The laws of supply and demand are fairly simple. If you have demands, free markets respond, and if supplies are too abundant, demand drives prices down. Now, if you’re in the convention-civic center business, a strange polarization occurs, when demand goes down, the supply and expansion of centers increases. Many communities in North Carolina are in the midst of just such a conundrum.
Most studies commissioned by the municipalities promise new jobs and lots of local economic benefits with an updated convention-civic center. The problem here is that none of these promises made in other areas of the nation has come true in the past 15 years.
In 1993, the Raleigh convention center held 21 conventions and hosted 10 trade shows. Rolling totals for attendance at those events was more than 70,000 (many were counted multiple times). Since that time, the numbers of shows, conventions and attendance have dwindled. Proponents, including KPMG and SAG (the consultants hired for the Raleigh feasibility study), have said that the real answer is to have a much bigger convention center with an attached hotel. The cost to taxpayers will be about $212 million paid out of the 3 percent hotel and 1 percent prepared-food tax. Similar claims have been made in Wilmington and Charlotte. Even Elizabeth City and Asheville are talking about it. Is it worth it?
Many of the same promises given were used to sell locals on the development of the Myrtle Beach Convention Center. The city had used public backing to finance the convention center with a hotel that they thought would cover the losses. In fact, they issued $65 million in bonds to cover the construction and startup costs in 2001. The city has defaulted on the bonds and had to refinance $47.7 million to cover the hotel’s losses. Forecasts were continually missed, losses were $1.7 million the first year, twice as much as predicted.
And this isn’t an isolated case. Projections in Atlanta, St. Louis, Boston, Omaha, San Antonio, Charleston, and elsewhere have been wrong as well. All are experiencing attendance and monetary problems. Common sense would dictate that we ask why.
The Brookings Institution, one of the nation’s oldest and most experienced think tanks, recently issued a report, written by Heywood Sanders, covering national findings about convention centers that was less than flattering.
Among those findings: The market for conventions is declining nationally and will likely not recover as attendance at the 200 largest trade-shows is still at the 1993 level; public spending on convention centers has doubled to $2.4 billion annually increasing square footage by more than 50 percent since 1990; and due to increased competition, increased spending by cities and deep discounts for tradeshow groups, many convention centers still operate at a financial loss.
So, how do you define success when you know this will never make money and will forever be subsidized?
First he will tell you that more often than not, people tend to share a room when they travel to conventions, they don’t stay for three days, but often only one or two, and because of many factors, they don’t spend nearly that much money per day. There is “no instance where projections have even come close to real attendance recently,” he said. The difference is that he looks at results and not projections.
Greensboro has a wonderful and successful convention center, the Koury Center, which makes money without taxpayer subsidy. Folks in Greensboro don’t have to worry about whether it succeeds or fails, and only the owners have to worry about projections, not taxpayers.
Residents would be wise to review what’s being promised and ask for sound, independent data to support it. In North Carolina, firms like KPMG and SAG, which make rosy projections, are long gone by the time those projections don’t come to fruition. Ultimately, is this a boondoggle that you as a taxpayer are willing to support forever?
Adams is vice chairman of the Lee County Board of Commissioners and director of the Center for Local Innovation. Visit www.LocalInnovation.org for more.