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The New York Times

 

A White Elephant for the West Side

March 31, 2004

By Steven Malanga

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As New York rushes to expand the Jacob Javits Convention Center and build a new football stadium on the Hudson River, we might want to take a look up and down the Eastern Seaboard. Boston's gleaming new $800 million convention center will open in a few months, yet it has booked only a handful of conventions and will need at least a $12 million annual operating subsidy in its first few years. Baltimore officials are trying to increase flagging business at the convention center they expanded in 1997, and are considering spending millions more in public money to build a subsidized hotel next door.

These cities are hardly alone: for a decade local governments around the country have been rushing, at enormous public cost, to build new convention centers or enlarge old ones. The increase in space has outpaced the growth of the convention industry, and the centers have often failed to generate the economic rewards predicted by supporters. The situation is only likely to get worse: some 40 more projects, with another 8 million to 10 million square feet of exhibition space, are scheduled to open within five years.

In this climate, how can New York City officials justify spending $1.4 billion to nearly double the size of the Javits center? Actually, they are using the same argument that officials everywhere else have made to justify their white elephants: claiming that their convention project will somehow work better than those of other cities. For example, they say that because New York is already a major trade-show destination, it won't suffer from new competition as severely as other cities.

To back up such claims, supporters put forward government-sponsored economic studies predicting an expanded center would create thousands of temporary construction jobs and permanent new jobs. But these studies, produced by an industry of consultants who specialize in helping governments justify gargantuan investments, tend to be unrealistically optimistic. One major New York study failed to take into account that the Javits center doesn't generate nearly as much hotel business as other centers because many convention attendees come from the New York area. The most recent report, by PriceWaterhouseCoopers, did not consider the nationwide overbuilding and excess capacity in the industry.

Let's face it: virtually every convention center around the country now having financial trouble was built on the strength of similar studies, which gives the consultants who produce them a pretty lousy track record.

Yet these centers get the green light anyway. Residents get swayed by the studies or promises of civic glory; the projects offer opportunities for politicians to burnish their images (and perhaps reward potential supporters with plum contracts). The original construction of the Javits center was perhaps the quintessential New York boondoggle: an effort rife with mafia influence and bid rigging that came in 30 percent over budget.

Unsurprisingly, the new Javits project also has the support of private-sector interests who would benefit from it yet risk nothing: the construction industry, the bankers who would underwrite the financing, and the hospitality industry. The hotel lobby has even signed on to a per-room tax increase to pay for the expansion—even though a decade ago the hoteliers vociferously protested raising that tax and even produced studies showing that doing so would hurt the local economy.

The proposed football stadium, with a $600 million taxpayer contribution, would be an even worse investment. Publicly financed sports facilities almost never return anywhere near their investment. For instance, an examination by economists from Stanford University and Smith College found that Baltimore was receiving only $3 million a year in additional tax revenues or new job benefits from its $200 million investment in the Camden Yards sports complex, which opened in 1992.

Developing Manhattan's West Side is a good idea, but the proper role for the city and state is limited: to extend public transportation into the area and to change zoning codes to allow privately financed, mixed-use construction there as the need develops. Doing any more would place far too much taxpayer money at risk and would put the government in the role of trying to predict what the market wants. The problem is, private investment isn't likely to appear as long as developers think they can wait for the government to pay for their dreams.

Steven Malanga is a contributing editor at City Journal.

Original Source: http://query.nytimes.com/gst/fullpage.html?res=9E07E0DC1739F932A05750C0A9629C8B63

 

 
 
 

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