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MAPS 3 concerns about proposed project changes. Early stages of implementation may take expensive twists voters weren’t told

Staff Report Story by on July 21, 2011 . Click on author name to view all articles by this author. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

 

 

By Ed Shadid, OKC Ward Two  City Councilman

 

On December 8, 2009 voters passed MAPS 3, a seven year one-cent sales tax to raise $777 million to pay for a convention center, a world class park, a downtown transit system, four senior wellness center, river and fairground improvements and trails and sidewalks.

The convention center was, by far, the least popular of the projects showing large majority opposition regardless of age, gender, political party, race or income. The Convention Center was presented as costing $280 million with its location to be at SW 4 and Robinson (the Core to Shore South site). That such placement would require moving an OG&E substation costing approximately $30 million was not publicly discussed during the MAPS 3 campaign.

The City never performed a needs assessment study and instead relied solely upon one study, commissioned by the OKC Chamber from a consultant, Convention Sports and Leisure (CS&L , Mar ‘09), to estimate the economic development impact of such a center. The CS&L study, which the OKC Chamber has refused to release to the public, made clear that such a project would need a roughly 650-room convention center hotel which would require public subsidies with a midrange of $50 million.

The notion that the public would need to subsidize a hotel was not publicly discussed during the MAPS 3 campaign.

Once MAPS 3 passed, a consultant (ADG) was hired to oversee implementation of all the projects by working in conjunction with a subcommittee for each project. ADG presented an initial timeline for implementation of the projects in March 2011 and then presented revised timelines which moved up the convention center after protests were issued from the convention center subcommittee.

A consultant (Populous) was hired by the City to recommend a convention center site location and after a four month process recommended the old Ford Dealership site (Core to Shore North).

Convention center proposal could prove more expensive than proposed

Questions and Answers with Ed Shadid

As planning for a new downtown Convention Center advance, many questions remain unanswered. Ward 2 City Councilman Ed Shadid’s thoughts follow.

Why won’t the City Chamber release its Convention Center Study?

Oklahoma City has put all of its eggs in one basket in terms of the research guiding convention center development. The City never performed its own study and instead has depended solely on the CS&L Study to predict future economic development and success of the center. The potential economic development recently cited by consultant ADG as a reason to move the convention center forward in the timeline comes exclusively from this study.

Many U.S. cities’ CS&L convention center studies have been published and are available to the public online. Why then, does the City Chamber repeatedly refuse to release to the public its own CS&L study, restricting our access only to an “Executive Summary”?

Would MAPS-3 have passed if the public was fully informed about the costs of a convention center?

Fifty-four percent of voters passed MAPS3 after an intense campaign. Advocates, including principally the City Chamber, spent estimates of $4 million for the campaign, while opponents spent roughly $100,000. The Achilles heel for MAPS-3 passage was the convention center, with polls, such as a September 2009 Gazette/News9 poll, showing 27% approval with large majority opposition regardless of age, gender, political party, race or income.

What was withheld from the public during the campaign was that the study proclaimed that in order to capture maximum economic development benefits, the public would need to fund a second expansion of the convention center after MAPS-3 and would have to subsidize, if not own, a convention center hotel. Mid-range estimates for the taxpayer are in the $50 million range (subsidy of $50 million towards a roughly $250 million hotel).

Quoting from the CS&L study:

“As clearly defined in the Market Demand Analysis, a new headquarter hotel…will be needed. …The costs to develop a headquarter hotel are significant. There are no examples nationwide of a fully privately-developed convention center headquarter hotel in at least the last five years”

Why accept the CS&L estimates of increased convention attendance when economic data is worrisome?

The amount of square footage for convention exhibitions nationwide has increased 75% since 1990, increasing from 40.4 million square feet to more than 70 million today. Convention center expansions in cities across the country are all being financed at taxpayer expense and all made with the same argument being made here; increased capacity will attract larger events and lure more out of state visitors who will spend money and generate growth.

The CS&L study estimates that a 285,000 sq. ft center will cause a tripling of total economic impact from $26.6 million currently to $78 million with jobs increasing from 412 to 1,121. Attendance at conventions and consumer shows, unfortunately, has plummeted from 126 million in 2000 to just 86 million in 2010 (“Trade Show Week, 2010”). In order to earn business, convention halls are increasingly required to give massive discounts for exhibit hall rental resulting in substantial decreases in revenue for the convention center. I encourage people to review the Boston Globe’s April 22, 2011 article indicting the accuracy of CS&L studies.

What additional funding will be sought for the new convention center and hotel and where will it come from?

Efforts have been underway for more than two years to secure a downtown convention center hotel (according to a statement from Convention Center Subcommittee member Mike Carrier to the Gazette). Midrange estimates of the required taxpayer subsidy are around $50 million, but leading convention center expert Heywood Sanders (U. of Texas San Antonio) believes our taxpayers will have to pay much more.

From where will these funds be secured? Is the Convention and Visitor’s Bureau adequately funded to attract and organize “high impact conventions”? How much will maintenance of the convention center cost? How do advocates plan to fund the long-term development plan, which envisions a Phase 2 Expansion to increase available square footage to 425,000?

Why did ADG utilize flawed methodology in determining the economic development impact of MAPS 3 projects, including transit?

Induced economic development is the cornerstone of the argument for proceeding with development of the streetcar as it encourages housing and retail in the area of transit stops. In a recent workshop, ADG agreed with estimates from cities such as Portland and Seattle suggesting $8-14 induced economic activity for every $1 invested. With federal matching funds, the streetcar investment will approach $200 million. Stating that because such economic activity could not be accurately predicted, ADG eliminated such induced economic activity from consideration entirely. The ongoing induced economic impact of the potential $200 million streetcar transit project was estimated by ADG to be $163,000 and seven jobs created.

If projections are wrong and convention attendance does not significantly increase, will a 650-room, publicly-subsidized hotel hurt existing downtown hotels?

Contrary to the claims made by the Chamber’s CS&L study, empirical data does not at all support the contention that a convention center hotel would increase demand in the local area market around the convention center. Instead, the new publicly subsidized hotel is likely to dilute the business of our downtown hotels. With the new convention center hotel absorbing existing demand, downtown hotels may suffer unsupportable losses, possible closures, and potential bankruptcies, with the resultant decrease in real estate prices stemming from having large empty buildings.

A 2003 study by Source Strategies Inc. found this scenario to be the case after the opening of every single one of the 16 large convention hotels built and opened in Texas between 1980 and 2003. Again, we are gambling our existing hotel economy on the contention of a single controversial CS&L study contending that we are going to triple our non-local out of state convention attendees. If that increase doesn’t come to fruition, and we build a publicly subsidized hotel, we decimate our existing downtown hotel stock.

Why were disadvantages of the Ford Dealership site minimized or ignored in the process?

ADG has budgeted $40 million for land acquisition. As previously reported only nine months ago, in a highly controversial real estate transaction, less than an acre (0.96), the “Vitagraph” property, immediately across the street, is listed on the county assessor’s site as being sold for $6.9 million.

The 10.46 acres of the Ford Dealership site would cost the taxpayers $75.2 million using that “comparable.”

In October of 2010, Fred Hall, the owner of the Ford Dealership, indicated that he was going to develop the land in a “mixed-use” fashion with retail and housing. We have now lost a golden opportunity for such sorely needed development.

We have placed an awkward convention center between two parks. Because we promised voters pedestrian-friendly walkways between the parks, we are now trying to find a way to dig a 45 -foot hole at the Ford Dealership site to bury the exhibit halls without knowing exactly how much that would cost.

By placing the convention center in the most prime location, you must have four aesthetically pleasing sides to the building (loading docks and staging areas now must be placed underground).

We have committed to building a showpiece, which we cannot afford. Instead of having a new Boulevard, which could serve as a street of interest for pedestrians, we will now have a Boulevard, which doesn’t touch a single area of meaningful development. We have now created another superblock in an area that has five superblocks. We have created a “dead zone” in what could have been a thriving area of the city because the convention center is only utilized roughly 150 days of the year and generally not at night or on weekends.

Where do we go from here?

Voters approved $250 million for a convention center largely because it was bundled with other projects which were much more popular. Forced to face a vote on its own, the voters almost certainly would not have approved financing a new convention center at this time.

Given the will of the people, and OKC’s horrifying and unsustainable health epidemics, the “quality of life projects” such as trails, sidewalks, and senior wellness centers, neglected over the 1 ½ years since MAPS 3 passage due to our preoccupation with the convention center, should be implemented with urgency.  The people did not approve funding for a very expensive convention center hotel, studies do not support its development, and ongoing financial losses of these hotels are commonplace and can be severe.

Taxpayer subsidies for a new convention center hotel should either be denied or subjected to an additional vote of the people. We should restrict spending on a convention center to the $250 million approved by the voters and not fall into the trap of throwing ever-increasing amounts of money to attract out of state convention attendees when the overwhelming amount of empirical data does not support such decisions. $250 million is more than enough to capture the “quality of life” benefits of a convention center, such as high school graduations and funerals, recently espoused by Roy Williams of the OKC Chamber.

My message to colleagues on the City Council continues to be: It is healthy and prudent to encourage and ensure extensive civil debate about the far-reaching implications of our decisions, which will impact the people of OKC for decades to come.

1 Comment for “MAPS 3 concerns about proposed project changes. Early stages of implementation may take expensive twists voters weren’t told”

  1. […] Shadid is raising questions about whether implementation of the MAPS 3 convention center will have costs that voters weren’t told about. The OK Policy Blog discusses a new study showing large benefits for Medicaid recipients in health […]

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