has to be a tax, it ought to be a regional tax," Peterson said.\nKenley said he considered a regional tax on food and beverages, but the counties surrounding Marion County do not support it.\nHe said he was open to other counties having the same option as Marion County to tax services. But he said he kept it out of the Colts funding plan to give it the best chance to pass the General Assembly.\nCurrently, services are not taxed under the state's sales tax. The proposed tax would affect large service providers like law firms, engineering and architectural businesses and financial companies.\nBut it would also add to the price of smaller transactions such as car repairs and haircuts. Kenley said a $1,000 legal bill would be taxed $10, while someone paying $10 for a haircut would pay an extra 10 cents.\nIf Kenley's proposal passes the General Assembly, the Indianapolis City-County Council would have to vote to increase the tax for it to take effect, although Peterson said he opposes the tax in its current form.\nUnder the stadium deal announced in December by Peterson and Colts owner Jim Irsay, the team and the NFL would contribute $100 million toward the project. Peterson had proposed allowing slot machines at a downtown betting parlor to raise much of the remaining money.\nKenley's plan includes an additional $5 million annual payment from the Colts, a $1 stadium admission tax on all events at the new venue and a 1 percent increase on income tax for professional athletes at the stadium.\nThe Colts issued a statement saying the team would work with Kenley and others on a funding plan, but that it had "serious concerns" about his proposal.\n"Even if we were still in the process of negotiations -- which we are not -- many of the facets of the new proposal would lead us to become noncompetitive in the NFL now and in the future," the team said.\nPeterson said asking the Colts for more money would change the deal the city struck with the team. He said it would be nearly impossible to renegotiate another agreement by the time the General Assembly is scheduled to adjourn at the end of April.\n"If we had to start over, there'd be a real risk of losing the team," Peterson said.\nKenley is working with a group of representatives from the Colts, the city, the Indiana House and the governor's office to come up with a funding plan.\n"There's plenty of room to work," Kenley said.\nAlthough Peterson did not like the details of Kenley's plan, he pointed out that it includes money for both the stadium and the convention center expansion.\n"That's a huge step forward and a major sign of progress," Peterson said.\nThe stadium is projected to cost between $550 million and $700 million, and with the planned expansion of the neighboring Indiana Convention Center, the total project could reach $990 million.\nSeveral bills to finance the project have died in the first half of the legislative session, including plans to increases taxes and put slot machines at horse racing tracks.\nKenley said such gambling options were out because they would have a difficult time winning approval in the Legislature.\n"My only concern is getting 26 votes in the Senate and 51 votes in the House," he said.\nPeterson said any option could be politically difficult, and that he thought expanded gambling is still the best plan.\n"There isn't going to be an easy answer," he said.