Competition means higher prices

(by Jim McNeil desnews.com 2-21-06)

How would the average businessperson feel if after investing his or her own money to build a theater, a reception center, or a floral shop, state government came in and gave huge tax incentives to help someone else compete in the same type of business?

For example, if promoters came to town proposing to build a huge basketball arena, using tax dollars to foot the bill, in order to recruit a professional basketball team to compete against the Utah Jazz, it is doubtful that state lawmakers would give them much of a hearing. Why would the state gamble tax dollars to compete with Larry Miller, who has already invested hundreds of millions of his own dollars in constructing the Delta Center and keeping the Jazz here in Utah? Yet that is the exact position in which I, as president and CEO of Utah-based United Concerts for 38 years, find myself.

By now many readers will already be familiar with proposals at the state Legislature involving "the Sandy Soccer Stadium," which most people seem to view with mixed skepticism and excitement. On one hand, it is exciting to have a new professional sports attraction at the south end of the Salt Lake Valley. We are certainly accustomed to state and local governments awarding incentives for commercial developments in hopes that those tax dollars will end up producing benefits down the road.

The skeptical will view it as one more example of government involving itself where it has no business.

Perhaps the truth is somewhere in between and has to do with the soundness of the "investment," its necessity and extent of the government's involvement. Usually, the actual impact on any one taxpayer will amount to a relatively few dollars over many years. Not so for us.

Five years ago, we saw the need for a high-quality outdoor concert venue in Utah. West Valley City was anxious to host it. Zions Bank reviewed our business plan and provided financing. With our own cash investment, Zions' help, and some very modest incentives from West Valley City, USANA Amphitheater was born.

Every part of USANA was built with unsubsidized private investment. West Valley City helped with utilities up to the property line, and about half the parking construction. In return we paid over appraisal for the land. The city is rapidly recovering its investment and also plans to utilize the parking for commercial development in future years. We also pay significant taxes to both city and state.

Over its first three seasons, USANA has proven its viability. Zions is being repaid, West Valley City is benefiting handily and we are happy with our investment to this point. Thousands of Utah concert fans have come to our privately built facility to enjoy acts from James Taylor to Tim McGraw.

Imagine my dismay in hearing of plans to spend tens of millions of state tax dollars to subsidize the construction of a facility that will compete directly with our private venue. "The Sandy Soccer Stadium" has announced its intention to book outdoor concerts by the dozens (they say), to compete with USANA, and to do so using enormous financial incentives from state coffers. The assistance USANA received from West Valley City was tiny compared to that proposed for the soccer stadium.

I am not a politician; I will leave the politics to others. I will leave whether Real Salt Lake can survive in this market to those in the soccer business. I will say this: To use state dollars to undermine an existing commercial venture built with private investment is simply wrong. The state would never use tax dollars to subsidize a competitor to Larry Miller and the Jazz. Why would they do it to United Concerts and USANA Amphitheater?

We at United Concerts have booked nearly 4,000 concerts over nearly 40 years. The bands and their managers know us. We will continue to book first-quality acts into USANA. But today's music managers are smart. Once they know there are two outdoor venues of this size in the same area, they will use it to bid up their prices.

United Concerts will continue to get its share of business. No new dollars or opportunities will be created — there are only so many concerts that will come. This competition won't benefit the consumer; it will only mean higher prices.

I am not a politician or a soccer expert, but I do know the music business. Competition is great, if that competition is fair. If the competition comes with a tax subsidy of $40 million or $50 million, we fear even more for the taxpayers and the concertgoer than we do for ourselves.