The Democratic Party’s track record and the event’s unknown price tag suggest taxpayers may be on the hook for Milwaukee’s July convention.
By Dan Benson for the Badger Institute
The Democratic National Convention to be held in Milwaukee next July will pump $200 million into the city and state economies — or so city leaders and organizers have been touting. But there’s plenty of reason to think that Mayor Tom Barrett and organizers have overpromised and will underdeliver.
Up to 50,000 party delegates, media, donors, activists, volunteers and others will be filling hotel rooms within a 150-mile radius of the city’s downtown to eat, drink and nominate their way to choosing a candidate they hope can defeat President Donald Trump in November 2020.
The hope: With more than 2,000 events planned so far during the July 13-16 convention, centered mostly in the Fiserv Forum area, there will be lots of opportunities for restaurants, caterers, bars and others to cash in. Visitors will come early, stay late and take home a lasting impression of a friendly, vibrant Wisconsin.
The reality: The Democrats’ record of unpaid bills, the experience of previous host cities and the unquantified costs suggest that state or city taxpayers might well be left footing some of the bill for the four-day extravaganza.
Barrett is already floating the idea of asking for help from taxpayers statewide — a suggestion that rankles some Wisconsin legislators.
Millions in funds and fundraising
Hosting such a massive event is an expensive undertaking.
For starters, $50 million to $55 million in a federal grant will be allocated by Congress to help pay for security, with the U.S. Secret Service taking the lead. The Democrats’ 2016 convention in Philadelphia cost $46 million in federal funds for security.
If that federal money isn’t enough, “the city agreement requires the host committee to reimburse the city for such costs,” according to a Milwaukee resolution agreeing to a contract with the Democratic National Committee (DNC). The city has reached out to Wisconsin’s two U.S. senators to ask Congress for more money for security, Barrett said in September.
The Milwaukee 2020 Host Committee has set a goal to raise $70 million in private funding, eclipsing the $67.4 million raised by Philadelphia’s host committee four years ago. That would make Milwaukee’s the most expensive Democratic National Convention ever in terms of private fundraising.
Milwaukee’s committee also was required to provide $5 million up front.
And if that’s not enough, in order to win the bid over Miami and Houston, the DNC required the City of Milwaukee to secure a roughly $20 million line of credit from private sources in case the host committee cannot pay the bills once they come in.
And if that’s not enough?
Well, despite Barrett vowing that taxpayers “will not pay one dime” and insisting there will be no impact on property taxpayers, the mayor recently mentioned seeking assistance from the state.
‘Ways for state to help’?
“We want obviously to see if there’s ways for the state to help,” he said Sept. 18 at a WisPolitics event in Washington, D.C.
Wisconsin legislators balked at the notion.
“Expenses relating to political functions, both for Democrats and Republicans, are the responsibility of the party and their sponsors, not taxpayers. I would fight tooth and nail against any proposal that would appropriate taxpayer money for these purposes,” says state Sen. Dale Kooyenga (R-Brookfield).
Senate Majority Leader Scott Fitzgerald (R-Juneau) says Barrett’s potential request is a non-starter. “I do not support any plans to divert state tax dollars toward the convention,” he says flatly.
“Countless events attract visitors to Wisconsin each year without the state providing earmarked state funding, and I think the DNC should be the same,” adds state Sen. Duey Stroebel (R-Cedarburg).
While Gov. Tony Evers hasn’t offered state help yet, he said in July that it was an “open question” whether the state would provide money. Back in March when Milwaukee won the bid, the governor said that no state taxpayer money would be used to fund the convention.
Total price tag unknown
While the $200 million economic-impact figure has been tossed around regularly, there apparently is no firm estimate on how much the Milwaukee convention will cost in the end.
Organizers hope the roughly $50 million federal stipend for security, the estimated $70 million in private funding and the $20 million line of credit will cover all expenses associated with the convention. But what the cost will be to local governments and the state and whether they will be reimbursed are uncertain.
Milwaukee Ald. Bob Donovan says cost estimates don’t exist yet. It will be at least later in October before meetings are held with the police and other city departments “when many of these issues may come to light,” he says.
“I have serious concerns as to precisely what the costs will be,” Donovan says, “but, in particular, what the impact will be on our neighborhoods regarding city services” such as police response outside of downtown.
The convention’s impact on the Department of Public Works budget and how much overtime might be required have not been estimated yet, says department spokesman Brian DeNeve.
Economic benefits oversold?
Adding to the murkiness is the question of whether the economic benefits of the convention will fully materialize. As details slowly emerge, it appears the $200 million impact may be inflated.
In fact, Illinois might be one of the biggest beneficiaries of what’s supposed to be a showcase for Wisconsin.
Nearly half of all hotel rooms booked by state delegations are in our neighbor to the south — with 26 of the 57 delegations and 2,841 hotel rooms in Illinois, compared with 2,926 in Wisconsin, according to the Milwaukee Journal Sentinel.
The proximity of hotels in northern Illinois was a selling point for Milwaukee, promoters now say, having failed to divulge that fact when they pitched the convention to Wisconsinites.
Illinois’ Democratic Gov. J.B. Pritzker practically did a victory dance over his state’s windfall. “It’s great for Illinois businesses,” his spokeswoman told the Chicago Sun Times.
Meanwhile, Barrett is downplaying concerns about the mass of delegates who will be lodging 80 miles from Milwaukee in Rosemont, Illinois. “To quote Aaron Rodgers … relax, relax,” the mayor quipped at the WisPolitics event.
Organizers didn’t see fit to book available rooms for delegates in nearby Madison, Racine, Kenosha or Sheboygan, saying those cities didn’t have hotels big enough to handle large delegations.
“When you’re trying to showcase the state of Wisconsin to delegates from around the country, why wouldn’t you have them stay in Wisconsin? Their decision is simply disappointing,” says Assembly Speaker Robin Vos (R-Rochester), who represents Racine County.
The initial shock of the news that the state would lose thousands of rooms to Illinois subsided as it became clear that hotels in outlying Wisconsin counties would still likely fill with other conventiongoers, but the damage was done to the Democrats’ storyline.
“It definitely looks bad for the Democrats that almost half their hotel rooms will be in Illinois,” Fitzgerald says, but adds that he remains hopeful that the convention will be an economic boon for Wisconsin.
State Rep. Joe Sanfelippo (R-New Berlin) had a harsher reaction. “Mayor Barrett should ask Illinois for money (rather than Wisconsin) since they will be benefiting from thousands of delegates who will be staying in their hotels, eating in their restaurants and drinking in their bars without any expense to Illinois taxpayers,” he says.
Attempting to patch the public relations hole, organizers say that California, Florida, Texas and other delegates staying in Illinois will still spend money in the Milwaukee area. But the fact remains that Wisconsin will miss out on millions of dollars spent on hotels, meals, transportation and other services purchased outside of the Badger State.
Projections have fallen short
At the last Democratic convention, the economic impact for the host city was significantly less than projected.
When the 2016 convention was pitched to Philadelphians, organizers predicted it would have a $350 million economic impact on the region. After they secured the convention, they dropped the estimate to $270 million. The final tally was even lower — $230.9 million, the Philadelphia Convention and Visitors Bureau reported.
In 2012, organizers of the Democratic convention in Charlotte, North Carolina, predicted an economic impact of up to $200 million. The actual benefit was $163 million, according to a city-funded study after the event.
Even that scaled-back figure draws skepticism. “The idea that the surfeit of visitors from a convention will induce millions of dollars of additional spending to benefit the economy doesn’t pass the smell test,” says Ike Brannon, president of Capital Policy Analytics and a Badger Institute visiting fellow.
“It’s a dubious metric that no one takes all that seriously — including the company that did the Charlotte study when it was asked to reckon with the lost induced spending from people crowded out of Charlotte by the convention,” he adds.
To be fair, Republicans aren’t immune to the negative fiscal impacts from party conventions. Tampa, Florida, incurred almost $1 million in lost revenue and unreimbursed expenses from the 2012 Republican National Convention, records show.
Missed economic activity
Much of the economic activity that will be generated from Milwaukee’s convention may not even benefit Wisconsinites.
A lot of the dollars spent by delegates and other visitors will go in the pockets of large national corporations, such as hotels and restaurant chains, reducing the long-term benefits to the local economy, past conventions show.
In Philadelphia, a much larger city than Milwaukee with a lot more resources, many of the big bucks went to firms outside Pennsylvania, including almost $11 million for convention stage production and almost $15 million to build the stage, according to Federal Elections Commission documents.
One could expect a similar scenario in Milwaukee, despite Barrett’s assurance that vendors and suppliers will “come from the community.”
Many businesses in Milwaukee will be excluded from the economic activity because organizers are being selective about who benefits from the convention, making it clear that those who don’t toe the Democrats’ ideological line are not welcome at the DNC table.
The host committee will pre-qualify vendors and suppliers, with “community engagement, environmental efforts including carbon neutrality and recycling” among its criteria along with $15 minimum wage and paid sick leave, Liz Gilbert, president of the Milwaukee 2020 Host Committee, told the Milwaukee Business Journal.
The committee’s online portal for venues seeking to host events during the convention asks registrants to identify whether they are owned by women, minorities, veterans, disabled persons or LGBTQ persons, suggesting that those applicants could be given preference.
The party’s unpaid bills
While the Democratic Party is prepared to pick business winners and losers in Milwaukee, its track record of running its own business is marked by a checkered payment history and high debt.
Expenses that were left unpaid from the Charlotte convention totaled $6 million, according to the Charlotte Business Journal.
The $6 million eventually was paid from a $10 million line of credit from Duke Energy. When the Democrats couldn’t pay back that loan, Duke Energy forgave the debt, leaving its shareholders to cover the expense.
All of the recent Democratic conventions — 2000 in Los Angeles, 2004 in Boston and 2008 in Denver — have ended in deficits, according to a 2017 report from the Pennsylvania auditor general following Philadelphia’s convention.
All of this adds up to make one question whether hosting the convention will benefit Milwaukee as much as Barrett and organizers have promised.
Last year, San Antonio, Texas, chose not to bid for the 2020 Republican National Convention, saying the potential costs outweighed the potential benefits.
Cost estimates, critics noted, did not include “ancillary” expenses such as capital improvements, police overtime, waste management and emergency operations — costs Milwaukee is likely to incur as well.
If the convention next July leaves behind a trail of bills and broken promises, as has happened in other host cities, Wisconsinites may sour on Democrats more than they did in 2016.
Dan Benson is a longtime Wisconsin journalist. Janet Fee, a University of Chicago student from Wauwatosa, contributed to this story. This appeared in the Fall Issue of Diggings and is reposted with permission.