Op-Ed: ‘Convention Center Mania’ Burdens Taxpayers

| January 6, 2012 1:25 PM

In his annual State of the State address earlier this week, Gov. Andrew Cuomo unveiled a plan to build a $4 billion convention center at the current site of the Aqueduct Racetrack in Queens. As reported to the Wall Street Journal, the governor could grant Malaysian developer Genting the exclusive rights to build a casino on the property, a move that would require an amendment to the state constitution. The 3.8 million-square-foot proposed convention center also includes plans for the construction of 3,000 hotel rooms and an extension of the facility onto nearby Port Authority land.

According to Cuomo, a new convention center in New York would invigorate the state economy by “creating tax revenues and jobs, jobs, jobs.” But some opponents of the plan, including City Journal’s Steve Malanga, see the “convention center mania” that has swept other cities as a poor investment that will leave taxpayers footing the bill. Read Malanga’s take on the “waning” convention center business and why it will ultimately leave taxpayers on the hook.  - Jamie Helmsworth for MetroFocus

An artist's rendering of the planned convention center's interior. At 3.8 million square feet, the convention center would be the largest in the country. Image courtesy of Genting.

For two decades, American cities have used public dollars to build convention center space — far more than demand warranted. The result has been a gigantic nationwide surplus of empty meeting facilities, struggling convention centers, and vacant hotel rooms (see “The Convention Center Shell Game,” Spring 2004). Given the glut, you’d think that cities would stop. Instead, many are spending hundreds of millions of dollars to expand convention centers and open yet more dazzling hotels, arguing that whatever convention business remains will flow to the places with the fanciest amenities. If this dubious rationale proves wrong and the facilities fail — it’s telling that the private sector won’t build them on its own — taxpayers will wind up on the hook, as usual.

The convention business has been waning for years. Back in 2007, before the current economic slowdown, a report from Destination Marketing Association International was already calling it a “buyer’s market.” It has only worsened since. In 2010, conventions and meetings drew just 86 million attendees, down from 126 million ten years earlier. Meantime, available convention space has steadily increased to 70 million square feet, up from 40 million 20 years ago.

The interior of Jacob Javits Convention Center, on Manhattan's west side. Cuomo said in his State of State Address that he plans to turn the facility into "a mixed-use facility to revitalize New York City's West Side," following the model of Battery Park. Flickr/Re:group

Boston exemplifies double-down madness. The city shelled out $230 million to renovate its convention center in the late 1980s. After the makeover produced virtually no economic bounce, Boston concluded that it needed a new $800 million center, projecting that it would help the city rent some 670,000 extra hotel rooms a year by 2009. The new center, which opened in 2004, fell far short of expectations: the actual number of room rentals that it generated in 2009 was slightly more than 300,000. Now Boston tourism officials are proposing to spend $2 billion to double the center’s size and add a convention hotel, to boot. The officials optimistically predict that the expanded facilities would inject $222 million annually into the local economy, including an extra 140,000 room rentals a year. Despite these bullish projections, officials claim that the hotel needs $200 million in subsidies.

The Boston Convention Center, when empty. Though touted as a way to increase hotel rentals in the city, it has not lived up to initial projections, according to City Journal's Steve Malanga. Flickr/redjar

Boston is far from alone. Hoping to help its limping convention center, Baltimore paid $300 million to build a city-owned convention hotel, which opened in 2008. The hotel lost $11 million last year and has barely been able to pay its employees or its debt service. Yet Baltimore is now considering a massive $900 million public-private expansion that would add a downtown arena, another convention hotel, and 400,000 feet of new convention space. The projected cost in public money: $400 million.

Convention-hotel mania has swept Texas, too. Dallas just opened a convention hotel financed with $388 million in Build America Bonds, and Arlington and nearby Irving are both proposing new hotels to boost tourism. These facilities will compete with alternatives in places like Austin, which opened a massive 800-room convention hotel in 2003 after a study predicted that it would generate more than 300,000 room rentals annually for the city. But Austin has yet to exceed 200,000 per year.

The Omni Dallas Hotel, a convention hotel. Convention hotels such as this one are popular with municipal developers, but may not be effective investments. Flickr/Justin Cozart

Perhaps recognizing this weak economic record, convention and tourism officials have been changing their sales pitch. Convention and meeting centers shouldn’t be judged, they now say, by how much business they bring to local hotels, restaurants and local attractions. Instead, we should see them as helping to establish a tourism brand for their cities. The director of Boston’s convention center, for instance, boasts that it brings the city “tourism impacts” — purportedly an economic value beyond whatever dollars the convention industry manages to attract.

The main value of such nebulous concepts seems to be to obscure the failure of publicly sponsored facilities to live up to exaggerated projections. As far as city officials are concerned, that failure is nothing that hundreds of millions of taxpayer dollars can’t fix.

Steven Malanga is the senior editor of City Journal and a senior fellow at the Manhattan Institute.

 

  • D Law

    On the surface, it does appear that private/public endeavors have not lived up to the hype, but let’s put the tourism industry in context shall we?
    The last reccession has been called the worst economic downturn since the Great Depression by some, resulting in commercial real estate transactions taking a bath, in addition to the worst foreclosure rates we have seen in decades.
    To use this time period as a benchmark for future construction is to say the least poor timing, if not self-serving for naysayers of any real progress.
    These endeavors take huge investments at a time when credit is increasingly hard to come by in the hospitality industry, even for companies with a good track record. Private companies have always used OP (other peoples) money by limiting their potential liability by finding multiple streams of financing, and the current administration is dying to finsd ways to stimulate the economy.
    So just call these investments the “New, new Deal” and build, baby build.

  • Ellen Imbimbo

    This is not really about the convention center, it’s about the land on which the Javits Center is located – and the eagerness of developers to get their hands on prime real estate on the West Side of Manhattan. Transportation links are already in the works. And, what about the $600 million currently being spent to renovate the Javits? Is all that money a waste if the Javits Center is torn down? There is ample data showing the convention center business is declining across the country. Queens is not Las Vegas. Conventioneers – after a day of selling their wares – cannot easily go out to find the kind of entertaintment needed after a hard day’s work. This issue needs serious reconsideration since if the foreign investor defaults, the taxpayer will be left with yet another white elephant on its hands.

  • Sue Z

    As a former attendee of many American Library Association Conferences, all I could think after reading this article is that I would much prefer to go to a conference at the Javits Center. I always looked for a hotel that was within walking distance of the convention center, and always enjoyed being right in the city. The convention center hotels were often more expensive- a key point to someone who had to pay her own way- and were not big enough to house all the attendees. ALA also had a lot of meetings in the convention hotels, and, even with free shuttle buses, travel time can get stressful. I urge Governor Cuomo to think about it from the convention-goer’s perspective, and put the focus on the Javits Center and all the resources within walking distance.

  • rory

    Start building NEW SCHOOLS to create a better future by investing in EDUCATION.

    Start building LOW INCOME AND MIDDLE INCOME HOUSING so that we don’t pay FEDERAL ASSISTANCE IN EXPENSIVE MOTELS and KEEP HOUSING AFFORDABLE for the Middle Class.

    This will provide jobs, a better educational environment, and more cost-effective private and government spending.

    We’ll have a healthier society that upgrades all the people
    and not simply a society that makes the wealthy become wealthier.

    Give these jobs to the middle and low income people.

    The rich have been too powerful in politics and therefore have made government enrich the richest. We need to rebalance the distribution of operating income, if salaries of the rich increase, then their employees’ salaries should be increased PROPORTIONATELY. The employer and employee cannot produce goods and services without the other. The average CEO salary shouldn’t be 300 times the average worker’s salary.

    INCOME is INCOME. ELIMINATE the reduced tax rate of Capital gains. If you invest or if you work with your hands, it’s all income and should be similarly taxed.

  • Charles Ponzio

    What a well researched/written article. I live in Austin where two large convention center hotels are under construction. If we are 100,000 room rentals shy of the 300,000 target, then two more convention hotels mean…I’m just not smart enough to figure out this kind of math.

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