American Dream

A recent article in Forbes magazine says that convention centers are almost always a waste of money. The center in our favorite smart-growth city, Portland, was cited as the leading example: Recently expanded at a cost of $116 million, it loses $5.5 million a year and enjoys just 43 percent occupancy.

So naturally, Salem, Oregon's capital city, had to have a convention center too. Its center is just opening at a cost to taxpayers of more than $32 million.

Forbes says the convention business "is a mess" because cities have spent $2.4 billion on new facilities, yet demand is falling. Exhibit space has increased from 40 million to nearly 65 million square feet, but convention attendance from more than 5 million people in 1996 to barely 4 million in 2003. This is only going to get worse as 44 cities are building or expanding their convention centers, almost all with tax subsidies.

Forbes points out that, when Portland asked voters for funds to expand the convention center a few years ago, they turned it down. But Portland, which is building light rail despite multiple voter rejections, did the expansion anyway, funding it out of higher taxes on hotel rooms and rental cars.

Now Portland wants to subsidize the construction of a new hotel to support the convention center. (Of course, one argument for expanding the convention center was that it would support local hotels.) But as both Forbes and the above article on the Salem convention center point out, such hotels are almost always bad investments. Flint Michigan, for example, spent $31 million on a hotel next to its convention center. The hotel later sold for $6.5 million to a nonprofit group that uses it for conferences.