On August 15, 2013 the Metro Council unanimously approved two resolutions that move the discussion forward toward subsidizing a Headquarters Hotel near the Oregon Convention Center in Portland.
Metro’s news article about the meeting (which quotes from Steve Buckstein’s testimony below) is here. Read his testimony below:
For the record my name is Steve Buckstein. I’m Senior Policy Analyst and founder of Cascade Policy Institute, a free-market think tank here in Portland.
Originally, the idea behind the Oregon Convention Center was that if we put together the right package of amenities, then everyone would come to Portland and spend lots of money eating and shopping when they weren’t attending meetings.
That same idea occurred to people in other cities, and it sparked an ambitious municipal competition that began back in the 1980s and is still going strong.
First, we built a new convention center to attract the convention business. When the original center didn’t generate the revenue we’d hoped for, we decided to expand it. When occupancy rates dropped after the expansion, we turned our attention to the need for a headquarters hotel. That was the magic ingredient we were missing.
Of course, no one wanted to listen to the critics like Professor Heywood Sanders who came here in 2005 to tell us that other cities had already tried what we wanted to try in 2007, and it didn’t work. Big convention center hotels were built in other cities with disappointing results. Not only didn’t they significantly increase convention business, but they didn’t make their occupancy projections either, and now those cities are saddled with money-losing convention centers and money-losing hotels. The fact that the private sector wouldn’t put up much of its own money for such facilities somehow didn’t matter in other cities.
The question you have to answer now is: Does it matter to us?
We like to tell ourselves that Portland is different, but are you willing to risk your taxpayers’ money on that difference, knowing that the competition for convention business is only getting more intense?
As you may remember, in 2007 The Portland Development Commission (PDC) rejected the only Convention Center hotel proposal that didn’t require government subsidies.
The Grand Ronde Indian Tribe said it could do the project with all private money if it were allowed to include a gambling casino. After they were turned down, a tribe spokesman said, “We refuse to raid taxpayer dollars for any project.” He could have added, “especially for hotels which are not core functions of government.”
Rather than deciding today if you want to double down by subsidizing a headquarters hotel, I suggest you do the politically incorrect thing and consider whether you really want to be in the convention center business at all. If the answer to that question is No, which I believe it should be, then consider selling the Convention Center and cut your losses.
[Metro Council] President Hughes, you have correctly pointed out that if you look for a project that’s been scrubbed of all the risk, you will never do anything.
But I hope you will also consider the advice of management guru Peter Drucker who warned:
“There is nothing so useless as doing efficiently that which should not be done at all.”
The core functions of government are to protect our lives, liberty, and property. Providing our entertainment and convention venues should not be done by government at all.
Ironically, in October the Convention Center will host another Scam Jam event where the state attorney general and others will help Oregonians avoid being ripped off by financial con artists. I wouldn’t be surprised if some day in the future publicly funded convention centers and headquarters hotels are listed along with stock swindles as financial transactions to be avoided at all costs by the public.
The Unseen Costs of Ribbon Cutting: Losses from Economic Development Programs, William B. Conerly, Ph.D., Cascade Policy Institute, June 1998.