On Process and Economics: How to think about the proposed Convention Center
The city council is in the final stages of approving a plan that will result in the development of a city-owned convention center conjoined with a privately-owned full-service hotel on the UNT land previously occupied by a large Radisson Hotel. This plan represents a partnership between the city (who will own the convention center), O’Reilly Hospitality Management (who will construct and own an Embassy Suites hotel), and UNT (who is leasing the land). As the plan reaches these final stages, there is increased interest in the project from many sectors of the city. The Denton Neighborhood Alliance is organizing a meeting to discuss this project (with city staff on hand to present and answer questions) on Wednesday, July 9 at 7pm in the historic Courthouse on the Square in the Commissioner’s Courtroom.
Today, the city released a video and FAQ addressing many of these issues today – see it here.
QUESTIONING THE WISDOM OF A CITY-OWNED CONVENTION CENTER
There are several recent articles questioning the wisdom of the city convention center craze across the country - here’s one that is helpful in laying out the basic criticism that is common to many of them. I’ve read just about all of them and passed many around to city staff members and council colleagues early in the process. Here are the main points that are important to our discussion:
- Convention Center space has increased over the last 20 years while the amount of actual conventions has declined – a glut of space combined with fewer conventions.
- As a result, some Convention Centers have not been successful. There are examples of many that have an actual negative economic development effect on the city precisely because the city has to support a failed convention center that it now owns.
- Cities sold these city-owned Convention Centers as a driver of tourism and outside money flowing in to support the local economy. Because of the previous two points, these promises have too-often gone unrealized.
Beyond this argument, several others have been offered by concerned citizens, including:
- Issues with the location – not near major retail, restaurants, downtown, or tourist attractions. How can we see economic development with this site?
- This will likely fail and the city will be left holding the purse and have to pay off the $25 million investment through other means.
- Distrust with partnering with UNT for one reason or another.
- No one wants to come to Denton for a convention.
- An abundance of regional competition for convention center space in better locations.
HOW TO THINK ABOUT THIS CONVENTION CENTER PROJECT
At the end of the day, this project is about economic development, so it is helpful to break down the discussion into two main questions – many, if not all, of the above issues can fit into one of these questions:
1) Is the project financially feasible and responsible?
2) Will the project spur significant economic development to justify the $25 million investment?
I’ll get to these two questions shortly, but I’d like to first offer a brief interlude on the question of process…
A DEFENSE OF THE PROCESS
In recent days, some of the opponents of this project have alleged that the city council has left the Denton citizens out of this process, some even going so far as to claim that the city has been hiding this project and its details up until now. While I certainly appreciate that some are just now paying attention to this issue for the first time, it is simply not true that this issue has been discussed outside the public eye and without the public’s ability to engage this issue.
There have been at least 22 public meetings where this project has been presented openly and accessible to the public since the proposal first came to the city in September 2011. The Master Developer Agreement has been publicly available since November 2013. I write weekly City Council Preview posts on this website FOR THIS VERY REASON: to open up City Hall to the citizens, translate the often legal-sounding language of council agendas, and give another avenue of citizen engagement for whoever is interested. To date, I’ve posted about this topic at least 12 times since Spring of 2012, often with links to PowerPoints and other media your average person wouldn’t have easy access to outside of attending meetings. I haven’t yet scanned through the 250 results coming up when you search for “Convention Center” online at our local newspaper, but I assure you this has graced their front page and editorial page on several occasions over the last two years. This has also been a major issue addressed in several candidate forums during the last three election cycles (2012, 2013, and 2014).
While it is true that there has been only one official “public hearing” on the issue, it is important to understand that “public hearing” has a specific legal designation and is required for certain things and not for others. Many important and/or controversial topics have only one official “public hearing” before the council prior to council action: the gas well ordinance, the smoking ordinance, zoning decisions, etc. But that doesn’t mean there aren’t other opportunities to engage the council during regular meetings (speaking to items of Individual Consideration, Citizen Comments section, etc.) and outside of meetings altogether. On this issue, many have up until this point. I’ve received several emails (even before this latest round), many phone calls, have visited with several citizens and concerned hoteliers, and am stopped often around town to discuss this and other issues. While the official “public hearing” process is hugely important, most people I know prefer to give me their opinions on a subject in other ways: email, phone, letter, social media, or even stopping me at the grocery store. In fact, on most issues, I tend to get more feedback outside the council meetings than I do at the actual council meeting. And there’s a benefit to that – we can actually have an extended conversation as opposed to the rules which prevent back and forth discussion during formal public hearings. It’s one of the beauties of local government: accessibility to the decision-makers.
While I understand that the narrative, “City Council is not listening to you and they are about to spend your money without getting your feedback!” is helpful in getting people’s attention, it is neither true nor helpful in focusing on the important issues at hand.
QUESTION #1: IS THE PROPOSED PROJECT FINANCIALLY FEASIBLE AND RESPONSIBLE?
Let’s return to the two questions I posed at the outset of this article. Regarding the first one, I will point out that the council has made it clear from the beginning of these discussions that the city would not approve an agreement that didn’t include safeguards to protect us against low performance. The city will fund the construction of the $25 million project and the debt will be repaid through: 100% of the Hotel Occupancy Tax from this project, up to $100,000 of existing HOT funds, 100% of the city property and sales taxes from the new hotel, possible involvement from the county and school board property taxes from this location, and annual lease payments from O’Reilly to cover whatever shortfall is left between the revenue just describes and the debt payment owed by the city. It is expected that the project will pay for itself. If it doesn’t the private developer involved will make up the difference. This is crucial – most, if not all, of the city convention centers described in the articles referenced above did not have this sort of protection. We’ve learned from that and sought to build in that safeguard to protect the city and the citizens.
It remains to be seen, however, what will this project bring to the city beyond simply paying for itself.
QUESTION #2: WILL THE PROJECT SPUR SIGNIFICANT ECONOMIC DEVELOPMENT? ENOUGH TO JUSTIFY THE $25 MILLION INVESTMENT?
This entire project has been couched in economic development terms. The purpose of the project and how it is done is stated in this city document released today: “The purpose of a convention center is to attract out-of-town business and generate economic activity throughout a city. The economic benefit is received from money spent by convention delegates before, after, and in between meetings.” The document then estimates a $13 million annual economic impact to the city as a result of the convention center.
Let’s break this down.
The $13 million assumes a $140 per day average spending rate among an estimated 46,500 collective nights of overnight-spending convention-goers. It also assumes a dollar for dollar multiplier effect in our local economy. For discussion sake, let’s assume all this. We also know that the $140 figure includes hotel costs – estimated to be about half of the total dollars spent per day. Assuming the bulk of these conventioneers are staying at the on-site hotel, it is important to point out that there are no additional economic benefit to their hotel costs. Anything the city would have received from their stay at this hotel will go directly toward paying the debt of the convention center. In order to account for this, therefore, let’s cut the original $13 million figure in half and assume a $6.5 million annual economic impact on the city (which is really a direct $3.25 million impact times two for the multiplier effect). This figure would account for non-hotel spending in the city – the “money spent by convention delegates before, after, and in between meetings.”
While that figure sounds decent, realize that any city-specific project with economic development goals needs to also look at this in terms of annual sales tax revenue for the city. At a local sales tax rate of 1.5%, the city will only see $97,500 a year in new sales tax revenue off this $6.5 million. Breaking this down even further, this means that each conference attendee will contribute only about $1.05 a day to the city’s tax base. To put that figure into context, annual revenue from sales tax city-wide is approximately $26 million – this project only amounts to about 0.375% of the annual revenue stream from sales taxes. You can also compare that with other things. Golden Triangle Mall itself seems to be contributing at least $1 million a year in sales taxes. There’s a movement afoot to allow retail liquor sales in Denton (it will be on the November ballot) – that is estimated to generate $700,000 in sales taxes a year.
$97,500 a year for a project that takes $25 million of city money to build. $700,000 a year for something that costs the city nothing.
If convention dollars spent in Denton is the main economic development argument for this Convention Center, based on this analysis, things aren’t looking good. With $25 million for a project coming from Certificate of Obligation bonds, there’s a debt capacity issue here which requires us to do an Opportunity Cost analysis. What else could the city do with $25 million to spur on economic activity beyond an additional $95,000 in sales taxes each year?
THE ARGUMENT AHEAD
It is time for those who have advocated for such a project for years to come out and make a case. If it is all about boosting tourism dollars, it’s unclear that $95,000 in annual new sales tax revenue is worth the $25 million investment. There are, however, additional arguments that might be made here:
- What’s the economic value of having a convention center for existing businesses in Denton? How can it help large companies in their mission and aid small businesses in their desire to scale? For that matter, what is the economic value of having a full-service hotel in town?
- What does the presence of a convention center add to our city’s economic development portfolio or toolkit? How does this help encourage greater economic vitality from within and renewed interest from without?
- How might the presence of this project spur significant redevelopment of the area directly across the highway? The entire area North to Eagle Drive, East to Carroll and West to Bonnie Brae is arguably ripe for major reinvestment and redevelopment. Are there related plans for this and how can this be added to the equation?
- What’s the economic impact of a major research institution to the city? Beyond its role as a major employer, how can it be leveraged to make Denton a hotbed of entrepreneurial activity and research-based business incubators? What, if any, impact does a Convention Center have on this?
- How can the presence of a Convention Center help Denton become a leader in certain sectors and industries by allowing the city to be host to targeted events and conferences?
- Is there a cumulative economic development case (using these and possibly other factors) that can be added to the tourism/convention dollars argument?
I continue to think that there are good reasons – beyond the convention-spending argument – to think this project can be good for the economic well-being of the city. But those need to be made and communicated to the citizenry. The old boosterism aims of these projects, as the growing literature is showing, can not be the entirety of the case for a Denton convention center.
I look forward to the continued discussion. Stay tuned to this website for more on this. Also follow me on Facebook and Twitter for updates.
Here’s the video just released by the city today…
Goodbye TAMS and UNT. Hello Startup.
After 15 great years of working with some of the brightest teenagers in the nation, I’ll be leaving my post with the Texas Academy of Mathematics and Science at UNT on August 1. These students are a tremendous asset for the university and the community. Each year, they collectively serve over 10,000 hours of community service and a big chunk of that is spent directly helping kids in Denton schools. Having this sort of concentration of innovative, creative young minds who consistently bring national and international attention to the university and city is every community’s dream. I expect to continue partnering with TAMS as we build our local tech/innovation/startup economy and as we continue to grow our community educational initiatives.
The educational tech startup my wife founded, Pascal Learning, is bringing me on to further their mission of helping schools and cities unlock the potential of their most at-risk kids by unlocking the potential of their parents, mentors, and caregivers. With 45% of our nation’s kids at-risk of failing, dropping out, or falling behind, we seek to help communities equip and inspire their very first teachers – parents.
ReadyRosie is Pascal Learning’s first creation and is helping parents of 0-5 year olds get their kids ready for school in dozens of communities in 10 different states – and growing every day. This Fall we’ll launch our latest venture, Bringing Up, an innovative parent engagement tool which schools will use to inspire the parents and mentors of their Kindergarten through 3rd grade kids.
I look forward to continuing my vocation as an educator by helping parents, mentors, and communities across the country reach their most at-risk families. And at the same time, I love that I’ll be a part of Denton’s emerging tech startup scene.
You can find out more about Pascal Learning and ReadyRosie from these stories in the Dallas Morning News and KERA.
City Council Preview – June 17, 2014
We’ll start our June 17 meeting with a Work Session at 2pm followed by a 6:30pm Regular Session, both at City Hall at 215 E. McKinney Street in beautiful Denton, Texas. Click here for the full agenda, complete with links to all the backup material. Here’s what I think you might be interested in…
CITY BUDGET TALKS BEGIN
The city’s fiscal year begins on October 1, so preparations are now taking place to hammer out our 2014-2015 budget for the entire city. With General Fund revenues and expenditures now around $90 million per year and total city services (including Denton Municipal Electric) surpassing $900 million per year, oversight and direction of the city budget is arguably the most important task and power of the city council. Any significant policy decision comes with a price tag – this is where the council helps shape the direction of the city for years to come.
This is why our Work Session begins with an overview of the city’s Strategic Plan – the document and collection of metrics that defines the council priorities. That will closely be followed by Preliminary Budget Overview outlining major assumptions leading into this year’s budget talks between the council, city staff, and the citizens of Denton. Click here for a copy of that presentation.
Some highlights of this presentation:
- Early property tax figures are encouraging, showing somewhere around a 12% increase in revenue to the city. This is quite preliminary, as appeals are taking place right now. The city is estimating a 8% increase for the 2014-15 budget.
- We are assuming a 3% sales tax increase from 2013-14.
- The increased revenue is enough to put off a planned 1 cent tax increase for this next year.
- But the city continues to grow and expenditures grow with it – new requests for additional funding will still be hard to come by.
- There are about $5.4 million in supplemental package requests from various city departments (requests for new funding) – many of these will go unfunded.
- Street repair and maintenance continues to be a priority.
FREE OAKLAND STREET!!
Does the above photo look familiar? Thanks to the popularity of the downtown square, the success of Oak Street Draft House, and the increasing desire to live in downtown Denton, the once sleepy stretch of Oakland Street between Hickory and Oak has been overcome by parked cars. City Staff and the Traffic Safety Commission has recommended prohibiting parking on both sides of that street. An ordinance to do just that is on our agenda, so heads-up!
FRY STREET AREA CVS REZONING REQUEST
A CVS is being proposed near UNT on the corner of Hickory and Ave. B, where the old Suhko Thai used to provide us poor university faculty and staff with very affordable Thai cuisine for lunch. This came before council at our last meeting and many of us were concerned with a hardship variance that was approved by Planning and Zoning to allow a 3rd driveway into the property. As I argued during our last meeting, this area is arguably one of the most walkable areas of the city and this project is likely to be in existence for several decades. As new infill development is coming into such parts of town, it is crucial that we require that development to conform to our long-term policy goals. Additional curb cuts and allowances that focus on the ease of car traffic in and out of such areas is counter-productive to our goals of urban design and pedestrian/bike-friendly streets. I expect another spirited discussion on this topic.
The presence of such a drug store will be an asset to university students and nearby apartment dwellers seeking to live out a car-free existence – such amenities are needed. The design and site plan, complete with a building pushed-up toward the street and an angled entrance on the hard corner of Ave B and Hickory is solid and preferable. There’s much to like about this project. Adding a third driveway, however, is unnecessary and harmful to our goals in that area.
CONVENTION CENTER TIRZ CREATION
We will be holding a public hearing prior to deciding whether or not to create a Tax Increment Reinvestment Zone on the property that is anticipated to hold the proposed hotel and convention center. Because it resides on UNT property (see rough outline of property in red on the map to the left), the current property tax value of the site is a whopping $0. A TIRZ allows a city to capture increases in property tax from a given area in order to invest in public projects – in this case, to help pay for the city-owned convention center. The city has plans to seek participation in the TIRZ from the county and Denton ISD.
AMENDMENTS TO THE GAS WELL MORATORIUM
On May 6, the city council voted in a moratorium on all new gas well permits, enacted in order to give us time to amend the current gas well ordinance. The purpose of the amendments proposed at this meeting are to fix some unintended consequences of the current moratorium. For instance, some gas well operators have been working with land developers to abandon existing well sites in order to allow for new development. The current moratorium didn’t contemplate this possibility and will not allow for amended gas well plats/site plans that would seek to do what is in the best interest of everyone: reduce the number of gas well sites in the city. So we aim to fix that.
On that note, the date for the public hearing to contemplate the Frack Free Denton initiative petition has been set for our July 15 meeting. I expect that to be a lively meeting. Put that on your calendar if you are interested in witnessing a great example of local government in action.
As always, let me know your thoughts on any of this – contact me at kevin.roden@cityofdenton.com or 940-206-5239.
City Council Preview – June 3, 2014
This will be our first regular meeting since the last election which gave us 3 new council members: Mayor Chris Watts, Place 6 At-Large Council Member Greg Johnson, and District 2 Council Member John Ryan. We’ll begin with a Work Session at 2pm followed by a 6:30pm Regular Session, both held at City Hall at 215 E. McKinney Street.
For a full agenda with backup material click here. Here’s what I think might interest you…
MORE CITIZEN EDUCATION AND INVOLVEMENT IN BUDGET PLANNING
Though not specifically on this agenda, because we are entering into our annual budget season, I want everyone to know about some new tools aimed at educating and involving our citizenry in a more meaningful way into our budget discussions. As Chair of the Council Committee on Citizen Engagement, citizen involvement in the budget process has been on our radar for a while. As a result, the city’s budget team has put together a website with an intro video, links to pertinent documents, a place for budget documents as they enter into the conversation, and a way for you to submit a proposal for consideration in this year’s budget talks. It’s part of our committee’s plans to make government more open, accessible, and transparent. Here’s the latest budget video:
CREATION OF TIRZ FOR HOTEL AND CONVENTION CENTER PROJECT
The city has been in talks with UNT and a private developer for a plan that includes a hotel and convention center on the site of the old Radisson Hotel on the UNT campus, just near Apogee Stadium. In December of last year, the city council approved the Master Developer Agreement for the project. That entered us into a feasibility period where all sides are analyzing cost specifics to make sure the project works. A Tax Increment Reinvestment Zone (TIRZ) is being contemplated for the area where the project will occur on approximately 13 acres. The TIRZ is a way that local governments can publicly finance infrastructure projects within a specific area. Because the area is now on UNT’s campus, is has no value on the tax roles. This project could change that significantly and a TIRZ would allow the city to recoup taxes resulting from the project from a variety of entities, should they choose to participate: the city, Denton ISD, and the county. For more on this, please consult this presentation.
BOND COMMITTEE RECOMMENDATIONS FOR NOVEMBER 2014 BOND ELECTION
We anticipate going to the voters in the November 2014 election with a series of bond proposals totaling nearly $100 million dollars. After months of dedicated, hard work, the committee has unanimously approved a recommendation for council. We will be hearing about those recommendations, giving direction, and likely planning a future council vote to put this on the ballot. To see the recommendations, check out this presentation.
BIKE SHARE COMING TO DENTON?
Denton will be one step closer to seeing it’s own Bike Share program after Tuesday’s meeting. On our agenda is a resolution showing our support for a bike share program and seeking grant opportunities through the Regional Transportation Council. It is anticipated that any share program will be collaborative with UNT, TWU, Downtown Denton, and DCTA. Here’s a bit about bike share programs in general to get you in the know:
FRACK FREE DENTON PETITION PRESENTED TO COUNCIL
Organizers of a petition seeking to ban fracking in the city limits of Denton have turned in the required number of signatures and those signatures have been verified by the City Secretary. As outlined in the City Charter, the petition will now be presented as a certified petition to the city council. We then are required to set up a public hearing to consider the ordinance and the council must act one way or another. We can vote for the ordinance or we can vote against it. A successful vote against the ordinance will trigger a city-wide vote on the issue on the November 2014 ballot. There will likely be little discussion on the topic during this meeting, but I expect significant discussion as eventually hold the public hearing on this important topic. Here’s a link to the Frack Free Denton petition so you can see precisely what is being advocated by this group.
THREE ZONING CASES ON THE AGENDA
I’m trying to utilize Google Maps to make it easier for anyone to see the precise locations of the zoning cases before the council and find out more information. Click on any of the projects on the map below for more information. And let me know how this feature could be more useful for you in the future…
As always, if you have any comments or questions, please let me know at kevin.roden@cityofdenton.com or 940-206-5239.
Net Neutrality, Municipal Broadband and the Future of Cities
Imagine if 19 million Americans lacked access to electricity. And imagine that number getting much worse in rural America, where a quarter of that population was cut-off from even the most basic levels of electrical service. Imagine in areas where there is access, the cost is such that 100 million people failed to get to subscribe to it, inevitably hitting lower economic individuals the hardest.
Now imagine, when faced with such access and inequity issues, a handful of big electricity providers stood in the way of solutions to fix it. Worse, they convinced politicians and supposed-regulators that “the state of the free market of electricity was doing just fine,” all the while convincing them to impose rules that actually destroyed free market principles by favoring their monopolous practices and stifling greater access, service, innovation, and solutions coming from other sectors.
Imagine that the US, a country that prides itself on being an economic powerhouse, found itself ranking 16th worldwide on penetration, speed, and price of electricity. Imagine that ranking dip deeper to 31st when speed is isolated.
This would be unacceptable. Yet this is the current state of internet broadband in our country. And instead of leading us out of this mess, our politicians and federal regulators are making the problem worse.
Internet broadband is to the 21st century what electricity was to the 20th century.
State leaders are increasingly erecting barriers to entry, innovation, price reductions, and speed by adopting rules prohibiting cities from jumping ahead with municipal broadband and preventing city-led innovation like your see in Chattanooga, TN with their universal Gig fiber roll-out. Texas is one of 20 states which, while claiming to have the best climate for business, is, with its allegiance to the innovation-less big ISPs, actually stifling economic activity in what could be its most promising sector: tech. While cities like Austin and San Antonio are able to attract something like a Google Fiber initiative, most cities will not.
Our national leaders are doing no better. Today, we saw proposed rules pass the FCC which further exasperate this problem by beginning the process of dismantling Net Neutrality. The big providers already control the access and speed of our internet service, these proposed rules now give them control over content and the ability to control which content comes to us at what speed.
In this innovation economy, do we really want to cede control of our most promising innovative tool to gigantic internet providers who, at best, are not interested in helping us move ahead and, at worst, just might have an interest in slowing things down?
Cities are the economic engines of our nation. State and national leaders seem to be teaming up with Federal regulators and big corporations to make our job of inspiring innovation, fostering entrepreneurship, giving our young access to the best 21st century tools, and bettering our economies much more difficult.
I call on the Texas Municipal League, the National League of Cities, and the US Conference of Mayors to explore these issues and add them to their legislative agendas. I also call on fellow city leaders to take the lead on this issue. Immediately, let’s address these two issues:
1) Call for a FCC rule prohibiting states from banning municipal broadband. Cities in states with such bans should begin actively lobbying their state legislature to reverse such rules. It is a counterproductive to our economic development goals. We need to begin thinking about broadband as a utility.
2) Pass city resolutions against the proposed FCC rules during this period of public comment. TML, NLC, and USCM can lead the way in creating sample resolutions and encouraging their member cities to adopt them.
City leaders must have a long-term perspective on this issue. The consequences for our citizens, families, educational institutions, and businesses are real and they are looming. It took leadership in the early 20th century to devise a regulatory program aimed at ensuring that every home and business had access to reliable electricity. Likewise, we are in need of leadership here in the dawn of the 21st century to get us the tools we need to lead the world in this innovation economy.