doubling the size of the center, it would in fact triple it. And with a bigger proposed center came a new consultant study. Ernst & Young produced a report on the expanded expansion in March 2003. Putting convention attendance at the existing Civic Plaza at 133,000 in 2002, the E&Y consultants argued that, while “Phoenix is the sixth largest city in the U.S., [it] ranks 60th in terms of convention center space.” By tripling the size of the center, annual attendance would reach 376,861, E&Y argued, and Phoenix would be “on par with Dallas, San Diego, and San Antonio,” with Dallas and San Diego having recently expanded. With the forecast threefold increase in attendance, center backers could now argue that total direct spending and state tax revenues would triple as well.
The combination of the massive business lobbying effort, led by Phoenix Suns owner Jerry Colangelo, and the seeming certitude of the consultant forecasts proved effective. The $300 million in state funding for the expansion passed both houses of the legislature, and was signed into law by Governor Janet Napolitano in June 2003.
The expanded Civic Plaza, renamed the Phoenix Convention Center, was completed in phases. The entire complex was fully opened in December 2008. City officials again promised abundant economic impact from a tide of new convention delegates, and described a city and center now poised to compete. According to center director Jay Greene, “As one of the top 20 largest convention centers in North America, this project has made history for the city, state, and the convention industry.”21
The 1,050 new hotel rooms called for by PriceWaterhouseCoopers in 1999 proved more difficult to realize, despite the promise of the expansion and the consultant studies. The city repeatedly tried to find a private developer for a massive convention center hotel, but failed. The alternative was for the city itself to finance, build, and own the new hotel.
In July 2004, the city council approved plans to directly finance a 1,000-room, $350 million dollar hotel project, backing the hotel’s bonds with a combination of net hotel revenues and city sports facility taxes. The city employed the HVS International consulting firm to evaluate the likely performance of the city-owned hotel. HVS concluded that the city financing model was “solidly financially feasible,” and the city staff reported, “Conservative revenue projections show the proposed hotel would generate more than adequate revenue to cover operations and debt payments during the project stabilization period and through the life of the financing term.”22
Phoenix ultimately sold the hotel bonds in December 2005, and the new city-owned Sheraton hotel opened in October 2008, just before the full convention center expansion was completed. Things would not work out quite the way the consultants had forecast and the city staff had promised.
The Phoenix case neatly exemplifies the dynamics and results of contemporary convention center development. A proposal for a new center or a major expansion appears to bubble up from a longstanding policy stream, often focused on downtown development and revitalization efforts. The idea comes buttressed with a seemingly compelling logic: the convention center is now old, competing cities have expanded and added more space, and expansion will bring enormous benefits in terms of spending, tax revenues, and job creation. A consultant study (or series of studies) documents the “need” for a larger convention facility, describes the expansions and additions of competing cities, and presents a highly precise forecast of expected performance and economic benefits. Local business leaders endorse the plan, and it receives an enthusiastic reception on the editorial page of the local newspaper. And, with little or no opposition, the plan receives the formal approval of the local mayor and city council.
Two central dimensions of convention center development provided the foundation for Phoenix’s expansion quest. The first was the manner in which the expansion was proposed and structured. The expansion proposal came before the public and the city council by itself, not as part of any larger consideration or plans. It did not result from a broad analysis of downtown revitalization or even tourism development. Indeed, it seemed to result from the failure of the efforts to develop a new privately built, albeit subsidized hotel.
During the entire period that the Civic Plaza expansion was being considered, from 1998 through the November 2001 city vote to the funding decision by the state legislature in mid-2003, there was no consideration of alternative visitor-related projects or different uses for the city’s $300 million investment. The city staff never offered the council or mayor an array of policy choices, or even a range of sizes and costs for the expansion itself. The proposal was literally a major investment in doubling (ultimately tripling) the size of Civic Plaza, or nothing.
The financing of the expansion was also structured in a narrow fashion, clearly designed to deal with the realities of voter sentiment while observing the formal, legal constraints on city spending. Both city staff and elected officials would no doubt have preferred to avoid any direct public vote on the project. But a 1989 amendment to the city charter required a vote on any sports or convention-related facility project costing more than $3 million. The city faced no alternative, and so structured the expansion proposal to make it salable to a tax-concerned electorate.
The vote authorization stressed that “The ballot proposition does not ask voters to authorize any new tax or funding sources,” and “under no circumstances will the project result in an increase in any city tax rate.” The proposition also stressed that the city government would only be responsible for half the cost—with “an additional $300 million from state or other funding sources.” And the city’s case for the expansion repeatedly stressed the imperative to compete with other places: “While Phoenix is the 6th largest city in the nation, we have only the 60th largest convention center. Other cities have been more aggressive at expanding and modernizing their convention centers, and have realized the economic and community benefits.”23
The second central element of the expansion effort in Phoenix was the reliance on outside, presumably expert consultants. The initial expansion proposal was accompanied by a study from PriceWaterhouseCoopers that appeared to endorse an expansion, with the promise that more space would allow the city to “Attract additional new and/or larger events to Phoenix,” “Increase capabilities of hosting simultaneous events by multiple users,” and “Increase patronage to downtown business including hotels, restaurants, retail shops, [and] entertainment and cultural venues.”24
The 1999 PWC report concluded that an expansion paired with 1,050 new hotel rooms would double convention attendance and thus increase attendee spending by a total of 86.5 percent. And when the city enlarged the scale of the expansion, it obtained another consultant study, from Ernst & Young, that was even more certain and expansive: convention and tradeshow attendance would grow from the 133,000 of 2002 to over 375,000 after expansion.
These consultant analyses and forecasts were effectively the only substantive market or demand information provided to the city council, local media, and public. They were presented as authoritative, with no sense of a range of alternative outcomes, “best” or “worst” cases, or even detailed discussions of the assumptions upon which they were based. Nor did the city staff, or any local group or organization, commission any competing or alternative analysis. Indeed, the assumption that Phoenix had to see a substantial boost in its convention business was accepted and regularly reported as an article of faith. That faith was neatly summarized in an Arizona Republic editorial before the November 2001 vote:
What’s more, a doubling of the size would allow Civic Plaza to handle multiple events, an advantage that not only helps expand business, but helps even out the ebb and flow of conventioneers into downtown Phoenix. It would help keep downtown businesses stable. It would help downtown thrive. A “yes” on Proposition 100 will allow the Valley of the Sun to continue competing for conventions and the wealth of tourism dollars that flow from them—nearly a third of convention travelers to the city venture around the state either before or after their event. And it will allow that to happen without an increase in city taxes.25
Much
