Cuomo’s Folly

I am at the Orlando World Center Marriott in Florida this week, attending the nation’s premier conference on estate planning along with seven of my colleagues and more than 2,000 other leading practitioners in this field.

Not a single one of us – not me, not my colleagues, and I’ll venture to say none of the other attendees here at the doorstep of Walt Disney World – wishes the University of Miami Law School would move its Heckerling Institute on Estate Planning to Queens, N.Y.

Granted, there probably are a few estate planners in metropolitan New York who would be more likely to attend the conference if it were near home. But there is only one person in the universe who thinks he can persuade convention-goers from Florida, or Illinois, or Virginia, or California (or almost anywhere else) to park themselves on the shores of Jamaica Bay for a week in January. This person sleeps in the governor’s mansion in Albany.

In his State of the State address last week, Gov. Andrew Cuomo outlined his plan to “generate billions of dollars in economic growth” for the self-proclaimed Empire State. Number one on the agenda is to tear down the Jacob Javits Convention Center in Manhattan and replace it with a bigger, better convention center near John F. Kennedy International Airport in Queens.

Demolishing the Javits Center is an idea worth considering. Putting a new center in one of the outermost parts of the outer boroughs, a solid hour’s subway ride from midtown Manhattan, is not. The fact that Cuomo proposed it makes me wonder whether he is experimenting on himself before calling for the decriminalization of marijuana.

Cuomo’s imagined convention center would feature a 3.8-million-square-foot exhibition hall, allowing it to take the title of largest convention center in the nation from Chicago’s 2.67-million-square-foot McCormick Place. Naturally, Cuomo is counting on someone else to pay for the construction of this behemoth. His proposal rests on a planned public-private partnership with the Malaysian Genting Group, which operates the casino at the Aqueduct Racetrack, the proposed convention center’s next-door-neighbor-to-be.

The bill for the convention center, along with a hotel and additional gambling space, is expected to be around $4 billion. So far, the Genting Group has entered into a nonbinding agreement to finance the project. The idea that the private sector would put up $4 billion to build a white elephant this conspicuous without the government getting on the hook for a large share of the cost, plus a fortune in infrastructure, should be taken with a large grain of salt. Make that a boulder of salt.

In his apparent eagerness to build the biggest convention center, Cuomo failed to examine how the nation’s current largest convention center is actually performing. Citing the Chicago Tribune, a recent Wall Street Journal article reported that Chicago’s McCormick Placeoperates at only 55 percent capacity. Convention centers in other cities around the country have been similar flops.

Despite its preferable location, the Javits Center has failed to live up to expectations as a boost to New York’s tourism industry, which has done very well without it. The Javits Center does host its fair share of conventions, but most of the participants are locals, so the convention center does little to generate business for hotels and restaurants. Meanwhile, it occupies a piece of land that could be worth up to $4 billion, as Robert Yaro, president of the Regional Plan Association, told the New York Times. (The fact that this equals the estimated cost of Cuomo’s pipe dream in Queens is, at least, an interesting coincidence.)

After demolishing the Javits Center, the city would lead the way in the development of a planned community including housing, hotels and museums. Battery Park City, at Manhattan’s southern tip, has been promoted as a successful model.

It might make excellent sense to knock down the Javits Center and put that valuable property to better use – not to mention back on the tax rolls. If he had stopped with this suggestion, I would be offering kudos to Cuomo for broaching the subject. There are many good reasons why private hotels, like the Marriott where I am staying this week, should finance their own convention spaces if they think they will attract sufficient business, and if they believe it is the best use of their real estate.

The Heckerling Institute used to be housed at the Fontainebleau Hotel on Miami Beach. That venue lost the business some years back when it underwent a renovation. The Marriott has held on, even after the Fontainebleau reopened, because of its superior facilities and competitive nearby attractions. Such is life in the private sector.

Meanwhile, a few miles away from the Marriott, Orlando’s municipal convention center is struggling along with the rest of the industry. The Florida United Numismatists left town yesterday. The convention center is dark through Wednesday. On Thursday it lights up again with the Surf Expo, the Art 4 Clean Air art contest, and the 2012 Martha’s Sewing Market put on by Martha Pullen, Inc. Friday brings the Orlando Spring Home and Garden Show. It is safe to say that central Florida’s hospitality industry is not waiting with bated breath for any of these events.

The convention industry is struggling everywhere. From 2000 to 2010, the number of convention attendees dropped from 126 million to 86 million people. The rise of on-line webinars and other technology-driven substitutes is likely a major factor, along with elevated domestic travel costs as fewer airlines fly with fuller planes. Yet in that same period, the amount of convention space increased from 53 million square feet to 70 million square feet. In attempts to increase their market share, cities sank ever-increasing sums of money into building ever-bigger convention centers, further devaluing the space. Cuomo proposes to take this trend to its most illogical extreme.

Given all the options for convention sites and the low level of interest in attending conventions altogether, organizers have no choice but to focus on hosting conventions in places where people already want to go. And the plain truth is that almost nobody wants to go to the far reaches of Queens.

Then there’s the problem of the climate. Aside from McCormick Place, which is in downtown Chicago, the country’s other largest convention centers are in Orlando, Las Vegas, Atlanta and New Orleans. All of those places are decidedly sunnier than Queens.

The Genting Group, or any other private party, would have to be stupid to expect that it could recoup a $4 billion investment on the Queens convention center. I doubt the company’s managers are stupid. However, I also seriously doubt a Genting spokesman’s statement that the company’s stated willingness to fund the convention center is unrelated to the governor’s recently expressed support for a constitutional amendment to legalize table games in casinos.

“Though Genting Americas supports the governor’s constitutional amendment legalizing table games in New York, our plans for a privately funded, $4 billion convention center are not predicated on that amendment,” the spokesman, Stefan Friedman, told The Wall Street Journal. I’ll believe this when Genting, or any other private investor, actually puts billions of dollars in cash on the table without government financial backing. But don’t bet on it.

Cuomo may be trying to win back the favor of New York’s influential labor unions, whom he offended last year with fairly hard-line positions on budgets and taxes. Or he may be trying to appear as a visionary with high aspirations for his state ahead of the 2014 re-election campaign for governor and a possible presidential candidacy in 2016.

But here in sunny Florida, Cuomo does not sound like a visionary with high aspirations. He sounds like he’s just high.

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About Larry M. Elkin 564 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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