City of Cincinnati may reach settlement with music festivals suing over "unfair" admission tax

The city of Cincinnati is trying to reach a settlement with the former owner of the Bunbury Music Festival, who sued claiming it was unfairly targeted to pay tens of thousands in admission tax, while other concerts and performances didn’t pay a dime.

U.S. District Judge Michael Barrett announced on June 8 that he would meet privately with both sides, ahead of a joint settlement conference set for July 21.

This came just a week after a WCPO story about the lawsuit. If successful, this case could erase the city’s admission tax altogether – which added more than $6.5 million to the city’s coffers this year – and expose the city to losing millions in future tax revenue.

RELATED: Music festivals revolt against Cincinnati admission tax with federal lawsuit 

“If they win, there are not just implications for (Bunbury),” said Stephanie Hunter McMahon, a University of Cincinnati law professor who reviewed the case. “If it is not being applied fairly, it would cancel out the entire statute so no one would pay admission tax … that could be a huge hit for the city’s budget.”

The federal lawsuit accuses the city treasurer’s office of selectively choosing which concerts and performances are required to pay the city’s 3 percent admission tax.

The lawsuit accuses the city of “discriminatory enforcement.” While Bunbury was asked to pay $42,128 in admission tax to Cincinnati in 2013, for example, other ticketed events didn’t pay a dime.

The former owner of Bunbury and its country music counterpart, the Buckle Up Festival, first filed the lawsuit in December 2015.

The sixth annual Bunbury Music Festival kicked off at Sawyer Point and Yeatman's Cove on June 2, 2017. Death Cab for Cutie performs on teh Sawyer Point Stage. Photo: David Sorcher

Bill Donabedian, who founded the festivals before selling them to PromoWest Productions in late 2014, said the city unfairly targeted Bunbury and Buckle Up. He paid more than $98,000 in admission tax “under protest,” in 2013 and 2014, according to the lawsuit.

Meanwhile other music festivals, such as the MidPoint Music Festival, which Donobedian launched in 2001 and helped run from 2002 to 2008, paid no admission tax, according to the lawsuit.

“Hundreds of bars, restaurants and other venues, as well as festivals, have never been required to pay a separate admissions tax to the city even though they charge a cover charge or other fee,” Donobedian alleged in court documents.

At issue is the vagueness of the city’s municipal code, which is murky about whether venues that do not offer reserved seating should be required to pay admission tax.

Attorneys for both sides declined comment.

But the city believes any for-profit event that sells tickets or charges admission must pay the tax.

“Plaintiffs’ decision to host the festivals without reserved seating does not exempt (them) from the admissions tax because ‘admission’ … includes seats, chairs, tables and benches ‘reserved or otherwise,’” according to court documents.

Arlo McKinley and the Lonesome Sound perform at the CVG River Stage during Bunbury Music Festival on Sunday, June 5, 2016.

Because this definition is so broad, it potentially puts hundreds of bars, restaurants, sporting events, concerts – no matter how small – on the hook to pay a 3 percent tax.

“If you had a small bar, a neighborhood bar that brings in a band and gets five people to walk through door…they may have to pay the 3 percent tax,” McMahon said.

Because the city likely lacks the manpower to go after every person they could potentially collect admission tax from, they must pick and choose, McMahon said.

“The statute is written incredibly broadly … under that interpretation the city needs to be attempting to collect from anyone who charges admission. And they’re not,” McMahon said. “There’s not sufficient citywide capacity … to enforce this against everyone.”

Donobedian, who is also the former Fountain Square managing director, tried to plead his case to the city. But the city wouldn’t budge and Donobedian paid the admission tax, “under protest,” according to the lawsuit.

In December 2014, Columbus-based concert promoter PromoWest Productions bought Bunbury and Buckle Up music festivals from Donobedian.

After a year-long hiatus, PromoWest announced last summer that it had canceled the Buckle Up festival.

Bunbury just finished its fifth music festival, drawing an expected 45,000 people over a three-day event that began June 2.

The sixth annual Bunbury Music Festival kicked off at Sawyer Point and Yeatman's Cove on June 2, 2017. Wiz Khalifa performs on the Nissan Stage. Photo: David Sorcher

Bunbury’s new owner is not part of the federal lawsuit and PromoWest CEO Scott Stienecker said the music festival pays admission tax to the city.

The lawsuit claims the MidPoint Music Festival never paid admission tax through 2015. But federal regulations don’t allow the city to reveal who pays tax and who doesn’t, a city spokesman said.

In the meantime McMahon, the law professor, believes the city should rewrite its municipal code with a threshold of who pays admission tax -- such as events that sell more than 100 tickets.

“There needs to be a definition of when this will apply,” McMahon said.

Barrett agreed that a true dispute exists in whether the city “selectively enforced” the tax. He declined to dismiss the lawsuit in February.

“I would be surprised if this didn’t settle,” McMahon said. “I would suggest it.”

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