other cities lament their failures with similar projects,
Albany pushes forward with ambitious plans for a new convention
if youve heard this one before: People of this fair
but beleaguered city! Do you want all your problems solved?
All you need is a convention center! Would you like crowds
of tourists with open wallets on your citys streets?
Build a convention center! Want new jobs, restaurants, art
galleries and cafes? Plant a convention center in downtown
Albany and watch the culture grow! Thats right, a convention
center is all it takes to change your city into an urban mecca
instead of a fading glory! And the best part of it all? It
wont cost you a dime.
to sound like a familiar pitch? It should, no matter what
city youre from. Residents of Albany and more than a
hundred other municipalities around the country are being
told the same thing by their local lawmakers and business
it all sounds too good to be true, thats because it
communities have learned over the last decade, the siren song
of convention centers can be exactly that: a plan that charms
elected officials and businessmen with promises of economic
upswing and opportunities to hand out massive construction
contracts, only to end up having disastrous effects on the
surrounding region. More often than not, these negative effects
extend far beyond a simple failure to spur new business. Faced
with facilities that never live up to expectations, many cities
have been forced to pass the cost of their failed convention
wagers on to local taxpayers.
that in mind, welcome to the world of convention centers,
cities learn from their own mistakes or the mistakes of any
others, says Heywood Sanders, a professor of public
administration at the University of Texas at San Antonio.
2005, Sanders became a focal point of frustration for many
elected officials with their eyes on projects like the one
in Albany, when he authored a highly critical report on the
convention industry for the Brookings Institution, a public-policy
think tank in Washington, D.C.
found that various factors such as industry consolidation,
telecommunication advances and rising energy costs have contributed
to a nearly 50-percent drop in convention attendance since
the late 1990s. But meanwhile, more than 100 U.S. cities completed
or began construction of convention centers, increasing the
supply of available exhibit space by more than 50 percent.
This growing gap between supply and demand, concluded Sanders,
should give local leaders pause as they consider calls
for ever more public investment into the convention business.
of all the cities he studied, Sanders says Albanys inability
to see the big picture is especially apparent when one massive
project politicians are touting as a turnaround point for
the city is being contemplated in the shadow of another massive
and similarly heralded project: the Empire State Plaza.
Albany has become the model that I share with my students
of what happens when the public sector thinks one huge construction
project is going to solve all of the citys ills,
Albanys lawmakers are barreling ahead with plans to
build a new, $200 million convention center and hotel, assuring
local taxpayers that the problems plaguing so many other cities
convention centers arent going to happen here.
project will create hundreds of new jobs and will result in
opportunities for new economic development in our region that
will make our city one of the premier destination centers
in the nation for convention-related tourism, said Albany
Mayor Jerry Jennings during his 2006 State of the City speech.
who has relentlessly pushed for the project both in the public
eye and behind closed doors for years, isnt alone in
presenting a sunny outlook on the plan to place 85,000 square
feet of exhibition space and an attached 400-room hotel within
a mile of the Empire Plaza. Gov. George Pataki recently gave
his seal of approval to the proposal, pledging $75 million
in state funding toward the facilitys costs as part
of his 2006 executive budget. For many elected officials,
such a project provides a unique opportunity to reward political
supporters and provide the sudden, large-scale job creation
that voters will remember in upcoming elections.
taxpayers of New York state . . . will be helping to finance
a premier venue and economic engine for Albany city and county,
wrote Albany County Legislator John Frederick in a Feb. 2
letter to the Times Union. Albany will be able to handle
larger conventions, sporting events and trade shows, with
people pouring in from all over to meet, eat and stay in downtown.
Jack McEneny (D-Albany), a member of the nine-person board
charged with deciding where the convention center will go
and what shape it will take, dismissed Sanders findings.
Too many recent events and conditions werent taken into
account in the reports evaluation of convention trends,
probably have a shortage of facilities now because of the
loss of New Orleans, says McEneny. With the Bush
fiasco in Iraq and whats happening to energy costs,
groups who would normally leave the state could decide to
is quick to point out that local residents might not want
to put all their money on Albany becoming the next stop for
displaced New Orleans convention attendees. That hurricane-ravaged
citys convention center is scheduled to open again this
April, and even so, the popular tourist destination had seen
its share of the convention pool dwindle every year since
1999. In 2004, the number of out-of-state visitors spending
their money in New Orleans was nearly half that of the citys
Sanders says, Airfare remains fairly competitive these
days, especially when compared to the cost of gasoline for
long drives. And if folks drive to Albany to attend a convention,
that means they dont have to stay in downtown Albany,
either. They can find a cheaper hotel outside of the city.
the nation, this style of betting on future trends has become
a common theme among public officials trying to convince taxpayers
of the necessity for new or expanded convention-center facilities.
From the citys status as a state capital to the presence
of the AquaDucks tours, a litany of reasons have been offered
up by political and business leaders why the Capital Region
can succeed as a convention destination where so many other
cities have failed.
end, lawmakers in Albany and many other municipalities have
commissioned private consulting firms to study their city's
feasibility as a convention destination. And in nearly every
one of those studies, the firm concludes that the city stands
to gain significant amounts of revenue if a new convention
center is built, existing facilities are expanded or a new
convention center hotel is added to the mix. These firms'
near-universal approval of convention-center projects has
led many critics to question whether the consultants are providing
a legitimate, objective assessment of a city's convention
prospects or simply a rubber stamp for local politicians'
reason the city brought in a consultant to do the feasibility
study was to provide an accurate assessment of what could
be expected, says Deputy Albany County Executive Joe
Pennisi, another member of the convention-center
board, about Jennings decision to hire one of three
major consulting firms in the industry, Strategic Advisory
Group, to assess Albanys feasibility as a convention
both their initial report and their May 2004 follow-up, SAG
predicted that a convention center of the recommended size
could be expected to draw at least 300 events annually. These
events would attract 270,000 attendees, who would then generate
more than 100,000 room-nights for local hotels. The city could
expect to see more than $33 million in additional annual spending
result from such a project, the firm claimed.
quickly became the most prominent weapon in public officials
battle to win over the hearts and minds of constituents who
were hesitant to approve such a massive project.
suspicions may have been-and could still be-well-founded.
In a February 2005 Forbes interview, SAG managing partner
Jeff Sachs offered the following perspective on his firm's
approach to the studies: "You lose clients if you shoot
down projects," he explained when asked why the answer
is so predictably "yes" when cities ask if a convention-center
turn their fortunes around.
already made up their minds by the time they come to us,
to Forbes, out of 74 other municipalities around the country
SAG was commissioned to study for convention-center feasibility
in recent years, only four received negative assessments.
history involving SAGs advice to other cities is any
indication of what can be expected in Albany, public officials
might want to think twice before putting any faith in the
time for us to get a new consultant, said Mayor Mark
McBride of Myrtle Beach, S.C., in a March 2005 interview with
Knight Ridder/Tribune Business News.
of Myrtle Beach found itself saddled with nearly $50 million
in debt last year due to an underperforming convention-center
hotel. In their initial feasibility study for Myrtle Beach,
SAG reported that the city could expect the new 402-room hotel
to generate around $6 million in revenue its first year and
recommended that the city issue bonds to cover the construction
of the privately run hotel. Once the hotel was built and the
city began repayment of the bonds, the operators of the hotel
would reimburse the city for the bond payments from hotel
profits. This is similar to the arrangement recommended for
SAGs predictions, it became clear in less than a year
that attendance at the citys 100,000 square-foot convention
center and occupancy rates at the new hotel were falling far
short of expectations. (The hotel posted a $1.7 million loss
its first year.) With the hotel unable to make any payments
to the city, Myrtle Beach defaulted on the construction bonds,
forcing city officials to increase the tax on hotel rooms
and restaurant meals in order to make up the difference.
a domino effect as many of the local hotels and restaurants
were forced to reduce their profit margins and take dramatic
cost-cutting measures (including layoffs and, in some cases,
closings) to offset the increased taxes.
the talk [about the problems plaguing convention centers]
starts, I always hear, It wont happen here,
says Sanders, But they say that everywhere.
in the year before Myrtle Beach taxpayers were saddled with
the burden of supporting an underachieving convention center
and hotel, many city officials dismissed the negative trends
that, just a few years later, became the focus of Sanders
study. The citys unique assets would insulate it from
suffering a similar fate, they argued.
seaside tourist destination was far from alone in experiencing
some disappointingand costlyheadaches upon venturing
into the world of convention centers.
city officials in Raleigh, N.C., decided a year ago that a
new, $190 million convention center with 150,000 square feet
of exhibit space would cure the capital citys woes (also
on the recommendation of SAG), rising construction-material
costs have increased the projects budget by more than
$23 million. With the first shovel not even in the ground,
public officials have already agreed to spend the additional
money and are now contemplating hikes in hotel-room and restaurant-meal
taxes similar to those used in Myrtle Beach.
list goes on.
built or expanded convention centers in major cities (and
tourist destinations) including Baltimore, San Francisco,
St. Louis and Portland, Ore., all have failed to approach
the number of booked conventions proposed in their initial
feasibility studies, while new facilities scheduled to open
in Boston, Omaha, Neb., and various other cities across the
nation have struggled to prebook enough events to fulfill
expectations. Like gamblers who refuse to leave the table,
many of these cities have found themselves locked in one expensive,
risky convention-related investment after another as they
try to make up for their earlier losses.
created a scenario in which the bar for judging convention-center
success is set so low that even the facilities that operate
at a loss, such as the Indianapolis Convention Center, are
labeled a success as long as they dont bring down the
surrounding neighborhoods along with them.
the nation, the cycle has followed a similar course: New facilities
are built when consultants report that the existing facilities
are outdated, existing facilities are expanded when consultants
determine that the current facilities are no longer adequate
(the standard life cycle of a convention center is only 15
to 20 years) and massive hotels are constructed when neither
of the two former plans generate the predicted financial windfalls.
greater the desperation, the greater the appeal of a quick-fix
solutions, says Sanders.
all convention centers tend to operate at a loss (SAG predicts
that the Albany convention center will incur a $600,000 annual
debt), supporters argue that its the economic benefits
of having so many more diners, shoppers and hotel occupants
in the city that make such a facility worthwhile.
the reduced dependency on unemployment and welfare, the taxes
paid by employees that wouldnt be working without this
project, and the number of restaurant meals and taxes they
generate, says McEneny. You cant judge this
project with tunnel vision.
muses Sanders, if people dont show up, none of
all of the evidence against such facilities chances
for success, the reality may be that Albanys taxpayers
are going to get a convention center whether they want it
or notjust like their neighbors around the nation.
the end, Hartford is stuck with the Connecticut Convention
Center, wrote Hartford Advocate columnist Meir Rinde
in February 2005 as construction progressed on the Connecticut
capitals new $300 million convention center and hotel.
It is, perhaps, better than nothing.
can Albany realistically expect from its own quest for convention
to the SAG reports, the citys primary competition will
come from similarly sized convention facilities in cities
like Hartford, which has a comparable population to Albany,
and Providence, R.I.
Connecticut Convention Center, which opened in June 2005 and
is slightly larger than the proposed Albany facility, enjoyed
a moderately successful first year, booking around 200 events
that brought in an estimated 250,000 visitors. While this
might make the future seem a bit brighter for Albany, two
facts merit attention: First, numerous studies have shown
that convention-center attendance tends to drop off significantly
once the novelty of a new facility wears off (the financial
forecast for Baltimores newly expanded convention center,
for example, dropped by more than $1.4 million within two
years of its grand reopening). Second, any share of that 200-event
pool that Albany is expected to dip into still falls far short
of the 300 predicted by SAG as necessary for the projects
the state, Albanys convention center will compete for
regional conventions against Buffalo, Rochester and Syracuse.
(New York Citys Jacob Javits Convention Center is in
a class all its own, offering nearly 800,000 square feet of
exhibit space at the moment and possibly more in the near
to Michelle Vennard, director of the Albany County Visitors
and Convention Bureau and another member of the convention-center
board, the city is banking on a regional market to generate
the bulk of Albanys convention business. Vennard says
the city has been unable to host many of the statewide unions,
religious groups and professional organizations (such as teachers
associations) that want to hold their conventions locally.
The new facilities, she claims, will change all that.
have a location advantage that [competing cities] dont
enjoy, says Vennard. We have the Capitol, were
centrally located and theres easy access.
factors, she hopes, will also trump the high cost of renting
rooms in Albany County. Currently, Albanys average daily
room rate is slightly higher than all of the citys intrastate
competitorsa fact that could pose an economic problem
for Albany when large groups are deciding where to hold their
meetings. Even if a group chooses to bring its convention
to Albany, if the members opt to stay at less expensive hotels
outside of the city or decide to drive home instead of staying
overnight, much of the anticipated revenue will disappear
with them. In order to make up for convention centers
annual operating expenses, cities must not only attract visitors,
but also keep them local.
taxpayers, this condition is especially important when considering
the nature of the city's relationship to the convention-center
hotel. According to the plan proposed by SAG and supported
by Jennings and other public officials, Albany's fortunes
will, like Myrtle Beach's, be tied to the hotel's ability
to keep rooms filled throughout the year. If the hotel fails
to generate enough revenue to pay off its construction costs,
Pataki's funding plan redirects state money that otherwise
would be headed to the city into the hotel's bond payments
instead. This state money, which serves as a form of reimbursement
for city property occupied by tax-exempt state buildings,
has become a significant part of Albany's annual budget process.
were going to have to do a budget without knowing how
much, if any, state money were going to receive each
year, says Albany Councilman Dominick Calsolaro (Ward
funding plan, which allows the state to cut payments to the
city by any amount necessary to make up for hotel
revenue shortfalls, was necessary to reassure investors, according
to McEneny. With hotels notoriously high failure rate,
luring investors tends to be a hard sell, he explained, especially
when repayment depends on their ability to turn a profit.
when St. Louis new 1,081-room convention-center hotel
only generated half the occupancy rates predicted by consultants
in its first year, the facilitys operators were forced
to lower room rates and take drastic measures to offset the
shortfallincluding the elimination of many of the hospitality
jobs initially promised by the projects supporters.
Now, the going room rate at the four-star hotel hovers around
$45a condition that has forced many of the facilitys
competitors to also reduce their rates, staff and profit margins
in order to compete.
these bonds were considered slightly shaky, but thats
because hotels are considered slightly shaky, acknowledges
McEneny. But [this arrangement] just tells the bondholders,
Look, if the hotel cant make it or theyre
behind in their payments, this money can make it whole.
however, has admitted no such uncertainty about the hotels
prospects, having said in January that he expects the hotel
to defy the odds and generate enough revenue to cover operating
expenses. (Skeptics are quick to point out that Jennings might
not be in office when payment on the bonds comes due.) Nevertheless,
local lawmakers recently approached Pataki about limiting
the amount of the state funding that can be cut if the hotel
fails to meet expectations.
Calsolaro says hes worried about the potential for the
convention center to become a weight on the shoulders of Albanys
taxpayers. After speaking with public officials in other cities
around the nation, he says he is convinced that the likelihood
of Albany reaping any significant benefit from the new convention
center is slim. According to Calsolaro, the project is not
only a taxpayer-funded gamble, but a supremely risky one at
governor is going to protect the investors in the convention
center before hes going to protect the local taxpayers,
says Calsolaro. Theres a lot being promised here,
but when it comes to seeing whats behind those promises,
the public isnt getting enough information.
the facts may paint an ugly picture of Albanys convention-center
prospects, that doesnt mean there arent any success
stories in the convention industry. Although the major markets
in Chicago, New Orleans and New York City have all struggled
in recent years as the pool of conventions thinned, perennial
convention destinations like Orlando and Las Vegas have continued
to benefit from the convention business. Unfortunately, thats
just about where the list ends when it comes to convention
centers that are both economic boons for the surrounding communities
and financially self-sufficient.
the construction of a new theme park or casino, what can local
residents hope to gain from a convention center? The answer
might lie in what occurs before the center is built, not after.
years, many communities that stood to be altered significantly
by city-sponsored construction projects within their borders
have opted to craft legally binding agreements regarding the
benefits residents would receive as part of the project. A
landmark December 2004 agreement between the city of Los Angeles
and a coalition of community groups, for example, guaranteed
that the expansion of the Los Angeles International Airport
would also include jobs-related benefits for local residents,
environmental mitigation and various other benefits for the
municipalities surrounding the project. Similar community-
benefit agreements have been included in major construction
projects in cities like Seattle, Denver and New York City,
where community groups pressed Columbia University to develop
low-income housing in an area where the college planned to
an agreement to take shape in Albany, however, it would need
the support of the local convention-center board. Councilwoman
Carolyn McLaughlin (Ward 2) and County Legislator Wanda Willingham
(District 3) recently began holding public meetings to generate
ideasand supportfor such a contract. In addition
to drawing many members of the public, several board members
have made their presence known at the meetings, leading some
to believe that even if the convention center and hotel dont
live up to expectations, local residents might be able to
ensure some positive effects from the project.
who has already pledged to push hard for this type of
agreement, says he would like to see more than just
regulations regarding how much of the workforce is local.
Requirements for reduced-cost use of the facilities by local
groups, apprenticeships and other benefits are all part of
the package hed like to see. While other members of
the board have been hesitant to express support for such an
agreement this early in the proceedings, both McLaughlin and
Willingham said they were encouraged by the presence of board
members at the public meetings.
adds McEneny, this type of agreement needs to have enforcement
built into its wording in order to hold developers and operators
agrees. Theres a Walgreens outside of Rochester
that was fined three times for not following their version
of the community-benefits agreement, he says. Eventually,
the town executive had to step in and stop the whole project
until the developer met the rules in the agreement.
need to make sure it cant come to that here, he
the creation of a new convention center and hotel in Albany
is all but assured, the exact scope of the project has yet
to be determined. While several appointees to the board have
put their faith in the findings of SAG, others (including
McEneny) have expressed a desire to reevaluate the possibilities
and treat the consulting firms findings as part of the
data instead of the final word.
according to Sanders, is at least a step in the right direction.
have very little expectation that it will go any way other
than the way its headed, he says. I only
hope that at some level, lawmakers in Albany are willing to
understand the kind and scale of bet this is.