In a hastily convened meeting tonight, the Newton City Council will discuss and consider passing a proposal that would reduce the Iowa Speedway’s tax burden, as well as create a ticket surcharge to aid the city in paying down bonds used to assist in funding improvements in and around the speedway.
Recent media reports out of Des Moines suggest there are not enough votes in the Iowa House of Representatives to support a four-year, $8 million incentive for the race track. The money would have been made available for the purpose of preparing the speedway for a NASCAR Sprint Cup race.
It has been long speculated Iowa Speedway is “next in line” for a much-coveted Cup race. To be able to host such an event, many upgrades to the speedway facilities — most notably, the addition of thousands of permanent seats — would need to first be completed.
Wednesday night, moments before the 24-hour time limit for announcing a meeting to the public was about to expire, Acting City Administrator Bryan Friedman sent out an email with the agenda and a 10-page electronic format City Council packet. The meeting will begin at 6:30 p.m. tonight in the Council Chamber.
The first item on the agenda is a public hearing to discuss “Resolution Amending the Substituted and Amended Agreement for Private Development by and between the City of Newton and the U.S. Motorsport Corporation in the Speedway Urban Renewal Area.” The second agenda item is to consider passage of the amended agreement.
The first notable change in the agreement states the city will provide U.S. Motorsport Corporation an additional partial rebate of the speedway’s regular property taxes for the 2013-14 and 2014-15 fiscal years.
“[S]uch property tax rebate shall be the portion of the annual regular real estate taxes above [$990,000] paid by the developer upon the development property which is to be collected and deposited by the city as tax-increment revenue into the tax-increment fund established for the Speedway Economic Development Area Urban Renewal Project or its successor development area,” the amended agreement states. “Said tax rebate payment by the city shall thereafter be made to the developer within 30 days of the city’s receipt of county tax payment to the city.”
The second notable change is the assessment of a $4 fee on all tickets sold at the speedway for events held there Jan. 1, 2014, through Dec. 31, 2026. The speedway must then give the city any money it collected in the previous month on the 20th day of the following month.
“Should the ticket surcharge collected total less than $390,000 in a given fiscal year, the developer shall pay over to the city the amount that the ticket surcharge was below $390,000 on August 1 of the fiscal year following the year of the deficiency,” the amended agreement states.
The agreement states the Assessor’s minimum actual value of the Iowa Speedway property will be reduced to $20 million on June 1 of this year. If ticketed motorsports events cease to take place there — for any reason — before Dec. 31, 2026, the Assessor’s minimum actual value will be returned to its current value of $40 million.
In his background report to the City Council, Friedman said:
“In order to better position itself for future growth, the Speedway has requested that the original Agreement be modified. The Minimum Assessed Value would be lowered from $40 million to $20 million beginning in 2014. For the two fiscal years before that new valuation would have an effect, the city would rebate all property taxes above $990,000 collected by the Speedway Urban Renewal TIF District from US Motorsport in each year.
“The City of Newton is obligated to pay the general obligation bonds that were issued for the infrastructure and grants associated with the Speedway project and is committed to having all of these bond costs be covered by the Speedway and its vicinity, not by the general taxpayer. In order to keep this commitment, the City would need to find a replacement of the revenue that would be lost if the Minimum Assessed Value for the Speedway were to be lowered.”
Friedman said one way the city is proposing to cover the gap is to assess the $4 ticket fee. A $1 ticket fee was imposed in the early days of the speedway development agreement, before a local option sales tax could be implemented by the city.
He also said the city would pursue a process in the near future to combine the speedway’s urban renewal TIF district with the adjacent Prairie Fire TIF district, which includes the development area around Exit 168 on Interstate Highway 80, and the land directly north of the speedway.
“Iowa Code allows adjoining TIF Districts to be combined, which enables their indebtedness and revenues to be shared,” Friedman said. “In this instance, much of the road infrastructure that is funded by the Speedway TIF District is actually located in the Prairie Fire TIF District, which adds a strong rationale for combining the districts. By joining the districts, the property taxes from developments such as Love’s Travel Plaza can help pay the infrastructure bonds.”
Friedman also noted there are some risks associated with relying on the ticket surcharge revenues and “unsecured valuations” from an adjoining TIF district, instead of fully on the minimum assessed value of the property.
“However, the community would stand to have enormous gains if the proposed amendment would be successful in helping the Speedway to attract a higher level of races,” he said. “The City has proposed security safeguards and fall-back provisions that protect its interests, while still allowing U.S. Motorsport to, in effect, convert some of its property taxes to a ticket surcharge and to have the adjoining development share in the infrastructure costs.”