Economic Development or Corporate Welfare, Continued

Recently I posted a commentary regarding the proposed publicly-funded convention center for downtown Lancaster, PA. This week, the Brookings Institution, which is an independent academic research organization, posted a report that blasted the growth in publicly funded convention centers. Titled “Space Available: The Realities of Convention Centers as Economic Development Strategy“, the report uses current and historical data to prove that the assumptions made by the consultant’s reports used to justify these expenditures are almost always wrong. You can download the entire report if you are interested, it is a 557K PDF. I am including a few noteworthy excerpts here:

From page 27:

“Today, a broad cross section of American cities from Richmond, VA to Peoria, IL; Jackson, MS to Tacoma, WA have or are investing millions of public dollars in the quest for convention center access.

They are pursuing an economic development strategy that has already failed in dozens of cities, and holds little prospect of succeeding in most. With the possible exception of a handful of major cities that have long dominated the national and regional economies and a very small number of prime visitor destinations like Orlando and Las Vegas, the grand promises of convention center investment are unlikely to be realized, the strategy doomed to failure.”

From page 28:

“As we’ve seen above, local decisions to invest in a new or expanded convention center or hotel typically rely on consultant’s market or feasibility studies that protray a growing, expanding industry and which ensure that the given locality is quite capable of successfully competing for convention events and out-of-town atttendees – and in the process reaping large financial benefits. Where, as in the last two years, there is clear evidence of a changed market environment, these studies have quite often shifted to a different source of data, promised an imminent market turnaround, or simply ignored the question of competition altogether.”

From page 29:

“The widespread use of revenue-backed bonds to finance convention centers and related projects has long proivided a means of avoiding state constitutional requirements (in the vast majority of states) for voter approval of general obligation debt fully backed by the local government. And even where the voters have said “no” to center bond issues or new taxes – as they have done in Pittsburgh, Columbus, Portland, and San Jose – investments in convention facilities have a way of happening despite the election outcome – as in Pittsburgh, Columbus, Portland, and San Jose. Yet there is no magic to the revenue backing of convention center bonds. Unlike other revenue debt issued for water or wastewater projects, airports or ports, they are not repaid by charges or fees on convention center users. Instead, everyone who stays in an area hotel room, eats a meal in an area restaurant, or rents a car helps pay the principal and interest on center debt.”

From page 30:

“Today, as all cities are obliged to compete with dozens of others, the prospects of real economic development and opportunity based on the convention strategy appear nil.”

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