There is small furor in some media reports over the financing of Answers in Genesis’s side-project, The Ark Encounter—a full size replica of Noah’s Ark and attendant theme park dedicated to the biblical story. Both the leftist media and AiG spokespersons have weighed in multiple times. I have reviewed most of the relevant information, including some harder-to-access stuff, and I have to say that I think neither side is telling the whole story.
The latest round involves a mocking Rachel Maddow blasting the project for its creationism and highlighting the fact that, she says, $43 million in Kentucky tax dollars are going to help fund this massive project. AiG president Ken Ham has responded by repeating the standard AiG rebuttal to the “tax dollars” critique. That rebuttal is repeated in several places by AiG and goes like this:
[T]he Ark Encounter will not, as some opponents imply, take money from the state budget. The Ark Encounter will actually add millions of dollars of sales tax (and from other related taxes) each year to the state. It will not take money from the state of Kentucky’s budget.
Well, from a certain perspective that is correct, but “taking money from the state budget” is not quite the same as the criticism at hand. Let me tell you a little more to the story.
There are basically two avenues of financing that will benefit Ark Encounter LLC that are tied to tax money. One is sales tax “rebates,” and the other is tax increment financing. I will describe both, but if you are short on time, skip to the second one below—“TIF”—because it is far more important.
Sales Tax Rebates
The first relevant tax program is the one that gets all the press on both sides: sales tax rebates. On this count, Ark Encounter is largely defensible. First, it is a for-profit company, not a non-profit like it part-owner AiG. It should qualify for any tax rebate program that any other for-profit corporation would (whether you like or agree with such programs or not).
Second, it is a theme park—a tourist attraction—that perfectly qualifies for sales tax rebates under the State of Kentucky’s Tourism Development Act. Many States and local governments have various tax incentive programs like this—usually to entice new businesses to open in their districts, bringing job opportunities to the region. By giving tax incentives, the government will be receiving less tax revenue than it would without giving rebates, but if the businesses would not have come at all otherwise, then slightly lower revenue is better than no revenue. Such tax programs are used all over the place, and should come as no surprise or special objection when Ark Encounter qualifies.
Third, these are not full subsidies, but only rebates paid if certain high sales figures are met. In the event they are paid back, Ark Encounter will have already generated considerable tax revenue to the State.
Nevertheless, while Maddow and the like are off their rockers to make an issue of this, I oppose all such tax programs because they are both unbiblical in general and inherently unfair. They are unfair because existing businesses must still pay full tax rates, and average citizens must still pay full tax rates, but the new guys—Ark Encounter or whomever—get rebates under the guise of “creating jobs” or “benefiting the community.” Whatever the rationale, programs that create unequal tax rates between corporations, and between corporations and individuals, are inescapably a form of subsidy to those receiving the lower rates—not matter what the actual volume of tax paid is, and even if the state nets income from the arrangement. While I believe all civil taxation is unjust, unequal tax rates are even more unjust, and this applies not only to Ark Encounter, but to all corporations that benefit from them. It’s a corporate subsidy that feeds state power and allows state and local politicians to claim they are “creating jobs.” The irony is that most of the conservatives involved in such arrangements—and I suspect most AiG and future Ark Encounter employees—would in private argue that creating jobs and stimulating the economy is not the government’s job to begin with. So why feed it? So why apply for it yourself?
But it is the other tax-related financing that I find most egregious. This one represents the open repudiation of free market economics on the part of Ark Encounter’s agents. This is a version of an arrangement known as “tax increment financing,” or “TIF” for short. Whether by that name or not, it is the same thing.
A TIF is a special tax district (usually created by a local government) in which money can be borrowed through the agency of the government against the collateral of future (projected) property tax revenues. There are a thousand nuances to the various possibilities and arrangements in such districts, but the bottom line is that someone (in this case Ark Encounter LLC) is privileged to use future property tax money to pay off bonds floated on the front end of the development project instead of paying it as taxes.
In this arrangement, a developer can borrow millions up front to spend on development. The debt is secured with the promise that a portion of future property tax revenues raised within the bounds of the TIF district, and because of the new development, is pledged to go to pay off the bondholder.
On the surface of it, it appears that everyone “benefits” from such an arrangement. The bondholder gets the local government’s written guarantee that tax revenue will be used to pay the bonds. That’s a much safer investment than normal—especially for risky developments. The developer gets access to the government’s bond markets, plenty of cash up front, and an easy way to pay off the debt with money they would be paying anyway—it’s just redirected for personal gain instead of civic gain. But the local government is game because, again, without the new development there would be no (or much less) property tax being paid there anyway. With the TIF, the local government can spur development, cash in on at least a portion of new increased tax revenue, and also tell the public that the local officials “created jobs” for the community and reduced unemployment. And now with a larger and more profitable community, maybe the commissioners, mayor, and council may all get a little raise.
To avoid the myriad of potential PR problems, it seems that Ark Encounter and the local government have taken steps to minimize some of the usual criticisms associated with TIFs. Originally, TIFs were created on top of existing development with a view towards urban revitalization. Thus, existing owners in usually depressed areas would see potential new development financed for their neighborhood. This means they would also see their property values rise, but if they remained, they would also see their own property tax bills skyrocket right along. If they could not afford to stay and pay, they would be pushed out. In Ark Encounter’s case, however, the district is in an entirely rural and undeveloped area, and the district includes only that property—thus, no other property owners within the district can complain that their taxes will increase.
The only possible blight here is that the increased development will lead to higher property tax valuations in adjoining properties (outside of the district, but close enough to be affected). These owners will see their taxes go up due to a government arrangement that allows Ark Encounter leverage its taxes to fund its own capital improvement, while everyone else has to pay full taxes as taxes. In short, this will be another form of indirect subsidy, or at least special privilege, for Ark Encounter.
Also, it is not uncommon for the local government to be liable for the bond payments in the event that the development fails in any way and cannot deliver on its tax payments. In such a case, the government is left footing the bill, and it could definitely be said that tax money was then directly subsidizing the investment. The Ark Encounter case has addressed this—on paper at least. In the legal documents by which this particular TIF was created, the local government pledges only to facilitate the payments between Ark Encounter and the bondholder via a special account, but specifically absolves itself from any liability in regard to unpaid payments. On paper this sounds defensible, but when there is a default in reality, bondholders can get pretty rabid, and my suspicion is that the local government would get dragged into a lawsuit at least, if not end up liable in some way. I could be wrong about that, but I can’t imagine a bondholder not at least trying, and trying vigorously.
So how much are we talking about? The portioning of the future property taxes can be adjusted however the parties agree. In this case, Ark Encounter will be allowed to allocate a whopping 75 percent of its property taxes to pay for the money it borrows. The government will only see 25 percent of what it would have otherwise. Now, granted, that’s 25 percent it would probably not have had at all without this arrangement, so it does not mind facilitating the arrangement. But that’s a huge tax privilege to Ark Encounter.
Here’s an easy way to understand the problem: imagine if your local government allowed you to take 75 percent of your yearly property tax payment and apply that amount directly to your mortgage or home improvements—instead of giving it to the government. That would be a de facto 75 percent cut in property taxes for you and you would pay off your house much faster in the long run. Ark Encounter will be getting that privilege merely because it is new and because it has big projections for the government.
Now, consider that no local government will ever allow average individuals or existing businesses into an arrangement like this in general, and you can see why it is so unfair to existing tax payers. Nevertheless, these will be told not to mind, and most will agree, because the public will be “benefiting” from the arrangement. They few who desire equity, principle, or not to see their quiet country lives altered by massive, brightly lit new developments paid for by tax privileges will be overrun by the developers, the local smiling politicians, and the masses who want increased tax revenue to fund local parks, monuments, historic districts, and, especially, public schools.
Did I note that AiG has never come out in principle and in total opposition against public schooling?
There is at least one further tax aspect to this TIF, and that is a creation of a new tax altogether. The TIF ordinance creates a brand new “Job Assessment Fee” (see SECTION 6) by which all new jobs created as a result of the Project are assessed a special extra tax on top of all income and payroll taxes: 2 percent on gross wages. This additional stream of revenue will also go to pay off the costs and the bonds borrowed by the developer. This will include all the construction workers for the new development, and all of the new amusement park workers in the future. They will all be assessed a special tax to help pay off the debts their developer and employer incurred up front. In short: you want one of these new jobs? You want to be employed building this thing? Then you have to help us pay for the Park. You will have to pay taxes most other people will not. And this is not the owners and shareholders, mind you, but the construction workers and the cleaning ladies.
All in all, however, I don’t see how anyone can say with this arrangement that the Ark Encounter is not tax funded to a some degree. I don’t see how AiG, Ken Ham, or anyone else involved can know all of this and say with a straight face that they are not being subsidized by the local government in some way. Sure, they can make the highly nuanced claim that their project “will not take money from the state budget,” but they can’t honestly give a blanket acknowledgement that tax subsidies or privileges, whatever you want to call them, are not involved.
Now here is the multi-million dollar question: Why did Ark Encounter need to resort to such a dubious government/tax arrangement to begin with? The answer is simple: they could not raise enough money through direct investments or donations in the free market. And this was widely known: their fundraising efforts and investment efforts had largely failed. There are multiple reports at different times over the past few years (many linked below). The free market said we don’t want to fund an Ark. So, it appears that Ham and Co. got the local government to float the thing on indirect tax subsidies. It’s that simple. It appears to me that this project would not have continued without government intervention.
Now, they may in fact get away with it. After all, it’s perfectly legal. And the only potential impediment is if the once-developed park actually turns out to be a complete failure. In that event, the lack of revenue will lead to a lack of payment on the taxes, and thus a lack of repayment of the bonds. I don’t think this will happen, and even if it did, the Ark Encounter crowd will simply say that was the risk the bondholder took by agreeing to this deal. On paper, it appears to me they would be correct. On paper.
Will they water down the message?
Finally, however, I have to mention that it appears there is some very clever dealing in regard to the integrity of the biblical message in order to get the state to agree to the sales tax issue. It is not enough merely to meet general qualifications. Before it grants status, the state wants to know that the project will be a viable project into the future. Toward this end, the state required a third-party analysis of the proposed project. The third-party group, Hunden Strategic Partners, presented their analysis covering two possible scenarios (see page 11): one in which the Park “does not promote a creationist view of Biblical events” but rather a “mainstream” interpretation that would appeal to a broader audience, including the 60 percent of Americans who believe in old earth and evolution, as well as Jews and Muslims.
The second scenario would be an openly six-day creationist view similar to that of AiG’s Creation Museum which the analysis says would “turn off a portion of the potential market” and “has a more limited audience.”
You could imagine that AiG, Ham and Co. would stand firm on its convictions and go with the latter.
And you would be wrong.
Well, that’s where the clever spin becomes involved. Here’s what the analysis itself actually says:
The first, Scenario A, assumes that the Project is operated, programmed and advertised as a mainstream interpretation of Biblical events and does not promote a creationist view of Biblical events that may turn off a portion of the potential market. The Creation Museum, created by many of the same people as the proposed Project, does promote the creationist perspective and therefore has a more limited audience. According to the most recent Gallup poll on the subject, 40 percent of the U.S. public believes in a “young Earth” or creationist perspective, while approximately 60 percent believes in a more scientific/evolution perspective of earth’s history. This would suggest that both interpretations would have a sizeable potential audience, but a more general interpretation (that did not take a creation vs. evolution perspective) would be popular with anyone interested in the Old Testament, including Christians, Muslims and Jews, who all have the first several books of the Old Testament as part of their theological heritage. Judaism, Islam and Christians all include the Noah’s Ark story within their teachings. In Islam, for example, Noah is considered one of the prophets.
Scenario B assumes that the programming, advertising and operations of the Project are similar to that of the Creation Museum, that is, the park promotes a specific interpretation of Biblical events. This interpretation is assumed to be creationist in nature and could turn off members of the general public who either are not religious or do not subscribe to this view of events. Given that 40 percent of the public surveyed agrees with a type of creationist viewpoint (interpretations are numerous), the audience should still be fairly large. The small Creation Museum receives approximately 300,000 visitors annually, a very high number given its size and location.
The report makes it clear that by “mainstream” it means a view that will appeal to those who hold to evolution and/or to other religions, including Islam. But here is how Ham spins this:
[T]he HSP analysis presented two Ark Encounter scenarios and the possible results of each: Scenario A, in which the Ark Encounter will present biblical events from the Old Testament that would exclude the creation account of origins; and Scenario B, in which the project would be similar in content to Answers in Genesis’s Creation Museum and its teachings from the first chapters of the book of Genesis. The Ark Encounter satisfies Scenario A, for it will be an attraction that starts with Noah’s Flood and then continues through the rest of the Old Testament.
While this could be construed as merely a clever “what you meant by that is not what I meant by that” move, it is beyond that. In order to meet the analyst’s Scenario A, you must not only merely exclude the creation account of origins, but you must not give a creationist view of any of the biblical events. You could not critique mainstream evolution, you could not say dinosaurs were on the Ark, you could make no claims that were in any way influenced by a young earth scenario, you could probably not even get away with saying the flood was global, and a whole host of other claims regarding the overlap between creationism in general and Noah’s Ark. Merely leaving off Genesis 1–2 does not truly meet that requirement. I think Ham is being clever.
Again, however, this is perfectly legal. Ark Encounter is under no legal obligation to do either scenario. The analysis was not giving legal requirements, but was merely a tool to persuade the state to accept Ark Encounter’s application for tax breaks. But since that proposal was “sold,” if you will, using the much higher attendance and revenue figures projected based upon Scenario A, then it seems like a bit of fast-and-loose dealing to march forward anything else.
None of this is to say that I disagree with six-day creationism or wish ill toward AiG, Ken Ham, or their future projects. I don’t. I just don’t think these things are as transparent or as completely free of state intervention as they have argued. And I don’t think the government should be involved in helping them along in any way—not because of some non-existent application of church-state relations, but because the unequal tax associations and the indications they bring are, in my opinion, not above board in regard to biblical worldview and stewardship, among other things. I don’t think the government should be involved in propping up endeavors that won’t succeed on their own in the free market, and I don’t believe Christians especially should court government favors in that regard.
If a ministry or mission cannot get off the ground based upon free market investments and/or donations, then back off. There’s no doubt Maddow is off the rails; but just because the liberals are idiots does not mean everything “our guys” do is laudable.
And finally, if ministries are to go against this advice, they ought to be as open and transparent as possible about what they are doing.