A Stitch in Haste

Assume you have to plan a medium-sized to large convention of some sort. Maybe a trade show, maybe a national civic organization meeting, maybe a professional association proceeding.

Where are you going to have your convention?

The answer is almost certainly going to be Las Vegas. Because that's simply what Las Vegas does best.

Or you might try New York — or San Diego, Chicago, San Francisco or New Orleans. Those large cities are also suitable for conventions.

But unless you are planning a tractor show or the annual meeting of Berkshire Hathaway shareholders, you are simply not going to have your convention in Omaha, Nebraska:

[T]he city of Omaha, Nebraska, would have to tap reserve funds to make payments on the bonds it sold to build the [convention center] hotel in 2002. When the city sold the $103 million in bonds, it also promised to make up a portion of the debt service, if hotel revenue fell short.
...
The hotel, owned by the city and operated by Hilton Hotels Corp., is meeting its goal of filling two-thirds of its rooms, but not at the rates originally projected, which were $143.43 in 2005 and $147.07 in 2006. A couple can stay there this weekend, for example, for as little as $109 per night.

That's not all. It looks like the city will have to increase property taxes in 2007 to pay debt service on the bonds it sold to build the convention center.

Sorry, but even at $109 per night, Omaha is not a bargain.

The fact that there is a convention center glut is not new news — I blogged about it back in January. But let's examine why there is a convention center glut in the first place.

The answer is quite simple: because the government builds them.

There are two aspects to this phenomenon of "if the government builds it, they still won't come." First, the very fact that the private sector won't build these projects shows that they cannot be self-supporting (which is a polite way of saying "profitable"). If there were a true demand for Omaha convention space, then Hilton, or some other "greedy" capitalist outfit, would figure that out and proceed accordingly. Demand creates its own supply.

Second is the vanity aspect. What better photo op can there be than "The House that Politician Built"? Throw in some Kelo-style gobbledygook about "economic development" and "revitalization" and some Broken Window Fallacy about how it will of course create jobs, jobs, jobs, and of course any project will be far bigger, far more expensive — and far more likely to lose money — than the true economics and demographics of the city would suggest. After all, it's always far less painful to lose taxpayer money than your own.

The politics and economics of convention centers expose a fundamental falsehood about public construction: just because something is big does not mean it is a public good. Skyscrapers are big, commercial jets are big, cruise ships are big — and they are all built privately (at least in this country).

I feel sorry for the taxpayers of Omaha who were duped into supporting this boondoggle.

But look on the bright side: If they ever form a "taxpayers union," then they have a convenient and inexpensive place to have their convention.

Cross-posted at Bastiat's Window.