Brewtown Gumshoe: May 2014

It isn't enough for the self-interested developers and their boosters to try and blackmail the public for a basketball stadium, now they also want a publicly-funded convention center expansion.

I won't rehash how stadiums are money losers and not economic catalysts. (See 'For Further Reading' at the end for more on that.)

Here we'll get into how convention centers are money losers and not economic catalysts.

A consultant, for the Wisconsin Center District (booster for the Bradley Center and operator of the Wisconsin Center), recently opined Best to expand convention center in tandem with a new arena. Yes, Milwaukee, for the low price of hundreds of millions you can have two boondoggles instead of just one.The consultants are HVS, out of Chicago. Another "impact assessment" song-and-dance, erroneously purporting to quantify these boondoggles.

The Milwaukee Journal Sentinel and the Milwaukee Business Journal have been more than compliant lapdogs shoveling this debunked drivel to readers day in and day out. Hardly a day goes by without one of these media outlets boasting about the jobs, economic impact, and general boom that will be caused by both/either of these projects.

Rich Kirchen, at the Milwaukee Business Journal, trotted out the usual cast of boosters in 'NO': Buck sale sets off new debate. In the article, Barry Mandel, real estate developer and major corporate welfare recipient, talks of how Milwaukee will fall into mediocrity without these projects. You shouldn't find it odd that he wants the public to fund this, he has received millions for his projects in the past, and the new projects are adjacent to other properties he owns. This is typical of the boosters - its about self-interest and what they can get out of the public coffers. The job talk and inflated impacts are just the lipstick on the pig.

The article said, "This is a community that struggled mightily to agree on a plan to fund Miller Park for the Milwaukee Brewers in the 1990s." Actually, citizens voted against Miller Park, repeatedly. State Senator George Petak, of Racine, changed a vote in the middle of the night, overturning the will of the people and pushing forward the construction of Miller Park.

It continues, "Given the community's ambivalence at best about public funds for a new arena...," casting a negative light as if Milwaukee is against everything just for the sake of being against it. But, we've actually voted repeatedly for a tax to fund the Park system. Yet, elected officials have never acted upon these wishes of their constituents.

Public goods (like parks) are non-starters, yet private playgrounds should have millions in public dollars lavished upon them.

Many of the biggest corporate welfare recipients are also some of the biggest finger-pointers. They feel taxpayers should fund even more of their speculation and projects. They have the audacity to criticize the City for not doing enough. Yet, as Mayor Barrett suggested, "The naysayers are the same developers seeking taxpayer money for their own projects." What a sad situation we're in - corporate welfare moochers trying to shame the City into wasting taxpayer money on their speculative ventures. Socialism is bad, unless its socialism for the rich.

The Business Journal goes on to compare Milwaukee with Indianapolis and Cincinnati. They've built new stadiums and conventions centers, they're supposedly booming (though this isn't quantified), ergo this is the formula for success. The article talks of major hotel growth in these cities due to these projects. Yet, Milwaukee has seen hotel growth already without a new basketball arena or convention center expansion. Brady Street, the Third Ward, Walker's Point, and Bay View - to name just a few Milwaukee neighborhoods - have been growing steadily without the expansion of a convention center or the addition of a new basketball arena.

A primary thing to keep in mind with these initiatives - they do not produce good jobs. Our recovery has already been plagued by low-wage jobs. More ticket-takers, ushers, vendors, janitors, etc. are not going to be a catalyst for the City.

Convention center expansion is often talked of as some sort of arms race - "Milwaukee is falling behind. Everyone else is expanding. We must expand, too." But, as experience has shown, the number of conventions and convention-goers has been falling the past few decades. With faltering demand already in place, increased supply drives the value down for everyone. A classic case of a race to the bottom. Maybe it's a good thing Milwaukee hasn't wasted hundreds of millions on pointless convention center expansion. If not for the Wisconsin Center, just think of the other uses for the prime real estate which the Wisconsin Center occupies.

From Governing magazine's The Great Convention Center Bailout:

“A lot of the over-building is a result of local business leaders who see the centers as a bulwark against declining property values in cities,” he [Heywood Sanders, professor of public administration at the University of Texas at San Antonio] says. Throw in consultants who often play up the impact of a convention center, says Sanders, and the result is an overbuilt market.

Maybe this money would be better spent bringing the regions public transit infrastructure up to 21st-century standards. As the article Dim light at the end of the tunnel states:

Unlike in virtually all other large U.S. cities, leaders here have balked for two decades at building any form of regional rail transit... In an era of expensive gas and pressures to reduce carbon footprints, it takes some magical thinking to believe that Milwaukee can remain economically competitive as one of the nation’s only large cities without such infrastructure...Moreover, even in fiscally strapped Milwaukee, we’ve found a way to spend billions in the past decade on a baseball stadium and a convention center, mega-projects that nearly all economists agree contribute precious little to regional economic growth... Businesses increasingly will locate in transit-friendly regions that offer the efficient and economical flow of people, goods and services. A Milwaukee without rail transit runs the risk of becoming economically obsolete, a city whose leaders failed to invest in its economic future.

The convention center opened in 1998 at a cost of $175 million. The Milwaukee Theater (another Wisconsin Center District property) had a $40 million remodel. Not to mention Miller Park, which Bruce Murphy calls our Billion-dollar Baby. Within the past 15 years we've spent somewhere in the neighborhood of a billion dollars on projects, according to the boosters logic, shouldn't we already be experiencing our job-growth renaissance?

HVS speculates an expanded convention center would generate $182 million per year economic impact and 1,800 permanent jobs in the Milwaukee area. With a cost of $200 million for the expansion, the cost per job would be $111,111. A ridiculously high per-job cost for primarily low-wage jobs. [An earlier Business Journal article reported on an HVS impact study showing all of the Wisconsin Center District properties have an $355 million impact supporting 4,000 jobs. $126 million is new spending, creating 1,400 jobs. By which they are implying without their facilities $126 million in spending and 1,400 jobs would not exist. Based on the $175 million cost for the convention center and the $40 million remodeling of the theater, this equates to a $153,571 per job cost.]

Though the Wisconsin Center District and HVS are so sure of the importance and impact of the facilities in question, their impact studies are flawed and biased. Upon closer look at what they feel the average spending per visitor is, the ratio of out-of-town attendees, their usage of spending multipliers, and how they arrived at all of those numbers, good impact-assessment analysts have laughed at their dubious numbers. The boosters claim pie-in-the-sky while concealing the true details.

Why doesn't the Wisconsin Center open its books? Publish the number of conventions held and the number of convention-goers, show us the competition and their numbers, let us see the profit (or loss), and let us compare these numbers over a period of time to see if things are stable, improving or declining.

As a 2006 article by UWM professor Marc V. Levine notes:

As the leaders of the Metropolitan Milwaukee Association of Commerce and the Greater Milwaukee Committee, the public policy arms of corporate Milwaukee, put it: "The business community's role is to provide economic growth and jobs." By that criterion, Milwaukee's business leaders have colossally failed this community since the city has had nearly the worst job growth record among big U.S. cities for two decades. Moreover, corporate Milwaukee has exerted a pernicious influence on local economic development policy. Notwithstanding business leadership's rhetoric about "market-driven" economic development, corporate Milwaukee has continually demanded public subsidies and incentives, all justified in the interests of job growth. Yet, since 1990, the end result of providing millions of dollars in business incentives and development subsidies has been a 10% net job loss in Milwaukee. In that vein, consider Milwaukee's signature initiatives over the past decade: Miller Park, the Midwest Airlines convention center, the Grand Avenue mall make-over and the "Initiative for a Competitive Milwaukee."All were heavily promoted by the MMAC and GMC, which lobbied for massive public spending on these projects chiefly on the grounds that they would be prodigious job generators. Well, the results are in - and Milwaukee's employment decline over the past decade speaks volumes on the job-generating efficacy of the business community's pet projects.

As Steven Malanga reports, in The Convention Center Shell Game, "A vast expansion of Chicago’s McCormick Place, costing $1 billion in the mid-1990s, didn’t prevent a drop in that city’s share of major conventions... Another word of warning: city-commissioned studies almost always wind up recommending convention centers—meaning that the industry of consultants who churn out such studies has a pretty lousy track record, considering the long list of underperforming centers around the country."

Amanda Erickson of The Atlantic, in Is It Time to Stop Building Convention Centers?, wrote:

McCormick Place's 2.2 million square feet host the greatest fraction of top tradeshows in the country. At its peak, in 1996, it hosted 30 large-scale events (attended by some 1.1 million people). That's more events than are hosted in Las Vegas, New York, or Atlanta.

And as a center, it has a lot of selling points. For one, Chicago is well-located. It's a major city in the center of the country. It's easily accessible by air (another national center of conventions, Atlanta, shares this virtue) and there are a lot of hotels and restaurants nearby.

Still, despite all these advantages, Chicago's been struggling to keep up. Between 2001 and 2011, the number delegates attending trade shows and meetings at McCormick place fell about 37 percent, from 1,333,906 to 828,013. Other national venues have seen a similar decline. As the Brookings Institution's Sanders writes, "major commercial centers, Chicago, New York, Atlanta, and New Orleans have all seen significant recent loss in convention activity, even as they expand their convention centers." In Las Vegas and Orlando — the two up-and-comers in the convention space — recent expansions have done little to grow the number of visitors per year.

This, in turn, leaves fewer and fewer options for second-tier cities. If Chicago is feeling the burn, what chance does Cincinnati have, or Buffalo?

Chicago is the biggest convention center city in America. If a billion-dollar investment can't prevent their slide, does anyone plausibly think a different outcome will occur in Milwaukee?

Just this past December, Mark Belko, of the Pittsburgh Gazette, described how Pittsburgh's David L. Lawrence Convention Center isn't living up to its high expectations.

Typically these types of projects merely realign spending. This is known as the substitution effect - where spending for one activity merely replaces spending on other previous activities. Ronald Wirtz elaborates, "While new entertainment options do likely bring in some new spending, advocates often mistake economic activity (all spending related to a sporting event or convention) with economic impact (new spending that otherwise would not have taken place)."

As Vladimir Kogan at Smart City Memphis describes, "From an economic standpoint, it seems incredibly silly and unproductive to invest half a billion dollars to simply shift economic activity from one region of the country to another. (Almost as silly and unproductive as spending hundreds of millions to move football teams from one stadium to another.) It’s much more beneficial to use scarce public dollars to invest in projects that actually grow the size of the economy, increasing productivity and overall societal well-being."

We've heard all this talk of [our government] being broke. We can't fix potholes, we can't expand rail transit, the parks can't be improved, schools need to close, workers don't deserve even a minimum wage, and pretty much any other public good or public project (except highways for the oil polluting, sprawling, road-builders) is out of the question. Yet, we have millions for Mercury Marine, Harley-Davidson, Miller Park, the Wisconsin Center, and millions more for well-to-do corporate interests and their speculative schemes.

Isn't it odd that these anti-government, free market advocates are always coming to the public with their hands out? I thought the government was supposed to just get out of the way and let these entrepreneurs create?

Oh, except for anytime these corporate players actually want to do something. Then they hire consultants, journalists and other talking-heads to sell, beg, and misinform the public about why taxpayers need to fund these private activities.

It wasn't the truth the first time they told us about the magical stadium and convention center economic impacts. It's not the truth now.

For Further Reading:

Space Available: Realities of Convention Centers as Economic Development Strategies

The Math and Taxes of Stadium Boondoggles