Economic development.

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Public Subsidies for Headquarters Hotel Development: Are They Necessary?

Charles Johnson and Charles Hunden

Economic Development Journal, Winter 2002, pp. 13-18.

A recent development in public finance is the use of tax-exempt bonds to finance convention center headquarters hotels. Since 1995, the public sector has subsidized nearly half of the $3 billion price tag of 20 major hotel developments. Competition for conventions--and the tax revenues generated by free-spending delegates--has become increasingly fierce among local governments. Cities now understand that to attract the meetings and conventions that drive their tourism industries, they must ensure easy access between convention centers and hotels. Because of the high cost of conventional financing and financial pressure during the early ramp-up years, private developers often shy away from them. Absent some kind of public sector participation, these projects tend to languish. As such, more and more governments are providing incentives for headquarters hotel development. Public involvement ranges anywhere from favorable...