Costless and Nice? Listen to the audio of the environmental hearing on the proposed UCLA hotel/conference center

A hearing on the draft environmental impact report on the proposed UCLA hotel-conference center took place at the Faculty Center on June 5, 2012.  You can find link to the audio (1 hour and 38 minutes) below.  A total of 17 individuals spoke, either pro or con, at the meeting.

A certain amount of orchestration of the testimony was apparent.  Originally, a 3-minute limit was suggested but it was dropped soon after the comments began.  The portable public address system was defective so that in some cases, the amplification went on and off.  However, all remarks should be audible at the link below although you may need to turn up the volume in cases where the PA system did not operate.  The 17 speakers’ comments are summarized very briefly below – since you can hear them in their entirety at the link below – followed by an editorial comment.

The program was introduced by Steve Olsen, Vice Chancellor for Finance, Budget, and Capital Programs, who turned the emceeing over to Tracy Dudman of Capital Programs.  There was no formal presentation of the report.  Some boards with illustrations of the project were mounted on easels near the entrance to the meeting room.
1) Sandy Brown representing a neighborhood group raised concerns about parking, traffic, and problems with the business plan.  She also noted the interim problem during the construction period of large trucks passing through the local area and campus.
2) Cathy Sandeen, Dean of UCLA Extension, talked about the need for a conference facility on campus with modern audio-visual equipment. Currently, much programming is off campus.
3) Steven Peckman, Associate Director for Administration and Planning of the UCLA Broad Stem Cell Research Center, spoke of the need for a conference center that could house large programs.  Current spaces available on campus are too small.
4) Alvin Milder, chair of a neighbor group, said building a hotel/conference center showed poor prioritization by the chancellor.  He said that the hearing should not be just on environmental issues but should cover the economic impact and that scheduling the hearing so late in the academic year conflicted with a UC guideline.
5) David Kaplan, Professor of Philosophy, argued that it is best for conferences to be on campus and that an important element of academic conferences is informal contact such as conversations over breakfast.  If conference participants are scattered in local hotels, such contact might not occur.
6) Michael Stentora (sp?) of a neighbor group said a conference center is needed but the current version has a faulty business plan.  He pointed to the impact on parking and the bus turnaround that is located in front of the proposed site.
7) Mark Peterson, Professor of Public Policy at the Luskin School, said a conference center is needed and that commercial hotels don’t have the appropriate facilities for academic conferences.  He referred to the informal contacts along the lines mentioned above.
8) Laura Lake, co-chair of a neighbor-local business group, said the business plan was faulty and suggested UCLA should look at alternatives including a location near the planned Metro subway station or buying an existing hotel. She raised concerns about parking and traffic and provision of emergency services by the LA Fire Dept. which the hotel would not pay taxes to support.
9) Christopher Waterman, Dean of Arts and Architecture, talked about inadequate current conference facilities on campus and informal interaction at conferences that having everyone on campus would provide.
10) Patrick McCray (sp?) from the Hilgard House Hotel in Westwood expressed concern about competition from a UCLA hotel that pays no taxes.  It would have an adverse effect on business in Westwood more generally, he argued.  Favored a conference center without a hotel.
11) Kathleen Komar, Professor of Comparative Literature, spoke of a need for more conference space on campus and informal interaction at conferences.
12) James Genkis (sp?) of the W Hotel in Westwood noted his hotel gives special rates to UCLA but his hotel has to pay taxes.  He supports a conference center but not a UCLA hotel.
13) J.R. DeShazo, Professor of Public Policy at the Luskin School and Director of the UCLA Luskin Center, said the hotel/conference center would be better for the environment because if conference guests are all located in one place on campus, there will be fewer car trips.
14) Marilyn Stern of a neighbor group said the new location for the proposed hotel/conference center is an improvement over the former Faculty Center site but she still has parking and traffic concerns.
15) Mark Vakaria (sp?) representing local hotels questioned the business plan of the hotel/conference center raised concern about competition with commercial hotels that pay taxes.  He supports a conference center, not a hotel.
16) Lawrence Kruger, Professor of Neurobiology, emphasized concerns over parking, lack of disclosure in the planning of this project by the administration, and the economic viability of the plan.  He noted that the Academic Senate’s Committee on Planning and Budget did not consider parking issues properly.
17) Norman Abrams, former Acting Chancellor of UCLA, compared the on-campus hotel/conference center with the move of UCLA away from being a commuter campus to a residential.  Both were related.  He said he had a gut feeling that in the long run the hotel/conference center would increase business for area hotels.

Editorial comment: Freebies are always desirable.  Taken at face value, the business plan for the hotel says there is no net monetary cost to UCLA; the hotel/conference center will pay for itself.  So if we take all of the advantages claimed for the facility at face value (fewer logistical complications in arranging housing, bigger meeting rooms, informal interaction, etc.), we seemingly get a gain at no cost.  Everyone gains the option of using the new hotel for their conferences (or not), and there is no net cost to providing this option. 

But here is the problem.  Risk is not free, as students at the Luskin School are supposed to learn.  There is a whole field of finance devoted to pricing risk and options.  However, you don’t need special expertise to understand that simple idea.  Insurance companies exist only because ordinary people who don’t expect to die this year, or who don’t expect their houses to burn down this year, are still willing to pay costly insurance premiums to mitigate the risk that these events might occur.  

The business plan for the hotel/conference center carries a financial risk to UCLA.  If the projected revenues and occupancy rates do not pan out, the campus – one way or another – will have to pay.  I heard neither of the two deans who spoke offer to set up a reserve of their budgetary funds to help cover that risk.  I heard none of the faculty who spoke of the advantages of having an on-campus facility – with the informal interaction that was cited as a plus – say anything about the risk and who should cover the cost if things don’t work as forecast.  “Costless and nice” is not an argument.  

In fact, I heard nothing from those faculty and administrators who endorsed the plan “as is” that suggested there was any potential risk at all.  Of course, adding the option of holding conference at the proposed hotel/conference center is desirable taken by itself to anyone or any school or department that organizes such events, if providing the option is free.  You have the option which you can exercise of using the new facility or you can continue putting on conferences as you currently do without using it.  But, again, providing such “option value” is not a freebie.  Thus, “it would be nice to have the option” is not, by itself, a sufficient argument.  It would be nice to have many things at the university that we don’t have.

Keeping the hotel filled with conference guests at a 70% rate over the cost of a year is an important assumption of the business plan.  Almost all of the remarks favoring the facility implicitly assumed that conferences alone would maintain the 70% rate.  Are there really going to be continuous conferences filling the hotel?  During the summer?  During the period when the campus is closed around Christmas and New Years?  If continuous conferences don’t fill the rooms, other business will have to be found.  But the UCLA hotel cannot take commercial business. 

The fact that there is opposition from area hotels means that if the UCLA hotel begins to push the envelope on what business it will take, the IRS is likely to be told about such practices and audits could result.  Such a development could affect not only the UCLA hotel but other enterprise-like entities throughout UCLA and the UC system.  There are alternative plans, as this blog has pointed out, that could reduce the financial and legal risk and yet meet the objectives of the donors, i.e., facilitating conference activities on campus.  It would be better now to step back, sit down with all interested parties, and see if a revised plan cannot be worked out.  If such an alternative can be found, it would reduce the additional risk of audits, litigation, and other fallout even apart from the direct financial risk.

At the end of the day, if the chancellor insists on the hotel plan as it currently is, the Regents will likely approve it since it is a campus project, despite their reservations.  Not doing so would effectively be a vote of no confidence in the chancellor who is up for a five-year review at present.  But why push it to that point?  There are also evident credibility costs – some of which have already occurred as a result of the March Regents meeting – that could be avoided.  It is extremely hard for bureaucracies to change course and it is easier to orchestrate meetings and produce plans and reports that rationalize existing decisions.  UCLA can have the conference center it needs. But it needs leadership to overcome the bureaucratic inertia that has characterized the process to date.
You can hear the entire event at the link below: