Reports the Tribune-Review:
“As feasibility studies for a convention center and hotel complex in Westmoreland County near completion, leaders from communities along Route 30 say that while they haven’t been contacted for information, they do have ideas about where it could be built.”
The Trib says the Westmoreland County Chamber of Commerce in December undertook a $25,000 study to explore the center’s potential construction. CBRE Hotels of Dallas conducted an initial feasibility study. “A second phase of the study is expected to provide chamber officials with an economic benefit analysis and potential building costs,” the Trib reports.
But Jake Haulk, president-emeritus of the Allegheny Institute for Public Policy, has no doubt that the “benefits” will be overstated:
“The assumptions of ‘benefits’ will be too generous,” the Ph.D. economist noted. “Additionally, there most likely will be no accounting for other community resorts and entertainment facilities that will be negatively affected” by the existence of such a convention center/hotel combo.
It’s another case of all that glitters not being gold.
As Ron Wirtz, an outreach coordinator at the Federal Reserve Bank of Minnesota, wrote in the FedGazette:
“It’s easy to love shiny new buildings, and even easier when they are believed to be harbingers of local economic development. That’s the pitch when it comes to stadiums, multiuse arenas and convention centers.
“But is it a strike?”
Wirtz says little attention is paid to the profitability of the superstructures themselves.
“Facilities rarely repay their construction costs,” he says. “Rather, these facilities are designed to be spending magnets for the city—community loss leaders, if you will, similar to the way a grocery chain underprices soda to get people into the store.
“Once they’ve got you in the store for soda—or in this case, in the city for a ballgame or a trade show—you’ll likely buy additional items to make up for the store’s initial loss on soda,” he says.
Thus, the main arguments in favor of publicly financed facilities such as convention centers stress the economic activity created outside, rather than inside, their walls.
“While such benefits are real and legitimate, they are often inflated and oversold,” Wirtz says, citing a concurring conclusion by Mary Bujold, president of Maxfield Research, a Minneapolis firm.
“Cities have blinders on to see whether the data [on local impact are] good,” she says.
Pittsburghers know the experience all too well with its own convention center, sports stadiums and, lest we forget, the North Shore Connector.
“These estimating organizations always overpromise and do not take into account negative effects such as traffic problems or harm to other facilities,” Wirtz notes. “Take the results of the study with several grains of salt is my recommendation.”
And ours, too.
In Wednesday’s At Large, some recommendations for journalists who, inexplicably and all too often, report the results of such economic impact studies without question.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
