Right before commercial real estate values in the U.S. started plummeting earlier this year, Massachusetts officials seemed to finally come to a consensus over the proposed sale of the Hynes Convention Center in the Back Bay. Privatization of the Back Bay property was slated to fund a 200,000-square foot expansion of another state-owned convention center, the Boston Convention and Exhibition Center or “BCEC.” Now, Boston’s weak commercial real estate market renders this plan entirely unappealing, largely because the Hynes probably couldn’t fetch its full Fiscal Year 2020 value of $176 million.
Moreover, during a deadly pandemic, it hardly makes sense to pour more public funds into indoor spaces that rely on large crowds to make money, especially when their long-term viability was in question to begin with. In fact, some observers, notably the Wall Street Journal, were singing swan songs on behalf of these enormous conference halls well before the pandemic. More recently, others have predicted a permanent shift towards teleconferencing because of COVID-19.
While, timing aside, selling the Hynes Convention Center to facilitate private investment is a good idea, reinvesting it in the same industry is a bad one. Instead, why not redirect that money to the general fund to mitigate the effect of lost tax revenues during the pandemic? Even better, the money could be used to create targeted COVID-19-related relief for needy families and small businesses.
That said, Massachusetts could likely get a much better deal by selling the Hynes Convention Center when and if Boston’s commercial real estate market recovers, setting up an awkward trade-off between the urgency of the state’s revenue woes and the profitability of its real estate sale.
However, in the long-term the state will need to re-examine how much money it is willing to spend on convention centers in general. Since 2007, the Commonwealth’s Convention and Exhibition Center Fund has received over $1.8 billion in revenues, as evidenced by the new state revenue tool on Pioneer Institute’s MassOpenBooks database. Most of this revenue comes from taxes levied on hotel rooms, restaurant meals, and retail sales within a designated “Convention Center Finance District,” and these services have seen a steep drop in consumer demand during the COVID-19 pandemic. Does it really make sense for taxes that fall partly on struggling businesses to pay for a new government conference center expansion?
Rather, until publicly owned event halls can remain viable post-COVID-19 (if they were ever viable to begin with), the state should consider asset sales other than the Hynes Convention Center that would allow the convention center bureaucracy to fund itself. In addition to the Hynes and the BCEC, the Massachusetts Convention Center Authority also owns the MassMutual Center in Springfield and some 30 acres of undeveloped real estate in Boston’s booming Seaport District.
At the local level, prioritizing financing for convention center expansion is just as consequential. In 2019, the City of Worcester announced it would levy tax surcharges on hotel rooms, restaurants, retail outlets, and parking garages to help pay for some $37 million in renovations for the city’s landmark event venue, the DCU Center. In other words, the city is further punishing some of the hardest-hit businesses from COVID-19 in order to bankroll a desperate attempt to lure the NCAA basketball (“March Madness”) tournament back to its city. Perhaps these surcharges were more politically palatable when they were first enacted, but now that demand for event venues has dried up nationwide and small businesses everywhere are in dire straits, there are much more urgent and worthwhile uses for public funds.
Massachusetts has already invested billions of dollars in convention centers that hope to lure touristy recreational events, business conferences, and international summits. But in the wake of COVID-19, we should invest much, much more in our residents and business owners than in these abominably expensive boondoggles.
See how else the Massachusetts government spends money – and where that money comes from – at MassOpenBooks.org.
Andrew Mikula is a Research Assistant at the Pioneer Institute. Research areas of particular interest to Mr. Mikula include land use issues, the cost of living, and tax and regulatory structures. Mr. Mikula was previously the Lovett & Ruth Peters Economic Opportunity Fellow at the Institute. He has a B.A. in economics from Bates College.