Op-Ed: ‘Convention Center Mania’ Burdens Taxpayers

January 06, 2012 at 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.


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