The Sacramento Convention Center: Bad Money


Image result for new sacramento convention center

 

An Old Updated Joke

A man walks into a Pet Store he is immediately drawn to the sounds of a parakeet.  Who resides in this large elaborate cage.   It was love at first sight, he had to have the bird.

The price was unimportant, he buys the bird and a small cage.

Arriving home, he clears a special place in the center of the room for the cage.   He was excitedly awaiting for the bird to sing..  But the bird sat in silence on its perch.  Hours passed. Perhaps it was the new surroundings?  After a few hours the owner, thought the bird would be happier if the cage was similar to the cage in the pet store.   

So he grabbed his keys and drove to the pet store and bought the large elaborate cage that was on display at the store.  Even in it’s familiar surroundings the bird remained silent.   He returned to pet store with his cell phone and at great expense bought every item in the cage and with his cell phone he took a picture so he could correctly stage the cage.    Within minutes the cage looked exactly like the one in the store and yet the bird didn’t sing.     So the owner walked away from the cage and left the bird alone.   After a few hours, the owner was exasperated and screamed at the bird.   I have given you everything, why wont you SING!  The bird slowly opened its mouth and said, FOOD!

_______________________________________________________________

In mid seventies, The City of Sacramento opened the Convention Center.  Leaders said the Center would generate millions of dollars for the city.   Unfortunately, that didn’t go as planned, the center was losing money.  Some believed a hotel of size, near the center would help generate business.

In 1988, the Hyatt Regency opened, it would be the largest hotel in the city with 503 rooms. The City of Sacramento subsidized the project.

Andy Plescia, deputy executive director of the city/county agency refers to as “a $13.3-million investment that’ll return about $28.5 million to local government within the decade.”  Those returns will come in the form of tax revenues, a lease-back parking arrangement involving the city government, the city/county agency and the developers, and from expected land sale profits (under the terms of the 55-year ground-site lease, developers may opt to buy the property outright after the ninth year). Sam Burns, director of the Sacramento Convention and Visitors Bureau, thinks the Hyatt Regency will help attract another 25,000 convention delegates a year and generate $1 million in room tax for the city and $25 million for the local economy.

Once again, with the new hotel the convention center didn’t come close to generating those ambitious numbers for the city.   The good news the city did eventually make a profit after the hotel was sold.

In the nineties, the money losing center was expanded again.  Operators said, the  convention center was too small and not competitive with other centers.  According to”Eye on Sacramento” the City loaned the Center 7.5 million to cover negative cash flows.

 Convention center operators said the center said it needed another component to become profitable. The twenty five story Sheraton Grand opened 2001 across the street from the center.  With all the expansions and additions, what the center needs was CUSTOMERS.

*In the last 17 years, the Center has lost an astounding $268 million taxpayers dollars!  $51 million in the last three years!

At 87% Sacramento currently spends nearly twice as much of its hotel taxes on the Convention Center than other cities. (The average is 45%) San Francisco’s spends 11%.

The Sacramento Convention Center is Sacramento’s “White Elephant”. Despite all the additions remains a drain on the city.    With 87% of the hotel taxes going to the city, Sacramento has virtually no funds to promote tourism.

Eye on Sacramento says:  City staff  presented the council with a staff report that relied heavily on the city’s primary convention center consultant ,the firm of Conventions, Sports and Leisure International (CS&L).  City staff cherry-picked data and findings from the CS&L study, but failed miserably to provide council members with crucial findings in the CS&L study that clearly states that an expansion of the Convention Center is not needed nor justified  given market conditions.

In short, the city council was mislead by its staff into believing that its principal conventions center consultant was solidly in favor of the proposed expansion,when, in fact, it was opposed to it.

If this is true, then there are larger issues in City Hall.  

The Vote to expand the center last December was unanimous!   Mayor and council members approved Two hundred forty million dollars to expand the Convention Center.  Which included adding a large ballroom to the plans .  The convention center will be closed for 18 months so work can be done quicker than initially planned and to renovate the Community Center Theater. 

The city reiterated that its general fund will not be used to pay off the debt.  That’s far from the truth.  If the convention center is unable to make its payments, the city has to cover the shortfall.

From the renderings, the new center and theater will be beautiful.  Mayor Steinberg said: We are going to have a convention center and a community center theater that is equal to the vision of our great city.   

Sacramento is a great city, over five hundred thousand people live within its boundaries.  Like any other city Sacramento has many other needs.  Cities build convention centers to generate income for the city.

As a business model ,the Sacramento Convention Center is a poor investment with little or no benefit to the majority of its citizens.  If the Convention Center was operated by a private entity, the owners would have longed walked away from the project.

It is no secret, The Sacramento Convention Center is a drain on the city and yet those charged with expenditures in the city unanimously approved spending 240 million dollars towards upgrading and expanding something that had never worked.    In a city who’s budget is already at its limits due to increased pension costs.   

City leaders often get it wrong. If they have one in Anaheim, we want one too.  Prestige at any cost to the city.  It doesn’t have to make sense, as long as we get one, just reach into the bottomless taxpayer cookie jar.    The Sacramento Convention Center is a forty year old joke, that’s not funny.  They’ve done everything imaginable to make it competitive with other convention centers in the state, and based on its history, it will be state of the art and has everything except CLIENTS.

CityFella

*Eye on Sacramento

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