The Wall Street Journal published a column by Steve Malanga that has a few things to say about the epidemic of cities bitten by the convention center bug:
"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.
Back in 2007, before the recession began, a report from Destination Marketing Association International described America's convention industry as a "buyer's market" suffering excess capacity. It's only gotten worse, attracting just 86 million attendees in 2010, compared to 126 million in 2000. Meanwhile, the amount of convention space angling for business has increased to 70 million square feet, up from 53 million in 2000 and 40 million two decades ago.
That's largely because governments refuse to stop making convention centers bigger and hotels even more dazzling, arguing that whatever business remains will flow to the places with the fanciest amenities. 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."
Take Illinois, an industry leader,where officials have invested heavily to keep Chicago's McCormick Place, long one of the three most-used centers in the nation, on top. They spent $1 billion in the early 1990s to build a 840,000-square foot expansion financed by fees on auto rentals, a hotel tax and a surcharge on restaurant meals in downtown Chicago. In 2007 they opened a new building, McCormick West, at a cost of an additional $900 million. The result? According to the Chicago Tribune, the center operates at 55% capacity.
Then there's Boston, perhaps the quintessential example of a city that interprets failure in the convention business as a license to spend more on it. Massachusetts officials shelled out $230 million to renovate Hynes Convention Center in the late 1980s. When the makeover produced virtually no economic bounce, officials decided that the city needed a new, $800 million center financed by a hotel occupancy excise tax, a rental-car surcharge, and the sale of taxi medallions. Opened in 2004, that new Boston Convention and Exhibition Center was projected (by consultants hired by the state) to have Boston renting some 670,000 additional hotel rooms annually within five years. Instead, Beantown saw just 310,000 additional hotel room rentals in 2009.
Now Massachusetts officials want to spend $2 billion to double the size of the Boston Convention Center and add a hotel. Of course, they predict that the expanded facilities would bring an additional $222 million into the local economy each year, including 140,000 hotel room rentals. Even with these bullish projections, officials claim that the hotel would need $200 million in public subsidies.
"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, and 400,000 feet of new convention space at the cost of $400 million in public money.
The list goes on—everywhere from Columbus, Ohio, to Dallas, Austin, Phoenix and places in between. One problem is that optimistic projections about new facilities fail to account for how other cities are expanding, too. Why did Minneapolis struggle to hit projected targets after it enlarged its convention center in 2002? "Other cities expanded right along with us,'' Minneapolis's convention center director, Jeff Johnson, said this year.
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. That's "narrow-minded thinking," said James Rooney of the Massachusetts Convention Center Authority this year. Instead, as Boston Mayor Thomas Menino has said, expanding a convention center can "demonstrate to the world that we have unlimited confidence in our city and what it can do, not only as a convention destination but as the center of the most important trends in hospitality, science, health and education."
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." Column
Check out the letter to the editor in this weekend's edition defending the Boston convention center:
When there's an old and tired argument to be made, it's always convenient to leave out a few facts and dismiss new perspectives ("Have We Got a Convention Center to Sell You!," by Steven Malanga, Cross Country, Dec. 31). So let me offer a few: Boston invested $850 million in a new convention center that opened in 2004. Since then, Boston has hosted 1,808 events, produced 3.9 million hotel-room nights and generated $3.9 billion in audited economic impact for the region. These activities support 5,500 hospitality-related jobs in Massachusetts. Not a bad taxpayer return on this investment.
Further, we are not changing our "sales pitch." In addition to our traditional tourism metrics, we have expanded our thinking to include the value that our region's medical and life sciences industries will receive when Boston hosts 24 major medical/life sciences events in 2012, including the world's largest biotechnology industry gathering, BIO 2012.
Conventions are organized for knowledge exchange and commerce. So why, as Mr. Malanga suggests, would we restrict ourselves to measuring the value of meetings in terms of how many hotel-room nights are generated or what some consultant said about that in 1997?
James E. Rooney
Executive Director
Massachusetts Convention Center Authority
Sunday, January 8, 2012
WSJ: Convention centers gone wild
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27 comments:
Geez! I hope that those buffoons pushing this "crock of you know what" on us will read this story. YO! Ben....PAY ATTENTION! If you want this hotel YOU and Leland PAY FOR IT!
In a very sad, peculiar way this is comforting. In a backhanded compliment it shows that our leaders are not dumber than the leaders of Boston, Chicago, Dallas, Austin, etc.
It's not very comforting to taxpayers that they ALL seem to be morons, but at least Harvey's gang don't seem to be any more clueless or crooked (small consolation, I know).
$3.9 billion in economic impact and 5500 jobs...sounds terrible! What were they thinking!?!
How do you figure? Jackson's leaders and Crony Class, despite an innumerable number of examples nationwide of failure, are bent on squandering a remaining tax base only on life support by madly rushing down the path to massive new financial losses of nearly another hundred million dollars. And you don't see that as dumber?
Sorry 2:39 but aleast these areas have a chance of getting some money back by having a major convention or trade show come to that center.Jackson will never get anything back...
You've got that right 3:33.. 95% of those clowns in "power" are still fighting the Civil War while looking for the Clan around ever corner and in the meanwhile want to build a hotel to cater to birthday parties, high school dances and family reunions... Those few of us that actually HAVE REAL JOBS and PAY TAXES in Jackson are expected to pay for it.... I for one say NO THANK YOU!
3.9B divided by 5,500 jobs =709,000. per job? Can that be right?
Limberger, I always take the word of a flack who has a vested interest in a project without further examination of the statement made. I remember the late mayor making a claim similar to the one made by the Boston flack. Noise, it's all noise. Life is easier when my bullshit detector's batteries are working.
@4:19
Economic impact has nothing to do with dividing it into jobs. It includes things like increased sales at stores and restaurants and all of the support areas needed for the influx of visitors.
Jackson Convention Center doesn't bring in enough to cover bond debt service. The financial situation is dire.
Was the convention center supposed to cover the bond debt service? Wasn't the point of the excise tax to fill the gap?
Notice the flack from Boston didn't estimate how much economic activity and jobs would have been generated without the new convention center. They had been a major convention destination for years already. Only the incremental increase in jobs and revenue should be counted against the cost of the huge expansion/renovation.
@ January 8, 2012 9:58 PM the special taxes collected to help pay for the JCC ... declined every year since the first full fiscal ... lag far, far behind initial projections.
Couple w/ losses from ongoing operations ... no surprise ... that also far exceed pre-election blue-sky pro forma plans ... plans that were used to dupe voters ... understand why general public not being told 'bout red ink that is more than $1,000,000 annually.
Some were heard to say, "It's our damned turn. You folk need to give us a convention center. We deserve nothing less for graduation, the Hat-Ladies annual chicken lunch, a place for reconciliation, a venue for church members to congregate when they find themselves without a steeple, a place to bring neighborhoods together or something like that and Stokes' annual canned food and bicycle giveaway. Y'all is just racist."
YO! 1:12...It was Harvey "study it to death" Johnson's wife on election night (1st term)live on WLBT Channel 3 (AKA BEEEEERRRRRTTTTT CAAASSSEEE) screeching, QUOTE "It's our turn now"....and what a turn it has been....
I think bloggers must not read the entire article.
It's not the number of days that a convention center or dome or coliseum is utilized or a hotel is filled, it's about how many people come for the events that are held and how much money they spend while they are at the event. If you spent $850 million and get $3 billion back, it's a good investment.
The concept that sometimes you have to invest and build to make money seems to be lost on some. Every business venture starts with risk and a vision. Sometimes, you have to invest in the future.
Of course, our convention center probably won't work because , unlike the successful examples when the entire community become promoters and gets behind community improvements,our citizens bad mouth their capitol city .
I'm glad no one was interested in ballet or we'd never have gotten the IBC.
You'll never succeed if you are afraid of failure. And, if you never TRY, you are doomed to failure.
Why is this so hard for some of you to grasp?
The economic impact numbers attributed to the JCC are made up out of thin air and HAVE NOT translated into increased tax receipts. Why is that so hard for you to grasp?
"The concept that sometimes you have to invest and build to make money seems to be lost on some. Every business venture starts with risk and a vision. Sometimes, you have to invest in the future."
Interesting word - "risk" - that's what the private sector is best at calculating. "invest" is another good word for the private sector - when the "risk" looks acceptable vis a vis the likelihood of a profit - that "vision" you mentioned - then someone or someones pony up their own money, and God bless 'em and good luck to 'em.
Just keep your hands out of the taxpayers' pockets. Maybe after the public sector provides adequate education, roads that aren't crumbling and water pipes that don't spring over 100 leaks when it gets cold - then the public sector can take a look at a "business venture". Until then they should stick with the obligations until they actually carry them out successfully.
$65 million in bonds to build the JCC ... costs, with interest, 'bout $131 million total in 2036 when paid off ... per Rick Hill ... means avg of $4.37 million annually to service the debt ... pre-election blue-sky pro forma financial plan used to dupe voters ... projected debt service @ ... wait for it ... $3.7 million annually ... ** OOOooooopppsssss **
@ 11:35. Where did you find the $131M number? I see how you arrived at $4.37M annually ($131M/30 years). I also see that $65M on a 30 yr bond at 4% would require $3.72M annually.
Has the Jackson convention and visitors bureau released any info on economic impact of the convention center? Without accounting for the economic impact, how can you blanketly call it a waste of tax payer dollars?
@9:21. The SBA takes an 80% risk every time they back a small business loan. They do this because the private sector banks would not loan money to new businesses without some sort of guarantee and the benefit to the economy outweighs the risks. "Risk" and "investment" are typically best calculated by the private sector, but the government does have to play a role from time to time.
January 10, 2012 2:33 PM ... Rick Hill's numbers ... Northside Sun ... March 17, 2011 ... the white elephant drowns in red ink.
I haven't seen a credible economic impact analysis anywhere, including The Northside Sun.
I hope one exists as a first rate analysis shouldn't be expensive or time consuming.
But, on this blog, there is a lack of understanding of the analytical formulas required .
I don't KNOW how much economic impact , for example, the growth of the Mississippi Marathon has generated but I do know that it's not the renting of the JCC for the weekend that generates the revenues or the profit made by the event planners or the hotel profits , it's how much the people who run in the marathon spend while they are here and the potential for growth and the multipliers that matter.
The Mississippi Marathon has grown dramatically each year and should continue to do so in the near future.
The Spoleto Festival in Charleston, SC has grown from nothing into a huge revenue source.
I doubt many natives know that bus tours coming to our Mississippi Museum of Art shows have included a pre-sold out comedy show in Tara Malia Hall. So, it's not just the museum that profits but the Hall as well.
I expect if anyone had applied the same criticisms to the Coliseum, it would never have been built.
So , there's more to this than how much the building cost and how much money is lost in years 1-5.
And, it's more than a little blatant to event planners that the biggest mistake was not having convenient and multi-priced hotel space near the JCC as part of the initial plan.
The JCC may never be a success, but none of the bloggers have demonstrated that it is doomed to failure. And, I would suggest that there's nothing to be gained if it does fail unless " nanananabooboo" gives one an extraordinarily long term orgasmic effect. SO, it might be better to spend one's energy in thinking of ways to make sure of success.
Get off your duffs and do some creative thinking like the Charleston folks did!
The JCC may never be a success, but none of the bloggers have demonstrated that it is doomed to failure.
Nor have you demonstrated that it will remotely approach being an economic success. EVER.
A copy of the WSJ article was e-mailed to David Hampton at the CL but I am not hopeful that he will share it with the Jackson City Council or JRA
Bunch of damn crybabies. IT IS BUILT (THANK GOD). DEAL WITH IT.
JCC is Packed for GALA. All hotel rooms downtown BOOKED. Boo effing WHO.
WHY did we ever build this fine facility?
SO F'ING WHAT? Thank goodness Phil Bryant threw a few crumbs their way. JCC is a failure! And you are better off loaded.
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