Zapping the Zap Tax 

An arts-and-community sales tax that took years to establish prepares for a rude awakening of reform.

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Elleney Soter was pissed and soon, the pissing match began. She is now referred to as an unfortunate choice.



Don Andrews was gracious and didn’t piss on a soul as he left. He is referred to as an unfortunate loss.



Jan Wells doesn’t want to sound pissy, but she got something she didn’t ask for. And she could be referred to as ungrateful.



In the far-reaching world of the arts, only money could create such disconnects for people so committed to the public good. An arts-and-parks fund administrator, a symphony CEO, and a Murray City administrator, each stung by a vision to sustain and grow the arts in Utah.



This is about money that’s scarce, competitive and alluring. In Utah, as in the nation, the quest to fund the arts has become a full-time proposition in which politics is prime.



That’s because of all the competition for leisure-time dollars'the Jazz, the Utes, the ballet, the theater'even Real soccer. There’s no question that the entertainment dollar is carved in smaller and smaller slices.



“The public supports all of these things,” says John Becker, a public-relations professional and longtime arts advocate, who serves on ZAP’s Tier 1 board. “People have only so much money to spend and so much time to allocate, but it shouldn’t be a Republican or Democratic issue. This is what makes it good here.

That’s the spin. Cultural diversity makes living worthwhile. And this is what, since 1997, has kept some $15 million a year flowing into coffers that fund everything from the Utah Symphony Opera to a Jordan River Parkway trail.



The reality is a little more sobering. Arts organizations around the state are dealing with deficits, even amid high public approval and tax money, too.



Oh sure, the tax money helps. A lot. And apparently it’s money that taxpayers really enjoy giving up. Last year, voters reauthorized Salt Lake County’s Zoo Arts and Parks (ZAP) tax by an amazing 71 percent or 227,608 votes. That represents more Salt Lake County votes than were cast for President George W. Bush (215,728) or for Gov. Jon Huntsman Jr. (168,818).



But the victory celebrations were cut short by Utah’s Republican Legislature, which has been swept up in the national enthusiasm for something called the Streamlined Sales Tax Project (SSTP). Not to be confused with motor oil, SSTP has lost traction this year in the face of the Flat-or-Flatter Income Tax Movement that has captured the imagination and fiduciary interest of the LDS Church.



SSTP began in 2000, with Utah as a founding state. Forty-two states and the District of Columbia participate now in the project, eager to harvest the untapped revenues from online sales. The goals are to make definitions uniform and sales tax easy to figure.



This is all still on the table, with ZAP and other programs in legislative flat-tax enthusiasts’ sights. The movement worries special-interest groups whose popularity is limited in reach and by access. And it worries those who like the invisibility of taxes on sales.



Not that anyone really wants to zap ZAP. They just might want to reroute it, it seems, from the sales tax to the property tax.



And that is a recipe for controversy.



Property taxes have been untouchable for decades, particularly since 1978 when California’s tax revolt, Proposition 13, hit the national circuit. Governments had relied heavily on these taxes since the early 1900s, and by the ’50s and ’60s, schools were taking a major share for their exploding budgets. Taxpayers didn’t like what they were seeing.



The Democrats lost control of the Utah State Senate in ’78, and some believe that was largely due to a sweeping statewide reappraisal. Salt Lake County property got its first look in some 48 years, and politicians would spend the next decade trying to deal with the property tax issue.



“Economists focus on equity and efficiency issues, which are certainly important; but a significant part of the attack on the property tax relates to perception,” wrote Holley Hewett Ulbrich, a professor of economics at Clemson University.



Perception. In assessing the property-tax revolt, Ulbrich noted a tax that strikes at the American dream of home ownership; plays to a general antitax, antigovernment audience; and comes once a year in a big, fat bill.



This is not the case for the sales tax, to which ZAP and other “good causes” have gleefully attached themselves. In a way, it’s like finding a personal shopper for endowments. The sales tax'a few cents on every dollar of goods consumed'is so neatly invisible that the general public just doesn’t feel the pain they do with that big property tax bill.



And so, as the Legislature ventures into the territory of major tax reform, it has perception as well as “right principles” to consider.



Sales taxes are an area of the keenest interest because they are seen as an easy mark to help fund a lot of good stuff like the arts, recreation, hospitals and transportation. You might remember last year when open-space advocates tried, unsuccessfully, to carve out another piece of the pie.



While the highest-profile issue for sales-tax reformers may be food and how taxing it is inhumane and burdens the poor, other issues are of greater interest.



Sales taxes also fund government operations, which is the reason cities and counties like to have control. Reform could jeopardize this control.



Take Utah County and the Utah Transit Authority, for instance. The county is painfully split on funding mass transit. If a statewide sales tax were put in place, local governments wouldn’t have the option to say no.



Enter Roger Tew, an attorney and former legislative counsel coming hat-in-hand to the committee vested with tax reform and the arcane subject of sales and use taxes. He is cautious and diplomatic even as he ventures into the tricky territory of municipal egoism. With 247 masters nipping at his heels, Tew is dancing the quick step.



But Sen. Howard Stephenson, R-Draper, just isn’t buying it. He has less than a little sympathy for Tew, the former tax commissioner who was now wincing in his role as lobbyist for the Utah League of Cities and Towns. That’s where all the masters come from'disparate municipalities, all bent on their own agendas.



To his friends, the cities, it’s like the Legislature was targeting each of them personally. And yet, in the netherworld of sales taxes, most people don’t really give a damn'unless they think really hard about how they might be getting screwed or how maybe they can quietly tap into someone’s pocketbook.



“We’re supportive and understand the need for simplification'we really do,” Tew pleads. “But the entity on whom the impact of that simplification falls is the cities. … For me to say the League supports a single rate'I’d be hung.

And this, in a nutshell, is the bogeyman facing tax reformers as they consider juggling everything from transit to the arts in the name of simplicity or SSTP'which, by the way, is anything but simple and seems to bring out the hanging urge in a lot of people.



Utah has 13 different combined sales-tax rates, ranging from 5.75 percent to 8 percent. While it’s the consumers who pay, it’s the retailers who are to be pitied. They have to figure out and collect the hodge-podge of taxes that include a 1-percent local tax, resort-communities tax, public-transit tax, highway tax, city-and-county-option ZAP tax and rural-hospital taxes.



That’s the big business complaint. Cities, however, are used to complicated accounting formulas. They’re not at all happy, though, when the power base gets complicated.



“The League is surrendering something,” says Tew. “In return for giving up future flexibility in the sales tax, we’ve got to have enhanced flexibility in other areas.

This is where Stephenson perks up. He’s struggling, he says, to understand why the cities are so afraid'and of what. A single-rate sales tax would protect the extra dollars cities get from sales taxes.



“So, I’m not sure I understand what you’re saying,” Stephenson continues. “Do cities currently have untapped sales-tax authority that’s been given by the Legislature?” Of course, Stephenson knows they don’t, but he’s making a point. What exactly would the cities be surrendering, then?



Maybe it’s political cover, suggests Mike Jerman of the Utah Taxpayers Association, which Stephenson heads. “The sales tax would be off-limits, unless they get legislation through to change it,” he says. “They get revenues off those sales; it’s not pure altruism by any means.

No matter what it is, what it will be is the question. And an unprecedented momentum for change is leaving the players a little edgy.



One person fidgeting on the edge is Carter Livingston, a Texas transplant and political junkie who’s now running interference for the ZAP-tax beneficiaries, among others. He’s gotten ZAP through two campaigns, but the politics are changing.



With ZAP earning between $14 million and $16 million annually in Salt Lake County, there is definitely something to protect. The reality is that ZAP is an enormously popular program that is often misunderstood by the public and sometimes disparaged by its own.



Underpinning ZAP is an ongoing statement of support. It’s a call to arms against those who would discard the arts and devalue parks and recreation as nonessential fluff in the budgetary process.



“It’s just a marvelous statement that the residents of Salt Lake County are willing to make about culture and the importance it has on their lives,” says Don Andrews, former CEO of the Utah Symphony. Andrews remains positive about the future of arts in the state he left during the contentious merger of the symphony and Utah Opera, which is under scrutiny now because of substantial fiscal missteps.



The truth is that ZAP was begun as an attempt to stem the budgetary bleeding of the symphony and ballet during a time of shrinking audiences.



Despite Utah’s reputation as a backwater of the nation, it has long been renowned for its orchestra, humbly created in 1940. From the time of the Mormon pioneers, Utahns have had deep respect for the arts, where icons such as the Mormon Tabernacle Choir, the Utah Symphony and Ballet West came to stand out as cultural oases in this peculiar desert enclave. The symphony grew and thrived under the direction of the late Maurice Abravanel, whose vision brought it to full-time professional status, and moved it permanently to Symphony (Abravanel) Hall in 1993. But frankly, it had also thrived a little from isolation.



The last two decades of the century spawned 92 “new cultural entities,” according to a 2002 budget report from the Legislative Fiscal Analyst. And that was only direct competition.



In 1984, the Utah Jazz recorded its first winning season, signaling the arrival of a whole new set of leisure-time activities for a generation with almost too much to do anyway. Audiences for orchestras around the nation were shrinking and the sustainability of cultural pursuits was at issue.



So began a debate over how to fund the arts. Sometime in the early ’80s, the notion of tax support began to ferment.



Tew has some vivid memories of this time, partly because of his work as director of the Office of Legislative Research and General Counsel, and partly because of how he dodged a major ass-chewing there.



While both the symphony and the ballet were beginning to struggle, they were hoping for a little help from the homefront. The problem was that “home” was hard to define.



“There was an ongoing debate as to whether they were state or local,” says Tew. Both organizations purported to serve a broad constituency around the state, but the fact is that their base of operations was in one city'Salt Lake City. Sure, it was the state capital, but it also was an urban demon that would suck needed tax dollars from poor rural counties.



Olene Walker, then House majority whip, and then-Rep. Ted Lewis were hoping to talk the Legislature out of operating money for Hogle Zoo. Tew distinctly remembers talk of funding the arts, although the paper trail is missing.



Walker, against great odds, managed to pass a tax to fund the zoo, only to discover that it didn’t pass after all.



It was a secretarial error that sank the arts tax then. After passing by one vote in the House, the bill went to Tew’s office to be enrolled, or prepared for the governor. The secretary neglected, however, to type in the clause that would actually enact the bill.



“I had to go down and tell Olene, you have to re-pass this,” Tew says. “She was really very good about it, but it was frustrating because the people who fought it insisted on adding the Logan zoo.

Willow Park Zoo, not exactly a household name, was a beneficiary of the monies appropriated back then for operation and maintenance costs'$1.5 million for Hogle Zoo and $100,000 for Willow Park.



Somehow, zoos as an important political chess piece got lost, and by 1993, it was arts and only arts. John Becker ran this first campaign, which failed muster by a 3-2 margin. People thought the county commission was trying to pull one over on them by placing the proposition in a special election. Indeed, only 17 percent of voters turned out, but that was a lot more than expected.



The campaign was orchestrated by the large arts organizations and led by Ken Knight of the symphony board. The symphony faced a $700,000 year-end deficit when private donors came up with $200,000 to run the campaign.



They lost to a coincidental coalition of Libertarians, Independents, the Utah Taxpayers Association and defense attorney Robert Breeze who spent only $10,000.



“Funding for just arts organizations was always seen as being elitism,” says Becker.



It might have been seen as Democratic, too. A 2004 Georgia State University study found that political liberals are more likely than conservatives to favor public funding of the arts.



“We needed to appeal to a broader cross-section of the population,” Becker says. That’s when zoos and parks came into the mix. It was brilliant strategy.



Today, more than 150 organizations and 16 cities in Salt Lake County benefit from ZAP, although not equally. Most of the funding'57.5 percent'goes to cultural organizations; 30 percent to parks and recreational facilities, and 12.5 percent to zoological organizations.



While the county has constructed 12 recreation facilities with ZAP money, a recent Deseret Morning News story noted that at least $39 million is needed to renovate and maintain a whole lot of them.



Murray City was the proud but puzzled recipient of one of these venues'an indoor ice arena at Murray Park.



“It’s a facility; it’s there,” says an unenthusiastic Jan Wells, chief of staff to Murray Mayor Dan Snarr. “I think it’s fine, but if it had been a choice of Murray’s, the answer would probably be ‘no.’

You see, Murray already has an ice rink'the only outdoor ice rink in the area, and Murray really wanted an arts facility. Really.



“We have an active arts council and arts group here, and our arts community would just really, really like a facility,” says Wells. “This is one of the challenges to ZAP funding. We would love to have some say or influence.

In fact, there have been many internal challenges for ZAP. Cultural groups, like This is the Place State Park, have fought for and won tier status with the big players.



ZAP is structured into two funding tiers. There are 25 major arts organizations in Tier 1 and 86 in Tier 2. Recent legislation has capped the number in Tier 1 so that there is some consistency of expectations.



Under former director Lynette Hiskey, the ZAP program grew and prospered, although Hiskey herself had quietly voiced concerns over the lack of operational funding. A stalwart advocate of the program, Hiskey nonetheless felt she could do more if she could promote the programs and facilities ZAP funded.



As it was, $250,000 or a mandated 1.5 percent was just enough to pay for office space, rent and payroll checks. Since Hiskey left, the program has struggled under a string of directors who nonetheless keep funneling through the funds.



Former ZAP program manager Elleney Soter charged that the daily operations and procedures had been “either neglected or misguided since the time Lynette Hiskey resigned,” according to her e-mailed resignation letter in May, 2005.



“In just 7 months, ZAP has employed 3 different program managers; it has moved back and forth between Mayor’s Operations and the County Council; it has been governed under two different mayors, as well as 3 different directors under the Community Services Department; it has been physically moved 4 times, resulting in many files, records, and office furniture being lost (most of which cannot be replaced). Additionally, ZAP has been without a fiscal manager for over 3 months, and has had to borrow support from other departments,” she said.



In response, Soter was described as unqualified and perhaps risky by Salt Lake County officials, including community services director Chris Crowley, because she’d been fired previously by Salt Lake City where she worked as Gallivan Center division director. However, the District Attorney found “no evidence of criminal violations.

As a testament to the strength of the program itself, ZAP still works for its recipients despite all the political maneuverings. But the question now is whether or not it’s wise to continue below the radar.



Tew verbalizes the debate as he’s heard it: “If you have an earmarked funding source, does it escape the scrutiny that other bills don’t? What type of scrutiny does it get in terms of the broad public? If social services and public safety are scrutinized, why does ZAP run off-budget? … After 30 years, are we spending money because it’s the highest priority or because we have the money? Do we need more rec centers or more health-care facilities?”



Rep. Wayne Harper, R-West Jordan, who co-chairs the Tax Reform Task Force, has heard that argument because it’s really all about legislative oversight. And then, he’s fundamentally opposed to using sales tax for goodies anyway.



Don Andrews doesn’t think of ZAP as a goodie. “We had to convince people it was a worthwhile project; we had the constant strategy that this would create a better community.



“It’s the nonprofit story'you can’t compete with Broadway commercial prices, but the value of the local cultural organizations is that they provide ongoing strategically integrated activities for the community.

Despite Andrews’ work to buoy the symphony, board members voted to merge with the Utah Opera under direction of Anne Ewers. He went on to become executive director of Allied Arts of Greater Chattanooga in Tennessee.



While ZAP remained in place, it would never solve administrative problems. Government funds don’t cover nearly enough. In fact, the National Endowment for the Arts says that American arts organizations get about half of their income from box office sales, and the rest comes mostly from private donations. Only about 10 percent of the funding comes from government, and only 2 percent from the feds.



So, when the Utah Symphony and Opera recently disclosed $3 million in operating deficits, it was fortunate that the public had already weighed in on renewed ZAP funding. With a PR nightmare at hand, it needed all the help it could get.



“We knew it was always subject to that renewal at the voting booth, and we needed to create activities in outreach that were going to have a significant impact on the community,” says Andrews. “The feeling was that healthy arts organizations could do that better if they were stabilized.”



ZAP and other such programs are sneeringly referred to as “boutique taxes” or “siloed revenues,” for which there has been a growing political acceptability. Until now.



Rep. Harper, an unabashed fan of the streamlined sales tax, doesn’t like ZAP and is looking to change the funding mechanism.



“My primary interest is to make sure if the [SSTP] program goes through, it’s easier for businesses to comply with and there’s no hidden surprises for any taxpayers,” Harper says.



“Sales tax is kind of a hidden tax'a couple dollars here and there or a lot if you buy a car. If you were billed for sales tax like property tax, you’d have nearly an uprising.

Stephenson jokes about sponsoring legislation to create magnetic purchasing cards from which consumers would get a lump-sum sales-tax bill at the end of the year.



This is no joke for those who depend on ZAP for whatever amount. At least for the foreseeable future, the reauthorized ZAP will stay in place. But there’s a smell of change in the wind.



Legislation is afoot to mandate one sales tax per county, rather than one for the whole state. This could make it easier, although not a slam-dunk, for ZAP. While Salt Lake County will support it, no one counts on Washington County’s support.



Neither will it be an easy task to move ZAP to the property tax. Cities around the country have tried and failed. In 2002, Detroit voters snubbed a 0.5 mill levy for arts and recreation, and this case alone has become the subject of study by other hopeful cities including Atlanta, Ga.



Harper has been struggling with all of this and recently floated an idea to shift minimum sales-tax revenues from cities to education, leaving cities with whatever they can get from property taxes. Needless to say, the League and education advocates went ballistic.



While it may seem like a no-brainer that the arts are important to the quality of life, how to sustain funding for them is murkier. And in Utah, everybody seems to want something new in the area of arts. Fund-raising experts are competing in Salt Lake County to boost interest for worthy causes like the Museum of Utah Art and History, the Leonardo, the Utah Theater renovation, not to mention an expansive arts campus winding along Salt Lake City’s Main Street.



Money for the arts is being whittled away from all corners.



“As we look at the plans people have to do a whole new cultural arts venture on Main Street, we ought to look at all the empty seats at Symphony Hall and the arts arenas, and count how many dark nights there are,” warns Becker.



Unbridled proliferation is perhaps a bigger threat to the arts than loss of government funds. Someone needs to figure out how much the county or state can support over the next 10 years, Becker says.



“If the whole purpose is to help solidify the foundation of Utah’s cultural arts because they were struggling and they continue to struggle, we ought to be concerned about their future,” Becker says.



The key is ongoing public support. And that doesn’t mean taxes.

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