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Convention Centers: It's a race to the bottom

There was a haunting piece of information last month in The Atlantic Cities that should send shivers down the spines of city leaders across the country.

Over the last 20 years, convention space in the United States has increased by 50 percent; since 2005, 44 new convention spaces have been planned or constructed in this country alone. That boom hasn’t come cheap. In the last ten years, spending on convention centers has doubled to $2.4 billion annually, much of it from public coffers. [Is It Time to Stop Building Convention Centers?]

The desire for convention centers is simple: it brings in visitors with outside money who consume things that are taxed at higher rates (alcohol, hotel rooms, rental cars, etc). From the city’s perspective, it appears to be a win-win. But, these investments come at a cost. In this case, the cost is increased competition.

The article continues,

There aren’t really enough conventions to go around. The actual number of conventions hosted in the U.S. has fallen over the last decade. Attendance at the 200 largest conventions peaked at about 5 million in the mid-1990s and has fallen steadily since then. [Is It Time to Stop Building Convention Centers?]

The number of conventions and total number of people going to conventions has decreased since it peaked in the mid-1990s. The situation we have now is that of more cities are competing for fewer dollars.

It's a classic race to the bottom.

The problem with convention center developments are numerous: there are usually a lot of bad urban design outcomes, they’re large buildings that are essentially single-use that don’t lend much to street life, and they cost local governments a lot of money.

Here’s the bigger problem. Convention centers aren’t limited to just our major cities. Most mid-size cities have them, too. In Minnesota – it’s not just Minneapolis and St. Paul, it’s Mankato, St. Cloud, Duluth, Rochester and even Bemidji!

The State pays for most of them. The confusing part is why a State would subsidize Bemidji’s convention center that will directly compete with its other State-aided convention centers in Mankato, St. Cloud, Duluth and Rochester. The cities are competing against each other to provide more space for fewer events and fewer people?

Minneapolis and St. Paul may struggle to make payments on conventions center operating cost overruns or debt service payments, but are big enough to absorb some bad decisions. But, towns like Mankato (pop. 40,000) and Bemidji (pop. 15,000) shouldn’t be risking economic growth on a convention center (or convention center expansions, of which is being seriously considered in Mankato).

I’m going to pick on Bemidji’s new convention-entertainment center. It cost $75 million.

[Image from www.ci.bemidji.mn.us website. Click to enlarge]

The problems here are numerous. Much has been written on convention centers and sporting arenas and their failures at delivering even the most modest of economic gains. This is a concern. But, I wanted to take a different angle.

It’s not just that these projects are economic losers. They more than often destroy prime parcels of real estate with little or nothing to show for it except lots of parking.

Here’s the location.

It’s approximately 1.4 miles from the center of town, occupies a large parcel of prime land on the south shore of Lake Bemidji, doesn’t add any real value to the adjacent neighborhood and won’t pay any property taxes. A better use of this land could be doing something as simple as just continuing the street grid and added single family homes.

This is a sample of 10 blocks of mostly taxpaying single-family homes that will easily fit on the parcel. Coincidentally, this is approximately the same space dedicated to parking.

To make matters worse, it’s about the same size as Bemidji’s charming and loveable downtown. Financing of the project aside, we need to scale down the size of our developments – especially those in small towns.

Continuing to expand convention center space is the economic development equivellent of gambling aginst someone with a stacked deck. It's not going to end well.

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Reader Comments (6)

Hey, Chuck. Nice to see another clean shot through the silver bullet salvation approach. But one question, as it relates to the proposed single family homes. How do the economics work in that area of the country? Where I am, with our own small, neighborhood accessible school system that's in high demand, once a sfh gets past one kid it becomes tax/revenue negative. Most of our neighborhoods dominated by sfh average out in the red, or close to it.

Are things different in your neck of the woods? Would love to see a post on the economics of the enshrined single family home. (Note: I live in one but still get tired when they're presented as the idealized lifestyle for everyone.)

July 11, 2012 | Unregistered CommenterScott

Dang. Just noticed this is a Nathaniel post and not a Chuck one. Sorry about that. I formally rescind my previous endorsement of Chuck and transfer it for today over to Nate!

July 11, 2012 | Unregistered CommenterScott

Nate! We should have talked Convention Centers when you were here!

July 11, 2012 | Unregistered CommenterMarty

Scott - Thanks for the compliments. You ask a great question: "How do the economics work in that area of the country?"

With current conditions, in Bemidji, 10 blocks of new housing wouldn't work - there isn't a market for that. I wanted to illustrate that the 10 block area of the traditional neighborhood could fit into the space. That being said, not all single-family neighborhoods are created equal (by the way, what was used is a lower middle to middle class neighborhood). Regarding services / property taxes paid, it's probably a wash. That isn't a bad thing though. City's shouldn't be in the business of profit. The neighborhood is certainly less of a drain on the local economy than the convention center.

Marty - I'll be down & back between St. Paul and CL these next couple months. I'll keep you posted. Maybe we can grab a beer and chat convention centers.

July 11, 2012 | Unregistered CommenterNathaniel Hood

Scott - The density of the neighborhood is a big driver of the cost/benefit question. The higher the density, the less the cost per acre to service these homes. There are some studies that show that very expensive homes at very low density will "pay for themselves". But they'll also chew up a lot of land unnecessarily. At typical suburban densities, the costs usually outpace the revenues, especially over a 20 - 30 year time period.

July 11, 2012 | Unregistered Commenteraim

Most studies indicate that the typical single-family house breaks even as regards revenue v expenditures for services.

July 11, 2012 | Unregistered CommenterMark A. Baker
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