Click to visit City Journal California

By Steven Malanga:

Shakedown: The Continuing Conspiracy Against the American Taxpayer

By Steven Malanga, Victor Davis Hanson and Heather Mac Donald

The Immigration Solution.

By Steven Malanga
The New New Left: How American Politics Works Today

Soundings

Steven Malanga
Consultant Humbug
Beware “studies” promising payback from tax-funded development on the Far West Side.
Summer 2004

Government officials, lobbying furiously for taxpayer-supported projects on Manhattan’s Far West Side—including an expanded Javits convention center, a new hotel, and a vast new stadium for the New York Jets—are waving around studies that promise thousands, even tens of thousands, of new jobs and a massive boost in tax revenues, if only Joe Public will lend a (generous) helping hand. New Yorkers should be deeply skeptical of these kinds of “studies”—and the projects they’re promoting.

Over the last decade, an entire industry of consultants has sprung up to churn out similar reports for pols around the country, advocating public subsidies for one big building project after another. Many of the projects, it turns out, have actually been built, and they’ve proved colossal duds, leading a growing chorus of critics to question the studies’ methods. One critic who has reviewed more than 30 of them, University of Texas professor of public administration Heywood T. Sanders, says they’re “misleading” and that they “offer no real basis for public investment.”

One reason the studies are so misleading in touting the future economic benefits of publicly subsidized projects is that they frequently ignore what the private sector might do with the property instead. Consider what happened back in the mid-nineties, when New York State tried to strip developer Larry Silverstein of a Far West Side property in order to expand the Javits Center. When political infighting derailed the expansion, Silverstein built an apartment building on the site, creating lots of construction jobs and new housing for New Yorkers—without taxpayers footing the bill for any of it.

Equally erroneous in the studies is the notion that, if other cities are building publicly subsidized convention centers or stadiums, then your city needs to fire up its own big projects, too, or else lose potential business and tourism. For example, a PriceWaterhouseCoopers survey, commissioned by the Javits Center, argues: “Other competitive convention centers have embarked upon expansions and improvements. . . thereby placing greater competitive pressure on the Javits Center.” But what such studies usually neglect to mention is that the convention business hasn’t grown much over the past decade, even as cities have added millions of feet in new exhibition space. Result: new centers, like one opening in Boston, remain disastrously underbooked and require fat subsidies just to keep their doors open.

A private business assessing a market that wasn’t growing and in which a host of competitors (all losing money) were already on the scene would doubtless not take the plunge and would fire any consultant who recommended jumping in. Things work differently when public officials hire the consultants, though. The officials often aren’t looking for a genuinely independent assessment but just some ammunition to back them up in their efforts to get a big project built.

Dubious, too, is a third argument that often crops up in the studies, telling public officials that their city is just so dazzling that if they would build a convention center or hotel, everyone will come flocking into it. New York City is especially susceptible to this seduction, because many New Yorkers can’t imagine how conventioneers or tourists could prefer any other city.

Anyone who wants to know what the consultants really think can just check out what they’re telling the competition. Sanders relates the tale of twin studies done by Coopers & Lybrand in 1997 for officials in Washington, D.C., and New York, when each city was thinking of using public money to expand convention facilities. For the Washington study, the consultants polled meeting planners across the nation to rate eight large cities as convention sites. New York finished dead last. Coopers & Lybrand conveniently left this key detail out of their New York study, which of course called for the city to expand Javits.

The consultants also falsely claim that every economic transaction that would take place at a proposed new stadium or convention center represents new business for the city. Backers of the new Jets stadium, for example, tout a study that says the public investment in the project is a good idea, because it’ll help lure to the city mega-events like the Super Bowl. But when a Super Bowl or other huge event comes to town, it often crowds out other business. Some cities have to ask conventions that have booked years in advance to give up their dates to make room. The net economic contribution of a Super Bowl or other big show is thus much less than it might appear.

Similarly, these studies tend to overestimate the positive impact that a new stadium housing a pro team will have on tourism. The consultants, using team-provided data on the number of out-of-towners who attend games during a season, will count all projected spending by these fans, such as money spent on hotel rooms, as generated by the stadium. But economists who’ve studied pro sports note that tourists often don’t come to a city specifically for a sporting event, even if they attend a game while in town. Think of an executive, in town for local meetings, who gets comp tickets to a baseball game from a client. Factor out such attendees, who would probably spend money on something else locally if they had no game to attend, and the real bump that teams and stadiums give to tourism becomes less impressive.

In sum, there’s a gigantic difference between these consultant projections and plain old reality. The truth is, disappointments and outright failure mark the real world of publicly financed convention centers, stadiums, and hotels. New Yorkers should keep this reality in mind as the debate over the West Side’s future proceeds.

SHARE
respondrespondTEXT SIZE
If you enjoyed
this article,
why not subscribe
to City Journal? subscribe Get the Free App on iTunes Or sign up for free online updates: