The Columbia River Crossing is mostly dead. But public boondoggles do not end. The latest is the Metro proposed $198 million convention center hotel project, featuring private ownership by the Hyatt Corporation and $78 million in public funds. Another potent constellation of special interests is at the public trough ready to feed.
Let us recall that for this current budget year, 2013-14, Portland Public Schools could not find an additional $45,000 to send five high school students to China and even had to cut FTE in the reading program that was doing background checks on the backlog of potential volunteers. $78 million over 20 year is almost $4 million per year, which would be roughly 40 additional teachers per year (at $100,000 each) or paying for 400 high school students per year to study abroad (at a generous $10,000 each).
From the Oregonian article “Metro sets open house on convention center hotel plan” by Elliot Njus (here):
…. The Oregon Legislature recently awarded $10 million in backing from state lottery funds. The project would also receive a $4 million grant from the Metro regional government and a $4 million loan from the Portland Development Commission. Metro would also issue $60 million in revenue bonds to be repaid with proceeds from a tax on hotel stays.
A development team led by Mortenson Development of Minneapolis would pick up the rest of the $198 million price tag, and Chicago-based Hyatt Corp. would buy the hotel upon completion….
The real question here is not primarily the economic benefits such a project might generate. The most important question to ask is why is public funding needed at all? If it is such a good deal, why does private financing not do it and capture all the benefits?
Or, as Matt Yglesias writes in his blog post “The Dubious Economics of Convention Centers” (here):
The real issue here is that though the externalities are real enough, there’s no reason to think property developers couldn’t capture them. Running a convention center as a loss-leader for a hotel would be a perfectly reasonable thing for a private firm to do. Alternatively, you could run a hotel as a loss-leader for a convention center. And of course bundling a hotel with a restaurant or two or three is very normal. Or a consortium of local hotels might band together to finance the construction of a convention center. The point is that these externalities can be as large as you like and they still don’t justify public subsidies for convention centers.
Forget the convention center hotel, let us put the $78 million into public education! It would be a better investment!