Convention center will still be a money-loser
In this morning's Whirled we were treated to some numbers from John Scott, director of Tulsa's government-owned convention center, estimating the economic impact of the expansion of the convention center, to be funded by Vision 2025 money. The numbers were presented last month to the City Council. What his own numbers reveal, despite his efforts to spin to the contrary, is that the convention center is an extraordinarily bad investment.
The expanded convention center is expected to generate a $1,962,000 operating loss, on top of continued debt service of $1,752,000 a year for money borrowed to build the last convention center expansion in 1984. With rounding, that's an annual total loss of $3,714,000, and it has to be made up out of city tax dollars, dollars that could otherwise be going to pay police officers, keep swimming pools open, and keep potholes filled.
Scott told the councilors not to fixate on the bottom line:
"I know business people focus on the bottom line," Scott said. "And we share concerns on the operating losses . . . but we feel that is more than made up by the overall economic impact benefit the convention center brings to the community."Wouldn't any business want to spend $3.7 million to get $43 million?" he asked.
But that isn't exactly what is happening. The City of Tulsa is going to be shelling out $3.7 million to get about $2 million in revenues, if we're lucky.
That $43 million is a rounding off of the estimated economic impact of the expanded convention center: $42.9 million. Scott told the Council that over the past five years economic impact from the convention center has averaged $35 million a year. That's direct spending -- an estimate of what convention-goers spend on hotel rooms, restaurants, and miscellany.
(I have to give Scott credit for not going completely overboard in his estimate. Before the "It's Tulsa's Time" vote in 2000, proponents were claiming a boost of $100 million annually in economic impact -- a 300% increase!)
Assuming that the number is accurate -- that direct spending really will increase by 22% -- how much of that $42.9 million will end up in the city treasury? The 3% city sales tax: $42.9 million in spending (assuming it's all taxable) x 3% = $1,287,000.
But wait! you say. We also have a hotel/motel tax of 5%, and part of that money is designated for convention center marketing and debt service. In FY 2004, that tax brought in about $4,815,000 -- a bit under 60% goes into the Convention Fund, and what isn't needed for debt service on the 1984 expansion can be used to offset operating expenses. Only about a third of hotel stays in Tulsa are in connection with conventions and group travel (the rest is individual business and personal travel), and of that third, some is generated by events at Expo Square, the Mabee Center, and individual hotels. Let's be generous give the convention center credit for 20% of hotel/motel tax revenues, and let's further generously assume that the hotel/motel tax generated by the convention center will increase proportionate to the projected direct spending increase -- 22%. That amounts to about $700,000 in convention center-generated hotel/motel tax revenue going into the Convention Fund.
The bottom line: For the $3.7 million that comes out of city coffers to keep the convention center open, the convention center will bring in $2 million -- a net loss of $1.7 million that will have to come out of the general fund. While it's true that hotel/motel tax money generated by individual travel can be applied to the convention center deficit, that money would be there even if the convention center weren't, in which case it could go into the general fund.
Convention centers have been justified to taxpayers as a way to bring in outside dollars and generate more sales taxes to pay for basic services. Instead, Tulsa has sacrificed and will continue to sacrifice basic services to accommodate the convention industry. I'd love to see some candidates in the next city election call for selling off the convention center, so that Tulsa's taxpayers would no longer have to foot the bill.
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So how come this story is over all the mainstream news sources like channels 2, 6, and 8? People should be all fired up and mad about this! This is a perfect example of the whitewashing and rug sweeping that occurs around here.