Convention Center Expansions Put Taxpayers on the Hook

Published September 18, 2013

As convention planners seek to have large new hotels and related facilities built for their events, taxpayers are often stuck footing the bill for what could be a building that sits empty much of the year.

For example, the Oregon Convention Center Hotel could result in a 40 percent taxpayer subsidy, according to a published report. The funding for the project includes $60 million in bonds to be paid by hotel taxes on rooms. If the tax revenue doesn’t meet expectations, taxpayers have to pick up the tab, as they will for the $10 million in state lottery funds, and another $8 million from other taxpayer-supported sources, that also will be directed to the hotel.

Supporters of these taxes and the project itself argue the convention center has lost attendance since a $116 million expansion in 2003, and they put some of the blame for this decline on the lack of a new hotel.

Revenues Down

But many conventions centers have lost revenue since 2000. Convention travel dropped off precipitously after the September 11, 2001 terrorist attacks. Though some convention centers started to recover business by the middle of the decade, some never did.

Many venues that showed recovery by the middle of the decade started falling off again with the onset of the Great Recession in 2008 and the continuing weak economy. One of the largest conventions in the late 1990s and early 2000s, the Supercomm telecommunications trade show, ended in 2010. Others have ended or shrunk in size. Additionally, with different online meeting applications, companies can bring together people in virtual environments for much less money than sending them to out-of-town conventions with hotel, travel and other costs.

Alternatives Up

The virtual conventions may not have the same networking opportunities as the traditional conventions, but even that issue may be solved in some respects. In early September, for example, there was a virtual convention to discuss usages of Microsoft Lync. The online site included online presentations complete with Q&A, downloads of presentations, bios, related materials, virtual meeting rooms, virtual networking, and several other elements of a traditional convention.

But even with the availability of the virtual conventions there are still the continuing proposals for taxpayer-subsidized facilities like the one in Oregon.

Chicago, for example, has on the drawing board construction of a nearly $200 million arena (construction and land acquisition costs) at the McCormick Place convention center to be funded largely by hotel taxes and backstopped by state General Revenue Funds. The arena would become the home court of DePaul University’s basketball team. But when the basketball team (and perhaps DePaul’s volleyball team) is not using the arena, it would sit dormant much of the year.

In Madison, Wis., backers are seeking an expansion of Monona Terrace Community and Convention Center. The so-called Judge Doyle Square proposal for a $25 million to $50 million taxpayer subsidy as part of a $200 million expansion would add more hotel rooms. As in the Oregon Convention Center Hotel proposal, Monona Terrace boosters say the facility needs additional rooms to bring in bigger and better conventions. The city will reap the economic benefits, they insist.

Questionable Numbers

However a report in Madison’s Isthmus The Daily Page calls many of the proposal’s numbers into question. According to the report, the largest “convention” held at Monona Terrace — accounting for 15 percent of the $32.8 million in spending generated in 2012 and 27 percent of the $23.5 million spent in 2010 — is Ironman Wisconsin. The annual bike, foot and swimming race takes place on Madison’s streets and lakes each September.

“Monona Terrace provides some support functions, but the facility hardly seems indispensable to the event,” the article says. “Although it’s a one-day race, Monona Terrace considers it a weeklong convention. The Madison Marathon is also considered a ‘convention’ that Monona Terrace draws to Madison.”

“Do they run the Ironman inside the convention center?” asks Heywood Sanders, a professor of public administration at the University of Texas at San Antonio and a prominent critic of publicly funded convention facilities. “To credit the Ironman with the convention center…seems to be a stretch,” he told Isthmus.