6 reasons to be skeptical of pouring more money into the convention center

The Austin Convention Center is considering expanding to another 3 blocks downtown. Here’s 6 reasons to be skeptical:

1. The Convention Center Loses An amazing Amount of Money

Convention Center lost $15.3m in 2013Even though the convention center doesn’t pay rent like a normal business, it loses stacks and stacks of money: $15.3m in 2013. It takes skills to run a business well enough to pay downtown rents. It takes special skills to run a rent-free business downtown  and lose twice as much money as you make!

2. The Convention Center Taxes Every Visitor to Austin To Subsidize Their Customers

The only way the Convention Center can balance its budget is to take the lion’s share of the city’s $9 tax on every $100 that every single tourist spends on hotels in Austin–whether they’re in the very small minority here for a convention or the vast majority here to listen to music, visit family, do business, go to Lake Austin, watch a UT game, or any other reason! A case can certainly be made that we should tax visitors to pay for things many visitors want but don’t make much money–parks, music, arts, museums. But we spend the vast majority of our tourist taxes on just one thing–the convention center.

3. The Convention Center Is a Giant Tax Dodge

Unlike the Convention Center, most downtown buildings pay huge sums on property taxes:The Frost Tower Paid $5.8m in property taxes in 2015.

  • 100 Congress: $3.69m
  • JW Marriott convention facilities/hotel: $5.24m
  • Frost Tower: $5.77m
  • Austonian: A lot! But harder to calculate.
  • 6-block convention center: $0.

Convention Center pays no taxesIf the Convention Center takes even more blocks off of the tax rolls, that could pull millions more dollars in potential taxes away from the city, the county, and Austin schools. That’s a property tax break EVERY SINGLE YEAR that we will be using to subsidize the convention industry.

4. The Convention Center Economic Analysis is Really weak

When people come to conventions, they spend money at hotels, bars, and restaurants. That’s good–it puts people to work and generates tax dollars. But downtown condo dwellers and office workers not only spend money on lunch and cocktails, they also spend money on legal services and dentists and furniture and everything else, not to mention taxes that pay for schools and streets and parks. Is the economic activity generated by conventions more than that generated by other uses? Enough more to justify giving tax incentives? Do we lose any non-convention tourism business because of the costs of our hotel taxes? Are there better uses for our tourist taxes than more convention center? The analysis doesn’t even ask these questions, let alone try to answer them. C’mon guys! You’re asking City Council and taxpayers to invest $400m in a money-losing business and your business case doesn’t answer the most basic questions.

5. The Convention Center Screws up traffic

Lack of alternative E-W routes on 2nd and 3rd channelizes all traffic onto heavily-trafficked streets on either side.
Lack of alternative E-W routes on 2nd and 3rd channelizes all traffic onto heavily-trafficked streets on either side.

Most buildings downtown are pretty small and reserve their disruptive traffic (trash collection, loading/unloading) for alleys. Some buildings, like the W or the JW Marriott, take up a full city block, which forces disruptive traffic into the street itself. The Convention Center one-ups even these buildings by shutting down 7 combined blocks of 2nd St, 3rd St, and Neches, forcing all nearby traffic onto crowded streets like Cesar Chavez, 4th, 5th, Trinity, and Red River. Like channelized water with nowhere else to go, traffic on Cesar Chavez regularly floods. The new plan mostly envisions keeping Trinity open; it needs to go much further to keep all existing streets open.

6. The Convention Center is a bad neighbor

Welcome to beautiful downtown Austin! Enjoy the view on your walk!
Welcome to beautiful downtown Austin! Enjoy the view on your walk!

Most developers downtown don’t just make a nice new building, they spruce up the area around them a bit too. The Independent condo tower is extending out the Shoal Creek Trail and building a pedestrian bridge. The 70 Rainey apartments are fixing up a park on the lot next door to them and building a wall covered in plants so neighbors have something pleasant to look at. The Convention Center has built one of the ugliest walls in all of downtown, helping to make Palm Park one of the most unloved and forgotten parks in the city. They say they’ve learned their lesson and they want to make the expanded section better. It would be a lot easier to believe them if they cleaned up their act first and put some real money toward fixing up Waller Creek and Palm Park and maybe trying to figure out some way to undo the ugliness of their current building. (Full disclosure: I’m affiliated with the awesome Generation Waller, but I’m speaking for myself.)

So, basically, you hate this expansion plan?

Character with dollar sign eyes
Artist rendition of convention officials seeing the pot of gold available for them to spend in hotel and venue taxes.

Really, not as much as this article makes it seem. But if the convention center authority wants us to believe their goal is improving the city, not securing their budget, they need to seriously step it up:

  1. ACVB says demand for conventions is so high, they’re turning conventions away. If so, they should be able to raise prices and stop bleeding so much money. If they can’t even raise prices on a money-losing enterprise, we should really question the whole idea of expansion.
  2. ACVB says they’ve learned design lessons from the terrible mauseoleum approach to building a dead building and destroying downtown street life. Prove it! Put real design sense and money into fixing the existing building first to show you now know what you’re doing. Improvements on the south side are a great start; now address the gaping holes on the east side.
  3. ACVB should be a good neighbor! Put more money into fixing up Waller Creek and Palm Park, following the Waller Creek Conservancy vision. Put more money back into the music community, one of the major selling points of Austin as a tourism and convention destination. Promoting Austin as a city should be about more than exhibit spaces and hotel room counts. It should be about keeping Austin a place that people want to be!

When the convention center was expanded in 2002, the world was a very different place. Downtown was filled with many low-value, low-intensity uses like surface parking lots and auto lots. One more low-slung ugly building fit in just fine. But now, the city is not approaching the convention center hat in hand desperately looking for jobs and downtown activity. The alternative to a convention center expansion isn’t a dead downtown; it’s a downtown Austin that continues to be one of the most prosperous, livable, desirable places to be in the entire state of Texas, radiating tax dollars out to fund the city. The Convention Center needs to understand this and improve their offer.

In addition, the days when the public was happy to give tax incentives to big businesses to get new jobs are over. Unemployment is scraping bottom in the city of Austin and City Council is rejecting hotel jobs (like the East Cesar Chavez hotel) even when they aren’t subsidized. Multiple bonds for 9-figure public projects like this one have been rejected by the public, for better or worse. An expansion plan that looks like a solid business plan for a money-making business will look an awful lot better to the incentives-wary Council members and public than red ink forever on an ever-growing budget.

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6 reasons to be skeptical of pouring more money into the convention center

2 thoughts on “6 reasons to be skeptical of pouring more money into the convention center

  1. Mary Arnett says:

    Thank you Dan. You nailed it. The hotels produce taxes to sort of pay for the convention center. But the public safety dollars to take care of the events downtown are not reimbursed by the convention center to the general revenue fund. To my eye, it’s really a mismatch of funding sources and the convention center has had a murky history of misdirecting money to insiders running the convention center as bonuses or “profit sharing” when it does not really generate a profit. Secondly, many years back, voters approved the rental car tax to be first directed to the Long Center, then it was supposed to pay for a park next to the convention center but that is when things went terribly wrong. Larry Akers, of ANC, did a great report analyzing how the car rental tax got railroaded over to the Convention Center. So everybody needs to remember that when we vote for taxes or bond money, city staffers have the ability and the power to redirect those funds to other things. It’s a lesson our tax payers have yet to learn.

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  2. Novacek says:

    What’s your source for 1 and 2?

    I’m looking at the 2015 budget.

    https://assets.austintexas.gov/budget/15-16/downloads/FY16_Proposed_Budget_Vol_1.pdf

    It looks like quite a bit of the tax revenue is actually transferred over to other departments (if I’m reading this right).

    Looks like they’re projecting $79M in total hotel taxes. ~60M then goes to the convention center, but the convention center then transfers $44M (from whatever source) to other departments.

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