Loss leader: Pueblo’s Convention Center is losing money and its economic impact is unknown

The Pueblo Convention Center is what they call in the retail business a loss-leader, such as a toaster or TV sold for a loss during the holiday season to get customers into a store to spend more money. The convention center operates in the red in the hope it attracts enough people to Pueblo in order to to spend money at restaurants, hotels or local businesses.

This is the basis for the argument that the expansion of the convention center, which is part of phase I of the Regional Tourism Act, will fuel Pueblo’s economy. More space means more conventions and events and people, and that means more money spent in Pueblo by tourists.

While numbers show that the expansion will likely have a positive impact on Pueblo’s economy, it’s hard to tell how much better it would be for the economy because there is no record of its impact thus far.

PULP checked with the Pueblo Urban Renewal Authority, Pueblo Chamber of Commerce, Pueblo Economic Development Corporation, County Economic Director of Economic Development Chris Markuson and the Pueblo Convention Center. Nobody had an economic impact study of the convention center beyond what’s expected of the expansion.

The economic impact is just not something being recorded, most offices said. Or, they wouldn’t be tasked with collecting that information.

The convention center, however, is working on getting an analysis done, said the center’s general manager Brian Hoffman. That study would likely include the past year or two, but he’s uncertain at this point how broad the study would be.

What is known is what the expansion is projected to do for business in Pueblo.

City sales tax would equal about $199,000, and $33,000 of that would be economic development, according to Hunden Strategic Partners, a Chicago-based analytical firm that studied the impact of the expansion back in 2010.

Including county, state and lodging, the expanded convention center would provide around $585,000 in tax revenue.

Those numbers have been estimated on what Hunden believes attendees will spend while in Pueblo.

The expansion is expected to bring roughly 28,000 guests per year who will spend the night. On average, they’ll spend $138.97 per day, the report said. Hunden also expects 95,000 guests will come for the day and spend $28.79.

Today, the convention center loses, on average, $400,000 per year — a cost the taxpayers payers pick up, according to a recent study of the convention’s finances by PURA board commissioner Daniel Ramos.

And it’s likely that there will be a deficit in the future as well.

In the first year of operation, there will be a $528,000 deficit, according to the Hunden report. Operation costs will be around $1.7 million. By 2017, expected operations costs will be $2 million.

After year four, the report said the convention center may break even — profit will cover operating and staffing the building. Plus, the expansion would create a total fiscal impact of more than half a million dollars.

This is the ideal scenario, the convention center creates enough revenue to sustain itself and bring money to the community.

The center’s past and current state, however, looks much different. Much murkier.

Ramos’ report showed that the convention center only profited six out of the last 60 months because attendance is consistently not met.

In 2013, the center brought in 6,748 less people than they budgeted. In 2012, they were down 4,171. In 2011, the gap was nearly three times that at 12,490, and in 2010 it was 11,784. In 2009, the convention center fell 14,844 visitors short.

“The months that the convention center profits, tourism pays for that,” Ramos said. “The months it doesn’t, taxpayers pay for.”

Vendor fees, operating fees paid to the city by local businesses, keeps the convention center operating. The fees also help fund Memorial Hall.

That means taxpayers are funding the convention center, and the fiscal impact isn’t being recorded.

What is unknown is how much of that $400,000 coming from vendor fees is being offset.

The center was built in 1997, upon taxpayer approval, for $9.4 million. But PULP was unable to find any documents that projected the impact of the convention center would have on the downtown area or local businesses.

“I do know there were tons of documents for many many years about building a convention center as I was located in the City Manager’s Office from 1985 – 1995,” said City Clerk Gina Dutcher. “The problem is records retention and what was kept and what was destroyed over the years, as it would have only been defined as correspondence and not anything official.”

Another problem, she said, is that when city administration moved out of city hall remaining records were transferred to an old Quonset hut, where they’re currently being stored.

It’s possible to request a document about the convention center around 1997, Dutcher said. But one would have to know exactly what they were asking for because they are so difficult to find now.

Regardless, those numbers, if they exist, haven’t been a part of the conversation for the expansion.

Expansion is expected to bring more events and, obviously, more people. What the convention center loses in people from not hitting projected numbers with around 440 events per year, would ideally be made up because there’d be more events that have the potential to attract a greater attendance.

Some events have been lost due to the size of the convention center, said Hoffman.

With the expansion, an exhibition hall would allow the convention center to attract sports, such as cheerleading and gymnastics, boat shows, car shows and trade shows that require more space.

Hoffman said he knows that they’ve lost events simply because there wasn’t enough room. Even with current conventions, he doesn’t believe the center is as suitable as it could be.

In January, the center hosted a convention for Colorado’s county clerks. The space was constantly being flipped to fit the group’s needs, Hoffman said. With more square footage, that wouldn’t be necessary.

But the question remains would larger events come to Pueblo even with an expanded convention center.

The Hunden report surveyed over 1,000 sports event planners and meeting planners to understand their needs and gage the likelihood of using Pueblo’s expanded convention center.

Forty-seven percent of respondents said they’d maybe be interested in using the space, while 24 percent gave a solid yes, they would be interested in using the space.

The survey also asked respondents to rate Pueblo (1-10) as a destination. The average was 5.25.

Hunden regarded this as good, as “many national event planners indicated that they are unaware of what Pueblo has to offer,” but the city would have to work hard to get the word out about an expanded convention center and Pueblo as a destination.

Most of those visitors would be coming from around the Mountain West and Plains region, the report said. Sixty-three percent would be from outside of Pueblo.

The expansion’s $14.3 million price tag will likely be funded by the half-cent sales tax.

In the beginning, the project was supposed to be bonded out, but when time ran out and no private developer jumped on board, it was up to PURA to facilitate the loan. Their two options are a private loan or a half-cent loan.

The project is eligible for the half-cent sales loan because the jobs, by definition, are primary jobs. In December, city council voted 4-1 to allow tourism-related jobs to qualify for half-cent funds.

Construction is expected to bring in 77 workers. That will create roughly $8.3 million in new income. Long term, Pueblo can expect around 211 jobs.

“It’s not an impressive number on paper,” said Beth Gladney, PURA board chairwoman. Bringing in people is the important part. “Our goal is to see Rosario’s packed every night.”

If you ask current Pueblo City Council President Steve Nawrocki, who is also a board member for PEDCO, the group responsible for attracting businesses to Pueblo that could utilize the half-cent funds, whether a company looking to relocate to Pueblo that could create 120 direct jobs would be a likely candidate for $14.3 million, his response is similar to Gladney’s.

They’d also be considering the thousands of people the $14.3 million would likely bring to Pueblo.

In June, five city council members voted down using the half-cent money. Three of them, Ami Nawrocki, Sandy Daff and Chris Kaufman have resigned from their seats on council since then.

Today, current council president Steve Nawrocki said it looks likely the loan will be approved without those three council members.

The only other option for funding the expansion is through a private loan. PURA has approached Sunflower Bank, but it’d be more costly, possibly $1 million more, according to John Batey, PURA executive director. Using the half-cent money also adds around $2.25 million to its fund.

RTA makes the tourism projects possible because local governments are allowed to keep a portion of state sales tax. In Pueblo’s case it will get that money for the next 50 years.

But some are concerned that Pueblo isn’t a destination just yet.

“There’s a difference between having a convention center in a city and being a convention center city,” said former councilman Chris Kaufman in a phone interview.

He lost support of the expansion when it couldn’t be funded through a bond. Favoring the expansion isn’t about enjoying its success, he said, it’s about bringing people to the city. And there’s a question of if that’s possible.

Even some supporters of the financing, such as current council president Steve Nawrocki, don’t believe Pueblo is doing a good enough job of branding itself.

“They’ll spend the night, but we have to figure out how to keep them here longer,” he said.

The conversation about better branding has started and he added half-cent funds should go toward that too.

But based on his findings, Ramos doesn’t believe the expansion will draw in enough people to offset the cost.

“You’re going to have a bunch of door-greeters greeting nobody,” Ramos said.

Batey disagrees. For every dollar lost at the convention center, he said, seven more is created in the community.

But PURA was not able to provide any kind of documentation proving that statistic.

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