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DNC’s Economic Boost to Chicago May Be Overhyped

While some have predicted economic returns of $150 million or more, economists predict that those numbers are inflated. Last time the Democratic National Convention came to Chicago, the city spent $60 million to prep for the event.

Delegates react after incumbent President Bill Clinton finished his nomination speech on Aug. 29, 1996
Delegates react after incumbent President Bill Clinton finished his nomination speech on Aug. 29, 1996, at the Democratic National Convention at the United Center in Chicago. (Bill Hogan/Chicago Tribune/TNS)
When Chicago last hosted the Democratic National Convention in 1996, Mayor Richard M. Daley played the role of deep-pocketed Johnny Appleseed.

He went on a patented Daley planting spree, larding the West Loop and downtown with trees and potted flowers as part of an expensive, targeted beautification project aimed at showing a particular version of a particular part of the city to national media and delegates in town to nominate President Bill Clinton for reelection.

As Chicago prepares for the 2024 Democratic convention, Mayor Brandon Johnson will face questions about how much he can and should spend to get the cash-strapped city ready, and whether spending tens of millions of dollars makes sense. Johnson is fresh off his inauguration and his administration has so far declined to comment on any plans.

Much has been written about the squishiness of pre-convention economic benefits, along with the costs cities end up eating themselves getting ready for the pomp and circumstance. While boosters have predicted economic returns of $150 million or more to cities that hosted them recently, economists say those numbers have been overblown.

With local spending on things such as police overtime and infrastructure improvements, will the city even break even?

Daley splashed out more than $60 million to pretty up the city ahead of the 1996 convention, according to a Tribune analysis at the time. In addition to the tree-planting spree, artisanal streetlamps ate up more than $1 million in public funds, while spending on bridge makeovers and renovations to Daley Plaza and State Street downtown climbed into the tens of millions.

One of Daley’s closest aides, Terry Teele, credits that DNC with not only resetting the city’s reputation after the violent clashes at the 1968 convention, but helping speed up the revitalization of the West Loop, generating new jobs, housing and city revenues.

“Do I think it was a good return on investment? Absolutely,” said Teele, Daley’s first deputy chief of staff who oversaw billions of dollars of infrastructure and public works projects during his time in the 1990s at City Hall.

How did they pay for it? In part, through Daley’s costly “Neighborhoods Alive!” bond-spending program, overlaid with tax increment financing dollars, and unspent money from other projects and federal Community Development Block Grants, Teele said.

“It was like a quilt. It was a little bit here, a little bit there, being real aggressive to try to find those various funding sources,” Teele said.

To offset the big public outlay for a partisan political event, boosters point to the money that comes in from conventioneers and other guests to the four-day event, and to the so-called soft benefits such as the free publicity that derives from the made-for-TV shindig.

But those metrics might not deliver as well as advertised.

The estimates by convention boosters and recently departed Mayor Lori Lightfoot that the economic impact on Chicago for the convention will climb to $150 million to $200 million are clearly overblown, according to economists who’ve studied the fiscal impact recent political conventions have had on host cities.

The city’s take thanks to increased hotel room stays and other spending will be well below that, according to Lauren Heller, a professor of economics at Berry College who has studied political conventions.

“There’s some interesting political economy in this,” Heller said. “Convention boosters have a lot of incentives to tell the public what a great windfall this convention is going to be, and they often pay for these economic impact studies that show wild benefits from conventions. And, unfortunately, if we really dig closely into the data, the research just doesn’t really support that.”

In part that’s because hotels don’t stand empty when the convention’s not in town, and are, in fact, often crowded during a typical August in Chicago. That makes the incremental increase in hotel stays a less impressive tax generator for the city than the total number of attendees for the convention that backers often tout, Heller said.

The last pre-pandemic Democratic convention was held in Philadelphia in 2016. The Philadelphia Convention and Visitors Bureau estimated afterward that it brought in $230.9 million in total economic impact to the city. That number was well below the $350 million total economic impact organizers predicted before the event.

Yet even the lower number was likely a significant exaggeration, according to a paper Heller co-authored that pegged the extra hotel portion of the revenue Philadelphia enjoyed at just $39 million.

But former Philadelphia Mayor Michael Nutter, who helped spearhead the city’s successful push to host in 2016, said it was a clear win.

Nutter was first elected mayor in 2007. He balked at vying with other cities to welcome the Democrats in 2012 as Philadelphia tried to recover from the 2008 recession.

“There were some people here who wanted to go for 2012, but it’s a two-year process, and in 2010, like everyone else, we were in the midst of the Great Recession,” he said. “And I realized the time and effort and money that go into that, raising money, certainly. And I needed to stay focused on our city budget.”

2016, though, had a clear and lasting positive impact on the City of Brotherly Love, he said. Philadelphia had a bit of a blueprint for success already, having hosted Republicans in 2000.

And while the city had to “have skin in the game” to win the bidding for 2016, a $50 million federal grant to cover security at the event “makes a hell of a difference,” Nutter said.

“You’ve got to remind people time after time, this money is coming from the federal government to handle police overtime, trash pickup. There are a lot of allowable uses,” he said. “Did we ultimately have to put some resources on the table? Sure. But we also, in many instances, were getting reimbursed.”

But the federal government doesn’t just give you a blank check.

After the Philadelphia convention ended, for instance, the U.S. Department of Justice released a report declaring that there were “significant deficiencies in the city’s grant management” and questioned nearly $15 million in expenditures as “unallowable and unsupported.”

Members of Illinois’ congressional delegation sent a letter last month to heads of the House and Senate appropriations committees requesting the federal security grants for the 2024 conventions be increased to $75 million each for Chicago and for Milwaukee, which will host the Republican National Convention next year.

In 2016, the most recent full in-person year for conventions before the pandemic prompted the parties to hold mostly online events in 2020, Republicans headed to Cleveland.

Karen Beckwith, a political science professor at Case Western Reserve University in Cleveland, said the city spent money to fast-track public works projects already on the drawing board, such as airport improvements and renovations to the city’s Public Square outdoor event space.

But the financial benefits to the city came in under what convention organizers predicted, she said.

“I wouldn’t say Cleveland necessarily benefited, except insofar as infrastructure projects were advanced and concluded,” Beckwith said. “Insofar as the city put on a good show, that we did ourselves no damage, is certainly the case.”

When Charlotte hosted the Democratic National Convention in 2012, it was at the time the largest single non-sporting event in the city’s history. A post-convention report commissioned by the city and several economic partners “to highlight the positive economic impacts felt across the region” pegged the total net economic impact at $163 million.

That included direct spending (minus spending that was “displaced” by the convention itself) of $91 million, according to the report, and indirect and induced spending of $72.6 million. That generated $3.4 million in additional state tax revenues and $4.5 million in local tax revenues for the Charlotte area, the report said. Spending was driven in large part by a boost in hotel revenues: Demand for limited space drove up hotel rates from their normal $100 average rate per night rate to about $220.

The city repaved roads in the Uptown neighborhood around the stadium, which at the time was called the Time Warner Cable Arena, where the convention was held. It also added upgraded pipes and fiber optic lines to accommodate communications traffic, planted trees and flowers and cleaned up parks.

Anthony Foxx, Charlotte’s mayor at the time, said road and sidewalk enhancements “were things that were part of our ongoing capital program” that were fast-tracked for maximum impact ahead of the convention.

The city was “very careful about the public investment in the convention,” he said, pointing out many costs were shouldered by a 501(c)(6) nonprofit he chaired called “New American City.”

Set up alongside the host committee in a year the DNC pledged not to take corporate or political action committee donations, the group paid for the host committee’s overhead costs. Foxx said the group also “initiated” the city’s bike-sharing program and paid for other improvements around the city.

Like other host cities, Charlotte was reimbursed with federal taxpayer dollars for security costs. It got to keep surveillance cameras, new uniforms, riot gear and helicopter equipment after the convention left town.

City employees dedicated “a lot” of hours to convention security and logistics, Foxx said. Experts point to time dedicated to convention work as another hidden cost, since city employees aren’t delivering basic services they were hired to provide residents.

But all in, “it easily was a net positive economic impact,” and boosted convention and tourism business alongside Charlotte’s reputation for Democratic politics.

“A lot of people confuse Charlotte with Charlottesville, with Charleston,” Foxx said. “As proud as I am, and we are, that we’re in North Carolina, the fact that our state has to constantly be part of how the city is recognized was also something we were trying to shake.”

Eric Heberlig, a professor of political science at the University of North Carolina at Charlotte, wondered at the actual value of that kind of spotlight recognition.

“Demonstrating in any quantitative sense what the value of (a reputational boost) is is nearly impossible,” Heberlig said. “In that sense, it’s like, what’s the value of sports teams? You’re getting the city’s name in the news, particularly when the team is doing well, bringing attention to the city, cameras to the city to cover the games, so does that make people more likely to want to vacation in the city? That business leaders are going to want to open up an office in the city? It’s hard to say.”

The convention certainly boosted Foxx’s profile: Obama named him secretary of transportation the following year.

Nutter also notably pointed less to the bottom line economic pluses for Philadelphia in 2016 than to the renown the city enjoyed and the good vibes the big party left in its wake.

“When you talk about the benefits, some are economic. I don’t know., there might have been a study done, but there are some things you just can’t measure,” he said. “As far as I know, there’s no fun and enjoyment index.”

“The emotional impact, again, not particularly measurable, but when you have joy you know it. People were happy. People were excited, even people who weren’t involved in politics.”

And with the “eyes of the world” on Philadelphia, Nutter said the city was able to show “it’s more than a train stop between Washington, D.C., and New York.”

Those kinds of soft boosts from conventions are notoriously fickle and prone to reversal, however.

Victor Matheson, an economics professor at College of the Holy Cross who has studied political conventions, said observers of the events tend to remember the cities in which they take place in large part if something goes wrong.

“The publicity that goes along with the city does not have to be good,” said Matheson, who was one of the co-authors with Berry College’s Heller on a paper about the economic impact of political conventions. “You could have a repeat of 1968, which people literally still know about, and know Chicago is a terrible place to go if you’re a hippie protesting the Vietnam War.”

Meanwhile, if things go well, “no one remembers the city, they remember what goes on inside” the stadium itself, which could be anywhere, Matheson said.

Of then-Illinois state Sen. Barack Obama’s star-making turn delivering the keynote speech at the 2004 Democratic National Convention, Matheson said: “I remember that. I have no idea where it took place.”

It was in Boston.

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