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.