Minneapolis Convention Center Revenue Sources

A recent City of Minneapolis report outlines the current financial health of the Minneapolis Convention Center and the ongoing provisions used to support the facility. The center relies heavily on operating revenue (i.e. space rental), a citywide sales tax, and several taxes targeting downtown consumption patterns. In 2009, the revenue breakdown was as follows:

Convention Center Revenue (in millions)	2009
0.5% Citywide Sales Tax	$26.5
3.0% Entertainment Tax	$9.1
3.0% Downtown Restaurant Tax	$9.9
3.0% Downtown Liquor Tax	$3.8
3.0% Lodging Tax	$5.7
Operating Revenue (space rental)	$13.4
Total	$68.4

As we begin to discuss tax analysis, the convention center serves as an interesting case for evaluating tax equity. If the convention revenue system is to rely on consumption taxes, the taxed goods and services appear to be selected with at least some care for non-convention goers. However, the taxes are clearly not immune from imposing unnecessary burdens. Most of the selected taxes affect anyone going downtown to a show, restaurant, or sporting event - whether they are attending a convention or not.

However, one must examine the intended benefit of the convention center to determine if the taxes actually impose an unnecessary burden on non-convention goers. The City report states that the convention center was created to “foster and generate economic growth and vitality by providing facilities and services for conventions… which benefit the City, the metropolitan region, and the State of Minnesota” (p. 140). Funds also support the operating expenses for Meet Minneapolis, a non-profit that books convention center events and markets the Twin Cities as a convention and tourist destination. So, is the tax bundle really a ‘civic image’ tax? If so how can we measure the benefit the City receives?

A Star Tribune article states that 70% of convention goers in 2009 lived within the Twin Cities metro area. Is the building really fulfilling it’s role as a marketing tool if it is only attracting local residents? Still, it terms of economic development, the same article estimates that the center generated $173 million for the local economy in 2009. However, a 1994 study projected that same figure would be closer to $300 million, raising questions of the taxes’ adequacy during difficult economic times.