June 6, 2006

RALEIGH – Two N.C. cities could save taxpayers from millions of dollars in unnecessary spending, by slamming the door on new convention center projects. That’s the key recommendation in a new John Locke Foundation Regional Brief.

“Wilmington and Asheville are considering new projects that will drag them into an ever-deepening, taxpayer-funded quagmire,” said Michael Sanera, JLF Research Director and Local Government Analyst. “Convention and civic center projects are a bad idea.”

Sanera and JLF research intern Travis Fisher examined the national growth of public convention and meeting space. Annual convention center construction spending tops $2.4 billion nationwide, according to their report. That’s a 50 percent increase since 1990.

At the same time, national convention attendance has dropped to levels recorded in the early 1990s. That trend has affected even popular convention destinations, such as Atlanta, Chicago, and New York. “There appear to be no winners in this great ‘space race,'” Sanera said.

Asheville could avoid the “space race” by selling its current civic center to the highest bidder, Sanera said. The city would benefit from the proceeds of the sale, along with the end of a nearly $1 million annual operating deficit. “By selling the civic center, the city would be able to focus on higher priority problems such as higher pay for police officers.”

Wilmington could avoid future problems of its own by shutting down a $50 million convention center project. The project already faces a court challenge and uncertain action in the General Assembly, Sanera said. “Losing the sunk cost of planning and consulting services is a small price to pay to avoid sapping taxpayers for years to come.”

Interest in new convention center space is based on a myth, Sanera said. City staff and outside consultants promise that a new or improved convention center will generate new business. They also support funding schemes that target visitors – including taxes on hotel rooms, rental cars, or prepared food and beverages.

“It is crucial to the economic well-being of North Carolina’s cities and counties that its local officials see past this myth,” Sanera said. “Despite a hopeful first glance, convention centers are never a ‘something for nothing’ proposition.”

The JLF report rejects the notion of so-called “visitor taxes,” pointing out that local residents rent cars, eat and drink in restaurants, and rent hotel rooms. “There is no such thing as a pure ‘tourist tax,'” Sanera said, “which means that anything called a tourist tax is just a well-hidden tax on local residents and businesses.”

Cities often base convention center projects on feasibility studies that overestimate both performance and economic impact, according to the report. JLF researchers also question using broad-based taxes with limited benefits. “Funding downtown projects with city or countywide taxes is nothing more than a wealth transfer from all over the city or county to downtown businesses,” Sanera said.

Asheville and Wilmington can look to North Carolina’s two largest cities for evidence of convention center problems, according to the report. Charlotte opened a convention center in 1995. Early projections called for 56 events and 751,000 people each year. Those projections never materialized.

“The Convention Center operating deficit was $1.8 million in fiscal 2004, and then it soared to $2.9 million in fiscal 2005,” Sanera said. “Again the city’s solution was to spend more rather than cut its losses.”

Charlotte now spends $1.5 million in incentives to lure conventions to the Queen City.

Meanwhile, Raleigh entered the great convention center “space race” a few years ago, with a project designed to replace a center built in 1977. The price tag for the still incomplete center is already pegged at $215 million, $35 million more than the original projection.

Only Jacksonville offers the taxpayers of Asheville and Wilmington a positive example, according to JLF researchers. In September 2005, the Jacksonville City Council voted to kill a nearly three-year project to build a new civic center. The council decided Jacksonville could not afford the project.

“The cycle of build, demolish, and rebuild happens because city and county elected officials are not concerned about bad long-term consequences, only short-term, politically motivated monuments that provide ribbon-cutting photo opportunities,” Sanera said. “North Carolinians are too smart to keep buying snake oil from highly paid outside consultants who say convention and civic centers pay for themselves and are an important economic development tool.”

Michael Sanera and Travis Fisher’s Regional Brief, “North Carolina Convention Centers: Important Lessons for Asheville and Wilmington,” is at the Locke Foundation’s web site. For more information, please contact Michael Sanera at (919) 828-3876 or [email protected]. To arrange an interview, contact JLF communications director Mitch Kokai at (919) 306-8736 or [email protected].