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Knoxville Convention Center Has Become Center of Contention; Built for $162 million
 in 2002, the Complex Lacks a Flagship Hotel
By Richard Quinn, The Virginian-Pilot, Norfolk, Va.McClatchy-Tribune Business News

Apr. 9, 2007 - In the Great Smoky Mountains drawl of Knoxville, Tenn., the idea sounded great.

Build a 500,000-square-foot convention center on park land that once hosted the 1982 World's Fair. Lure regional conventions from cities as far away as Atlanta. Funnel millions of dollars into the local economy.

Instead, the Knoxville Convention Center has become a center of contention.

A mayor once fought renewing the city's annual contract with the center, citing a dearth of out-of-town business. Voters overwhelmingly decided to ban the use of public money to subsidize a headquarters hotel for the center. And now, just 6 percent of the building's bookings are conventions or trade shows -- less than half the business projected.

As Virginia Beach sifts through proposals to build a headquarters hotel for its convention center, possibly funded with a public subsidy, resort officials would do well to study the rocky path taken by Knoxville.

Like Virginia Beach, Knoxville built its $162 million complex without a flagship hotel.

Now, that missing piece is singularly blamed for the center's inability to attract regional and national business.

"We are what we are," said Craig Liston, the center's general manager. "The only thing that could change the long-term prospects for this facility ... would be that hotel project. And I don't see that on the horizon."

Knoxville, a city of 173,000 in eastern Tennessee, didn't have the debt capacity to open a convention center in 2002 and pay $20 million toward the construction of a major hotel, said Randy Vineyard, former city finance director.

Leaders built only the convention center, hoping private investors would build a convention-quality hotel to support it. That didn't happen, and Knoxville now struggles to book larger events.

Of the 250 or so events the facility hosts each year, about 15 are conventions or trade shows, Liston said.

"If you're that low," former Knoxville Mayor Victor Ashe said, "there's no place to go but up."

The performance looks just as bad on paper. The city pays $10 million a year in debt on the building and loses $1.5 million a year o n operating costs . That includes last year's payment of $371,000 to SMG, a national venue management firm that runs the building for the city.

"We're still making the convention center work," said Margie Nichols, Knoxville's senior director of governmental affairs. "It's not ideal or the way we'd like it."

Knoxville has another hurdle Virginia Beach doesn't. In a 2004 referendum, Knoxville voters overwhelmingly forbade the city to spend taxpayer money to help finance a headquarters hotel.

As a result, an unsolicited proposal for a convention-quality hotel was dismissed last year once the developer asked for public money, Nichols said.

"We would like the flexibility to be able to do a deal, to do what needs to be done," she said. "We've had our hands tied and we're not happy about that."

-- Reach Richard Quinn at (757) 222-5119 or richard.quinn@pilotonline.com.

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Copyright (c) 2007, The Virginian-Pilot, Norfolk, Va.

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