Wednesday, March 14, 2007

Subsidizing Groups

I’ve always been puzzled, if not amused, when “business” and/or “local government” officials, not to mention CVBs, propose subsiding groups in order to draw group visitor business like conventions, meetings or sports groups. Yes, it’s truly “buying activity at the expense of the bottom line.”

With a straight face a friend of mine recently rationalized that, in order to draw a national convention of business-related associations, his community would have to come up with $60,000 cash. Our own N.C. League of Municipalities does something similar.

Why is it amusing? Because ironically, the reason a community hosts these groups is to fuel the business climate and generate local tax revenue. So the group in question will generate $30,000 in local tax revenue. That means this community will spend twice what the group is worth in yield, essentially going into the red.

No one in their right mind would make such a business deal, or every business and local government would be broke.

What drives this insanity? Communities build convention centers and sports facilities that aren’t feasible. So to generate the “impression” of activity, they subsidize groups as basically a cover-up for a crazy decision to build something that wasn’t sustainable in the first place. Then to cover that up, often they cook the economic impact numbers.

What’s ironic about the group in question? They are supposed to be generating economic development for communities, so the first thing they do is insist their own convention is a losing proposition for the host community?

So why doesn’t the news media get wind? Unless they are like ours, they are often complicit in the initial decision via boosterism and therefore reticent to question.

I’m proud that Durham doesn’t go after subsidized business. Although we’re not immune from building things we can’t sustain.

2 comments:

Anonymous said...

Speaking of buildings we can't sustain, what's the story on that "Durham Centre" monstrosity (and associated parking facilities) across from the civic center/Carolina Theatre? Still no second "Renaissance" tower, still no street-level retail, and I've heard the building is largely empty. Not to mention the fact that it sticks out like a sore thumb.

Bill Geist said...

Reyn...

Couldn't agree more. The madness of subsidization threatens REAL destinations like yours and mine, as lesser communities attempt to "buy" the business. Sadly, there will always be a destination that is hungry enough to do this, failing to realize that it's a losing proposition.