Wednesday, January 4, 2012

Conventions Centers - Familiarity Breeds Contempt

It does not matter where you live in this country, you are going to read an article about the unprofitability of convention centers. We all heard about how profitable the Sioux Falls Convention Center was going to become with the building of a new Event Center.

In Virginia Beach, Virginia there is a public controversy going on regarding the Virginia Beach Convention Center and the necessity to build a another luxury hotel to spur competition with cities like Savannah, Myrtle Beach, Charlotte, Richmond, Louisville, Baltimore, Raleigh and Nashville who have built hotels next to their convention centers. Their state of the art convention center is located approximately eight blocks from the oceanfront. Even with the oceanfront being a selling point, the convention center has brought in little more than half the visits from conventions and trade shows predicted in a 2000 study as reported by a Virginian-Pilot editorial.

The Virginia Beach City Council wants to enter into a public-private partnership with a developer to build a hotel and more conference space. You know, that pesky floor space issue we heard so much about in the campaign. The proposed hotel would cost $102 million with the city paying $67 million up front. The city council says that money will not come from the "general fund." Sound familiar? The VB City Council is split 5-5 and the Mayor is expected to break the tie. Sound familiar?

They say the tourists are going to pay for the hotel. Sound familiar? Virginia Beach has a "Tourism Investment Program Fund" which is similar in theory to our Entertainment Tax Fund. They charge an 8% hotel tax, a 5.5% restaurant meals tax, and 10% amusement tax paid on such things as going to the movies, playing golf, bowling, going to plays, etc. There's a cigarette tax, revenue from parking tickets - this fund has approximately 20 different revenue streams and pays off the debt service of many buildings and facilities in the area.

Their "TIP" is being proposed to pay off the debt incurred with this new public private hotel partnership. Our ETF is going to subsidize the operating expense. The public outcry is that it is a joke to say it won't cost the taxpayers any money. They say they all pay some portion of the tourism tax. They eat out, they go to movies, they play golf - you get the idea.  But it's the debt that worries taxpayers here and they don't like it when they read things like a stagnant convention business and the convention center business not meeting projections. They are saying the numbers don't add up. Sound familiar?

There are stories in newspapers all over the country about the convention centers and event centers not meeting expectations or fulfilling those lofty study estimates. The WALLSTREET  JOURNAL ran an article last Friday about this very subject. Here's a few quotes out of that article that tell the tale about convention centers :

  • America's convention center business has been declining, resulting in a nationwide surplus of empty meeting facilities, struggling convention halls and vacant hotel rooms.
  • Governments have responded to the glut by building more convention centers, financed by debt backed by new taxes and fees on already struggling taxpayers.
  • Optimistic projections about new facilities fail to account for how other cities are expanding too.
  • The failure of these facilities to live up to exaggerted projections is nothing that hundreds of millions more in taxpayer dollars can't fix.

It would be funny if it weren't downright ironic. Familiarity breeds contempt.


  1. Of course the new building won't pay for itself.
    Mayor Mike misled the voters of Sioux Falls on the entire issue. This events center is his monument to himself.
    I caught a rerun of a listening and learning session where Mayor Mike said of course some of the streets in the area will need to be wider and made stronger to carry the traffic. If they widen Burnside, will Mr. Entenman donate the land in front of his building since he says he will receive no benefit from the center.
    Also, where is the money coming from to pay for street improvements. What other areas of town will suffer to make these improvements. Of course we were misled. The pot of gold is limited in size. I am certain city infrastructure will take a hit, unless Mayor Mike can get another stream of revenue.

  2. It would be funny, if it weren't downright sickening. Our city or should I say the south end got sold a slick campaign of misinformation and they voted for the events center idea with no knowledge about how it would be paid for. Taxpayers will rue the day they gave this mayor the okay to proceed with the Huether-Entenmen Events Center. This Council absent Brown and Jamison should be thrown out of office when they come up for re-election.

  3. How about the Concert industry? It's also been in decline and cities like Omaha are aggressively competing for (and winning) concerts by guaranteeing a certain number of ticket sales to the promoters in order to hedge against losses. EC backers have said there's no plans for Sioux Falls to do this so tell me how we will "lure" these shows to Sioux Falls? Our facility will be newer; but smaller, poorly located, and we won't offer the same incentive or even anything similar?

  4. How about the upcoming "October Surprise" for the Events Center? A few weeks after they break ground we will see that not only will streets need to be "wider and stronger" but they will have to figure out how to fix an already antiquated and functionally inadequate sewer system, both sanitary and storm.

    I recall an article about how before an after a game at the Arena they have to go around and flush every toilet so the systems doesn't back up. Once they start digging and "discover" this problem, they will have to trench for hundreds of yards (hence the real need to fix the streets) to get anywhere near a spot to correct the trunk lines. I also don't see any plans for a retention pond in any of the site plans, so where does all that water go once they pave over every green space out there?

    Just a guess, but I'll call this a $10 million add-on that they will try to hide in other infrastructure upgrades.

  5. The horseshoe block of voters south of 33rd street, west of I29, and east of I229, were sold on a fee-harvesting mayor a year and a half ago. That same block of voters approved this money pit. Now in this mornings Argus, front page AGAIN.... I read even more about our ego driven mayor. WHEN is enough, enough?


  6. More food for thought.

    Of course this type of info has always been available to us...just not by our locally OWNED media. I could post dozens of more similar links, but you get the picture. Just google

    "convention centers fail"


    "convention centers attendance"


  7. The Virginian-Pilot top of the fold front page this morning, "Proposed Virginia Beach Convention Center Hotel No Go at least for now. Mayor and Vice Mayor join opposition, say city must seek a better deal." Hallelujah!
    The public outcry seems to have worked.

  8. Jennifer, I was at yesterday's meeting.

    I've written a pc for your blog, but I rec'd an error message that it must be at most 4,096 characters. Can you override this?

  9. Sorry, I meant to put 3:00 P.M. comment on the charter revision pc.