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Competition is not a reason for taxpayer-funded financial incentives

At its January 9, 2024, meeting, the Branson Board of Aldermen passed an ordinance authorizing the mayor to execute a contract for the economic development of the Mammoth Fieldhouse Project (Project) using a portion of the city’s sales tax and tourism tax revenues. The staff report for the Project describes it as a facility spanning approximately 42,000 square feet, offering golf, pickleball, food, beverages, recreational activities and entertainment. It is a $41 million development in Branson Meadows on a nine-acre site along Gretna Road, across from Branson Mill. It is expected to bring in over $19.2 million in sales and tourism tax over a 15-year period and spur additional development in Branson Meadows.

 

The ordinance provides up to $10 million incentive for the Project’s developers. One hundred percent of the city’s general sales tax revenues and 25 percent of the city’s tourism tax revenues that are generated by the Project will be remitted to the developer for 23 years, or until the total remitted reaches $10 million, whichever occurs first. In granting the incentives, the city followed existing procedures and evaluated many factors, including “but for” and the total potential revenue gains for Branson.

 

During aldermen and public comments regarding the ordinance, there was a significant amount of discussion before the vote on incentivizing new businesses that would compete with older businesses that received no incentives. It’s crucial to understand that in the context of the financial viability of Branson’s tourism industry, every Branson business competes with every other Branson business to win the time of the tourists coming to Branson. Very few, if any, Branson businesses will get any revenue from tourists who don’t spend time in their establishment, show, or attraction, etc.

 

Simply put, competition is an inherent part of doing business, period. While competition, in certain cases, such as wholesale cannibalism, might be a reason for not granting incentives, the Ole Seagull can think of no reason why “competition” should initially be a factor in awarding an incentive. Yet it was one of the reasons, hopefully not the primary reason, why the city is currently evaluating its economic, development and incentive policies.

 

For what it’s worth, an Ole Seagull believes there will be more cases than not where a financial incentive from the city gives a competitive advantage to the one getting it. From the city’s point of view, however, it is the expected total economic benefit to the city that should govern their decisions relative to granting the incentive. Large scale cannibalism of a number of existing businesses reducing the overall financial benefits to the city might be a reason for not granting an incentive, but the fact that a business wants an incentive because of the decisions they made or failed to make, and competition should never be a factor in granting financial incentives.

 

While the Ole Seagull is yet to learn the specifics of how those policies will eventually work out, he hopes that no Branson taxpayer dollars are used as incentives after the fact or for existing businesses based on competition from someone else. The city’s involvement with incentives and competition should start and stop based on objective, definitive criteria and requirements and with the granting or denial of an incentive before the Project begins.

 

Existing businesses and developers should have made their decisions based on due diligence, what they think will be profitable, the financial tools available, and the full expectation of competition. If they didn’t, that’s on them, not the taxpayer.

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