Consultant: Conference Center to lose money before it makes money
Projection given as part of a long-range marketing study
Thursday, September 5, 2013
Editor's Note: Click here for an updated, expanded report.
Jefferson City should expect a conference center to operate in the red for at least a decade, even though it has “key characteristics” to support a conference center, City Council members were told Thursday night.
City officials should consider a smaller accompanying hotel, a consultant told the council members at a two-hour public meeting before the council went into a closed session to discuss the specifics of two proposals it received earlier this year.
Charles Johnson of Johnson Consulting went over his updated conference center market study that Jefferson City commissioned earlier this year, for $17,000.
The study said it expects a local conference center to show net losses of $500,000 in 2015, the first year of operation.
That annual deficit could shrink to $55,369 by 2025. But the cumulative loss over 11 years from 2015 to 2025 would be nearly $1.8 million.
Those figures, the study notes, are “worst-case projections.”
“The proposed conference center is expected to operate at a net deficit throughout the projection period,” Johnson’s study said. “However, the projected deficits are consistent with those observed at conference centers of similar size and orientation.”
The study also said that the Jefferson City is “adamant” that it would not pay annual subsidies to prop up conference center revenues after its anticipated $9 million outlay to build the center.
“It is reasonable for the hotel developer to incur the risk associated with this project, so as to guarantee zero liability to the city after the city pays debt service,” the report said.
In response to a question from Mayor Eric Struemph, Johnson said that the city could consider giving a marketing stipend or capital improvements stipend rather than a subsidy.
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