
                         THE VIRGINIAN-PILOT
                 Copyright (c) 1994, Landmark Communications, Inc.

DATE: FRIDAY, June 24, 1994                    TAG: 9406240029 
SECTION: FRONT                     PAGE: A12    EDITION: FINAL  
SOURCE: Medium 
DATELINE: 940624                                 LENGTH:

CONVENTION CENTER AND HOTEL AT THE BEACH\

{LEAD} Visions of convention centers always cause the hearts of municipal officials to flutter. Cities across America have invested big bucks developing them. Virginia Beach is considering expanding the Pavilion to attract conventions year-round and luring an upscale 400-room hotel to accommodate conventioneers.

Virginia Beach would seem like a natural destination for conventions, and sprucing up and expanding the 14-year-old Pavilion might be a worthwhile investment in municipal infrastructure. The experience of other cities with convention centers, however, suggests there are pitfalls. The convention-al wisdom that these centers are lucrative public investments deserves careful scrutiny.

{REST} Revenues from the Pavilion have never met operating, let alone capital, costs. Its function as a ``loss leader'' is hardly unique. In a report for the Chicago-based Heartland Institute, Edwin S. Mills, a professor at Northwestern University and expert on real estate and urban policy, found that the boom years for convention centers, 1975-85, produced ``chronic money-losers.'' Revenues seldom covered operating expenses, much less the debt the city incurred to erect them. The indirect benefits - the rise in employment, in salaries spent and in taxes paid in the city - seldom met the projections.

``Government spending,'' Mills reports, ``does not have unique characteristics that generate prosperity in ways that private spending does not.'' In fact, it requires calculating benefits and costs in ways that private investors cannot. Workers' pay, for instance, counts as a benefit rather than a cost, on the presumption that workers employed in the construction or operation of the center would not have a job otherwise. That has rarely proved the case, particularly in cities like Virginia Beach, where unemployment is relatively low and skill levels high.

The other half of the proposal is the construction of a large, luxury hotel. It is certainly surprising that one of these has not already been built in Virginia Beach. But the city's residents and existing business owners should not be taxed to help provide one, in the form of inducements or incentives.

Proprietors who have already built and maintain their resort businesses without any public boost were also the ones who supported the increase in the meal, hotel and amusements taxes that comprise the Tourism Growth Investment Fund; Pavilion expansion, though set back by the hurricane-protection program, is still on the TGIF projects list. But the intent was to spur year-round tourism, not to underwrite new competition.

The ocean is Virginia Beach's prime asset, and capitalizing on that geographical fact is natural. But the city had better make certain there is a potential market for more and bigger conventions. If a major hotel operator needs inducements to locate in Virginia Beach, that could be a signal that the investment might not produce the projected return.

by CNB