The Outstater

August 5, 2021

“Youʼve all gone completely crazy.” — the architect father of Albert Speers on being shown Hitler’s plans for a new Berlin

MY CITY HAS an almost 70-year-old coliseum, the old-fashioned kind built simply to serve the sports and entertainment needs of the community. It continues to do that impressively well, paying its own bills and undergoing regular renovation and expansion.

Some years ago, the local powers, encouraged by bonding attorneys, architectural firms, contractors and consultants, decided we needed something better, something more grand, something that would serve not just the locals but attract people from throughout the state, throughout the nation even, perhaps the world.

Tax-backed financial incentives made it happen. The way it worked was local officials used low-cost municipal bonds because private industry was wary of investing in such mega projects. The cities then promised bond-buyers that taxes on hotel rooms and other spending by visitors would pay off the debt.

In 1985, we broke ground on a 225,000-square-foot facility aptly named the Grand Wayne Center. Its sales manager, a Missy Eppley, will tell you it is “the Midwest’s premier event destination” ideally located within one day’s drive of “half the U.S. population” —  all in the heart of our downtown.

We visited the center and the downtown recently. We were impressed by the amount of concrete and rebar. Architects, many of them large contributors to recent mayoral campaigns, plainly have been busy. There were several tower cranes downtown testifying to some sort of construction boom. We did not see, however, a lot of people, and we saw none we could identify as out-of-towners with pockets full of cash. 

That is not to say that conventions are not being booked. At what profit, though, is difficult to determine. Even more difficult is whether the center and its downtown focus has enriched the community at large — at least compared with what might have been the case had private investment been the motivating force.

So we began asking the classic journalistic questions: Compared with what, at what cost or gain, and on what hard evidence?

It turned out that a fog surrounds much of downtown renewal. The fine print in the rental agreement for the new baseball stadium across the street, for instance, is rarely discussed. The new downtown restaurants seem a bit light on diners. There are nasty rumor about the vacancy rates in office space. Much of downtown property is off the tax rolls, partly a result of the City Council’s attempts to incentivize development there.

Several years ago, the Indiana Policy Review commissioned a survey by a certified public accountant to determine whether the convention center was making money as it claimed (the link requires registration). He was given a set of books but they did not include critical financing costs. His attempts to gather year-over-year numbers also were discouraged. Any independent cost-benefit analysis was impossible.

We were left with the suspicion that the Grand Wayne and its attendant downtown hotels, parking garages and restaurants were not delivering as promised, and perhaps the new downtown itself was more a Potemkin Village than a dynamic public-private partnership.

Now comes reports that the pandemic has exposed a core weakness in the downtown economic-development strategy. That is, if one city can use tax-backed bonding to build that from which private investment shies away, then a lot of cities can do the same. The result is a market glut, a situation that private investors try mightily to avoid.

From the mid-1980s through 2010, cities added 30 million square feet of convention space, an increase of 75 percent, according to Steven Malanga of City Magazine: “The only problem: the growth of the convention business didn’t keep pace. In fact, it declined. From 2000 through 2010, the number of attendees at conventions fell by nearly a third, from 126 million to 86 million.”

Malanga quotes the ex-mayor of Seattle as saying that convention centers are now “a stagnant and dying industry that require endless taxes.“

If that is the case in my city, mum’s the word. The boosterish local newspaper, which has benefited from the spike in downtown property values, is zipped up tight.

And finally there is human nature. It was fun to sit down with architects and contractors planning grand edifices using other people’s money. It was more fun to attend ribbon-cuttings, throw out opening-day pitches and expand on how this or that project fits into a greater civic vision. We all enjoyed that, politicians particularly.

But we are not so good at ensuring that these projects are operated efficiently or were even justified initially. That takes real expertise. We are particularly bad at explaining what happens when the numbers head south.

In the case of convention centers, the authorities who dreamed them up and pushed them through the city councils and oversight committees are long gone or are in tall grass. If the centers fail, we will be left to blame ourselves for trusting fools with such foolhardy projects.

“It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong,” famously wrote the economist Thomas Sowell. 

That would make a grand city motto. — tcl


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