Will RNC convention be an economic bonanza for NC?

By: Dan Way - Carolina Journal

RALEIGH — The 2020 Republican National Convention in Charlotte will gain international attention, but isn’t likely to provide a major economic boost to the city. Nor will the mega-event have a big impact on North Carolina’s election results.

That’s the long view of Eric Heberlig, a UNC-Charlotte political science professor and co-author of the book American Cities and the Politics of Party Conventions.

Pundits and the media “often focus on whether having a convention in a particular state will help that party win the state,” especially if it’s a swing state, Heberlig told Carolina Journal.

“We found that it really doesn’t make a difference,” Heberlig said of the research he and his co-authors conducted. Typically the party that wins the popular vote in a convention state would have won it with or without the convention.

“The political parties tout the big economic impacts because they want to attract cities to bid,” Heberlig said. Economic impact studies are done after national party conventions. “In all but a few instances, it’s very positive,” their research showed.

But compared to the size of a large city’s economy, even a successful four-day event is “pretty much a drop in the bucket,” Heberlig said. Hosting a convention has a downside as well. It disrupts the normal flow of activities for residents and regular visitors, imposes costs for police and security which aren’t always recovered, and can tip small local businesses which won’t gain from convention traffic into bankruptcy.

The Charlotte metropolitan statistical area had a $163.6 billion gross domestic product in 2016, according to the U.S. Department of Commerce. Economic developers put the total impact of the 2012 Democratic convention on the local economy at $163 million — or 0.1 percent of the city’s annual economic output.

When Charlotte was announced as the RNC 2020 winner Friday, July 20, and a contract was signed with the Republican National Committee, Republicans touted the expected economic gains.

“The convention brings millions of dollars of positive economic impact to Charlotte and our state as a whole,” N.C. GOP Chairwoman Michele Nix said.

“I know the residents and city officials will do an excellent job hosting the thousands of visitors expected to descend on the Queen City, and I look forward to the positive economic impact all of this will have on the entire state of North Carolina,” said Lt. Gov. Dan Forest.

Boosters say the bounty will cross state lines.

“With Charlotte so close to the South Carolina border and only a little over an hour away from Columbia, the South Carolina capital, we know the economic impact will be extensive throughout both Carolinas,” said South Carolina Republican Party Chairman Drew McKissick.

Hotels, caterers, security forces, and taxi drivers will profit during the convention because they will operate inside a tightly restricted security zone set up by the Secret Service.

“The economic impacts on everybody else are not going to be widespread,” Heberlig said.

Some businesses inside the security zone are likely to lose money because the Secret Service will require them to close for the week, Heberlig said. Parking decks will be shut down as part of anti-terror measures, and the city will need to plan and execute complex logistics. “If everybody thinks they’re going to make money out of this, those people are going to be angry.”

Heberlig believes the larger potential benefit to a convention host city is international branding and marketing. Having hosted the 2012 Democratic National Convention, Charlotte can tout two recent successes on its resumé.

But any boost in branding is intangible, Heberlig said.

Looking at economic indicators before and after a political convention, it’s impossible to say whether the event affected a city’s economy. Heberlig compared convention effects to advertising. Companies can’t conclusively say consumers bought their products because they saw an advertisement, or if they would have purchased them anyway.

Convention-related branding and marketing also can give taxpayers unexpected headaches.

Host cities tell taxpayers state and local governments won’t spend their money, Heberlig said. But depends on hitting a promised fundraising goal the host committee negotiates with the political party. For RNC 2020, it’s $70 million. Former Charlotte City Council member John Lassiter, a political ally of former Gov. Pat McCrory, has been named president and CEO of the host committee.

If the host committee doesn’t hit the goal, it faces a dilemma. Does it cancel some scheduled events, disappointing delegates and other visitors, or do governments cough up the shortfall?

“The visitors, if they don’t feel like they’re getting the experience they expected, they’re not going to blame the host committee,” Heberlig said. They’ll scorn the city.

Host committee promises can seem to hold cities hostage. Or cities hit up corporate sponsors for more money. In 2012, Duke Energy — a regulated monopoly utility — forked over $10 million to erase the Democrats’ Charlotte shortfall.

Heberlig said state governments sometimes come to the financial rescue.

According to The Patriot News in Harrisburg, Pennsylvania paid $10 million to the host committee for the Democrats’ $86 million 2016 convention in Philadelphia for venue rental, event production, and construction.

The Chicago Tribune reported Illinois taxpayers spent about $13 million for the 1996 convention in Chicago. City taxpayers paid about $6.3 million for venue rental, police and fire protection, and other administrative costs. A $6.7 million state tourism grant covered city costs for employee legal services, transportation planning, and sanitation.

Dallas Woodhouse, the N.C. Republican Party executive director, dismissed the possibility of a taxpayer bailout in 2020.

“If you look at this on either the Republican or the Democrat side, these things are set up to protect the taxpayer, and they have been year in and year out. There’s no reason to think that ours is going to be any different,” Woodhouse said.

Despite the $10 million deficit, “The taxpayers were not on the hook in 2012, and the city manager said that this contract was even more favorable to the city of Charlotte,” Woodhouse said.

“Here’s the biggest reason that taxpayers can’t get stuck with it,” he said. If conventions don’t make money, “Nobody’s going to host a convention anymore. You’ve got to be able to go somewhere in four years.” The host committee posts a bond to cover specific costs. “The debts they incur are owed as a legal entity by that committee.”

Some tax money will pay for security no matter where the conventions are held. The federal government has provided $50 million for convention security costs since 9/11. “No place has ever gone over the $50 million,” Woodhouse said.

Former Charlotte City Council member Don Reid isn’t convinced. The Charlotte Regional Visitors Authority was a co-bidder with the city for RNC 2020, and Reid expects the authority will lose money on the convention. CRVA operates the Charlotte Convention Center, Spectrum Center (formerly Time Warner Cable Arena), Bojangles’ Coliseum, Ovens Auditorium, and NASCAR Hall of Fame. He says they all lose money.

“I personally am a Republican, a conservative, but I don’t want the Republican National Convention here because it will cost the taxpayers money,” Reid said.

Attempts to get comment from the Visitors Authority by press time were unsuccessful.

Reid said Charlotte’s uptown area will be closed down, disrupting city life and further complicating the city’s overloaded traffic flow. The transit center is inside the security zone, so bus patrons will be routed to a temporary tent facility.

“If you think we can’t build walls [to keep illegal immigrants out of the country], come to Charlotte, and see how quickly the walls are built around the downtown area that keeps everyone out,” Reid said. “We need to put those folks in charge of the southern border. They’d build that wall in six months.”

Rather than pursuing attention-grabbing one-time events aiding a tiny slice of Uptown Charlotte businesses, Reid said, the city should focus more on funding essential services citywide.

Dan Way

Carolina Journal