Cuomo’s Folly

I am at the Orlando World centre Marriott in Florida this week, attending the nation’s premier conference on estate planning along with seven of my colleagues and more than 2,000 other leading practitioners in this field.

Not a single one of us – not me, not my colleagues, and I’ll venture to say none of the other attendees here at the doorstep of Walt Disney World – wishes the University of Miami Law School would move its Heckerling Institute on Estate Planning to Queens, N.Y.

Granted, there probably are a few estate planners in metropolitan New York who would be more likely to attend the conference if it were near home. But there is only one person in the universe who thinks he can persuade convention-goers from Florida, or Illinois, or Virginia, or California (or almost anywhere else) to park themselves on the shores of Jamaica Bay for a week in January. This person sleeps in the governor’s mansion in Albany.

In his State of the State address last week, Gov. Andrew Cuomo outlined his plan to “generate billions of dollars in economic growth” for the self-proclaimed Empire State. Number one on the agenda is to tear down the Jacob Javits Convention centre in Manhattan and replace it with a bigger, better convention centre near John F. Kennedy International Airport in Queens.

Demolishing the Javits centre is an idea worth considering. Putting a new centre in one of the outermost parts of the outer boroughs, a solid hour’s subway ride from midtown Manhattan, is not. The fact that Cuomo proposed it makes me wonder whether he is experimenting on himself before calling for the decriminalization of marijuana.

Cuomo’s imagined convention centre would feature a 3.8-million-square-foot exhibition hall, allowing it to take the title of largest convention centre in the nation from Chicago’s 2.67-million-square-foot McCormick Place. Naturally, Cuomo is counting on someone else to pay for the construction of this behemoth. His proposal rests on a planned public-private partnership with the Malaysian Genting Group, which operates the casino at the Aqueduct Racetrack, the proposed convention centre’s next-door-neighbour-to-be.

The bill for the convention centre, along with a hotel and additional gambling space, is expected to be around $4 billion. So far, the Genting Group has entered into a nonbinding agreement to finance the project. The idea that the private sector would put up $4 billion to build a white elephant this conspicuous without the government getting on the hook for a large share of the cost, plus a fortune in infrastructure, should be taken with a large grain of salt. Make that a boulder of salt.

In his apparent eagerness to build the biggest convention centre, Cuomo failed to examine how the nation’s current largest convention centre is actually performing. Citing the Chicago Tribune, a recent Wall Street Journal article reported that Chicago’s McCormick Place operates at only 55 per cent capacity. Convention centres in other cities around the country have been similar flops.

Despite its preferable location, the Javits centre has failed to live up to expectations as a boost to New York’s tourism industry, which has done very well without it. The Javits centre does host its fair share of conventions, but most of the participants are locals, so the convention centre does little to generate business for hotels and restaurants. Meanwhile, it occupies a piece of land that could be worth up to $4 billion, as Robert Yaro, president of the Regional Plan Association, told the New York Times. (The fact that this equals the estimated cost of Cuomo’s pipe dream in Queens is, at least, an interesting coincidence.)

After demolishing the Javits centre, the city would lead the way in the development of a planned community including housing, hotels and museums. Battery Park City, at Manhattan’s southern tip, has been promoted as a successful model.

It might make excellent sense to knock down the Javits centre and put that valuable property to better use – not to mention back on the tax rolls. If he had stopped with this suggestion, I would be offering kudos to Cuomo for broaching the subject. There are many good reasons why private hotels, like the Marriott where I am staying this week, should finance their own convention spaces if they think they will attract sufficient business, and if they believe it is the best use of their real estate.

The Heckerling Institute used to be housed at the Fontainebleau Hotel on Miami Beach. That venue lost the business some years back when it underwent a renovation. The Marriott has held on, even after the Fontainebleau reopened, because of its superior facilities and competitive nearby attractions. Such is life in the private sector.

Meanwhile, a few miles away from the Marriott, Orlando’s municipal convention centre is struggling along with the rest of the industry. The Florida United Numismatists left town yesterday. The convention centre is dark through Wednesday. On Thursday it lights up again with the Surf Expo, the Art 4 Clean Air art contest, and the 2012 Martha’s Sewing Market put on by Martha Pullen, Inc. Friday brings the Orlando Spring Home and Garden Show. It is safe to say that central Florida’s hospitality industry is not waiting with bated breath for any of these events.

The convention industry is struggling everywhere. From 2000 to 2010, the number of convention attendees dropped from 126 million to 86 million people. The rise of on-line webinars and other technology-driven substitutes is likely a major factor, along with elevated domestic travel costs as fewer airlines fly with fuller planes. Yet in that same period, the amount of convention space increased from 53 million square feet to 70 million square feet. In attempts to increase their market share, cities sank ever-increasing sums of money into building ever-bigger convention centres, further devaluing the space. Cuomo proposes to take this trend to its most illogical extreme.

Given all the options for convention sites and the low level of interest in attending conventions altogether, organisers have no choice but to focus on hosting conventions in places where people already want to go. And the plain truth is that almost nobody wants to go to the far reaches of Queens.

Then there’s the problem of the climate. Aside from McCormick Place, which is in downtown Chicago, the country’s other largest convention centres are in Orlando, Las Vegas, Atlanta and New Orleans. All of those places are decidedly sunnier than Queens.

The Genting Group, or any other private party, would have to be stupid to expect that it could recoup a $4 billion investment on the Queens convention centre. I doubt the company’s managers are stupid. However, I also seriously doubt a Genting spokesman’s statement that the company’s stated willingness to fund the convention centre is unrelated to the governor’s recently expressed support for a constitutional amendment to legalise table games in casinos.

“Though Genting Americas supports the governor’s constitutional amendment legalizing table games in New York, our plans for a privately funded, $4 billion convention centre are not predicated on that amendment,” the spokesman, Stefan Friedman, told The Wall Street Journal. I’ll believe this when Genting, or any other private investor, actually puts billions of dollars in cash on the table without government financial backing. But don’t bet on it.

Cuomo may be trying to win back the favour of New York’s influential labour unions, whom he offended last year with fairly hard-line positions on budgets and taxes. Or he may be trying to appear as a visionary with high aspirations for his state ahead of the 2014 re-election campaign for governor and a possible presidential candidacy in 2016.

But here in sunny Florida, Cuomo does not sound like a visionary with high aspirations. He sounds like he’s just high.


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