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Spinning off the convention business

The city is looking to get out of the convention and entertainment business and maybe make a few bucks in the process.

The city’s Convention and Entertainment Facilities department currently runs the George R. Brown Convention Center and other city-owned venues downtown. A plan on its way to City Council next week would make the department a separate corporation that does not need council approval for its purchases. About 120 people who work for the department no longer would be city employees and would lose their union protections under the plan.

A summary of the plan obtained by the Houston Chronicle outlines the creation of Houston First, a merger of the city department with the Houston Convention Center Hotel Corporation, a city-created nonprofit that runs the Hilton Americas hotel adjacent to the convention center. Houston First would have its own board of directors and lease the convention center and other buildings from the city for $2 million a year. It would pay the first five years’ rent up front during the fiscal year that starts on July 1.

That cash infusion would bring down next fiscal year’s projected budget gap to $75 million, a shortfall that had been as high as $130 million but has steadily shrunk as the city lays off employees, consolidates operations and finds other savings.

[…]

The new corporation also would run the Wortham Center, Jones Hall and the Miller Outdoor Theatre.

I’m generally not a fan of privatization – Lord knows, the track record of it in this state sucks – but this doesn’t seem unreasonable to me. Unlike handling food stamps and other state benefits, running these facilities doesn’t strike me as a core function of government, and there’s no reason why a private non-profit couldn’t do a perfectly good job. As the story notes, the city spun off the zoo in a similar fashion in 2002, and I daresay it’s none the worse for wear. I’d like to know what happens at the end of the 15-year lease – do the terms get renegotiated, or does the non-profit get the businesses free and clear? – but otherwise I’m not particularly alarmed. What do you think? Nonsequiteuse has more.

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3 Comments

  1. Nonsequiteuse says:

    I don’t automatically oppose privatization, or shedding of non-core services, but this article made me uneasy for several reasons. First, it seems to be happening quickly, with some key stakeholders (major tenants for the facilities like the Opera & Symphony) perhaps not knowing anything about it. Even if the whole deal is a great one for the city, having the news come out like this just a few days before the scheduled vote makes it seem like someone is trying to get somthing by without scrutiny. Second, is there a less-drastic step that could be taken? Could the burdensome purchasing and contracting requirements that tie things up in council be changed so the city could benefit from what consultants think could be $3-7M more in sponsorship money each year? And, if there really is that much more to be made, should the rent be a mere $2M/year; or, perhaps, should there be a chance for other potential operators to bid on running it? Because if they could make $15-35M over 5 years, is the city really well-served by receiving only $10M in rent?

  2. […] press release from the Mayor’s office about the proposed spinoff of the city’s convention business hit my inbox this afternoon: Mayor Annise Parker today […]

  3. […] here for some background. The story notes that the Mayor’s office overcame some initial skepticism […]