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City Council members are poised to spend another $800,000 or more over the next three years on the convention center's mechanical systems, kitchen equipment and other items skipped during the earlier renovation --- all this in a facility routinely running an annual $60,000 to $100,000 direct operating deficit.

"Right now, from a scheduling standpoint, we have to be very careful when we talk to (convention) groups to make sure we have availability with rooms," said Gary Wheat, executive director of the Waterloo Convention and Visitors Bureau.

"We're coming off two straight quarters of record-breaking hotel-motel tax revenue," he added. "A lot of that is a direct result of what we're seeing for increased business at the convention center."

The 30-year-old downtown landmark --- named for the city's most famous sons --- has been hopping with activity since the $1.5 million overhaul in 2003. That has fueled overnight hotel stays and brought extra business to area restaurants and stores. Yet the building continues to strain the city budget.

City Council members are poised to spend another $800,000 or more over the next three years on the convention center's mechanical systems, kitchen equipment and other items skipped during the earlier renovation --- all this in a facility routinely running an annual $60,000 to $100,000 direct operating deficit.

"I don't lose sight of the fact that it runs in the red," said Mayor Tim Hurley. "I'm not satisfied that it's not making money, but there's very few (municipal civic centers) that do.

"If we don't have a convention center, regardless of who owns it, we lose a heck of a lot of competitiveness as a community. We lose the turnover in dollars and overnight stays," he added. "Do we just throw in the towel and let other people have this business? Or do we compete?"

Birth and rebirth

Voters approved a $5.5 million bond issue in 1972 to construct what was originally called the ConWay Civic Center, amid a wave of convention center construction nationwide. It officially opened in 1975. A hotel, now the Ramada Inn, was built in 1983 to provide lodging for conventioneers and manage the facility, and the adjacent parking lot was expanded at city expense.

The ConWay was renamed in 1988 in honor of five Waterloo brothers killed while serving on the same ship during World War II.

Advertising brochures circulated before the original bond issue called the civic center "an investment that promises to pay for itself twice over." But that promise was not realized. The center required annual operating subsidies from the city, and important maintenance was ignored.

Facing growing complaints from center users about its deteriorating condition --- and declining room rentals --- the city invested nearly $1.5 million into an upgrade in 2003. New paint, ceiling tiles, carpet and flooring, restroom improvements and other repairs were undertaken.

City officials and Dennis Law, general manager of the Ramada Inn, say the renovation has paid dividends.

"I think the decisions all around have been in the right direction," said Law. "Our numbers every year have gone up, even with the opening of the Pipac Centre on the Lake, a privately owned convention and meeting facility in Cedar Falls.

"A couple of years ago, we did 37 weddings," he added. "This year, we'll probably do 50 or 60."

Law said the Sullivan center has been getting back business lost during the early '90s due to the center's poor condition. The changes have provided another tool for increased marketing efforts by both the hotel and CVB.

Wheat said his office and the hotel have added staff to market the center, while word of mouth about the renovation is starting to circulate among event planners.

"People are seeing we've put a lot of money into this place and it's very nice," he said. "We hear people saying they had a great time and are coming back."

Hurley noted complaints to his office about the center have turned into compliments.

"The comments have been that it looks great. It's moved out of the '70s into the 21st century and looks sharp," Hurley said. "The service, the food and presentation have all made a giant leap in reputation and acceptance thanks to the hard work of Ramada and Dennis Law."

But the center still requires public funds to stay open.

Still costing money

The only direct cash to city coffers is the 4.5 percent of gross revenue the center pays based on a long-term lease agreement with Ramada. That always falls well short of the city's maintenance costs.

Lease payments for the last four years ranged from $41,000 in 2002 to $47,000 last year. Maintenance costs, which do not include capital improvements to the building, have run from $82,000 to $138,000. The current budget shows a $100,000 shortfall between revenue and expenses.

The Sullivan center also receives 20 percent, or at least $150,000, of the revenue generated from a 7 percent surtax on hotel rooms citywide, while the remaining $600,000 to $700,000 is spent on tourism marketing, events and quality-of-life projects. But a large chunk of the Sullivan's share is earmarked to repay $500,000 in bonds sold as part of the $1.5 million renovation project.

The rest of the renovation was financed with bonds repaid through property taxes. And more than $350,000 in property tax-backed bonds are earmarked for additional work, including entrance doors, recarpeting and painting several first-floor conference rooms, buying new chairs, replacing tables, new employee restrooms and new kitchen equipment.

City Council members are also scheduled to hold a public hearing Aug. 15 on the sale of another $450,000 in bonds to make improvements to the heating and cooling system. Ramada has agreed to forward energy savings resulting from those improvements to the city for repayment of the bonds.

Such subsidies have drawn criticism, amplified in 2002 when the city campaigned for voters to approve an option tax referendum for construction of Vision Iowa projects, including a planned sports center. Critics said the sports facility would become another "white elephant" or "albatross" like the Sullivan center. The referendum failed.

But Waterloo's convention center is not alone in requiring a subsidy.

Worth the cost?

David Petersen, a convention center consultant, wrote in a 2001 Urban Land Institute report "almost every convention center in the country operates at a loss, not even counting construction costs or debt. In North America, only two or three convention centers in major markets consistently generate enough operating income to pay operating expenses."

The city-owned US Cellular Center in Cedar Rapids, for example, ran a $160,000 deficit in 2004 and is budgeted to fall $600,000 in the hole in the current fiscal year, according to the city's budget published online.

The Brookings Institution's Metropolitan Policy Program issued a study in January noting the overall convention marketplace is declining while total convention space continues to develop. Overall attendance at the 200 largest trade show events "languishes at 1993 levels," while convention space has grown by over 50 percent since 1990.

"To cities, the lure of the convention business has long been the prospect of visitors emptying their wallets on meals, lodging and entertainment, helping to rejuvenate ailing downtowns," said Brookings study author Heywood Sanders. He contends those benefits have failed to materialize in most cases in ways that warrant the public investment.

"This analysis should give local leaders pause as they consider calls for ever more public investment into the convention business, while weighing simultaneously where else scarce public funds could be spent to boost the urban economy," Sanders added.

But local city and tourism officials believe there is a tangible benefit to bringing in overnight visitors to stay in hotels, eat at restaurants and shop in stores. Such activity boosts hotel and sales taxes received by local government while bolstering the viability of small businesses paying annual property tax bills to cities, schools and county government.

"That's ultimately the job within our business," said the CVB's Wheat. "The role the convention center serves is to generate that other traffic, which is overnight stays, restaurant and retail business."

Mayor Hurley notes the Sullivan center is not unlike other quality-of-life activities in Waterloo, including parks, golf courses, recreational trails or the Center for the Arts, which require tax subsidies but also play a role in attracting new tax-paying businesses and homeowners to the city.

Many of the projects funded by the Vision Iowa Program, a statewide effort to attract more Iowans, involved convention center construction and renovation, he said. And the Sullivan center, while not tied to Waterloo's Vision Iowa project, will play a role in downtown renovation, which includes Cedar River improvements, riverwalk trails and a pedestrian mall and amphitheater.

"With all the stuff we have on the table now, I'm convinced (the Sullivan center work) is a proper expenditure," Hurley said.