Hotels May Pony Up to Fund Convention Center Expansion

The economic benefits of sports stadia and convention centers are dubious at best. (See here and here.) Often, taxpayers are asked to cough up hundreds of milllions of dollars (sometimes billions) to pay for facilities that almost exlcusively benefit private interests such as owners, players, and private investors. Such is the case playing out in Sacramento where the NBA is extorting the city to get a new $400 million arena. City council has been thankfully resistant to dumping more tax dollars into this abyss.

Now, local hotel chains and operators have come up with a plan to impose a new hotel tax to help fund the convention center expansion. This is a good sign because, as a direct beneficiary of these facilities, they are taking on more of the burden for financing them. This moves policy more toward a beneficiary and user pays principle for financing these facilities even if it doesn’t fully privatize them. According to the Sacramento Bee (20 January 2012):

“Sacramento hotel owners are considering a plan to generate $1 million a year for the proposed downtown sports arena, officials said today.

“The complicated, still-evolving plan is tied to a potential expansion of the Sacramento Convention Center.

“Brian Larson, chairman of the Sacramento Convention and Visitors Bureau, said an expanded Convention Center could yield as much as $5 million a year in new hotel occupancy taxes.

“Currently, the hotel tax goes mostly toward renovations of properties like the Convention Center and the Community Center Theater. Members of the City Council have swatted down proposals to earmark some of the hotel tax dollars to the proposed arena.”

Read more here:

For a broader discussion of how special districts can be used to pay for these facilities, see the article 1998 article in Public Administration Review by David Swindell and Mark Rosentraub “Who Benefits from the Presence of Professional Sports Teams?”