J.L. “Rusty” Meadows, managing principal, Ai
Testimony
Committee on Economic Development and Committee on Finance and Revenue Joint Hearing on the “Ballpark Omnibus Financing and Revenue Act of 2004,” Bill 15-1028
October 28, 2004

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Good afternoon, Mr. Chairman and members of the committee. My name is Rusty Meadows. I am the Managing Principal of Ai. We are a $15 million dollar per year architectural and engineering firm headquartered here in Washington, DC. We have been in business for over 20 years, maintain a staff of approximately 100 employees in Washington, and are currently working on projects for other DC based organizations such as Fannie Mae, the FDIC, the Coast Guard, and the Department of Transportation. We also have offices in Richmond, Hartford, and San Francisco.

Mr. Chairman, I believe, and many small businessmen like myself, also believe, that bringing major league baseball back to Washington is generally a good thing. The benefits are compelling. We believe the benefits include:

• The enhancement of the city's image,
• The potential increased commerce in the hospitality sector,
• New additional part end full-time jobs,
• the ability to jump-start the Anacostia Waterfront Initiative with a new stadium, and
• the potential for new revenues for the District's general fund to support any number of important agenda items.

However, being one of the chosen few to contribute to this initiative, or perhaps identified as an involuntary investor, I do have some concerns about the proposed "ballpark fee" tax to the business community.

My concerns are as follows:

• The concept. The concept of a tax on a limited portion of the business community to subsidize another business, regardless of the community benefit, just doesn't seem to fit within the free market society in which we live. Baseball is many things, but today it is first and foremost a business. Baseball has it's community benefits, but they are finite, and do not last forever, as the city of Montreal knows all too well. As such, it should live or die based on its merit and its value proposition to the community just like my firm and the 1999 other firms proposed to be selectively taxed to support this business. Mr. Chairman, if this tax was for improving our health and education system, our safety, or our environment, it is unlikely that I would be testifying here today.
• The proposed legislation. The legislation utilizes a gross receipts tax that is perhaps more easily monitored than a tax on profits, but is also ripe with inequity to a number of businesses with models of high gross revenues and thin margins. The legislation is too broad in the definition of the use of these funds, the duration of the tax is virtually open ended, and there is no limitation of the amount to be taxed on an annual basis. In addition, the tax is not equitable in how much firms must pay. Under the proposed legislation, many smaller firms would actually end up paying more as a percentage of revenues or profits than many much larger firms. To that end, it should not be lost on you that the large firms are not represented here today.
• And last, the proposed "ballpark fee", or "ballpark tax" is a business subsidy. It is being imposed on a select few based apparently on the premise that "all boats float in a high tide." Please understand that that is a myth, the benefactors are also a select few. One proposed benefactor is the DC government's general fund. It is forecasted that the general fund will receive nearly $30 million per year in increased revenue, an amount in excess of the proposed tax contribution. Yet there is no real commitment as to how those funds will be used.

Mr. Chairman, if this legislation is approved as written,, without consideration of the inequities and open-ended nature of the terms, I will obviously pay the tax. But you should be aware, that as a small business, it would be necessary for me to do one of two things if I intend to remain a viable business. I must either find a corresponding income stream to offset the cost, or I must reduce my expenses in kind. And while they are not here, I can, in fact, represent both large and small business in this reality.

Large companies can say that this does not impact them. That statement is in fact true, an increase in taxes of $28,000 is not going to bankrupt one of our larger businesses. But having spent 10 years with the Bell System let me assure you that this money will simply come from someplace else on their balance sheet. It might come out of a miscellaneous tax line item, or it may come from one of many charitable causes that they currently support within the city's borders. But please do not deceive yourself into thinking that they're so big, they make so much money, that it just won't matter. Whether you gross $5 million a year or $500 million a year, the rules of business apply equally to all of us. Every action will, in fact, have an equal and opposite reaction.

And where will the tax likely be absorbed in the small business? Truthfully, the most likely place is payroll. Like most small businesses, more than 75% of our cost is payroll. The $20,000 check that I will write every year to support the new stadium will almost assuredly come from a portion of a new or existing job. It is estimated that 2000 businesses will be taxed "not less than $24 million." Once again, when counting the new jobs created from the baseball initiative, please factor in the jobs eliminated by firms compensating for the increased tax.

Mr. Chairman, my colleagues, and I truly understand and appreciate the incredible complexities in making public/private business deals of this nature work. We live every day in the world of negotiation, compromise, mutual pain, and mutual benefit. But we believe that there can be a better way. As such, we must respectfully request that some additional thought be given to this legislation. We ask that you consider the following:

• Consider adjustments in the tax to remove some of the inherent inequities so that there is more equitable sharing of the pain.
• Consider additional tax vehicles targeted specifically at the true beneficiaries of the initiative and earmark that revenue stream to retiring the debt thereby minimizing the tax requirements,
• Consider a more finite sunset provision in the tax to perhaps as few as three years, thereafter utilizing the forecasted increased tax benefits to the general fund to replace the tax at that time to retire the debt.
• And lastly, and perhaps more importantly, consider allowing the businesses paying the "baseball fee" substantial discounts on season tickets, concessions, parking, other privileged benefits, and the opportunity to see Barbara Lang throw out the first pitch in the new stadium.

Mr. Chairman, thank you for the opportunity to voice our opinion.