Are the yearly subsidies for the R.I. Convention Center worth it? Most say yes.

MORE THAN AN ECONOMIC ENGINE: R.I. Convention Center Authority Executive Director James P. McCarvill says that the convention center, seen in the background, was never designed to be a moneymaker, even as its impact on Providence is significant. / PBN PHOTO/MICHAEL SALERNO
MORE THAN AN ECONOMIC ENGINE: R.I. Convention Center Authority Executive Director James P. McCarvill says that the convention center, seen in the background, was never designed to be a moneymaker, even as its impact on Providence is significant. / PBN PHOTO/MICHAEL SALERNO

Billed as a future income generator, the R.I. Convention Center has been a point of contention since its doors opened in 1993.

Operationally, the facility, including the parking garage and food services, has lost more than $21 million over the last two decades – a total that doesn’t include hundreds of millions of tax dollars appropriated to repay bonds that funded the convention center and then-Westin Hotel’s construction.

Yes, the costs have been monumental – but do they outweigh the convention center’s role in defining Providence culture, hospitality and tourism?

Residents were told the RICC would be “revenue-positive” its first year, said Rep. Patricia Morgan, R-West Warwick, but this would soon be found false and, later, used as ammunition against the facility.

- Advertisement -

Some, however, namely, James P. McCarvill, executive director of the R.I. Convention Center Authority, RICC’s governing entity, as well as The VETS and the Dunkin’ Donuts Center, knew from the start that would not be the case.

Yet, from tax revenue to the indirect spending of attendees at events staged at the RICC, there is no doubt the convention center is a major economic engine in Providence, if not the metro area.

Build it, they will come … right?

Bob Burke, who remembers pre-RICC Providence, said walking through that neighborhood prior to construction was like a Dickens novel setting.

Elevated rail-line girders formed dank pedestrian tunnels, said the long-time owner of downtown restaurant Pot au Feu. The situation worsened in winter months when, he added, ice stalactites endangered pedestrians from above, while rats and pigeons resided below.

Now, after seeing its impact, Burke called the convention center, “brilliant,” but remembered how untrustworthy the bonding system financing construction was perceived initially. He said the use of public money by quasi-public groups, and the financial reaping by a small network of investors, was the catalyst for the distrust. Accountability that comes with direct state budget spending was lacking, he said.

Bonds were sold in 1991, 1993 and 2006 to pay for the convention center, hotel and parking garages, which were refinanced by additional bonds in 2009, 2013 and 2015. During this time old bonds were retired when the new bonds were floated. At the moment, the convention center authority has $301.4 million in debt on its books for the construction of the facility, as well as updates made to it and to the other two properties it has taken control of.

In the long run, Burke said, “Rhode Islanders are the [financial] beneficiaries” of the convention center.

Former Providence Mayor Joseph R. Paolino Jr. thinks a lack of financial awareness and understanding might have been the cause of the distrust.

“Rhode Islanders typically don’t like big projects, and I think there were opponents to it that were afraid of budgetary costs. I don’t think it was portrayed to them that the convention center was not supposed to make money,” he said.

What people do agree on is the outcome – downtown Providence would not be the city it is today without the convention center, a conclusion that is reflected in a 2015 report commissioned by RICCA and undertaken by Conventions, Sports & Leisure International.

Included in its finding was a summary of the 7 percent state sales, 6 percent state and local hotel occupancy, state meals and beverage, state auto rental and state income taxes collected by the RICC, Dunkin’ Donuts Center and The VETs for a recent five-year period. The average tax revenue generated between 2009 and 2013 was $10.7 million, the highest during that period was $11.8 million in 2010, the lowest was $10.1 million in 2009.

Providence Mayor Jorge O. Elorza said the greatest beneficiaries are downtown shops and restaurants that welcome convention center visitors. “Many businesses pay a premium to be downtown and they rely on foot traffic … to come out in the black,” he said.

Laurie White, president of the Greater Providence Chamber of Commerce, was one of the witnesses. Before the convention center was built, she said, the organization would hold its business expo in Providence College’s field house, subject to weather and graduations.

Martha Sheridan, president and CEO of the Providence Warwick Convention & Visitors Bureau, said for those who witnessed the development, the benefit is undeniable. “There is no one that was here in 1993 that can look at this city now and tell me that building wasn’t worth the investment,” she said.

The convention center was designed to attract visitors to Providence at a time when other cities were building similar centers that were drawing the public to their cities, explained Sheridan.

The PWCVB tracks RICC-associated booked hotel room nights they have contracted going back to 2006. On average, between calendar year 2006 and 2015 the PWCVB booked 52,976 hotel room nights annually. In 2015 Providence hosted the Irish Dance Teachers 2015 national competition, U.S. Figure Skating National Synchronized Skating championships and National Council for Education in the Ceramic Arts meeting, which, according to the PWCVB, accounted for more than 20,000 additional hotel room nights for a total of 74,108 – the highest since 2006.

To date, in calendar year 2016, in which Providence hosted a first round of the NCAA Division I Men’s Basketball tournament for the second time, the PWCVB has booked 54,560 hotel room nights. Thus far, for 2017, the PWCVB has identified room bookings of 57,020. However, numbers for both years are not finalized.

Because visitors spend the “highest dollar amount” during a convention on their hotel stay, this is the industry standard, Sheridan explained. According to the 2015 CSL report the top four expenses of nonlocals were hotels (40 percent), restaurants (25 percent), other industries (12.6 percent) and retail shops (8 percent).

The development and expansion of convention centers in other cities have had an effect on the RICC’s performance. In 1993, when the RICC first opened its doors, Sheridan said, there was one other regional competitor: Boston’s Hynes Convention Center.

Since then Hartford built the Connecticut Convention Center in 2005, while Worcester has completed a $23 million renovation and expansion to the 1982-built DCU Center.

Restaurateur Burke, who has witnessed the development of downtown Providence, said the advent of low-cost airfare has supported the expansion of convention business to more markets. Cities saw convention centers as an opportunity to bring in thousands of visitors whose spending would help pay for restaurants, businesses and public transport systems that were in dire need, he said.

Of the RICC, Burke said: “I don’t know that it’s done as much as it could, but compared to what was happening, it’s absolutely essential.”

A FISCAL CHALLENGE

Not everyone is convinced that the results justify the continuing expense. Rep. Morgan and the Republican Minority Caucus published a 2014 report that found the lease signed between the state and RICCA in 1993 held the Rhode Island taxpayer financially accountable for any debt RICCA could not pay, including debt service, bonds issued to pay for the project; maintenance and operations and “any additional payments needed.”

Morgan said this was tantamount to “floating along” with no concern for the taxpayer. “My sense is [officials] don’t care that much,” she said.

As construction of the convention center moved forward, costs rose, said Morgan, and questions were raised about the increase.

It cost $300 million to build the convention center, associated parking garages and the then-Westin Hotel, according to RICCA. Morgan found the initial design for the facility was 45,000 square feet with a total cost of $100 million, but the end product was 100,000 square feet at more than double the price.

“Taxpayers are not fools. They knew the cost would come to rest on their shoulders. They had a right to be skeptical, and they still have a right to be skeptical,” said Morgan.

What is lacking is a reliable measurement of the value of the building as an attractor of people and generator of local business, she added.

From 1996 to 2016 RICC has proved itself a money loser. On average the operation – including revenue generated by the parking garage, food services and other ancillary operations, but excluding the profit from the hotel RICCA ran until selling it in fiscal 2005 – lost $1 million per year. The highest loss ($2.4 million) came in 2015 (McCarvill called 2015 the convention center’s “worst year ever,” citing a snowy winter).

In only two years did the convention center turn a profit, 2007 and 2010, and even the biggest gain was $28,658 (on an operating budget of $14.2 million.

These totals do not include debt service, paid annually by taxpayers. In fiscal 2017 the public will pay $22.4 million of the remaining $301.4 million combined principal ($203.8 million) and interest ($97.5 million).

House Speaker Nicholas A. Mattiello did not immediately respond to requests for comment on whether the convention center has been worth the ongoing state expense.

From 1993 to 2005, when it was sold, the major moneymaker attached to the RICC was the then-Westin Hotel, which earned, on average, $6.84 million per year. According to RICCA, the capacity of the hotel needed to be increased and the state, not wanting to be in the hotel business, could not afford to do so. The $95.5 million it received from the sale was used to retire construction debt.

In 2005 and 2008, respectively, RICCA purchased the Dunkin’ Donuts Center, managed by SMG Worldwide Entertainment and Convention Event Management, and initiated management of the Veterans Memorial Auditorium, overseen by the Providence Performing Arts Council, with the goal of renewing the facilities with a “demonstrated place in the market,” said McCarvill.

Still, he said “convention centers don’t make money,” and found fault with Morgan’s report, which he said was “inaccurate” with a “forgone conclusion.”

“When you’re talking 20 years later about building-cost overruns, it’s a little late for those observations to mean much,” he said.

The $300 million price tag was what most people had issue with, said McCarvill, but economic studies show the facility has had a $100 million-plus economic impact every year for the past 15 years.

Renovations to the Dunk in 2008, paid for by RICCA bonds issued in 2006, and The VETs in 2011, paid for in full by $15 million appropriated over five fiscal years by the state’s Capital Fund, have helped the venues remain contemporary and competitive, said McCarvill.

THE FULL IMPACT

Attracting convention business has become more difficult with the existence of regional facilities and so the Providence package – shops, restaurants and quality of life – was prioritized as a selling point.

Kristen Adamo, PWCVB’s vice president of marketing and communications, said the organization highlights the city’s “less tangible” aspects when marketing to potential bookers. For example, the latest tagline PWCVB has been using is, “Your destination for inspiration,” which emphasizes the public art and numerous colleges and universities in Providence. Playing on the local culinary talent, the PWCVB has handed out promotional measuring spoons with a recipe from a local chef at marketing events.

The relationship between the city and the convention center, said Adamo, is strengthened by the PWCVB’s convention-services team, which acts as a liaison between the organization and local businesses. This success would not be possible without the RICC, a foundation on which these businesses rely and source much of their consumer base.

McCarvill says when he came to Providence in 1992 there were half as many hotel rooms and credited the increase directly to the RICC.

“The convention center generates room nights, room nights drive hotel profitability,” he said.

However, the 2015 CSL report measured other metrics from 2009 to 2013, including attendance and number of events, out-of-facility spending, tax revenue, indirect impact and employment, each of which plays a role in the city’s development.

Together RICC, Dunkin’ Donuts Center and The VETS hosted on average 508 events per year between the fiscal years of 2009 and 2016. The most events were held in 2016 (543) and the year with the least events was 2010 with 471. McCarvill had no contextual insight for the 2016 high, but said The VETS’ 2010 renovation may have caused the low then.

At RICC the most popular type of event four out of five years was meetings; at the Dunk it was the Providence Bruins; and nonticketed events, such as registrations and children’s events, drew the most crowds at The VETS.

The Great Recession preceded the time period measured, but bookings didn’t really suffer, said McCarvill of the steady trend. He added convention business was not as good as it could have been, especially for boat, RV and home shows, because there were fewer willing buyers during the lean economy.

Combined average yearly attendance for events held between 2009 and 2016 at the three facilities was 999,463. The year with the highest attendance rate was 2013 (1.08 million) and the year with the least was 2011 (908,358). Additionally, the report found between 2009 and 2013 the three venues, combined, employed an average of 1,518 people.

The report also measured out-of-facility spending by nonlocal attendees, defined by CSL as “spending by event patrons at local businesses … in conjunction with attendance at facility events,” which supports the claim the convention center generates local business. On average, between 2009 and 2016 nonlocal attendees spent $66 million, with the highest amount ($77.7 million) spent in 2010 and lowest amount ($60.7) spent in 2013.

The indirect effects of RICC spending, in which out-of-facility spending is incorporated, piques White’s interest. As Greater Providence Chamber of Commerce president, White was intrigued by how the RICC acts as a central hub for various industries.

She said reading the report reminded her of the behind-the-scenes action – utilities, AV services, floral arrangements, food, graphic design – and how much local businesses rely on RICC to survive. The revenue flowing from there, she added, gives the city an “economic kick” benefiting the taxpayer and “keep[ing] the quality of life in downtown Providence appealing, interesting and diverse.”

One such business that benefited from its close proximity to the RICC is Providence River Boat Co. Kristin Stone, general manager, said it has positively impacted bookings and interest. Open from May to December, she estimated 80 percent of the company’s business comes from RICC foot traffic. But she would like that to be higher.

Currently, RICC patrons walk 20 minutes to the nearest dock, on South Water Street, she explained, but the company wants to build a second dock.

“If [we had a stop] near the convention center where they could see signage or bump into us, it would impact those walkup [numbers] that we just don’t have right now,” she said.

The Hilton Providence is next door to the Dunk, which is connected by walkway to the convention center, and while he could not calculate a percentage of business creditable to the RICC, Socrates Ramirez, the hotel’s general manager, said it’s a “big contributor” to both room nights and food and beverage service.

If the RICC did not exist, Ramirez said the city’s hospitality industry would be drained.

“If the convention center were removed, and that much business taken away, then we would start cutting each other’s throats for everything that’s left,” he said.

In the future, RICC could play a big role in further development of the capital, he added. “Particularly the I-195 land, the convention center is a great entry point for businesses and jobs we’re trying to attract for relocation.”

WHAT IS TO COME?

If there is one way that the discussion about the convention center can move beyond the issue of taxpayer subsidies, it may come from the three facilities in McCarvill’s portfolio growing their business.

Perhaps a step toward identifying new audiences and increased revenue was taken on the evening of July 28, when the Dunkin’ Donuts Center lights dimmed and a short woman in a long, red tunic walked on stage to monstrous applause. Nineteen-year-old Malala Yousafzai, who survived an assassination attempt in 2012 by Taliban fighters in her home district of Swat, Pakistan, made her only East Coast appearance at the Dunk on that day.

Her speech was one of only a few speakers’ forums hosted at the venue in the past decade, said Cheryl Cohen, the Dunk’s director of marketing, public relations and booking, but after the success of that night Cohen would like to make it an annual event.

Cohen, who believes this type of event was lacking from the previous mix of offerings, said the event proved the audience exists. The trick is to match the right speaker with the population that Providence is trying to attract – those with more education and professional training, people who perhaps have not been attending events at the venues as much as they could.

While it was a sold-out crowd, however, McCarvill is torn about Yousafzai’s appearance and others like it. Wondering how many speakers can fill an arena, he added, “6,000 people inside is a big event in the summer, that speaks to an audience being there for the right product.”

Still, he does not seem concerned about answering critics as he looks forward.

McCarvill believes the convention center is doing what it was designed to from the start: “Our job is to stimulate business, improve economic activity and increase quality of life. By those measures [we’ve been] successful since the day we opened.” •

No posts to display