The convention centre rescue plan
Downtown is struggling. But is a publicly funded convention centre the best way to help?
by Tim Bousquet / The Coast / April 1, 2010
If you doubt these are topsy-turvy times, consider that mayor Peter Kelly is now held up as Halifax's foremost example of clear thinking.
Building a new convention centre in downtown Halifax is a "no-brainer," Kelly told a daily newspaper last week, and the comment was placed in a headline on the front page and plastered about town in several hundred boxes. Plenty of businesspeople, bureaucrats and politicians agree with Kelly; with planning for it well underway, they say a new convention centre is a good investment that will bring a much-needed boost to downtown.
The proposal calls for 120,000 square feet in new convention space (the existing World Trade and Convention Centre is about 50,000 square feet) on the blocks once occupied by the old Chronicle-Herald and Midtown Tavern buildings. The centre will open out to Argyle Street, but will extend underground as the hill rises up to Grafton and Market Streets. An 18-storey hotel will tower above the lower block, and a 14-storey office building above the upper block. Grafton Street will be partly covered, with restaurants and shops at street level.
To make the centre a reality, taxpayers will be asked to pony up as much as $100 million. Scott Ferguson, president of Trade Centre Limited, which manages the existing World Trade Centre and would operate the new convention centre, says the 1980s-era WTC is an outdated space, too small and inflexible, and that an expanded facility will allow his organization to attract larger conventions, and host multiple smaller conventions concurrently. Those larger number of conventioneers, he argues, will in turn bring economic good times to Halifax.
"You're bringing hundred of thousands of people into the market, not because it's Halifax--- they're here because they're street sweepers, or they're arborists, but they're in Halifax because that's where the meeting is," says Ferguson. "So you have 1,000 of them. They spend three times more than the average tourist does, they come in groups of 500 or 1,000, and they take friends and family with them and they stay and they travel the province and they go back and they talk about what a wonderful place Halifax is, and they come back again."
That pitch is the essence of a heated public relations effort. Ferguson is appearing on radio talk shows and before newspaper editorial boards, citing economic impact studies and consultant reports to make the sell. The Chamber of Commerce is writing op-ed pieces, and Paul MacKinnon, president of the Downtown Halifax Business Commission, is busily Twittering away, urging his followers to swarm online polls about the convention centre with "yes" votes. The development industry is likewise in favour of the proposal, as is FUSION, the networking group of young professionals who hope to soon take their places among the city's elite business classes.
The full-court PR press is evidently having its effect. My informal vox pop interviewing finds broad support for the convention centre, with an even greater invective directed at the Heritage Trust, the main group that has expressed opposition to the project. "They're Nazis!" three separate interviewees have told me, comparing a heritage preservation society to the mass murderers of millions of people. A satiric video making its way around the internet goes one step further: in the video, even Hitler expresses his dismay at the idiotic arguments of Heritage Trust---Heritage Trust is worse than Hitler!
Surely it will only be a matter of time before pollster Don Mills informs us that only malcontents and the unintelligent oppose the new convention centre. And, sure enough, a half-dozen of my interviewees tell me that building a convention centre is a "no-brainer."
None of the six were aware they were mouthing Peter Kelly's words.
Certainly, downtown Halifax is struggling, retail business can use a boost and government has a role to play in revitalizing the city's core. The question then is: Is the convention centre the best use of taxpayer money to help downtown?
Problem is, there's no way for the public to answer that question, because nearly all the information related to the convention centre proposal is not publicly available.
The secrecy started right at the start, in 2008, when the city, province and Trade Centre Limited put out a request for proposal, asking six developers to put forward their ideas for a new convention centre. In secret deliberations, a small group of bureaucrats decided that the best plan was put forward by Joe Ramia's Rank, Inc. Beyond platitudes, we're still not told why Ramia's plan was better than the other five.
Since then, Ramia has published a lot of pretty concept drawings for the centre, but beyond the 14- and 18-storey buildings, he has given no detail whatsoever as it relates to how much office and hotel space the buildings will hold.
Whatever the office space, Ramia claims to have verbal commitments for leasing 75 percent of it. "These are big, international companies," he tells me. "We're talking 100-, 200-, 300,000 square feet each."
If this claim is true, Ramia has managed to pull off something that has eluded every other developer in Halifax. Over a million square feet in office space has been approved for development downtown, but developers aren't much constructing buildings because there's not demand for the space.
"The harsh reality is that demand no longer exists to warrant [office space] development [downtown]," writes local real estate appraiser Mike Turner, a sentiment echoed by the international firm Cushman & Wakefield, which, citing Ramia's development, says a "concern for developers could be the increase in space available in the Central Business District and the possible trend that downtown Halifax is losing some of its appeal as the place to do business."
In other words, Ramia's development could be so large that it floods the market with office space, causing a collapse in already low rental prices and destroying the business case for any further development. That would be the case especially if Ramia is, with government subsidy, merely low-balling lease prices and attracting existing downtown firms to his building.
And that subsidy isn't just the $100 million. HRM By Design planning rules that guide development downtown place a nine- and seven-storey height limit on the blocks owned by Ramia, but with the addition of a "significant" public amenity like a convention centre in the basement, those height limits are doubled. Regardless, Ramia declines to say which firms have committed to leasing from him.
As for the convention centre part of the development, there exists no business plan for it as yet. Those details, we're told, will come April 19, when Ramia will present his specific proposal to provincial infrastructure minister Bill Estabrooks.
There are, however, business analysis and economic impact reports that say the expanded convention centre makes economic sense. At least, that's what we're told they say.
The province and Trade Centre Limited contracted with four different consultants to analyze the proposed expansion---Deloitte and HLT Advisory looked at the business case, Criterion Communications looked at "business prospects and implications" and Gardener Pinfold performed an economic impact analysis.
Save the View, a citizen group in opposition to the project, obtained the reports via a Freedom of Information request, and passed them on to me. But, citing a clause in the Freedom of Information Act that allows information that could "harm the financial or economic interests of a public body" to be kept secret, bureaucrats redacted nearly every page of all four reports.
From the standpoint of the public trying to independently evaluate the business case for the convention centre, the redacted reports are of no use whatsoever; the implication is that we are merely to trust the good judgment of the bureaucrats and politicians who have unfettered access to the uncensored reports.
Halifax last experienced a PR blitz on the scale of the convention centre push in 2006, when pretty much the same people now pushing for a convention centre wanted to bring the 2014 Commonwealth Games to Halifax.
In October 2006, Peter Kelly joined a bevy of provincial and federal politicians at a press conference on the waterfront to announce a $400 million "right-sized" Games, and the establishment of Halifax 2014, a committee that would ferret out all the details. Halifax 2014 was made up of Fred MacGillivray, Ferguson's blustery predecessor at Trade Centre Limited, HRM's top bureaucrat Dan English and an assortment of local business mucky mucks.
Halifax 2014 put a lot of effort into its PR campaign, paying hundreds of thousands of dollars to local advertising firms. Pollster Don Mills announced that the public was very supportive of the Games, but in all the press releases and public appearances touting the poll, neither Mills nor Halifax 2014 disclosed that Mills was paid more than $12,000 by Halifax 2014, presumably for polling services.
In 2007, Halifax 2014 locked itself behind closed doors in a luxury office suite on the Dartmouth waterfront, and proceeded to put together a Games agenda that would cost $2 billion, five times the "right-sized" Games announced on the waterfront a few months before. Moreover, two independent auditors who looked at the committee's proposal were so alarmed by the lack of restraint on the committee's part that the auditors interrupted their work to alert provincial authorities; they also reported that the committee was setting up the city of Halifax for a $200-million loss involving the proposed Athletes Village.
Worse still, the auditors' reports showed that the much-cited, but never publicly released, economic impact studies and budgets that Halifax 2014 used to sell the Games were bizarrely delusional---for example, Halifax 2014 said they could raise unprecedented money through TV contracts, priced tickets for just the opening ceremony at $375 (three times the price for the Rolling Stones' Common show) and expected fully five percent of the entire population of HRM to volunteer at the Games. And there was no business plan at all for the problematic Athletes Village.
When word of the costs, excesses and bogus budgeting of Halifax 2014 began leaking, the PR machine went into overdrive---even with knowledge of the looming fiscal disaster, Games backers were still all too prepared to drive Halifax right off the $2-billion Commonwealth Games cliff.
Despite what was by then clear (but unpolled) public outrage, Halifax 2014 kept at the Games agenda, and was only stopped because then-premier Rodney MacDonald pulled the plug on any hope of provincial financing.
It's surprising, then, that many Haligonians are trusting of the push for a new convention centre. That trust is especially perplexing in the wake of the MLA spending and P3 schools scandals that have erupted since provincial auditor Jacques Lapoint released his report in February. We now know that, given the opportunity, politicians from all three parties were ready, willing and able to loot the public treasury, and the P3 management scheme for schools---which looks a lot like that proposed for the convention centre ---resulted in at least $52 million in lost value to the public, and probably much more, as the P3 contracts are essentially unmanageable.
Contrast the uber secrecy of convention centre proponents to the openness of Heywood Sanders.
An academic in Texas, Sanders has exhaustively examined convention centres and their promised rewards since the 1980s. (Because he has already been much quoted in the local media, I called several other academics across North America to find a fresh voice, but they all referred me back to Sanders as the expert.)
Sanders has looked at hundreds, if not thousands, of consultant reports that extolled the value of proposed convention centres, and then at the actual real-world performance of those centres once they were built. (See, for example, his investigation of claims made about the Vancouver Centre, at tinyurl.com/VancouverCentre.) During our nearly two-hour discussion, we talk about dozens of cities: Baltimore, Montreal, Norfolk, Boston, New York, Richmond, Orlando, San Francisco, San Antonio, Niagara Falls, Ottawa, Las Vegas, Vancouver, Honolulu and more. He insists that I pull up on my computer the published reports of several cities' convention centres, and he walks me through them as we speak.
"I do analyses based on data that's as substantial and as factual as I can manage," he says. "I don't have an argument about Halifax; what I have are a great many questions that have come out of looking at what's happened at other places, to the extent that it can be documented."
Ferguson's argument---that an expanded convention centre will attract more out-of-towners who will bring their families and stay in the province before and after the convention and spend lots of money---is typical, says Sanders.
"The first part is the assumption that, simply and somewhat amusingly put, you will build it and they will come," he says. "They don't always come. You build a new or expanded convention centre based on a consultant's study that says more people will come, and you don't in the end get nearly as many people as the consultants say you will. In a very large number of cases, you don't get any new people, it turns out."
Sanders' arguments are posted in detail at thecoast.ca, but suffice it to say that in city after city, convention centres' own numbers show that the claims for increased visitation and spending due to expanded facilities simply don't hold true. This has been the reality since the convention centre boom started in the 1980s, and is entirely unrelated to the recent recession, says Sanders.
I tell Sanders he's been discounted by the local proponents of an expanded convention centre; they say he doesn't study small markets like Halifax's, and doesn't understand the Canadian dynamic for conventions.
"I don't have elaborated data on performance of Tiers Two and Three centres in Canada," agrees Sanders. "I would suggest that folks should have such data; if such data are available, I'd love to see them."
The kind of information Sanders would like to see is found, for example, on the Vancouver Centre web site (bcpavco.com), which lists dollars per day spent and the number of hotel-nights spent by out-of-town conventioneers---both in past years, and as projected into the future. In many cities, those published figures show rosy claims for expanded centres are never realized.
But Trade Centre Limited doesn't publish such figures. The figures are included in the four consultants' reports examining the proposed expansion, but unlike convention centre managers in nearly every other city in North America, Halifax's Trade Centre Limited considers that information a trade secret and refuses to release it to the public. So there's no way to analyze the claims now being made---and, more to the point, there's no way to hold expansion proponents accountable in the future should their big, but secret, claims not materialize.
There is, however, little doubt that downtown Halifax can use all the help it can get, and downtown business owners I surveyed are universal in their support for the expanded convention centre.
"If they think it will bring even one customer downtown, business owners will support a convention centre," says Sanders.
But $100 million is, well, a hell of a lot of money. Are the uncertain returns from that kind of investment the best use of the money? If it's a question of spending $100 million on a convention centre or doing nothing at all, a lot of people would choose the convention centre---but can downtown be better helped by spending that money in other ways?
Sanders points out that the successful River Walk, a stretch of popular restaurants and bars along the Rio Grande in his native San Antonio, was 40 years in the making. "You can't just make success materialize over night," he says, and I'm reminded of a recent conversation I had with real estate appraiser Mike Turner, a partner in Turner-Drake, who discussed how the collapse of downtown was likewise decades in the making.
"It was Bayers Lake and Burnside that hurt downtown---decisions that were made in the 1980s," said Turner, who went on to explain how free and subsidized land given to retailers, and millions spent on road networks in the business parks, made it impossible for downtown to compete.
Those policies were enacted by an earlier collection of business people, bureaucrats and politicians who, like the present set, assured the populace they knew best. Nowadays, city leaders claim they have learned the lessons of the past and support a thriving downtown, but at the same time they continue to subsidize suburban retail development---most recently by expanding the boundaries of both Bayers Lake and Burnside, and by adopting a business park plan that guarantees any business setting up shop in Halifax has unfettered access to inexpensive suburban sites.
Advocates of the failed "tax reform" plan argued they were addressing this imbalance by increasing suburban taxes, giving downtown a competitive edge. (They botched the effort by seeking to impose a right-wing American Libertarian-type tax structure that would shift the tax burden not just from downtown to the suburbs, but also from rich people to poor people. Moreover, the "reform" effort was aimed at residential property, and not commercial property.) But it would be far better for downtown if the city stopped subsidizing the creation of new suburban commercial development with reduced cost land sales, wide-open zoning policies and freeway interchanges. While officials contemplate spending $100 million on a convention centre project to help downtown, they're now spending over $70 million on just five suburban highway projects that will serve to undercut downtown.
And yes, government should spend money downtown. The new central library is a good start, but there's plenty more that can be tried. "You try lots and lots of little things," says Sanders. "Investing in theatres, in dance studios, giving subsidized rents for artists. If those don't work, you haven't lost a lot of money, and you try something else."
Perhaps the biggest boost for downtown could come from implementing the five-year transit plan for Metro Transit, with capital costs of $93 million; the city is now debating various fare increase and property tax options to raise that money, because there is no suggestion that the province, which is expected to willingly fund the $100 million convention centre, is considering much help on the transit front.
But those little investments and changes in policies aren't as sexy as a new convention centre. Moreover, they don't put money in connected people's hands.
"As I'm writing a book," says Sanders, "I try to look at the numbers and pose the question: If these convention centres don't work particularly well---that is, not that many more people come, etc.---why do they keep getting proposed and developed?"
His answer: local elites---the chambers of commerce, the politicians, the development industry, the convention centre managers---want to revitalize downtowns in ways that don't cost them personally, but from which they can personally profit through governmental expenditures, construction contracts, bigger managerial salaries and more votes. As Sanders says, "They propose these things because they work for them."
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