The Wall Street Journal recently published an article on the trend toward less and less utilization for convention centers at a time when local governments continue to pour taxpayer dollars into the trappings of big conventions. The full article is on the link at the bottom but here are some critical excerpts for you to ponder.
“For two decades, America’s convention center business has been declining, resulting in a nationwide surplus of empty meeting facilities, struggling convention halls and vacant hotel rooms. How have governments responded to this glut? By building more convention centers, of course, financed by debt backed by new taxes and fees on already struggling taxpayers.”
” To finance these risky projects—which the private sector won’t build by itself—cities float debt backed by new taxes and fees on already struggling taxpayers. As Charles Chieppo, a former board member of Massachusetts Convention Center Authority, lamented last year, “Logic rarely has a place in the convention business.””
“”The whole thing is a racket,” Boston Globe columnist Jeff Jacoby recently observed. “Once again the politicos will expand their empire. Once again crony capitalism will enrich a handful of wired business operators. And once again Joe and Jane Taxpayer will pay through the nose. How many times must we see this movie before we finally shut it off?””
“Many times, if officials in Baltimore have their way. Several years ago they built a $300 million city-owned hotel, (the Hilton Baltimore Convention Center Hotel) to boost the fortunes of the city’s struggling convention center. Having opened in 2008, the hotel lost $11 million last year. Now the city is considering a public-private expansion plan that would add a downtown arena, an additional convention hotel,”
“The surest sign that taxpayers should be leery of such public investments is that officials have changed their sales pitch. Convention and meeting centers shouldn’t be judged, they now say, by how many hotel rooms, restaurants, and local attractions they help fill. ”
“This new metric—a city’s amorphous brand value—is little more than a convenient way to ignore the failure of publicly sponsored facilities to live up to exaggerated projections. But as far as city officials are concerned, that failure is nothing that hundreds of millions more in taxpayer dollars can’t fix.”
It’s not necessarily the centers themselves that are the focus, its the ancillary revenue brought to area restaurants, hotels, and local businesses. The question becomes should taxpayers carry the cost of a likely break-even or losing business venture (the centers themselves) to bring in X dollars for local business owners.
That is the point of this article…they are not generating the revenue from other sources and as result more taxes are imposed to make up the difference…more debt to build more space that generates less return…its that old marginal cost equals marginal return argument..except with government convention centers that rule doesn’t limit the development because of the government can bond itself into oblivion
In the fall of 2008 Financial crash, it was noted that most Convention Hotels next door to an Arena went belly up, or were SOLD. Being next door to an Arena doesn’t mean the Hotels are going to make it. And, a trend is looking at costs and making Medium sized markets options. Plus, with Video Conferencing and Skype, now, it saves companies a Lot of Money versus travel for meetings. Lets watch. The McCurdy Building and the new Convention Hotel….it is going to be interesting in 2012. Grab the Popcorn!
Big Fish? One thing that has been proven over the years, and that is, in Evansville’s Leadership “Pond”,—Common Sense is the commodity in the shortest supply. Not to worry, We haven’t any shortage of Snegal for the minnows however.
The biggest mistake in the history of Evansville was to build a smaller arena than the existing facility. Whiny-zapple could have skimmed a hell of a lot more money from the business community simply by building a new conference hotel on a back corner of the Roberts Stadium parking lot. That way we would have only one city-sponsored financial hole in the ground instead of two, and no need to spend $500,000 tearing down a profitable, fully functional stadium. And there is no doubt that one more hotel on the Lloyd would be one hell of a lot more profitable than one built downtown.
Has a feasibility study been done on the proposed (new)downtown hotel?
No. Apparently the city just wants to use the analysis of the developers..these were supposedly analyzed by a third party that issued a multi page memo and a powerpoint for $9M…the memo clearly states that it is not a feasibility study…ordering one or calling to talk to someone from Cornell’s Hospitality Management program would be too much work given the knowledge of the commission’s members.
If businesses will be the one to benefit from a Convention Hotel, why shouldn’t they pay for it ? Also, how many people who attend the Lady Antebellum concert at the Arena will come from so far away they have to spend the night ? Around 12, I would guess. I would advocate to:
1) Cancel downtown hotel plan unless businesses pay for it;
2) Tear down The Centre to make parking for the Arena and save substantial operating losses;
3) Disband the Evansville Convention & Visitors Bureau, and put Operation City Beautiful in charge of making our city clean and welcoming to Visitors;
4) Get out of the “Convention Business” in general. This is a great article, but both convention centers and publicly-financed sports arena are well-known boondoggles–witness Indianapolis and Cincinnati to name just two. Seems like building these things is the cocaine of politicians.
I suggest that we start paying attention to an economic measurement that for what ever reason has basically been ignored. I am talking about: Municipal Debt per Capita, and Municipal Debt per Household.
I would like to see these measurements become a common part of our local fiscal language, and routinely reported by the local media.
Knowledge is power.
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Definition of ‘Net Debt Per Capita’
A measurement of the value of a government’s debt expressed in terms of the amount attributable to each citizen under the government’s jurisdiction. It is commonly computed using the following formula:
Net Debt Per Capita
The level of net debt per capita is an important factor to consider when analyzing a government’s ability to continue to pay its debt service costs through its current levels of tax revenue. In other words, this measure helps indicate the default risk of government bonds.
Read more: http://www.investopedia.com/terms/n/netdebtpercapita.asp#ixzz1iJHHRCA2
Upon Wennecke taking over the office of mayor 1-1-2012, what was Evansville’s net debt per capita?
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I posted sometime ago that you needed to check the viability of any feasibility study but that presupposes you have people on the commission that have the background to either know who to contact to vet the study or can do it themselves…the latest report given to the commission was not a feasibility study and one should have been ordered to determine what is needed once it was decided to tear down the Excutive Inn..it seem we have the blind leading the blind due to lack of relevant data to make a recommendation as to what really needs to be built and if it can be financed privately without some sort city backstop for debt service payments
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