Convention Center Follies. Heywood T. Sanders
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of new revenue streams from an increased city hotel tax, a boost in the county hotel tax, a restaurant tax, and a new sales tax increment scheme, it was simply impossible to finance an expansion of that scale and price. Finally, in late 2001, a special mayoral task force embraced a far smaller expansion, one that could be realized at a cost estimated at $171 million.57
Even a dramatically reduced expansion plan would cost far more than the city itself could afford, and that demanded an exercise in imaginative intergovernmental finance. Cincinnati Mayor Charlie Luken and Hamilton County commissioner Todd Portune were able to craft a financing deal “breakthrough” in January 2002 that joined together city and county hotel tax revenues, a $10 million contribution from the Greater Cincinnati Convention and Visitors Bureau, a annual contribution from the city, and some $15 million in naming rights, for an expansion that carried a $198 million cost. The deal continued to evolve through the year, with a significant change in May that boosted the revenue from naming rights and promised a portion of the county hotel tax revenue to suburban communities, while putting the financing of the expansion in the hands of a new public authority, the Hamilton County Convention Facilities Authority.58
The final deal for Cincinnati’s $160 million renamed Duke Energy Convention Center neatly combined funds from the city and county hotel tax revenues with contributions from the local convention bureau, the business community’s Equity Fund, and Duke Energy’s naming rights. With the expanded center’s grand opening in June 2006, the Cincinnati Enquirer touted “Convention Center Upgrade Breeds Confidence,” with the observation that “Business and tourism officials hope an improved and expanded convention center will boost the local economy downtown and beyond.”59
The story of the expansion of Cincinnati’s convention center has all of the elements of a “Perils of Pauline” saga that extended over more than 15 years. The effort would regularly appear to be stalled or dead, with financing impossible to secure, only to rise again, perhaps in a different form, with yet another increasingly intricate financial arrangement. The one political and fiscal constant was that local voters were never given the choice of investing in a larger center. If Cincinnati’s business leaders ended up with a far smaller expansion than they had sought, they nonetheless finally got an expansion without a public vote.
Reformation and Result
The 1970s marked a turning point in the fiscal politics of convention center investment. Faced with growing voter disenchantment or outright revolt, symbolized by the passage of California’s Proposition 13 in 1978, city after city reshaped the historic pattern of building broad voter coalitions for comprehensive packages of bond projects. For some cities, like Kansas City, the initial shift reflected the defeat of a convention center bond proposal. In Cincinnati, the unwillingness of the city’s business leaders and elected officials to put a proposal before the voters reflected a clear calculation that it would likely fail. For San Antonio, the shift to hotel taxes and revenue debt took somewhat longer but ultimately reflected precisely the same political calculus—the need to insulate convention center investment from direct voter review.
Other cities were no less imaginative. After decades of plans and proposals, San Jose, California, finally opened a new downtown convention center in 1989, financing it with “certificates of obligation” that did not require a public vote, and would ostensibly be repaid by tax revenues from local redevelopment projects. When the city sought to expand and renovate its McEnery Convention Center in the late 1990s, it ultimately chose to use the revenue stream from an increase in the local hotel tax (Transient Occupancy Tax). But under California law, even that tax increase required voter approval. And the voters did not approve, providing the tax increase with a 65 percent “yes” vote that fell just short of the required two-thirds. The verdict of the electorate did not end the quest for a bigger convention center for San Jose. It simply shifted the focus of local business and political leaders to a fiscal scheme that could avoid voter review. The solution proved to be a “convention center facilities district,” created by the city council in August 2008, that could impose an additional hotel tax to finance the expansion. But the great virtue of the district was that its taxation only had to be approved by a vote of the city’s hotel owners, based on the size of their hotels. With “yes” votes representing 78 percent of local hotel rooms, San Jose could move ahead on a $120 million expansion project, with a guaranteed steady stream of future revenues dedicated to the convention center. And with the San Jose special district model approved by a state court, San Diego and San Francisco began to move ahead to finance their own center expansions with tourism district schemes that required only a (weighted) vote of local hotel owners.60
The fiscal reformation of these cities and a host of others was achieved in a piecemeal fashion. Yet it evidenced a remarkable level of imagination and innovation. Cities committed to center development or expansion were willing to find revenue streams in a great many places. And, as the Cincinnati case so well demonstrates, they were often willing to “bet” on uncertain revenues or commitments in the hope of securing a politically viable deal. City boundaries were not necessarily a limitation either. Kansas City managed to piggyback on St. Louis’s quest for state dollars for a domed stadium, gaining it own share of state government dollars. And Cincinnati’s politicians proved amenable to sharing the responsibility for convention center expansion with the county government when the city lacked both the fiscal resources and the political capacity.
Formal legal limits were no hurdle either. State laws could be amended or changed to allow new taxes, or in the case of San Antonio, a higher tax dedicated solely to convention center expansion. State legislatures could also be persuaded to allow the creation of new governmental entities, such as the convention center districts in San Jose and San Diego, that exist solely to finance more convention center development without a public vote. The state government also represented an attractive political ally for convention center proponents, one with substantial fiscal resources where the promise of new distant visitors yielding increased tax revenues might well produce political success.
Bringing the State In
For convention center proponents, the search for financing—and a political opening—need not stop at a city or county boundary. Much as Willie Sutton observed about banks, state governments and state-created public authorities offer attractive vehicles for convention center building, often without the political or fiscal constraints and the requirement for voter approval faced by city or county governments. Consulting firms such as PriceWaterhouse have regularly argued that state governments reap a fiscal windfall, through the state sales tax, from the out-of-state attendees attracted to major centers. Yet, aside from potential fiscal benefits, business and hospitality groups already organized to lobby for their interests at the state capital find the appeal to a different level of government an easy shift to manage. State governments have come to play an increasingly important role in convention center development, one merely suggested by convention center names—the Connecticut Convention Center in Hartford, the Pennsylvania Convention Center in Philadelphia, the Georgia World Congress Center in Atlanta, the Washington State Convention and Trade Center in Seattle. That role, not entirely new, represents yet another form of the fiscal and political adaptation that has supported the enormous growth in convention center space across the U.S. over the last five decades.
New York City
New York’s business leaders regularly bemoaned the lack of a major convention hall through the 1920s, 1930s, and 1940s, particularly as other cities developed new venues. A New York Times editorial in December 1947, headlined “A Convention Hall Needed,” outlined that history from 1923, described the new auditoriums in Cleveland, Kansas City, St. Louis, and Atlantic City, and then noted the city’s loss of millions of dollars in convention business.61
The New York Merchants Association and its convention bureau had pressed the idea of a new auditorium/convention hall for Manhattan in conjunction with the planned 1939 World’s Fair, an idea endorsed by Mayor Fiorello LaGuardia. But with no prospect of federal funds, the city was not in a position to deliver a major new building. The city’s convention and visitors bureau, and its longtime chair merchant Bernard Gimbel, regularly pressed for a new public convention venue, albeit with no success. The first real plan for a convention center emerged in November