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Wednesday, July 23, 2014 |  Madison, WI: 66.0° F  Fair
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MADISON.GOV

Calculating Monona Terrace's economic impact
The numbers from the city's accounting firm don't add up

Ahrens: 'We don't really know what the level of direct spending is.'
Ahrens: 'We don't really know what the level of direct spending is.'
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The way Gregg McManners sees it, Monona Terrace is raking in dough for Madison.

McManners has said that Monona Terrace Community and Convention Center, where he is general manager, has more than paid for itself in economic benefits: "The average economic impact generated by Monona Terrace in the past seven years, which has benefited the city of Madison...is $41,581,300 or roughly 62% of its construction cost every year."

McManners makes the case as he and other convention center boosters urge the city to invest even more in Monona Terrace. The Judge Doyle Square proposal -- expected to top $200 million and include a $25-$50 million city subsidy -- is meant to offer Monona Terrace more hotel rooms, which these boosters say it needs to draw in bigger and better conventions. The city will reap the economic benefits, they insist.

But the supporting evidence for Monona Terrace's economic benefit contains inconsistent numbers and disingenuous claims, and reveals some bizarre trends.

For instance, the largest "convention" held at Monona Terrace -- accounting for 15% of the $32.8 million in spending generated in 2012 and 27% of the $23.5 million spent in 2010 -- is Ironman Wisconsin. The annual bike, foot and swimming race takes place on Madison's streets and lakes each September. Monona Terrace provides some support functions, but the facility hardly seems indispensable to the event. Although it's a one-day race, Monona Terrace considers it a weeklong convention. The Madison Marathon is also considered a "convention" that Monona Terrace draws to Madison.

"Do they run the Ironman inside the convention center?" asks Heywood Sanders, a professor of public administration at the University of Texas at San Antonio and a prominent critic of publicly funded convention facilities. "To credit the Ironman with the convention center...seems to be a stretch."

Suspicious patterns

Virchow, Krause, the local branch of the accounting firm Baker Tilly, provides breakdowns of Monona Terrace's economic impact each year to the city. (Read the economic impact reports for Monona Terrace for 2006, 2007, 2008, 2009, 2010, 2011, and 2012.)

In 2012, according to the firm, more than 46,000 people attended 65 conventions or conferences held at Monona Terrace. Some of these are annual events, such as the one held by AIA Wisconsin, the architectural trade group. Oddities emerge when you compare the group's conventions over the years.

Baker Tilly's numbers show that in 2006, 2007 and 2008, 2,000 people attended the AIA convention. The economic benefit to the city from these conventions is given as $227,800 in 2006; $232,800 in 2007; and $229,000 in 2008.

In 2009, attendance for AIA is measured at 1,000 -- half of what it had been the three previous years. Despite that big drop, the economic benefit to the city, according to Baker Tilly, increased slightly to $234,400.

In 2010, attendance goes back up to 2,000 for the event, but the economic benefit to Madison drops to $202,184. For 2011, Baker Tilly lists attendance dropping to 1,284. Nevertheless, the economic benefit from the convention soars to $378,230 -- an 87% increase in spending despite a 36% drop in attendance.

Baker Tilly's data for other conventions show similarly suspicious patterns. In 2010, 5,000 people attended the Wisconsin State Music Conference, the annual event held by the Wisconsin Music Educators Association for K-12 music teachers, students and parents. According to Baker Tilly, this event generated $758,190 in spending.

The same conference in 2011 saw attendance plummet to 1,300, according to Baker Tilly. Yet this much smaller group generated an even greater economic benefit for the city, spending a collective $1,016,577 -- a 34% increase in spending despite a 74% drop in attendance.

If Baker Tilly's numbers are correct, 1,284 architects spent $378,230 in Madison over three days in 2011, while 1,300 K-12 music teachers and students (people not generally known for deep pockets) spent more than $1 million over four days.

"These numbers are not credible," says Sanders, who studies reports like these from around the country. "This is crazy."

Inaccurate figures

Baker Tilly's attendance figures, it turns out, are wrong for both events.

Kevin Thays, a spokesman for the Wisconsin Music Educators Association, says the big drop in attendance that Baker Tilly shows didn't happen. In both 2010 and 2011, more than 7,000 people came to the conference. And Brenda Taylor, an AIA Wisconsin spokeswoman, reports no major fluctuations in attendance for her group. Between 2006 and 2010, AIA's convention drew about 1,500 people each year, with about 400 venders. In the past three years, attendance has dipped to around 1,300.

Baker Tilly did not respond to calls from Isthmus. Bill Zeinemann, Monona Terrace's associate director of marketing and event services, says, "Baker Tilly has a firm policy to allow the client to work with media inquiries." Monona Terrace officials would not meet with Isthmus about the studies, responding to questions only in writing.

Officials write that Ironman Wisconsin is much more than a one- or two-day event: "Setup and deliveries for the race typically start on the Tuesday before, and teardown lasts until the Tuesday after the race."

Monona Terrace is vital to the race, in part because "the bikes for 2,000-plus race participants are stored on the top deck of the Monona Terrace parking ramp. The athletes' transition from swim to bike, and from bike to run, takes place inside of Monona Terrace in our ballroom space. The athletes' gear bags are inside of Monona Terrace."

An email from Zeinemann insists that spending estimates from conventions are conservative. He says the spending estimates changed for the 2010-11 season because Monona Terrace and Baker Tilly "completed a survey of event attendees, sponsors and exhibitors. Starting with the 2011 analysis, the data from this survey replaced the previously used national data source."

Lack of scrutiny

At the July 16 Common Council meeting, Ald. Mike Verveer -- a longtime convention center booster who sits on its board -- said that Monona Terrace rarely gets much scrutiny.

The council was debating whether it should allow the convention center to put out for bid a major renovation of its bathrooms -- expected to cost about $1.2 million. Several people from the public spoke, asking the council to instead invest in homeless services. Some alders said the bathrooms were in good shape.

"This really is a new experience," Verveer told the council. "In all the years I've been here, I can't recall this much discussion about Monona Terrace's capital budget, frankly ever."

Ald. David Ahrens, who was elected in the spring, says he's new to the debate. He's reviewed the economic impact reports and says they show "we don't really know what the level of direct spending is. They clearly overstate, substantially overstate, what any measure of direct economic impact is."

Ahrens doesn't understand why the city is spending so much money on "a very specific industry in a very small part of the city."

"I have not seen any evidence to support that this is a wise or fruitful benefit for the city, to invest millions in a minuscule part of the economic activities of the city," he says. "Now the question is, are we doubling down with the prospect of a new hotel?"

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