Local leaders are often captivated by the idea of convention and event centers they believe will grow their communities’ economies and raise their profiles. However, these projects are best left to the private sector to build where there is actual viability. In most cases, convention and event centers have not been built by private developers because they rightly conclude that there is insufficient demand for such facilities.
Taxpayer-funded convention and event centers, however, because of their heavy subsidies, don’t have to worry so much about economic viability. Take, for example, a recent event center plan in Rocky Mount that is moving forward with $36 million in general obligation bond financing and revenue estimates that are shaky at best. There is little expectation that the event center will ever make a profit.
The publicly owned Raleigh Convention Center offers another example. It opened in 2008, and by 2017, the director was asking for an expansion. This despite losing millions of dollars each year. The heavy subsidies allow the meeting spaces to be full, as the center gives away meeting rooms or offers them at deep discounts, but the center is staying afloat only because of the steady stream of taxpayer money it receives. Meanwhile, subsidized rates at the convention center make it difficult for private venues to compete. And the taxpayers stay on the hook for millions of dollars, year after year.
Still these projects are attractive to city leaders, who can unveil a new center and claim it will be a huge boost to the local economy, with the promise of bringing in visitors who will pay special taxes on hotel occupancy, car rentals, and prepared meals, and attracting other new businesses to the area. The argument is not so much that the convention or event center itself will turn a profit, but rather that it will attract other investment.
Nevertheless, heavily subsidized convention and event centers too often end up being followed by subsidized hotels and restaurants. It all amounts to a gamble for taxpayers that rarely pays off. And taxpayers are stuck with a large bill for a long time.
- It is detrimental to economic development for city leaders to compete with private centers and hotels offering their own meeting spaces, and this unfair competition can be exacerbated by city-subsidized hotels and restaurants placed near the convention centers.
- City-owned convention and event centers become a burden for taxpayers for decades, both through the bonds that are typically used to finance their construction and through the operating deficits they incur year after year. Raleigh’s convention center, for example, attracted a subsidy of nearly $20 million from the city in 2016-17.
- After spending $100 million to build the Charlotte Convention Center in 1995, Charlotte is currently planning to spend another $110 million for renovation and expansion, which will further burden Charlotte taxpayers.
- State and local governments should not use taxpayer funds to subsidize private ventures, especially vanity projects like convention and event centers that will never pay for themselves. Let private developers handle these projects where there is sufficient real demand.
- Avoid cronyism and playing favorites with the tax code. These schemes put the government in the position of picking winners and losers, usually favoring big, new businesses over local, homegrown ones with roots in the community.
- Local governments should consider lowering, or at least freezing, tax rates. This offers relief to property owners, whether home or business, who want to make improvements to their property, making the area more attractive and desirable. It keeps more money in the pockets of small-business owners who want to invest in their businesses or hire additional employees, both of which strengthen the local economy. And it makes the area more attractive to developers who may want to build a privately financed center.
- Local governments should consider zoning regulations. Less restrictive zoning makes it easier for businesses to grow and entrepreneurs to innovate. Done well, zoning can free up people to use downtown space more creatively, including for privately funded convention and event space.