‘Roger & Me’ Raises Old Questions That Are Still With Us.
In class on Saturday we watched the classic Michael Moore documentary, Roger & Me. You may recall this was Moore’s first film and it focused on his hometown of Flint Michigan. The topics covered are wide-ranging from corporate greed (GM was making a big profit in those days), outsourcing jobs, a community’s heavy reliance on a single employer, and the costs to lure tourists to town. A short sequel, called Pets or Meat, is online.
Flint, located an hour or so from Detroit, was the auto capital of the world at one time and was closely tied with General Motors. Between GM and associated suppliers the auto industry was the employment base. The town, like so many, had a downtown that had seen better days. Hoping to bring new life, in 1981 they opened a luxury Hyatt Regency Hotel w/convention center and a “festival marketplace” known as Water Street Pavilion. In 1984 they opened a theme park called AutoWorld which, I kid you not, had a reproduction of their old main street. All were intended to bring in droves of tourists.
The $100 million AutoWorld theme park wasn’t even open a year. The hotel & marketplace both eneded up closing within a decade. All three were internally focused projects with little relationship to each other or the real city. Instead of returning their main street (Saginaw St. btw) to its former glory they went for the big splash projects popular in the times.
Around this same time St. Louis had followed much of the same formula. We already had our convention center in place in the 1970s but we’d see new hotel projects and expansions of the center on the boards in the 80s. We also went crazy with two competing shopping destinations downtown; St. Louis Union Station and St. Louis Centre.
Each time our convention facilities failed to produce the desired revenue, the answer was to expand. Either we needed more floor space to attract larger and larger conventions or the answer was a dedicated convention hotel. Many conventions I have seen both in town and in other cities fit comfortably within the context of a hotel — the days of the mega convention are coming to an end. In reality, the convention route for tourist dollars may never have been as hyped. Here is the executive summary from a 2005 Brookings report titled ‘Space Available: The Realities of Convention Centers as Economic Development Strategy:’
To cities the lure of the convention business has long been the prospect of visitors emptying their wallets on meals, lodging, and entertainment, helping to rejuvenate ailing downtowns.
However, an examination of the convention business and city and state spending on host venues finds that:
• 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.
• Nonetheless, localities, sometimes with state assistance, have continued a type of arms race with competing cities to host these events, investing massive amounts of capital in new convention center construction and expansion of existing facilities. Over the past decade alone, public capital spending on convention centers has doubled to $2.4 billion annually, increasing convention space by over 50 percent since 1990. Nationwide, 44 new or expanded convention centers are now in planning or construction.
• Faced with increased competition, many cities spend more money on additional convention amenities, like publicly-financed hotels to serve as convention “headquarters.” Another competitive response has been to offer deep discounts to tradeshow groups. Despite dedicated taxes to pay off the public bonds issued to build convention centers, many—including Washington, D.C and St. Louis—operate at a loss.
This analysis should give local leaders pause as they consider calls for ever more public investment into the convention business, while weighing simultaneously where else scarce public funds could be spent to boost the urban economy.
The full report is worth the read because several pages focuses on St. Louis as a case study. It goes through all the history from the 1970s through to a few years ago. Concluding with:
St. Louis used the vast bulk of its $130 million in federal empowerment bonds authorization, fully 75 percent, in pursuit of its convention hotel dream. It also took on the obligation to repay another $50 million backed by its HUD community development block
grant funds. The commitment to the hotel, rather than some other form of job creation or economic development, thus represents a substantial opportunity cost. Now, with the hotel failing to meet its operating costs or debt service, the city of St. Louis will be forced to use $500,000 in federal aid to meet the debt service cost this year.
But the bill for the convention center and headquarters hotel in a highly competitive market does not stop there. The Moody’s assessment of the hotel’s financial prospects argued that its future success “will depend in part on continued redevelopment of down-
town,†with the city seeking to “fast track certain downtown redevelopment efforts.†The likelihood is that St. Louis and the state of Missouri will continue to pour public capital investment and tax subsidies into the downtown area and convention competition, despite
the limited returns. The city is thus regularly subsidizing the convention center at the expense of other public services or other revitalization strategies.
So when you are wondering why we don’t have money to maintain Forest Park just keep failed projects like the $90 million St. Louis Centre (now with a new round of funding backed by the city), St. Louis Marketplace (costing us $1 million a year) and the convention center fiasco. Elected officials continue to pour money into mega projects with promises of big returns.
This proves that manufacturing creates prosperity. Anything that Flint or St. Louis could do is window dressing.
I agree that chasing conventions, especially for second-tier cities like St. Louis (we’re NOT Las Vegas or Orlando), is a waste of taxpapayer money. Locals will continue to go to the car show, the boat show, the home show, etc., and what we have now works. We’ll continue to get our share of regional conventions, but we’re now starting to have local competition from across both rivers, in Illinois and in St. Charles. But expecting to land more than one or two “big” juicy conventions every year is crazy. After you’ve seen the arch and the zoo, there’s not much else to attract the spouse as a tourist (unlike Vegas or Orlando), so people attending business conventions stay in their hotels and head home as quickly as possible. So, we have a massive facility that’s good for a few footbal games in the fall, a few conventions and a few concerts. It would be interesting to see how much it actually takes in direct, public funding, on a per capita basis, to both pay the debt and operating expenses and the money we continue to throw out promoting STL as a convention destination . . . What really scares me, however, is the sequel, the next great idea to attract tourists – the Aquarium! It worked in Chattanooga, it worked in California, so it should work here . . . wrong, folks, the first one with a good new idea scores. Coming in a with a me-too project rarely succeeds. Heck, the aquarium in Denver is now a themed restaurant run by Landry’s (they picked the facility up out of bankruptcy)! To attract tourists, especially in large numbers, we need to build on what makes us unique. Something as simple as promoting Route 66 could work as well as Graceland and/or Beale Street does in Memphis. A-B has a massive, historic presence, but they’re not that that easy for tourists to find. But the reality remains that catering to tourists (and conventioneers are tourists) erodes the middle class. We apparently have the beginnings of a new breed of advertising agencies happening here – what’s being done to build on that momentum? Trying to recreate our industrial past makes about as much sense as betting the farm on the convention-center arms race. We’re in a new century. We have some pretty fun infrastructure that can accomodate new-age commerce and technology. Our midwestern housing is incredibly cheap compared to boom areas. Yes, our weather can suck, but we have decent air service. Instead of chasing the low-paying jobs of the service sector, we need to be nurturing middle-class ones . . .
^I agree, Jim. An aquarium seems kitschy to me. It will be popular and probably succeed for about a year or so, then people will lose interest and it will turn into another big, vacant hole. Downtown needs what downtown lacks (grocery, movie theater, etc.) to get suburbanites more interested in the renaissance, not pretentious crap.
Hi Steve,
Great write up. I am working on a presentation that sort of builds on the idea of how St. Louis has used their funding, and asks how they will react to future opportunities, and I would love to talk about it with you.
Please shoot me an email, either at: apickett@rosemann.com, or atpickett@hotmail.com.
Hope to hear from you soon,
Adam
Out of curiosity, how would you have spent the $130 million? While I am not knowledgable on this specific fund, generally these federal bonds have an expiration date. Thus, you cannot use them for long term financial improvements such as the school system or to eliminate the earnings tax. It’s not enough to take on massive projects, such as a North-South metro line. It seems as though you’re stuck building a structure or series of structures and ideally, these projects should encourage more growth rather than being an ends in and of themselves. So once again, what would you have done with $130 million instead?
Money, like oil, is fungible. It’s green and it can be spent many places. The argument here is not so much whether a certain $130 million should or should not have been spent on the Convention Center, but whether the Convention Center should’ve been expanded or not. The $130 million spent here is $130 million that wasn’t spent 60 light rail vehicles or wasn’t spent equpping and paying the salaries of 1800 soldiers. It’s a question about the wisdom of spending $130 million to attract, what, 5,000 people a year who otherwise wouldn’t come to St. Louis. Do the math – 5000 visitors x 20 years = 100,000 visitors, or a subsidy of $130 per visitor. To recover that investment from increased sales taxes (assume an 8% rate) would require that each vistor spend at least $1625 within the city. Throw in debt service and the numbers look worse. Yes, an increase in conventions does marginally increase the demand for service-sector employees. But unless you have a steady stream of conventions (think Las Vegas or Orlando), any increase will be for temporary positions, not full-time ones. Bottom line, convention centers are more about ego (keeping up with other cities, politicians able to attend ribbon-cuttings) and less about sustained economic development. Last fall, I went with my wife to a convention in Paducah (of all places). In my lifetime, Louisville, Ky. (where I grew up) has had an ongoing series on convention center expansions. Kansas City is building (has completed?) a major new convention center. As we saw on American Idol, Memphis has a decent-sized convention complex. I’m guessing there are a few more state and regional conventions to go around (MIssouri Society of Embalmers, Railvolution, Southern Illinois CPA’s), and yes our population has continued to grow, but there hasn’t been THAT much growth in demand, and major national conventions usually go to the few sites that can accomodate them. It makes little business sense to spend $2 to attract $1. Or, to put it another way, what would be the net negative impact if St. Louis had lost a few conventions to other cities? Would we be better off if the $130 million HAD gone to Metro and they had been able to build 20 miles of track (at $5 million per mile) and purchased 14 light rail vehicles to provide service to, say, Gumbo Flats? Instead of the Chesterfield Megabox complex, would we have transit-oriented development? Would the employees who work along the Highway 40 corridor appreciate a viable alternative to bumper-to-bumper commuting? Convention Centers are glorified warehouses. The boat show and the car show and the garden show will always have a place to do their thing. I just don’t think the government should be in the convention center “business”, especially when it hasn’t proven to be a real money-maker. And if the city quit subsidizing a money-losing proposition, there’d be a much bigger incentive for private businesses (like the casinos) to pick up the slack. A privately-run facility at the Casino Queen or the new Pinnacle casino would be just as successful as the current one at America’s Center, and would generate as much (or more) tax revenue for the city. We might have to pay $1 more to get into the boat show, but I’d rather do that than to see a larger reduction in city services as our tax dollars need to be flexed to pay to maintain the current, underused facility!
Government intiatives, whether TIFs, tax subsidies or outright ownership, have become the preferred product of StL leadership. inevitably these policies lead to a climate of favoritism for a few and uncertainty for the majority. The problems are exacerbated in the StL area because of our abundance of governmental units.
Why do we continue to trust government as it ventures into the private realm? Whether it is building convention centers or neighborhood athletic facilities, elected leaders rarely have the necessary incentives to properly manage such assets. The results are the same: the public’s liabilities grow and needed funds get harder to find. The worst outcomes though are the creation of mistrust and the rise of special interest groups. Our local trends are not positive and our financial health points to more problems, not less.
Jim – I could not agree with you more, I really feel that St. Louis is always trying to chase other cities with the same ideas which will never work. There is nothing wrong with being a second tier city in the convention marketplace I just wish our politicians could accept that as opposed to consuming our limited resourses attracting non – existent tourists.
We are following the same policy: the triage method. Support areas which can be revitalized, like Downtown, while ignoring areas which are “dying or dead,” the North Side.
The only difference is that now we are using local tax dollars.
Yet, we have this wonderful Blairmont proposed 100,000,000 program. Shouldn’t we be rather happy that our rural friends what to help us? After decades of neglect they finally realized their error?
This is suspect as they have done nothing before and most likely will only seek to suburbanize and displace the residents which remain. Why would they want to attract residents to the City when that only reduces the political power of their own districts?
awesome post! truly amazing; a great resource for stlouis, and for me if elected.