Last week The Atlantic Cities asked if it is time to stop building convention centers? Here’s a quick recap:
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. [Quoted from The Atlantic Cities]
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.). Of course, as the typical Strong Towns reader already knows – this comes at a cost.
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. [Quoted from The Atlantic Cities]
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 competing for fewer dollars. This problem is extrapolated by governments subsidizing their own competition. Just look at the State of Minnesota: 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!
I examined Bemidji’s situation. Their new Sanford Center cost $75 million … and here’s what you’ll get for $75 million:
The problems here are numerous, but I’m going to break it down into two categories;
1) Bad Design
The State of Minnesota, the City of Bemidji (pop. 15,000), the local university and some grants pulled together some $75 million and this was the best design they could come up with [here's the building from a less flattering angle]. I’m not an architectural snob. I believe in ‘everyday buildings‘; they play an important economic and social role in cities and towns. The Sanford Center is not an everyday building. It’s a $75 million building,. It is likely the most expensive building ever built in the City of Bemidji. This type of expenditure should leverage existing development, accommodate the spirit of Bemidji and be in a position to add value to adjacent properties.
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 this in a different angle …
It’s about 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.
Generally speaking, what’s the most desirable land in Minnesota? Lake front. The site is currently a park. There is a lot of community value in having non-private lake shore, but let’s pretend you wanted to boost local property taxes and utilize the shore. The Sanford Center takes up approximately .65 miles of shore line. Let’s compare that space to .65 miles of shoreline elsewhere on the same lake.
I counted about 35 properties. I did some quick, non-scientific research (thanks Trulia and Zillow) and found a couple homes for sale on this stretch of road (avg. listing price: $322,000) who pay approximately $2,356 in property taxes per property. Multiple that by 35 and you’re looking at about $82,471 in revenue. $82,471 doesn’t sound like a lot of money, but it’s better than debt.
According Bemidji Regional Events Center website, the money that funded the construction of the Sanford Center is composed of sales tax revenue bonds ($42,000,00), state bonds ($20,000,000), state planning funds ($3,000,000), TIF bonds ($5,037,853), and land sales ($4,136,00). [Source]
The sales tax revenue bonds are likely local. I’m not sure how they are structure though – by the way, it’s nearly impossible to find information on this kind of stuff. The State is kicking in the rest. The confusing part is why the state would subsidize Bemidji’s convention center that will directly compete with its other government-funded convention centers in Mankato, St. Cloud, Duluth and Rochester.
It’s been only 4 years and operating expenditures for the Sanford Center are already exceeding exceptions. It’s taken a group of concerns citizens to write checks to cover the costs:
The City of Bemidji received a check for $45,000 Tuesday afternoon from a group formed to help cover costs associated with a new Bemidji event center. The “Bemidji Regional Event Center Operating Fund” was established in 2008, accepting pledges from individuals and businesses. Bemidji area banks tracked and collected the pledges, most for $100 per year for 5 years. Just four years have passed, but the group says they want to help with operating cost deficits so far at the Sanford Center. They plan to turn over the remainder at the end of the 5-year pledge drive. [Source]
While it’s encouraging to see concerned citizens pitch in for public infrastructure, its discouraging to see an event center already run a deficit after only 4 years. As the building ages, costs will rise. This story doesn’t have a happy ending.