Critic says Cedar Rapids convention center may not deliver what's expected

CEDAR RAPIDS - It is a ship that has sailed.

Even so, a professor in Texas who is critical of public investment in convention centers said on Thursday, Sept. 15, just such spending on a Convention Complex and hotel renovation here may not deliver the results that the projections say they will.

In a phone interview, Heywood Sanders, professor of public administration at the University of Texas at San Antonio, said he has studied projects nationwide for years in which cities with declining downtowns use public funds on convention centers and arenas, only to find that the projects don't meet their revenue projections, he said.

“I have no intention of spoiling anybody's party in Cedar Rapids,” he said.

However, Sanders, who was featured in a news story on Sept. 15 Thursday on Iowa Public Radio and is well acquainted with the projections for the Cedar Rapids Convention Complex, said he found it especially noteworthy that the projection for Cedar Rapids' new convention center says it will attract 10 conventions and trade shows a year, each averaging 500 attendees. That's 5,000 people, according to the projection from the city's consultant, HVS of Chicago.

“That's not a big number,” Sanders said.

In total, the HVS report projects that the Convention Complex will attract 301,925 attendees a year in the fifth year of operation, but Sanders said those will be for concerts, meetings and other events that he said will draw largely a local audience and so not add a large boost in economic impact for the city.

“This is the business community trying to revitalize the downtown using public funds,” Frew said of the Convention Complex and hotel projects. “He's absolutely right.”

Frew continued, saying that the financial analysis report provided to the city by HVS in January projects on its first pages that the Convention Complex - which consists of a new convention center and renovated U.S. Cellular Center arena next to it - is likely to lose $1.3 million a year in its fifth year of operations.

“It will lose money. He's absolutely right,” Frew said to Sanders' point. “We know that. The city knows that.”

The question, said Frew, is “how do you minimize the loss?”

Frew said one of the reasons the city purchased the hotel attached to the arena from its creditors is that a renovated hotel is expected to generate a profit enough to make the debt payments for the renovation and purchase of the hotel - a cost he put at $28 million - and to cover the projected annual operating loss at the Convention Complex and pay some of the annual debt payments on the Convention Complex.

Sanders said that hotel projections can misfire as readily as those for convention centers, to which Frew said, “if hotels didn't make money, then why are they in business?”

Frew, a principal with Frew Nations Group, was responding to the Iowa Public Radio story and Sanders' comments in it. The radio report noted that two firms produced reports on the Cedar Rapids Convention Complex, with a report from VenuWorks of Ames last October projecting that 375,000 would attend the complex annually and that the complex would generate $35 million in economic impact for the city.

City confidence in its report

Frew said he and city officials have depended on the HVS report, which is more recent, has more conservation projections and factors the hotel into the mix.

“They're showing different numbers because they disagree,” Frew said of the two reports. “And that's a good thing. You want people to poke holes in these things.”

Frew, who has developed arenas elsewhere, said he tries to “dampen” expectations for communities that are building convention centers and arenas. He likes to promise less and deliver more, he said.

Frew said communities build convention centers and arenas for a reason - They attract people to town who spend money.

“You have to measure what it is going to cost to build and operate and what you get back,” he said. “Well, it's not a precise science. But will city of Cedar Rapids benefit? Will the local economy benefit from having this? Unquestionably, yes.”

Most cities, he said, have to come up with much if not all the cost for a new convention center and arena. Cedar Rapids has secured a $35-million grant from the federal Economic Development Administration and a $15-million grant from the state I-JOBS grant for the $75.6-million Convention Complex project.

“By any measure, any city would give whatever they could to get what Cedar Rapids has (from federal and state funds),” Frew said.

Frew calls convention centers and arenas a “legitimizer” for cities

“Where are you going for your convention?” he asked, imagining a conversation. “'Cedar Rapids.' Where are your going to go for your wedding? ‘Cedar Rapids.'”

“It's a legitimizer in so many ways, and that's why cities do these things,” he said.

Background

Doug Neumann, president/CEO of the Cedar Rapids Downtown District, said the city first hired a firm in 1992 to study the expansion of the city's arena, built in 1979 along with the hotel.

In 1998, an effort to pass a local-option sales tax for a variety of projects, including an arena upgrade, was defeated, he noted.

Neumann said interest in doing something about the city's arena accelerated in 2007 after a widely embraced report by JLG Architects, Minneapolis, which suggested that the arena was “tired and antiquated” and was no longer serving as a necessary anchor for the downtown.

Neumann noted that the federal Economic Development Administration arrived in Cedar Rapids in the first weeks after the June 2008 flood to let the city and community know that it had disaster-recovery funds available to help the city get back on its feet. The federal agency decided to give the city's Convention Complex its largest disaster grant ever, $35 million, because it concluded that the project would serve as a catalyst for economic development for the downtown and region, Neumann said.

He said convention centers that have failed to deliver on their promises of economic impact often are located by airports or along Interstates and not in cities that people can use once the meetings are over. Visitors to the Cedar Rapids Convention Complex will use the downtown hotel, restaurants and entertainment venues, he said.

“And for that reason, I've always been optimistic about this project,” Neumann said. “I truly believe it will be an anchor for the downtown and a catalyst to drive the downtown economy.”

The construction of the new convention center is just starting as is the hotel and arena renovations. The hotel - which is slated to become a DoubleTree by Hilton - and arena are slated to reopen in the fall of 2012, the convention center in early 2013.