If the outlook for the Los Angeles Convention Center looked uncertain before Sept.11, it looks downright bleak in the wake of the terrorist attacks. A recent audit by the Los Angeles City Controller throws yet another cloud over the faltering complex, reporting that the Convention Center has incurred millions of dollars of losses through poor management and lax bookkeeping.
Unfortunately, city officials seem hell-bent on throwing even more money at the facility. Reminiscent of Kevin Costner's movie, "Field of Dreams" they seem to believe that if they build it, people will come. In reality, the proposal to invest an additional $1 billion in the facility and surrounding areas, including a subsidy for a major new hotel seem akin to Costner's more recent filmsï¿½big budget, very little return. In such uncertain times, public officials should be dubious about putting more money into failed projects.
In 1983, city officials first visited the idea of convention center expansion. Officials studied the matter and were convinced that expansion would boost economic activity and create new jobs in Los Angeles. The feasibility study that swept officials off their feet reported that expansion would boost attendance some two and a half times. It is now painfully evident that the optimistic projections consultants made about future conference attendance have not panned out and have left taxpayers footing the bill. The devastating impacts of the terrorist attacks on convention business only make matters worse.
Even before the attacks, Los Angeles' most expensive publicly financed building ever carried an annual price tag of $30 million to pay bonds that financed a $500 million expansion and annual operating subsidy. Not only has the convention center not covered the costs of the expansion, it can't even cover operating costs. In fact, the center is doing just about the same level of business now as it did in the late 1970s and early 1980s.
One would think that such a failure would engrain a healthy dose of skepticism about future investments but public officials do not seem changed. City officials blame the center's abysmal performance on too few hotel rooms. Planners have long envisioned a facility that would attract new hotels and restaurants to move in. Unfortunately even the lure of the Staples Center with scheduled events almost every night hasn't been able to bring the necessary financing for a marquee hotel.
Now we are told that if only a new hotel were in place with adequate financing, more conventions, more jobs, and healthy economic growth would certainly follow, in spite of a convention industry in decline across the nation. Only two convention centers in the U.S. make money or break even—Orlando and Las Vegas. Both have reported drops in attendance and revenue since the attacks on September 11th.
Several prominent expansions in Southern California have saturated the market, making the prospects of a successful Los Angeles Convention Center even more unlikely. Space has been added or upgraded in Long Beach, San Diego, and Anaheim—supply has ballooned even as demand has continued to drop.
The September 11th attacks will only worsen the situation in Los Angeles. Two conferences have already been cancelled, costing millions of dollars—but convention center officials continue to assure city hall that other conventions will go on as planned. Concerns about travel and the difficulties associated with travel, especially at LAX, will undoubtedly have dramatic effectsï¿½lower long-term attendance, revenue, and economic activity. Coupled with an economic downturn, companies will continue to shy away from hosting conventions or sending their delegates to future conferences.
Los Angeles faces several challenges in the years to come that increased investment in a convention center would certainly distract from. During times of a struggling economy and reduced public revenues city officials should focus on the things that matter most—improving education, transportation infrastructure, and increased public safety. Now is not the time for a grandiose convention center expansion.
While taxpayers must ultimately bite the bullet on the original expansion commitments, city officials can stop the bleeding by refusing to dump even more public money into a field of pipe dreams.
Geoffrey Segal is the Director of Privatization and Government Reform at Reason Foundation