Convention Center Analysis
(An Urban Economics Presentation)
Zach Hines: UW-Eau Claire
About Me
5th year studying Economics and Mathematics
Interest Include:
Urban Economics
Labor Economics
Economic Theory
Convention Center Economics:
General Overview
Five City Focus Group:
Duluth, Rochester, St. Cloud, Eau Claire, Dubuque
Examine:
A convention centers costs and benefits to the local community as
well as the larger region
City-wide data (1981-2005) on income and total tax revenue for raw
correlations, general economic trends, and estimated economic
impact
The Costs and Benefits
Costs
Possible increase in property taxes or other “consumption-type” taxes
Increased traffic congestion
Possible annexation of land
Taxing on the local energy and other public services
Benefits
Culture cultivating
Engages the community
New business investment
Increased restaurant, nightclub, and retail sales
Increased hotel occupancy
Makes Eau Claire an important destination for various groups of people
Explanation of the data
Data was taken from the cities comprehensive annual financial reports
(CAFR)
Years Compiled (1981-2009)
Response Variables
City Income (INCOME)
Total Tax Revenue (TTAX)
Explanatory Variables
License and permit revenue (LICPER)
Real estate property value (REALPROPVAL)
Construction Value (CONST)
Unemployment Rate (UNEMP)
Convention center intercept dummy (CVTN) (0 if no convention center, 1 if convention center)
All variables valued in dollars are adjusted for inflation using the PCE
Raw Correlations of
CVTN variable
Strong Positive Correlations (>0.50):
INCOME for cities Dubuque, Duluth, Rochester, and St. Cloud
TTAX for cities Dubuque, Rochester, and St. Cloud
LICPER for cities Dubuque, Rochester, and St. Cloud
REALPROPVAL for cities Dubuque, Duluth, Rochester, and St. Cloud
Strong Negative Correlations (>∣0.50∣):
Negative correlations with all other variables
UNEMP for cities Rochester and St. Cloud
Weak Correlations (<∣0.50∣):
CONST for cities Duluth, Rochester, and St. Cloud
UNEMP for cities Dubuque and Duluth
Looking for General Trends: Income
Modest Growth from 1981to late
1980’s
Increased volatility from late 1980’s to
early 1990’s
Still maintains positive growth
Very strong growth through late 1990’s
Due to:
Adoptions of technology
Productivity Increases
Early-mid 2000’s we see increased
volatility and stagnant growth
Recessions have significant effects
Looking for General Trends: TTAX
Nice growth early-mid 1980’s
Negative growth late 1980’s-early 1990’s
Return to strong growth in mid-late 1990’s
2002 and 2003 were negative growth
years
2004-2005 a return to growth
Conclusions:
Recessions have significant effects
Looking for General Trends (cont.)
We see a tug of war between Eau Claire, Rochester, Duluth, and St.
Cloud in the increase in income through our time series with Eau Claire
performing the best in the first half of the 1980’s, St. Cloud taking over
in the second half of the 1980’s, Rochester blowing people out of the
water in the 1990’s, and finally Duluth outperforming every other city in
the 2000’s
We see a case where Rochester and Dubuque expand taxes the most
in the 80’s through the mid 90’s with Rochester expanding more for the
years 1980-1985 and 1991-1996 and Dubuque expanding taxes the
most 1986-1990. Eau Claire comes on strong in the late 1990’s as it
consistently increases its tax revenue
Regression Analysis
Purpose:
To analyze the effects of the CVTN variable on our dependent variables: TTAX and
INCOME
Assess the reliability of our results
Method:
For each city and each dependent variable, we chose a regression that is “the best
specified”.
We varied the “best specified regression” by subtracting elements based on their respective
levels of significance to create many different regression specifications
We assessed the “robustness” of our results by examining how the CVTN variable changed
relative to our “best specified regression estimate” as a result of different specifications
The less change in the CVTN variable, the more robust and reliable our results are.
Specified Regressions:
Defining the CVTN Variables
Dubuque
Measuring the impact of building the original convention center 2004-2005
Duluth
Measuring the impact of a major expansion 1996-2005
Eau Claire
Measuring the building of the original convention center 1980-1992 (Taken off the city’s
books in 1993)
Rochester
Measuring the impact of an major expansion 1986-2005
St. Cloud
Measuring the impact of building the original convention center 1991-2005
CVTN effects on TTAX
Cities with CVTN variables that show a positive effect based on specified regression:
Rochester ($6,187,224) (Statistically Significant)
Eau Claire ($699,874) (Statistically Insignificant)
Cities with positive results and high level of robustness:
Duluth (14 of 17 variations are positive), Eau Claire (15 of 17 variations are positive), Rochester (19 of 22
variations are positive)
Cities with CVTN variables that show a negative effect based on specified regression:
Duluth (-$549,546) (Statistically Significant)
Dubuque (-$6,756,572) (Statistically Significant) (Lack of data)
St. Cloud (-$907,725) (Statistically Insignificant)
Cities with negative results and high level of robustness:
Dubuque (15 of 17 variations are negative) (Lack of data)
St. Cloud (7 of 12 are negative)
CVTN effects on INCOME
Cities with CVTN variables that show a positive effect based on specified regression:
Duluth ($160,000,000) (Statistically Significant)
St. Cloud ($155,475,260) (Statistically Insignificant)
Eau Claire ($346,399,151) (Showed no tangible results)
Cities with positive results and high level of robustness:
Duluth (14 of 14 variations are positive)
St. Cloud (15 of 15 variations are positive)
Cities with CVTN variables that show a negative effect based on specified regression:
Rochester (-$748,000,000) (Statistically Significant)
Dubuque (-$278,686,073) (Statistically Significant)
Cities with negative results and high level of robustness:
Dubuque (9 of 13 variations are negative)
Rochester (11 of 13 variations are negative)
Possible explanations of positive and negative results
CVTN effects on TTAX
Positive Results
The expansion or building of the convention center, as well as the secondary economic
activity associated increased the value of real property, and therefore increased total
tax revenues
Negative Results
The expansion or building of the convention center, as well as the secondary economic
activity associated failed to increase the real value of property, and therefore
decreased total tax revenues.
The city gave tax incentives for building or expansion of the convention center that
were larger than any increases in tax revenue associated with the building or
expansion of the convention center.
Possible explanations of positive and negative results
CVTN effects on INCOME
Positive Results
Building or expansion of convention center created jobs for people living in the city,
therefore increasing income
Negative Results
Business activity present before convention center was built or expanded yielded more
income to workers within the city than business activity associated with the convention
center
Building or expanding of the convention center increased incomes, but increased
incomes for workers that live outside the city
Thank You!
Questions??