City Government and ICVA and Arts & Entertainment, etc. and Conventions and Marketing and Local Government and Hospitality taxes and Tourism Groups and Taxes and Capital Improvement Board and Hotels and Tourism & Hospitality and Government & Economic Development and Government and Media & Marketing

ICVA might take out loan to market city for conventions

August 24, 2009
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The Indianapolis Convention & Visitors Association is so desperate for more marketing funding, the organization charged with promoting the city as a convention and tourism destination is considering taking out a loan.

While that would be the last resort, ICVA CEO Don Welsh said it is one he will have to consider if the money can’t be raised through local taxes.

“This is a most critical time for this city,” Welsh said. “If we don’t market the city’s new infrastructure, the money we could generate [through visitor spending in the near future] is irrecoverable.”

The timing is critical, Welsh said, because with Lucas Oil Stadium and the Indiana Convention Center expansion, which opens next year, the ICVA has more inventory to sell.

The Indiana Convention Center’s $275 million, 420,000-square-foot expansion is expected to be finished in December 2010. Including Lucas Oil Stadium, the Indianapolis Convention and Visitors Association will have 1.2 million square feet of convention space, 65 percent more than it had in the Convention Center and RCA Dome. That will make the city the 16th largest in the country in terms of convention space, an improvement from 32nd.

The ICVA also wants to capitalize on the new midfield airport terminal and 1,626-room JW Marriott hotel complex, set to open next year, to maximize the city’s revenue potential from direct visitor spending.

Studies commissioned by the ICVA show every dollar spent marketing the city to convention-goers and leisure travelers will reap at least $1.72 paid back to the city’s Capital Improvement Board in taxes and $4.48 in state taxes, Welsh said.

“We’re showing that this is a solid investment that is strategic in its approach,” he said.

Welsh

The ICVA is funded largely through hotel taxes collected through and distributed by the city’s Capital Improvement Board, which owns Conseco Fieldhouse, the Indiana Convention Center and Lucas Oil Stadium.

Welsh said the ICVA spends 85 percent of its $10.5 million budget on sales and marketing, with the rest going toward administration, finance and information technology. The ICVA is seeking $1 million more for marketing this year and $3 million to $5 million on top of its current budget for 2010 through 2012.

The money would be used to add sales and marketing staff, to advertise in trade publications, and to beef up the ICVA’s presence at gatherings for trade show and convention planners. It would also enhance the ICVA’s ability to fly prospective customers here for site visits. Extra funds would also be used to market the city to leisure travelers in neighboring cities, such as Chicago, Cincinnati and Louisville.

But CIB and the City-County Council, which has control over other funding mechanisms, aren’t optimistic any additional funds will be found for the ICVA this year.

And time is running short to find funds for 2010. CIB’s budget for next year was approved by the City-County Council Aug. 10 without the extra marketing funds requested. At the same meeting, the council voted 15-14 to raise the city’s hotel tax from 9 percent to 10 percent to help CIB close its budget shortfall. Most of that money will go toward operating Lucas Oil Stadium and other CIB operational expenses.

If the marketing money is to be included in the city budget, it will have to be added quickly. The council must approve the city’s 2010 budget by Sept. 30. It’s convening a five-member task force to study the matter, but there’s no guarantee it will come up with funds by the end of next month.

If the money is not included in the city budget, the ICVA has few options.

If the economy picks up, boosting local hotel business, the money generated by the hotel tax would increase, but there are competing interests for those extra funds if they materialize. The Indiana Pacers need $15 million to operate Conseco Fieldhouse and CIB needs more money to operate and maintain Lucas Oil Stadium.

Early

The ICVA could seek a special appropriation from the city budget, which could occur almost anytime during 2010. But City-County Council members expect that budget to be tight.

If no money from those sources materializes, the ICVA would have to consider taking out a loan. ICVA officials said they’d likely have to make that decision by next spring to maximize the visitor traffic for the year. The loan would only need the approval of the ICVA’s 34-member board, which includes the CIB president and two council members who do not have voting power.

CIB members said their hands are tied when it comes to raising more money for the ICVA.

“At this point in time, we’re just covering our expenses and we don’t have the money in the budget for additional marketing in 2009 or 2010,” said longtime CIB member Pat Early. “We understand the value of marketing for the ICVA, but we’re dealing with the reality of the situation we’re in.”

City officials are faced with a chicken-and-egg scenario. Taxes generated through visitor spending are needed to pay for infrastructure construction and operation. But it costs significant dollars to draw in the visitors needed to raise those taxes.

Not everyone on the council likes the loan idea, especially during a recession, when revenue forecasts can quickly go south.

“It’s bad financing to borrow money for operational expenses,” said City County-Council President Bob Cockrum, a Republican. “You’re just running up your credit cards to the point where you can’t pay them back.”

But Cockrum doesn’t dismiss the ICVA’s marketing needs, and admits it will be difficult to find money from city tax sources.

“Personally, I think this is an issue that needs to be revisited,” said Joanne Sanders, the Democratic minority leader on the City-County Council. “I think the ICVA has a great argument for this funding. But I just don’t know what line item it would come from.”

Cockrum thinks he has a long-term solution to the problem, but it might not fly outside Marion County.

“I feel tourism and convention business is a regional issue and should be supported regionally,” he said. “I think it’s time to start talking to officials in the surrounding counties to gain their support for this initiative.”•

 

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