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 V.19 No.29 | July 22 - 28, 2010 

Gessing Again

The Downtown “Arena”

Berry should know better

Like a bad penny, the idea of expanding the Convention Center keeps coming back. Mayor Richard Berry says he's neutral on the concept, but at least seven city councilors seem hell-bent on acquiring land at the First Baptist Church site to build the $400 million project. The Council voted on June 21 to urge the Berry administration to share the site with APS, despite the fact that no vote has been taken on the so-called arena project.

I prefer the term "Convention Center expansion" because that is the real purpose of what has been proposed Downtown. After all, while this events center may have an arena component, the addition of a taxpayer-subsidized headquarters hotel makes it clear that the project is designed primarily for the benefit of out-of-town visitorsnot locals.

While I and most beleaguered Albuquerque taxpayers (74 percent of Albuquerque's voters oppose the project, according to a Fall 2009 Journal poll) would like to see the arena issue go away once and for all, most of the City Council seems to have fallen for the fantasy being sold by the Downtown-first crowd that a bigger, better, more modern (taxpayer-financed) Convention Center is the key to turning Albuquerque’s Downtown around.

That could not be further from the truth. First and foremost, this project will drive taxes up. Our gross receipts tax, imposed in only a handful of states, just rose to 7 percent as of July 1. It’s broader than a sales tax because it taxes services, suckerpunching our small businesses.

Does Albuquerque really want to get more deeply invested in the convention center business?

The Convention Center would drive that rate up by at least one-eighth of a percent, possibly higher, to pay for this $400 million project. As we have seen with the tax hike to pay for the Rail Runner’s operations, in bad economic times, tax revenue is not always what it was predicted to be.

The Downtown-first crowd and most members of the City Council ignore higher taxes and instead focus on the supposed benefits our economy will derive from having the latest and greatest space for conventions and other events. But they ignore the realities of a nationwide convention market slump that preceded the recession

Heywood Sanders is a professor in the department of public administration at the University of Texas at San Antonio. He authored an in-depth study of convention centers for the D.C.-based Brookings Institution in 2005 and pointed out that convention centers are not the surefire economic development tools their proponents would have us believe.

For starters, the overall convention marketplace is in a sustained, long-term decline. This decline began before the disruptions of 9/11 and was exacerbated by advances in communications technology. With remote conferencing options, people don’t need to travel as often for work. The poor economy is not helping matters.

Sanders notes that despite the decline, localities, sometimes with state assistance, have continued to invest massive amounts of taxpayer dollars into convention center expansion and construction. Over the past decade alone, writes Sanders, “public capital spending on convention centers has doubled to $2.4 billion annually, increasing convention space by over 50 percent since 1990.”

Like Albuquerque, many other cities are spending even more money to add publicly financed hotels to serve as convention “headquarters.”

With a declining industry nationwide and cities wasting taxpayer money on these projects, does Albuquerque really want to get more deeply invested in the convention center business? Plus, the Duke City faces stiff competition from the Santa Ana Star Center, facilities owned by the Indian tribes and UNM’s Pit. One wonders exactly what market there is for even more convention space.

Berry was elected mayor in large part because voters were frustrated with the high-handed, big-spending ways of his predecessor. With the city facing deep deficits, layoffs and a shaky economic outlook, it would be unwise to embark on a massive new project.

As a businessman, Berry should know better than to invest taxpayer dollars in a dying industry. Mr. Mayor, it is time to step up and oppose efforts by the City Council to burn taxpayer money on the Convention Center.

The opinions expressed are solely those of the author.

Paul Gessing is the president of New Mexico’s Rio Grande Foundation, an organization that promotes limited government, economic freedom and individual responsibility.
 

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