Convention Center shortcomings costing Nashville $$$$

[jice]

I have stayed on the sidelines of this debate trying to get a general feel from the board. There seems to be four schools of thought at this point (warning generalizations coming);

(1) A new CC is required to keep Nashville convention and tourism sector growing

(2) A new CC would be nice BUT can we afford it

(3) The existing CC is just fine; Nashville can better use revenue in other ways

(4) Kheldane

LOL... sorry, but I got a laugh outta that (If ya know what I mean)

I, personally, am leaning more towards a mixture of 1-3. I mentioned somethin before on this thread about that... but basically, I say keep the old CC and use it along with a nice new exhibition hall (and maybe some other new stuff) at the SoBro site. I definitely think something needs to be done to add more space to the current CC in order to continue (not to mention sustain?) the growth of the tourism industry here in Nashville. But, I'm pretty skeptical about dishing out $455mil for a brand new state-of-the-art center.

But hey, does it really matter what we think anyway? If the business leaders, etc., in this city want it to happen... i'm sure they'll find a way to do it the way they want to do it.

[Nashvillain]

I thought this might help. Here is a jpeg illustrating the 1.2 million square feet (dark blue) and the 375,000 square feet of exhibition hall space (light blue). I thought is might help frame the urban design discussion.

Obviously, this is not a site plan. This is only to show the CC's size in relationship to the downtown.

Is the Pentagon being relocated?

[bzorch]

I wish people were not so lazy to walk from the East Bank. I think it would be a good location with views to downtown. It could help connect East Nashville to Downtown or if done poorly it could isolate them further.

That said, as like many others I am studying the report from Friday and trying to form my opinion of this. The actually estimate for this facility is $467 million plus $25 million for the land or a total of $492 million. Of course when you are talking about this much money, who cares about $37 million, right.

If you listen to the proponents of this, their ultimatum of if you do not build this, Nashville is going to hell in a hand basket, you would have to be an idiot to not support this. If you could invest $43 million dollars each year for it does not say for how many years (I guess the taxes hikes would left in place permanently) and receive $700 million a year in generated revenue for local economy, you would have to be an idiot to not support it. Who would not want to make 1,600% on their investments. Increasing the current revenue from meetings and conventions from $1 billion to $1.7 billion would be great as well (The current $1 billion + $700 million). Of the $700 million, the City generates $15.7 million is sales taxes of which $10.3 million would go to public schools. It sure does not seem like a lot of money for the trouble.

The executive summary reads

[sleepy]

I've gone through the entire 140-page report and still am undecided if this is something we really need to quantify our position in the league of "great" cities. We're already in the league of cities with distinct personalities which will continue to be a great and getting greater place to live regardless of whether we choose to commit a half-billion dollars to the "Center."

I believe you and I have had this discussion before on some other forum about the economic "sense" or economic "viability" of convention centers. And most independent studies have shown that new convention centers are a financial drain.

"Convention centers have become increasingly popular "investments" of state and local tax dollars. Between 1975 and 1985, construction began or was completed on some 250 convention centers, sports arenas, and similar facilities at a cost of more than $10 billion. Forty-three cities nationwide -- including Chicago, St. Louis, and Kansas City in the Midwest -- are currently building or expanding convention facilities.

Unlike private investors, taxpayers can expect to receive no direct return on their investments in convention centers. Government convention centers rarely cover even their operating costs. One survey found that annual operating losses at large government convention centers averaged 42 percent of revenue. (That is, a facility whose operating revenues were $3 million had operating costs of $4.26 million.) In 1989, the Washington, D.C. Convention Center -- 98 percent booked and routinely turning away business -- had operating revenues of $7.4 million and operating costs of $12.8 million. D.C. taxpayers made up the $5.4 million difference from the general treasury.

More disturbing is the fact that operating expenses account for only 25 to 30 percent of a center's total annual cost, which includes debt service and other capital costs. D.C. taxpayers, for example, paid about $9 million in interest and principal payments in 1989, in addition to the $5.4 million operating subsidy."

http://www.heartland.org/Article.cfm?artId=10795

Now, having said all that, having a brand, spanking new CC is perhaps akin to having a pro sports team. It can be a source of local pride, even though there is relatively little economic benefit (again studies show that). At least with sports teams, though, there is a local, emotional benefit for the citizens to be involved in and live or die with the local team.

[cheeriokid61]

Dealing with numbers 2 and 5, I've always wondered if we could do something extremely unique. Say this takes up six blocks. What if we leave the street grid as it is, and build six buildings. One could be the large exhibition hall, another ballrooms, another meeting rooms, and so on. Each building could be completely different. One very modern, with lots of windows. One art deco inspired. One residential-looking, maybe even wrapped around with condos. The possibilities are endless. Then, they could all be connected by bridges that are a good three or four stories up. Would that not be a cool idea?

[jice]

Dealing with numbers 2 and 5, I've always wondered if we could do something extremely unique. Say this takes up six blocks. What if we leave the street grid as it is, and build six buildings. One could be the large exhibition hall, another ballrooms, another meeting rooms, and so on. Each building could be completely different. One very modern, with lots of windows. One art deco inspired. One residential-looking, maybe even wrapped around with condos. The possibilities are endless. Then, they could all be connected by bridges that are a good three or four stories up. Would that not be a cool idea?

I like that idea.. and related to what I said before, I don't see why the current CC couldn't be used (for the time being at least) as one of those six or whatever buildings.... along with the GEC. Actually, I just really want that sky bridge over Broadway lol

[Kheldane]

(1) A new CC is required to keep Nashville convention and tourism sector growing

(2) A new CC would be nice BUT can we afford it

(3) The existing CC is just fine; Nashville can better use revenue in other ways

(4) Kheldane

LOL! I do appreciate being given my own category!!

One interesting thing I did notice about your post: You mentioned "intanible" benefits. What exactly do you mean by this? Or more specifically, why make tangible sacrifices (like economic waste, surpressing private enterprise, and taking on additional long-term risk/debt on the city's balance sheet) in order to gain intangible benefits? Nashvillians can never enjoy intangible benefits - because they're intangible! The concept is so vague that it sends warning sirens screaming through my libertairian cerebral cortex.

[Guest]

I thought you would appreciate that

Yeah no spell check on the mobile...The sentence should have read-

"That there are numerous intangible benefits that would arise from a new CC"

I am addressing benefits that are incapable of being realized or defined but are no less real. The increased expose can only help our recruiting efforts and the

[Kheldane]

I needed to chime in quickly to make a point. It is true most convention centers lose money. Everyone is comparing Gaylord to the CC downtown. The only problem is that if Nashville or any other city owns the CC and not the rooms then it will lose money. The majority of the revenue comes from hotel rooms and food sales. Now if the city were to own the hotel that would be different, but that would be in competition with the private sector and I dont think they can, by law compete with private companies. I may be wrong there and I am sure to be corrected if I am because you guys dont miss much.

Now could the answer be to subsidize a CC and let the majority of the risk be on the companies operating the surrounding hotels. That is a lot of money to recoup and I doubt they would be able to do it. But there could be an answer on the private side that we may be overlooking. Are there any large CC in the US that are private excluding Las Vegas that are in large cities?

Smeagolsfree! This ^^^ is a really good post! I was just reviewing the discussion so far and this post is the most concise summary of the main problem with the convention center. I would say that you're absolutely right about the money being made on rooms and restaurants, but not the CC itself. That explains why the Opryland model has worked. The conventioneers are trapped out there on the Opryland campus, thus they have to stay in the overpriced rooms and eat at the overpriced restaurants so opryland can afford to run the convention center. I bet they do have to compete with some publicly owned CC's around the country who are under no pressure to make a profit, so I bet (if only we could see Opryland's balance sheet) that they do loose money on their CC as well ---- but they can re-coup it and still make a profit by operating all the hotel and restaurants on the premises.

So your above point directly addresses my earlier point about the new CC being a subsidy for surrounding restaurants and hotels. And, I also agree with you that if the new CC were to be financed by taxes just on the businesses surrounding it, the businesses would go bankrupt. That explains why the businesses themselves haven't built a CC using their own funds. Actually, this whole revelation has got me thinking: I wonder how much of downtown business is "artificial"? What I mean is, without the government attractions subsidized by taxpayers all over davidson county (arena, coliseum, cc), how much of downtown restaurants and hotels would still be in business? This is purely a theoretical question, there's really no way to know. But I would guess the impact from these loss-leading facilities is a huge positive for the surrounding privately owned businesses. It basically amounts to a huge re-distribution of wealth out of suburban and quasi-urban davidson county, into the dowtown core.

But, your point about Las Vegas also made me remember that I once heard that Opryland is the largest hotel in the US outside of Las Vegas. Let me propose this theory: If you own sufficient restaurants and hotels around (or attached to) your convention center, then you can afford to run a money-loosing center - but a stand-alone center is destined to go bankrupt. Of course, since this is a state of non-equilibrium in the convention market (where it's impossible to offer convention space for use at a profit), then it makes me think that some of the other posters were right when they guessed that there might be too much convetion space in the US already. It is possible to over-build convention space in this country. The demand is not limiteless, as someone also already pointed out.

In the private sector, if you see that the price paid for a service (convention hall rental) is below the cost to provide that service (construction and maintenance costs), then that is the signal for investors to look elswhere and not invest in that business. Now, some have suggested that the above scenario is the exact reason that government should step in and provide the service - but consider this: The economic reality will remain the same even if government steps in and does build the center. Someone will still loose money, and that means economic waste - loss of wealth - declining standard of living.

Also, to address your question about government ownership of businesses - this is perfectly legal if people vote for it. Consider public schools, utilities, roads, airports, seaports, libraries, even lotteries and fire departments. All of these have been privately owned and operated at different stages in american history. Consider the Lottery as a recent case: Government engages in the gambling industry, but luckily, they don't have to compete with private gaming establishments - since they've made those illegal. Looks like they've taken it a bit further than what you first guessed!

[Kheldane]

I think the concept is straightforward.

Now to address the tangible costs you bring up in your post, (like economic waste, suppressing private enterprise, and taking on additional long-term risk/debt on the city's balance sheet) I think most of these are false assumptions on your part. Define the economic waste; is this the opportunity cost of the money that builds the new CC?

[smeagolsfree]

Hey Guys, I dont have a lot of time to respond other than to post a couple of links. Keep up the great work about this discussion going. Its great to see differing points of view and be civil about it. That is why the forum meets are so important to come out and get to know each other and we dont get our feelings hurt.

This is from the Tennessean today:

[Nashvillain]

I hate how all these "discussions" are always framed as either/or propositions by their proponents/opponents. Proponents would like us to believe that Nashvilles $3+billion tourism and hospitality industry will evaporate without a new CC and detractors say it will virtually bankrupt Nashville and further erode its local taxbase. The truth is probably somewhere in the middle. I'm talking about the opinions and articles in the media and not the discussion on this thread.

In considering whether to build this thing, Nashville has a huge advantage over many of its competitors in that it already is a destination city and has a name brand and cache that other similar sized cities like Indy, Cleveland, Louisville, etc. don't have. So if the CC were built than we would be able to attract the conventions those cities get by virtue of their previously superior convention space. I'm not convinced that this is the case. It's interesting that in an article in the Tennessean which seeks to explain how the commission arrived at their proposed figures, it's assumed that a new CC will attract four times as many visitors and generate eight times as much revenue as the current CC. The current facility generates $92 million and the new CC will generate $700 million.(!) In explaining this, a member of the commission stated that the current CC attracts many local companies with local employees that don't spend money on hotels and resturaunts. This seems a huge assumption to make, what indications do they have that the revenue generated will be so exponentially greater?

In seeking to finance a new CC, it is believed that increased taxes on services and hospitality will generate the revenue to cover the debt for construction. Isn't it possible that some companies will still choose to stay away due to lower costs elsewhere? Not to mention that taxes will be higher and we'll still have out of date facitities for at least four years. How much will this hurt business in the interim while the new CC is underway. This is also a tax on all non convention tourists and visitors as well as locals who spend money in this zone.

To proponents that who say that Nashville's tourism and convention business will erode or go away completely, an article from a september 2004 City Paper article stated that the NCVB had a record sales year in 2003 and that Nashville is now a top 5 market in the country. Nashville's tourism industry is first in the state and generates more than $3 billion annually, $150 million of which goes to the state and $77.5 million goes to metro. I know that the mayor and the NCVB are seeking ways to increase the economic impact of tourism and that the new CC is intended to do this, I just think it's interesting that we're achieving these numbers with what we have currently.

This brings me to what some others have been asking, Bzorch in particular I think; what are some alternative ways we can grow without this huge government expenditure? I think there already is a more sustainable and responsible economic growth underway and it's being driven by our market economy. (Yeah Kheldane!) I'm talking about the residential growth of downtown and the surrounding inner city. Downtown businesses will not be entirely dependent on the fluctuations of the tourism and convention industry but will hopefully have a stable and and gradually expanding customer base. A more eclectic , vibrant and excitng indiginous population will further increase Nashville's cache as a destination city.

I think this is a huge gamble and I'm not convinced that the economic impact is of a nature that justifies Metro to take on this burden. What are the benefits to cities like St. Louis, DC, Louisville, Knoxville, et all? Benefits to the residents in terms of quality of life, education, health care, transportation, etc. Like Kheldane said, it's not Metro's job to ensure the viability of the downtown hospitality and entertainment industry. I believe that the private sector is already stepping up and providing for the survival and growth of downtown.

[Nashvillain]

It would be good to know what percentage of Nashville's tourism industry comes from conventions and how much comes from other sources. I haven't been able to find this information.

[NewTowner]

I don't know enough about Convention Economics to form an opinion I'd be willing to defend to the death. I tentatively back this project at the moment--but I do think somebody should point out the ominous fact that this building, as much sense as it maybe makes right now, must be considered in the flickering light of exploding energy prices which may put the stop on large conventions in the medium-to-long-term, period.

But even aside from this disturbingly likely Petroleum Doomsday scenario, it seems to me that Metro Government should not take a strictly "bankroll" approach to this--after all, I think Kheldane had a point when he waxed theoretically eloquent on how a thing like Gaylord could use its obese sow-like proportions to rope a profitable convention in on its own terms. Maybe the local businesses downtown and in the surrounding areas should band together and fund this thing themselves...

But of course, even given an approach like this, the government would still have a task to undertake. Metro would act more as a facilitator, and less like a hapless entrepreneur. It could (and should!) help shore up some land, and use a local tax network as a collecting mechanism to fund the CC over time. We would witness the creation of a downtown commerical "resident's fee," so to speak.

It may actually be that this is the role Metro is currently considering...but in this case, the CC backers should articulate this a little more if they want Libertarians and their associates to back the CC up.

I love downtown, and think it is the sort of living arrangment which produces citizens rather than consumers, but big projects like this make me nervous. I still think it was kind of dumb to build a bunch of Sports Arenas instead of a light rail system. But...that's just me.

Kheldane, you have made some valid points about the Convention Center. But your suggestion that Downtown businesses are "artificial" was weird. I really wish you would consider how anti-libertarian current suburban development patterns are...you are very selective about the subsidies you criticize, and this makes me a little crazy sometimes. With sincere respect, I beg you to please consider how an urban fabric in which feet are a possible method of transport is more Libertarian than fossil-fuel dependent, publicly constructed archipelagoes of machine-driven "country houses".

I am a citizen downtown, with rights and responsibilities. I am a consumer in the mall, with neither.

Anyway, I think this Convention Center has a lot of potential for both good and ill. On top of everything else (perhaps literally), it will be huge. Should it be built at all? If so, should the city fund it for the greater good, or should it be bankrolled only by those businesses who will most directly profit from it? Why does everything have to be so complicated? Is there a convention of convention center builders we could attend? And why isn't it coming to Nashville? At the moment, I am glad I live in Savannah. Our convention center is such an obvious disaster that no one is fighting about it.

[Kheldane]

I really wish you would consider how anti-libertarian current suburban development patterns are...you are very selective about the subsidies you criticize, and this makes me a little crazy sometimes. With sincere respect, I beg you to please consider how an urban fabric in which feet are a possible method of transport is more Libertarian than fossil-fuel dependent, publicly constructed archipelagoes of machine-driven "country houses".

Hey NewTowner, I totally agree with what you say above^^^ about american suburbs being a non-market phenomenon. I didn't mean to suggest that downtown business was "artificial" in the sense that everyone lives and plays in the suburbs absent government intervention. I was just thinking out loud, although I probably shouldn't do that, but I was. I was just wondering: Given the fact that people do live in the suburbs and would likely stay there without the government funded sports teams to lure them into the city, how much of downtown business exists as a result of that particular government market distortion.

But I do agree with what you said above about suburbs. My personal opinion (although one can never guess what the market will do) is that suburbs are 100% the result of government intervention in the market place, and without it, you would see american cities arranged more like Paris, for example, in that all the rich would live in the city-center and the outskirts would be slums. I believe suburbanization was driven by many ill-fated government policies/programs including: Public schools (along with de-segregation that really ramped up "white flight"), public roadways like interstates and highways making it cheap to live in the 'burbs, GI bill encouraging new home construction, Excessive taxes in urban counties driving out residents and business, restrictive zoning that prevents the use of land for the market desired purpose, excess public property allowing homeless a place to "hang-out" in the downtown area, excessive land prices caused by restrictive zoning, the list probably goes on, but basically I blame suburbanization on the government. So I think we probably agree on this!

[sleepy]

^I don't know if you meant to express it that way, but how is desegregation an ill-fated government program? Most would say that segregation was the ill-fated program.

[smeagolsfree]

One Question that is coming to mind is; If they build it will they come?

I think the answer is yes. Nashville is already a tourist destination with the country music industry and the people that visit Nashville love it. We are already a draw without the convention business but the convention business would bring many more people to Nashville than would come on their own. I think Nashville has much more to offer a typical tourist or conventioneer than lets say Louisville or Indianapolis or for that matter Cincinnati and Charlotte. So we can compete and draw business from those cities. With a huge convention market other attractions may come such as an amusement park or many of the attractions you would find in Las Vegas or Orlando.

As to rising energy cost, Nashville would be a better destination than many other cities because of its central location in the U.S. because people would not have to drive as far or fly as long to get here. I am not sure what percentage of the population is within a days drive, but I would venture to say it is very high.

Can we afford this? Well, maybe the question needs to be; can we afford not to build it?

[Kheldane]

^I don't know if you meant to express it that way, but how is desegregation an ill-fated government program? Most would say that segregation was the ill-fated program.

Yes Sleepy, you're right! Thanks for pointing that out, I don't want to give the wrong idea: I mean that public schools are the ill-fated program. Segregation and De-segregation both highlight one of the primary flaws with public schools: Lack of choice. I think absent govt. schools you would see very well integrated school populations based on religous and economic groupings, which are often "mixed", for lack of a better term. My personal vision about what a 100% privately schooled society would look like allows for any number of schooling concepts to be tested by the market.

But this is kind of off topic, so we'll switch back to the CC discussion.

Horray for a new Convention Center!.....and....Down with the metro government! Do I sound hypocritical for expounding both of those viewpoints at the same time? Maybe at first, but I'm really not if you read my posts in detail. I am 100% in favor of a privately owned and operated CC.

[NewTowner]

Horray for a new Convention Center!.....and....Down with the metro government! Do I sound hypocritical for expounding both of those viewpoints at the same time? Maybe at first, but I'm really not if you read my posts in detail. I am 100% in favor of a privately owned and operated CC.

Kheldane...what exactly are your interests in urban design and architecture? I mean...I guess being an anarchist and an architecture fan are not necessarily mutually exclusive...but perhaps you should start a new thread outlining your personal worldview. I think many people would be interested to read it, and a dedicated thread might give you a chance to say your piece in a way that frees you up to discuss the specifics of other issues without having to constantly refer to your own "big picture" Libertarian perspective. We could "get to know you", so to speak, and then the actual Convention Center could be discussed without us having to "break it down." Does this make sense?

[tomcampion]

Today's City Paper talks about the Civic Design Center's plans for review of the CC proposal. So far the MCC materials I've seen in the Tennessean ignore the Plan of Nashville's Gulch site, instead focusing on the infeasibility of a location in the Gulch further south than the Plan of Nashville's proposed CC location.

http://nashvillecitypaper.com/index.cfm?se...s&news_id=47952

[Guest]

Some already know this but the NCDC preferred location in the Gulch is Tony G.'s property where it backs-up from the Church Street Viaduct to the Ice House at Charlotte Pike. I am sure this played a role in the site selection.

I understand why the NCDC picked this site but to me it is too far removed from the core and the tourist mecca's on 2nd and Broad. Plus Tony will develop this site so unless they are willing to trade him some land in the core the site would be robbing Peter to pay Paul.

[Kheldane]

Does this make sense?

Actually, no. This thread is not just about how a CC should look, it's also about should there be a new CC, how should it be done, why should it be done, will it be a success or failure, etc. Even the title of the thread is about the CC "Costing" nashville - so I don't feel like I'm out of line to address the cost structure. I also think it's relevant for us to discuss the convention business in general, as we have been doing.

New Towner, I have enormous respect for the knowledge and unique perspective you bring to this forum, and I always enjoy reading your posts. However, you seem to get really hung up on the "Libertarian" aspect of my posts. I'm not 100% loyal to the libertarians, although I do agree with them a lot, I also disagree on some things. Please consider my posts as ideas and perspectives from someone who wants to increase development, population, and prosperity in nashville to the maximum extent possible, but also who wants to accomplish it while respecting people's rights. I want nashville to be a wealthy, successful, world-class city. I want long-term economic viability, and my take on a govt.-built CC is that it's a short-term political stunt at best, or even a government subsidy of downtown business at worst. I don't feel like I've unnecessarily politicized the issue in my posts.

Plus,Plus,Plus:

1) I try to avoid labeling people "socialist" just because they espouse socialist beliefs. Instead I find it more useful to discuss the nature/merits of the socialist project in question.

2) I have provided detailed reasons for my assertions about the moral/economic implications of the proposed CC - I have not simply said "it's government, it sucks!".

3) I do not think it's appropriate for me to start a separate thread about myself, my beliefs, or about libertarianism in general. I find it's more useful to discuss particular issues and express my perspective where applicable.

4) I actually do not consider myself an anarchist, but rather, a libertarian. We can discuss the details of this at some other time, but basically when I said "Down with metro government" I meant it with respect to the proposed CC, not in the absolute sense. Sorry if that seemed excessive, but I was half-joking/half-mocking myself a bit in that last post.

[Rural King]

Has there been any discussion in any of the local media about whether or not there is even remotely the support to pass a new CC through Metro Council in the near term?

I just don't think the timing is right for a new CC. The city has a lot of other projects going on and I think folks would like to see the dust settle on a few of those first before the city goes and takes out hundreds of millions in bonds to fund another capital project, even if those bonds are to be paid off via mainly tourism generated tax dollars.

I support a new CC, but I'm not sure now is the time to pursue it.

[smeagolsfree]

There were a couple of stories ran on a couple of the TV stations and several of the Council members were in support of this including David Briley and Howard Gentry. The story also said the leadership of the council is in favor of doing this.

[LA_TN]

http://www.nashvillecitypaper.com/index.cf...l&news_id=47952

There is a poll being conducted by the City Paper that is currently running:

Too many projects?

With the Sounds stadium deal finalized, the Schermerhorn Symphony Center soon to open and now a massive convention center proposed, could downtown Nashville be harmed by all these large