County approves $125m tax gift to Carolina Hurricanes, city approval next up

Wake County, North Carolina yesterday approved $46.6 million a year in tourism tax spending — money from a 6% hotel tax and 1% restaurant tax imposed in 1991 — and the beneficiaries are set to include the Carolina Hurricanes and the Raleigh Convention Center, though not yet a proposed Raleigh soccer stadium:

  • The Hurricanes would get $9 million a year in tax money for the next 25 years, a present value of about $125 million. The NHL franchise has been looking at an arena renovation cost of up to $200 million, so this would pay for the bulk of that.
  • The convention center would get $3 million a year for maintenance, $2.2 million a year for parking and infrastructure, $19 million flat fee for renovations and new land acquisition, and $17.575 million a year starting in the mid-2020s for an expansion and new music venue.
  • The North Carolina FC USL team didn’t get its proposed $11 million a year stadium grant, but can still apply for part of the remaining funds, where it would compete against other arts groups.

I know that some of you are thinking about now, “But isn’t the whole point of a tourism tax to promote tourism, so the tax money should be spent on things that will bring tourists to town?” Sure, but then it’s important to ensure that the spending will bring tourists to town, and the return on sports and convention spending is historically really awful in that regard: Sports teams only bring in a tiny sliver of new spending compared to what they cost in subsidies, and conventions are equally dismal.

One solution, if you’re really determined to use tax dollars to encourage people to come to your town, would be to demand some kind of direct repayment from the beneficiaries: Sure, we’ll give you a pile of free cash, but then you need to share the resulting increased revenues with the public treasury. But that doesn’t appear to be what’s going on in Raleigh; rather, the Hurricanes and other operators will keep any windfall revenues, and local government will just sit back and hope that the rising tide lifts their fiscal boat as well.

This whole plan still needs to be signed off on by the city of Raleigh, but at this point it looks like all that’s left to decide is which private interests to funnel tax money to, not whether to do it at all. (It’s possible there are some ways that Wake County could use tourist tax dollars to displace other spending that would then be freed up for broader social goods like schools or whatever, as has been the case in other locales, but none of the coverage has addressed that.) If anyone was wondering why somebody would spend $420 million to buy an NHL team with attendance near the bottom of the league, you may have just gotten your answer.

Cincy mulls convention center redo to lure new visitors, since that worked so well last time

Cincinnati tourism officials are pressing for a major renovation of the city’s Duke Energy Convention Center, and construction of a big new hotel next door, arguing that the city would otherwise see a big drop in visitors. Mike Latsch of the Cincinnati Convention & Visitors Bureau says without the project, the city could lose 100,000 annual hotel room nights by 2022.

But the last time the city expanded the convention center, it literally had to scrape up the $140 million cost, using naming rights from Duke Energy and millions in contributions from local corporations in addition to local hotel tax revenues. The 2006 expansion actually did little to boost the city’s convention business. And in the decade since, Cleveland opened a new center, Columbus expanded its center, and Indianapolis opened a major expansion, increasing competition for scarce convention dollars.

Now, any expansion plans will have to compete for hotel tax dollars against renovations to the US Bank Arena — proposed in order to ready the venue for hosting the NCAA men’s basketball tourney in 2022 — as well as plans for a new Major League Soccer stadium. All this in a city and county that have already managed to pour an immense amount of public money into stadiums.

Cuomo proposes spending $1B to make Javits convention center exhibit space 11% bigger

The New York State Convention Center Development Corporation recently released a Request for Qualifications (RFQ) for a designer/builder for Gov. Andrew Cuomo’s planned expansion of the Javits Center on Manhattan’s west side. So now there are some specifics on the $1 billion boondoggle, but no real indication of where the public dollars are actually going to come from, beyond that “a State appropriation of $1 billion, bond issuance proceeds, cash on hand, and other sources as required.” It’s nice to have “cash on hand.”

The project would include a new 480,000-square-foot marshaling facility, with 27 loading docks — because what Manhattan most needs are fleets of 18-wheelers hauling stuff on city streets — roof terrace for outdoor events, and 92,000 square feet of new prime exhibit space, together with added meeting room and ballroom space. That amounts to just an 11 percent increase in exhibit space — what a deal for a billion bucks in public dollars!

Gov. Cuomo proclaimed last January that the Javits was the “busiest convention center in the United States,” with more than 2 million visitors annually. The Javits’ annual report shows attendance of 2,056,500 in 2014. But that year Chicago’s McCormick Place saw total attendance of 2.34 million. So “busiest” might be open to some question. And those Javits attendance figures include big public shows like the New York International Auto Show that sees a million attendees itself, almost entirely from the New York metro area.

The real issue with the Javits is dismal attendance at conventions and trade shows, the events that draw out-of-town visitors and fill hotel rooms. In 2000, the Javits drew 1.25 million convention and trade show attendees. For 2014, the total was just 629,500. And those attendees produced just 478,000 hotel room nights — a tiny fraction of the 31.6 million room nights filled in the city in 2014. That may be why the Cuomo administration has yet to produce any kind of market analysis or feasibility study for the expansion: It likely won’t produce any real increase in the Javits’ convention business.

Nobody is against downtown Chargers stadium/convention center, except for pretty much everybody

The San Diego Chargers want a combined stadium/convention center downtown. But the mayor doesn’t. And the county doesn’t. And the convention center doesn’t. Which should make for an amusing few months.

Having lost the great race for a deal in Los Angeles, the Chargers have now floated a plan for a combined stadium/convention center in downtown San Diego, just east of the Padres‘ Petco Park. The “convedium” scheme would stack the stadium on top of a 225,000-square-foot convention exhibit hall, with meeting space and ballrooms in a connected building. City officials and local hoteliers have long been pushing for an expansion of the existing convention center, and they’re armed with a study by our friends at Conventions, Sports & Leisure International that says a separate new center won’t boost local convention business the way a contiguous expansion would — a difference of exactly six conventions and trade shows a year.

The earlier expansion plan was blocked by the courts, ruling a scheme that used a fee on local hotels was really a tax, and that required a public vote. Now the Chargers have joined attorney Cory Briggs (who brought the suit that stopped the expansion effort) to back an initiative to change the way the city’s hotel tax is distributed.

It appears the public financing for the stadium/center combine would come from a hotel tax, and that will undoubtedly require a public vote (maybe a two-thirds majority vote) in spending-limit-heaven California. But while Mayor Kevin Faulconer and other local officials (and the hotel folks) will likely oppose it, the combination deal has lots of friends. The Chargers get to argue that a combined stadium and convention facility will bring more conventioneers to sunny San Diego. They’ve got Fred Maas, former downtown honcho and center expansion promoter, on board. John Moores, who did the deal that built Petco Park, will get a boost for his surrounding property. And the hotel types will get something, even if it’s not what they prefer.

Yet one big question mark is Comic-Con, the event that (according to the convention center) drew 130,000 attendees last year, fully 24 percent of total convention attendance. The Comic-Con folks want a contiguous expansion, not the Chargers deal. And Los Angeles and Anaheim have both tried to lure the event, which is facing increasing competition from a host of “Cons” around the country. Will San Diego lose the hordes of costumed superheroes? Will Spiderman spin a big web for a convention center?

Does it all make sense? No, but this is “Field of Schemes” after all.

St. Louis wants to expand convention center after losing NFL, because that worked so well the last time

Coming off the loss of the Rams, St. Louis’ leaders have come up with a can’t fail strategy for boosting the city and its fortunes: Spend hundreds of millions to improve the convention center and domed stadium complex abandoned by the Rams to better compete in the national convention market. Kitty Ratcliffe, head of the St. Louis Convention and Visitors Commission, owner of the center and dome, recently proclaimed, “Our competitors are building, while we’ve been doing nothing.” The chief of staff for St. Louis Mayor Francis Slay weighed in with “We’re looking at this as a boost for the region’s tourism industry.” And they promised a consultant study “in the next few weeks” that would document the needs and set out a price tag.

Here they go again. Thirty years ago, faced with the loss of the NFL Cardinals, then-Mayor Vince Schoemehl and the region’s business leaders promoted a combined convention center expansion and domed stadium as the cure for the city’s ills. The argument by mayoral staffers was that “the City cannot feel like a ‘winner’ if it’s constantly losing things.” The city’s then budget director argued that a combined dome/convention center would be “an exciting world-class building project. We don’t often get this type of opportunity to make an international impact, like the Astrodome.”

Armed with consultant studies that promised a big boost in convention activity from what was supposed to be the country’s fourth biggest convention center, the city, county and state governments plopped down $240 million for a dome that still didn’t have a football tenant. More consultant studies said that what St. Louis really needed was a 1,000-room hotel next door to the new America’s Center complex. The head of the Convention and Visitors Commission in 1999 forecast that a new hotel would boost major conventions from 33 in 1998 to 56 in 2004, with hotel room nights almost doubling, to 800,000 a year. Mayor Clarence Harmon pressed the case for state aid for the hotel as “the foundation of our efforts to revitalize downtown and its is a cornerstone of our overall economic development strategy in the City of St. Louis.”

The new $277 million, 1,081-room Renaissance Grand Hotel opened in 2003 and immediately floundered, with occupancy and rates well below consultant forecasts. Beyond the problem of opening in the wake of 9/11, the hotel never spurred the predicted convention boom. By 2006, there weren’t 54 major conventions, but just 32. And the total continued to sink, so that 2008 saw just 438,000 convention room nights, a bit less than the 800,000 promised. With no new convention business, the hotel proved a total dud, and bondholders foreclosed on it in 2009, finally selling it for a third of debt. The story of the city’s convention business is still the same — 26 major conventions in 2014 and 425,411 room nights in 2014, almost exactly the same as the figures for 1997 and 1998.

Now, lest the city once again be viewed as a “loser,” with more promises of a “boost” for tourism, state and local officials seem poised to throw away more public money.



Austin needs a convention center expansion, because some other cities have bigger ones

The Austin American-Statesman reports that Austin needs to expand its convention center, adding 200,000 square feet of exhibit space and more meeting and ballroom space, at a cost estimated between $400 million and $600 million. The “long-range master plan” presented to the city council offers as evidence of the “convention center’s success” a chart of the growth in citywide hotel tax collections. No mention of how hotel demand has boomed because of the city’s success as a tech center. No mention of the role of big events like South by Southwest in bringing visitors. And just two numbers on the actual performance of the convention center — two “estimated [hotel] room nights of ACC events” — from 2009 and 2015.

The major argument from a local technical assistance panel of the Urban Land Institute is that “with 247,050 square feet of exhibition space, the Convention Center is well below the average of 518,000 square feet of Convention Center exhibit space offered by many peer cities” — and less than half the space of centers in San Antonio, Houston, and Denver. Which is, of course, the case for almost every other city with a center smaller than the two million square feet or more in Chicago, Orlando, and Las Vegas.

And what if Austin doesn’t expand? Then there will be “competitiveness in convention market at risk” and “lost jobs.”

Note to Austin councilmembers and staff, who have again hired C. H. Johnson Consulting to advise them on the expansion: When Johnson Consulting produced the July 1997 “Strategic Plan for Austin’s Convention Center Industry” on the previous expansion, the firm forecast “an expanded Center will generate approximately 332,600 room nights in Austin.” Last year’s room night total from the center: 261,178.

If Georgia-funded parking deck isn’t for Falcons, don’t expect conventions to make it worthwhile

The Atlanta Journal-Constitution reported recently on a $23 million proposal “tucked into Gov. Nathan Deal’s budget” for an expanded parking deck at the new Falcons stadium. “You wouldn’t build something like this parking deck for just eight games, Frank Poe, head of the Georgia World Congress Center Authority (owner of the World Congress Center, the Georgia Dome, and the new stadium) told the paper. “You build it because it’s sustainable for all the other businesses we have on our campus.” Maybe what Poe meant was “You build it and hope somebody actually turns up.”

Unfortunately for Atlanta, they haven’t been turning up much. For fiscal year 2014, the World Congress Center saw just 390,870 convention and trade show attendees. That’s down 17 percent from the previous year, and less than half the 807,000 attendees the center saw in 2007. It’s even far less convention business than the 601,000 attendees the center saw in 1989 — and that was two expansions ago. And if anyone thinks a big new parking garage is going to lure thousands to downtown Atlanta, the World Congress Center Authority has another trick to lure all that new business: a big new hotel.

The Authority just issued a Request for Proposals for a new 800- to 1,200-room hotel next door to the GWCC. According to the RFP, “The Authority envisions a new Hotel, if developed, to be an immediate enhancement to financial viability and dynamism of surrounding facilities, GWCC convention business, and to the City of Atlanta and the State of Georgia in general.” That would of course be the dynamism of a failing convention venue and a brand new $1.1 billion stadium, along with the booming convention business.

Add a P.S. on the work of the consultants: PriceWaterhouseCoopers produced a “market analysis” in October 1996 that forecast that after the latest center expansion, completed in 2002, the World Congress Center would see 1.4 to 1.5 million convention and tradeshow attendees a year. Didn’t quite work out that way.


Phoenix’s convention center subsidies may limit ability to provide Suns arena subsidies

Arizona Republic columnist Robert Robb has weighed in on Phoenix’s big investment for both a massive convention center expansion and a city-owned (that’s right, city-owned) hotel, following a Republic story that the 1,000-room Sheraton has lost $28 million since 2008. Noting that Phoenix city officials had assured that the city-owned hotel “would pay for its operations and servicing the debt to build it. No sweat,” Robb reports that the hotel’s ongoing losses, paid back from the city’s Sports Facilities Taxes, may now affect the city’s ability to refurbish or expand the Suns’ basketball arena.

The big Sheraton has been a fiscal disaster — last year’s occupancy rate came to an impressive 51.2% — because the convention center has genuinely flopped. Consultants from Ernst & Young and later HVS had forecast that the hotel would be humming along at 69% occupancy, based on the assumption that the bigger convention center would draw 375,000 convention delegates a year. Last year, the center actually saw 118,332. Oops.

Former NYC deputy mayor proposes $8b convention center in Queens, says it’s really free

Grand schemes never seem to die. So former New York City deputy mayor Dan Doctoroff is back with a plan for scrapping Manhattan’s Jacob K Javits Convention Center and building an entirely new convention center in the middle of the Sunnyside Yards in Queens. Doctoroff’s op-ed pulled out the standard expansive booster rhetoric: “We are an undisputed leader in tourism, yet we lag badly in one important aspect: the huge convention and conference business.” And as for the Javits Center itself, well “It’s too small for many events and can’t compete with facilities in other cities.” And the price tag for a new center with double the space of the Javits, conveniently located in Queens? A mere $8 billion. Doctoroff offers the reassuring news that it would really be free: “But the beauty of this plan is that it can all be financed at no new net cost to taxpayers.” The fiscal magic would be performed by a sale of the existing Javits property, and all the new “incremental” tax revenues from the development boom around the Sunnyside Yards and the former Javits site.

The notion of a big new convention center in Queens isn’t new. Bob Yaro of the Regional Plan Association has been pushing the idea for years. And in his January 2012 “State of the State” address, Gov. Andrew Cuomo flogged a plan for the biggest convention center in the country to be by the Genting Organization gaming firm at Aqueduct Racetrack. For the politicos, NYC deserves something akin to the biggest.

Doctoroff (and Yaro and Cuomo before) neatly managed to avoid the realities of the convention business in New York and the rest of the country. The Javits has been hemorrhaging business for years, with convention and tradeshow attendance down from 1.25 million in 2000 to 817,100 in pre-recession 2007, and then just 595,300 last year. It’s been much the same at what is now the biggest center in the country, Chicago’s McCormick Place. There convention business has fallen from 1.44 million in 2000 to 863,773 last year. Even that has taken millions in public incentives and discounts to lure events, a necessity in an overbuilt buyer’s market.

The promise that a new center can be financed for free, with the tax revenues from adjacent development, has a familiar ring. When Mayor John Lindsay first promoted what would become the Javits in 1970, it was touted as the “first step in the redevelopment of the west midtown area,” part of a “transformation” of the West Side that would include a crosstown subway or “people mover” direct to the center, a “major new center” of high rise offices, and new hotels and restaurants, supported by the flood of new convention visitors. Didn’t quite work out that way.