WGBH News Commentary: Does Expanding The Convention Center Make Economic Sense?

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Date: April 10, 2014

Reasonable people can disagree about the wisdom of doubling the size of the Boston Convention and Exhibition Center (BCEC). But two things are indisputable: The expansion would not, as the Massachusetts Convention Center Authority (MCCA) claims, pay for itself, and the convention industry is one that remains mired in decline.

The original 1997 convention center finance plan levied a series of taxes, including a rental car surcharge, an additional tax on hotels in Boston and Cambridge and on tourist trolleys, to fund BCEC construction. Once BCEC bonds are paid off in 2034, those tax receipts could revert to the commonwealth.

But expansion would push back the date when tax receipts could revert to the general fund until around 2050, causing the commonwealth to forego about $5 billion in revenue over that time. The annual cost doesn’t change, but because we would pay for far longer, the overall price goes through the roof.

The MCCA claims that because it gets its operating subsidy and money for capital maintenance from the fund, diverting convention tax receipts to the general fund would be akin to “turning off the lights” in their three convention centers (two in Boston and one in Springfield). Nothing could be further from the truth.

When the original BCEC finance plan was adopted in 1997, then-House Speaker Thomas Finneran wisely set up a generous revenue stream to keep the facility out of financial trouble even if bookings were scarce. As a result, the taxes generate more money than the MCCA needs. By 2034, the fund’s balance is projected to grow to more than $2 billion, which would throw off more than enough to operate and maintain the three convention centers in perpetuity.

Thanks largely to solid leadership from Massachusetts Convention Center Authority (MCCA) Executive Director James Rooney and his team, the BCEC is outperforming many of its competitors. But as state lawmakers contemplate expansion, precious little has been written or said about the larger convention market.

In 2011, Boston Globe columnist Jeff Jacoby noted that the square footage available for exhibitions nationwide soared from 40.4 million square feet in 1990 to more than 70 million square feet in 2011. But while the supply of convention space has mushroomed, demand for that space has plummeted. A few years ago, TradeShow Week reported that attendance at conventions and trade or consumer shows plummeted from 126 million in 2000 to just 86 million in 2010.

Perhaps the best indicator of the state of the convention industry is that TradeShow Week, once the industry bible, ceased publication in 2010. In some cities, convention halls are literally giving space away.

The MCCA claims that it is forced to turn away business because the BCEC isn’t large enough. But in recent years, Las Vegas, Orlando, Atlanta and Chicago — four cities who do more convention business than Boston — all expanded their convention centers amidst identical claims. In each case, convention business dropped after the expansions were complete.

None of us have crystal balls accurate enough to see what an expanded Boston Convention and Exhibition Center would bring. But we do have reliable data about the cost of expansion and what the market in which an expanded BCEC would be competing looks like. As lawmakers weigh the expansion proposal, it’s imperative that they take that data into account.

Charles Chieppo is a senior fellow at the Pioneer Institute and a former vice chair of the Massachusetts Convention Center Authority.

Read it here.