Convention Center in Provo - does it make sense?

Below is a thoughtful editorial on the Convention Center in Provo. Utah County recently borrowed $40 million to build it. Now that we have it, I will try to do everything I can to make it successful. But over 95% of the Convention Centers in the USA lose money, and all the signs indicate the Provo Convention Center could cost the taxpayers of Utah County millions of dollars going forward.

Twenty years ago the County Commissioners allowed the taxpayers of Utah County to vote on supporting the McKay Events Center at UVU with their tax dollars. I wish our current Utah County Commissioners had done the same, and allowed the voters to decide if the Provo Convention Center makes sense.




http://heraldextra.com/news/opinion/article_2073d488-45d9-584f-aeb3-8afc395c6a9d.html?mode=story

In Our View

Convention center: May it succeed

Posted: Sunday, June 13, 2010 12:30 am

The Utah County Convention Center will be a reality soon. The groundbreaking is Tuesday. But how should Utah County residents expect the center to perform financially after it's completed?

In a guest opinion on this page a week ago, Joel Racker, president and CEO of the Utah County Convention and Visitors Bureau, laid out an optimistic case. In a nutshell:

• Some groups have rejected Utah Valley because there's no facility big enough for them. The Utah County Convention Center will solve that, attracting more conventions, trade shows and other events.

• More events mean more customers to hotels, restaurants and other businesses in Provo and the rest of the county, which means more taxes collected.

• With interest rates and construction costs at rock bottom, this is an opportune time to build.

The new convention center has every bit as good a chance of meeting expectations as other similar venues. But success is no slam dunk, and not merely a function of square-footage.

Inadequacy of facilities is only one of many reasons that conventions reject Utah County, according to a market analysis/feasibility study done by CSL International last year. If Utah County is generally unappealing as a destination, then building a new center may not help much.

Convention centers all over the nation are running deficits these days. Many require subsidies from government. But if convention centers in travel meccas such as New York, Chicago, Orlando and New Orleans are struggling, what does that mean for quiet little Provo?

According to Heywood Sanders, a University of Texas at San Antonio professor and longtime critic of public convention centers, achieving financial success is a tall order for any convention center. But don't most U.S. centers at least break even? Sanders had two short answers: "No" and "You've got to be kidding."

"The vast, overwhelming majority of convention centers -- 95 or 96 percent -- operate at a loss," Sanders said. Some take in revenue that's half or less of expenses.

Advance projections of how many events a particular center can attract can be wildly optimistic, Sanders said. With about 325 convention centers of significant size in the U.S., "this business is astonishingly, murderously competitive."

As a result of the ferocious competition, facilities are often forced to slash prices. For example, Washington, D.C.'s convention center now offers 44 percent discounts. If a facility in the nation's capital -- a prime tourist draw -- must offer cut-rate deals, it must be wondered what lies ahead for Utah County.

There is an alternative to fighting for major events, Sanders said: Book more local events such as weddings, group meetings and graduations. In other words, use the facility as a big banquet hall.

That could work. But of course that approach won't draw in the heavy load of outside visitors needed to pay the freight of the center's construction. That was a key selling point to Utah County taxpayers. Bonds will be retired by hotel, car rental and restaurant taxes -- in other words by out-of-towners.

That's an appealing pitch, but local people are on the hook, too. If you take your family out to eat, the local restaurant doesn't care whether you're from Orem or Oklahoma, Spanish Fork or Singapore: You'll pay the surtax.

Likewise, if a Utah County resident rents a car for a trip, or a motel for visiting relatives, he'll pay the higher car and room taxes.

Sanders added that analysis must also consider what economists call "opportunity costs." No matter how the money is raised, it could go for potentially more valuable uses.

"Just because visitors are paying, that doesn't justify doing dumb things," he said. He added, tongue in cheek, "It might be better to bury a million bucks somewhere and invite people to come to Utah County to dig it up!"

Of course, Sanders has not studied the Utah County project in detail. He's speaking broadly. Nevertheless, many of his comments seem applicable.

Two factors could make it hard for the new convention center in Provo to pan out financially:

First is that little intangible element the convention trade calls "destination appeal." These are the characteristics of a place which, on their own merits, draw visitors. Lists of top convention cities usually are topped by Chicago, Washington, Las Vegas, Orlando and other hot spots -- places where you can do things other than attend a conference.

So where would Provo/Utah County land on such a list? The 2009 feasibility study noted: "There are some important weaknesses of the local market -- and the downtown, in particular -- that will influence Provo's ability to attract events, including the limited number of restaurants, bars, entertainment options and attractions (often desired by planners and event attendees.)"

There's also the economy. Nobody is out of the woods yet. The Utah County Convention Center could face some tough sledding in the years ahead.

What will be government's attitude after the convention center is up and running? Sanders noted that local officials are often reluctant to admit when their expensive facilities fail to reach income expectations. The financial results sometimes remain hidden from the public. "Often you cannot even find out how it's doing as far as bringing in conventions," Sanders said.

It will be essential going forward that our local governments provide absolute transparency to the public. Once the center opens, Utah County should post regular statements on its website showing revenues and expenses, as well as reasonable figures on collateral income received by local businesses from convention visitors. Residents need to know exactly what's going on with this big investment, warts (should there be any) and all.

Hopefully, things will go well. Elected officials say that they paid great attention to details over several years of planning, and that they approved the center only after careful and diligent analysis. That's encouraging. And Racker, whose organization is charged with the task of marketing and sales, is enthusiastic. He thinks it's all going to work.

We hope so. With sound management and some good luck, the taxpayers of Utah County will never be required to subsidize the new convention center.