City Hall Hustle: Cheap at Any Price
How to get richer while getting poorer
Oh wait ... we actually did that last one.
Right now, the city's considering another project: a new convention (i.e., mammoth) hotel, akin to the 800-room Convention Center Hilton. Per a City Council initiative calling for a look at the issue, various economists and booster types took to council chambers last week, arguing that Austin's missing out on additional convention bucks by not having another 500-plus-room hotel near the CC.
Council's go-to outside economist, John Hockenyos of Texas Perspectives, plotted Austin against three other "peer cities" in the conventioneer business: San Antonio, Indianapolis, and Nashville, Tenn. Within a quarter-mile of the center, we have nine hotels with 2,786 rooms and one building that holds more than 500 – better than Nashville, but lagging behind San Antonio and Indianapolis.
By definition, this can only mean Austin's missing out: Hockenyos accordingly floated three economic scenarios revolving around a new convention center hotel. His conservative projection estimated nearly $14 million in direct spending – on hotels, convention center revenues, and the like – and $25 million in "total" economic activity. The most optimistic scenario predicted $46 million in direct impact, and almost $84 million overall. Hokenyos said the most likely result was Scenario B, splitting the difference and tallying almost $27 million in direct impact and $48 million overall. Those figures were also accompanied by estimates of new jobs created, plotted from 351 to 682 to nearly 1,200.
Step Right Up
Hockenyos prefaced his remarks with a thumbnail sketch of the arguments in favor and against city involvement in encouraging a new hotel. (Just what that involvement might look like – tax abatements, fee waivers, etc. – wasn't really floated at this stage.) His argument in favor was "this is gonna be good for your local economy," that a rising tide – or passenger count at Austin-Bergstrom – lifts all planes, ahem, boats. Arguments against fell into three camps: a lack of demand, potentially negative "cannibalization" effects on existing industry, and third, a philosophical objection, that "it's just not appropriate for cities to be involved in what should be a private sector enterprise."
Permit the Hustle to register a fourth objection: that, if those 700-odd jobs are created, the best benefits those employees will receive is the occasional $1 Lone Star tall boy on service industry night.
As it happens, journalist Bill Bishop at the Daily Yonder (www.dailyyonder.com) has long chronicled the detrimental effects on cities of tourism-based economies. "If you want to look like San Antonio – or Jamaica – you can have at it," he says. "You can attract a bunch of people to take your low-income jobs and be worse off than when you began," with employment and poverty rates rising together.
To that end, look at the jobs tourism promotes: the latest numbers from the Texas Workforce Commission show 21 of the 30 lowest-paying jobs in the Austin/Round Rock area are in the hospitality/service industry, ranging from an average hourly wage of $8.13 for ushers and lobby attendants to a princely $9.84 for restaurant line cooks.
It's not like Austin's exactly hurting for jobs either. Bishop points out unemployment in Travis County is 6.6%, well below the national average. "You don't have a lot of problems creating jobs, so why would you want to create ones lowering your average income?" One might suggest that any city incentives might be tied to a living-wage agreement by any prospective hotelier – although given the standards of the industry, it's a good bet that the race to the bottom would move elsewhere.
Fortunately, council members appeared to have plenty of questions of their own. "John, as usual you've waved a red flag in front of a bull," Council Member Bill Spelman told Hockenyos, before intimating that a massive hotel isn't exactly a charity case. "Can we reasonably expect whoever builds this thing is going to make as much money off this as they would off their next best alternative? ... It seems this would be a lucrative opportunity."
Of course, looming over the discussion is the ghost of another potential project, one that never came to pass: the Marriott once slated for the Las Manitas site. The only discernible economic impact that's making, since the hotelier backed out, has been for the food trailers occupying the now empty lot.
But hey – at least a $5 kebab's affordable to the hotel staff just down the street.
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