Friday, January 22, 2010

Cities Should not be in the Hotel Business

We'll accumulate a series of links in this post about the experience of cities in funding local convention centers and hotels. It gives you an idea of what Ann Arbor might experience with the Valiant proposal, and probably the Acquest.

Governing Magazine, December 2009

"Critics, though, don’t merely say that hotel ownership is beyond the proper scope of government. They argue that cities have placed bets on a declining stream of revenue based on impossibly rosy forecasts. And, there is reason for caution. Some publicly funded convention-center hotels have been solid successes, but others have been colossal failures."

Brookings Institute 2005

"The overall convention marketplace is declining in a manner that suggests that a recovery or turnaround is unlikely to yield much increased business for any given community, contrary to repeated industry projections. Moreover this decline began prior to the disruptions of 9-11 and is exacerbated by advances in communications technology. Currently, overall attendance at the 200 largest tradeshow events languishes at 1993 levels."

Domestic Policy Subcommitee (U.S. Congress)

"The public justification for public financing, including construction financing with tax exempt bonds, is that this is an investment that brings jobs and consumers to a city’s downtown. Academic research on the value to economic development, however, has universally concluded that sports stadiums, convention centers and hotels do not increase economic activity in downtown areas."

Testimony - Domestic Policy Subcommittee (March 2007)

"These cases of public hotel development and ownership present an intriguing case of public projects, making use of the low interest rates available with tax exempt bonds directly competing against privately-owned and operated competitors, often directly across the street."

Economic Impact of Convention and Conference Centers (Steven Spickard, 1998)

"What if you build it, and they do not come? For one thing, the community is stuck with debt service that continues for 15 to 25 years. You may very well achieve negative economic impacts."

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