Do All 'Public' Projects Pay Off?

August 11, 2010

Can large public projects be justified on economic terms, especially when taxpayers are footing the bill for enterprises that some deem "frivolous."

In general, the public can be counted on to pay for bridges, sewer systems, schools, libraries, and other public works. But when taxpayers are asked to pony up for projects that could have less immediate public benefit, fireworks can go off.

In the 1990s, the controversy centered on baseball and football stadiums. Since professional teams were privately owned, opponents argued, why should the public put up any money? In most such cases, civic pride—and the threat of a team moving to another city—was usually enough to force the issue.

Recently, the debate has shifted to convention centers. In January, the Brookings Institution issued a report questioning whether every one of the 44 new or expanded centers planned or under construction in U.S. cities could be justified economically. "Space Available: The Realities of Convention Centers as Economic Development Strategy" documented the decline of attendance to 1993 levels for the top 200 tradeshows. Yet cities and states continue to invest "massive amounts of capital"—$2.4 billion a year—in what the Washington, D.C., think tank calls "a type of arms race" with competing cities.

"If taxing, spending, and building have been successful, the performance and results of that investment have been decidedly less so," says the report. "Existing convention centers have seen their business evaporate, while new centers and expansions are delivering little in terms of attendance and activity.

"What is even more striking, in city after city, is that the new private investment and development that these centers were supposed to spur ... has simply not occurred. Rather, city and convention bureau officials now argue that cities need more space, and more convenience, to lure those promised conventions."

The next "logical" step for these underperforming convention centers, says the Brookings report, is to "be redeemed by public investment and ownership of big new hotels." But when those hotels fail to deliver the promised flood of new visitors, "then the excuse is that more attractions, or more retail shops, or even more convention center space will be needed."

Now, public funding for arts centers has become the focus of attention. Last month, the RAND Corporation issued a lengthy study which argued that public policy "be refocused to build demand for the arts by introducing more Americans to engaging arts experience."

"Gifts of the Muse: Reframing the Debate About the Benefits of the Arts" actually sidestepped the economic spin-off issue, stating that "an exclusive emphasis on instrumental benefits, such as economic impact, does not provide a sufficient basis for policy decisions about the arts." Despite RAND's demurrer, arts groups used the report to argue for the economic value of public investment in arts centers.

To see how A/E/C firms are responding to this issue, see "Arts and the Bottom Line," page 20.

For a quick link to the Brookings and RAND reports, go to: www.bdcmag.com/newstrends/artcenters.asp.

         
 

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