In 1992, the 115 year old Watt & Shand department store was purchased by an out-of-town corporation, the Bon-Ton. Three years later the downtown store was closed. After much time and effort, Democratic Mayor Janice Stork was able to secure an agreement with Harrisburg Area Community College to open a new location in the former Watt & Shand building. However, in late 1997, Republican Mayor-elect Charlie Smithgall promised to block any attempt to help provide parking for the proposed college, and the deal collapsed. Since then, HACC has located just outside the City limits, and is enjoying notable growth.

Two groups placed identical bids for the purchase of the vacant Watt & Shand building. Both local developer Rob Ecklin and the Penn Square Partners offered $1.25 million dollars for the property. Penn Square Partners was formed by High Industries, Fulton Bank, and Lancaster Newspapers, for the purpose of purchasing the Watt & Shand building. Rob Ecklin's bid was never seriously considered, and the Penn Square Partners took ownership in February 1998.

A group of local business leaders known as The Lancaster Campaign commissioned from LDR International a study of downtown Lancaster, commonly known as the Winterbottom Report, which was released in February of 1998. One of many recommendations was the establishment of a 40,000 to 50,000 square foot "Conference Center" to be located on the west side of Lancaster Square, with a cost estimated to be up to seven million dollars. In a misguided response to this recommendation, a Convention Center Task Force was formed to organize the development of a "first-class meeting facility".

In early 1999, the Convention Center Task Force supposedly asked Penn Square Partners to consider developing the Watt & Shand building into a hotel designed to support a convention center to be located on South Queen Street. Consequently, Penn Square Partners asked the Lancaster County Commissioners and Lancaster City Council to create a Convention Center Authority, and enact a tax on hotel rooms and lodging to support the proposed 60,000 square foot convention center facility; this was done in September 1999.

In early 2000, a group of over one hundred local hotels, motels, bed-and-breakfast lodgings, and other tourist related businesses filed suit against the Hotel Tax. Numerous litigants were removed over time by various court decisions until only a group of eleven local hotel operators remained. These lawsuits were ended only when the LCCCA took action in August 2003 to file counter-suits against the hotel operators, potentially bankrupting them.

In November 2000, a marketing study commissioned by the LCCCA from consulting firm PricewaterhouseCoopers was released. Based on information supplied by industry sources, it stated that a large convention center in downtown Lancaster has the potential for success. Unfortunately, many of its conclusions do not reference the data used to draw them. All studies supported by the LCCCA since then have been based on the questionable data from the original PricewaterhouseCoopers report. In light of the many changes made in the project since then, this report was officially withdrawn by PricewaterhouseCoopers in early 2005.

In 2001, Penn Square Partners contracted with Interstate Hotels to manage the proposed hotel. Soon afterwards, the LCCCA voted to choose a different operator to manage the convention center. Penn Square Partners threatened to withdraw from the project unless LCCCA agreed to use its management group; the LCCCA had no choice other than to give in and comply.

In April 2003, the project architects were instructed to redesign the project "in order to reduce the overall project costs", according to the LCCCA web site. Instead, the project quadrupled in size, and doubled in cost. Although the Pennsylvania Dutch Convention and Visitors Bureau endorsed a main exhibit hall of 50,000 square feet, no reasonable explanation has ever been provided as to why other areas of the project have expanded to include so much additional space.

During 2004, another disagreement between the PSP and the LCCCA surfaced when the LCCCA took an option to purchase the Hotel Brunswick in Downtown Lancaster, and threatened to move the proposed convention center to Lancaster Square. This dispute was apparently resolved, and the option was allowed to expire.

In January 2005, the Brookings Institute released a study of publicly owned convention centers titled "Space Available - The Realities of Convention Centers as Economic Development Strategy". This report, along with a huge amount of independent information, shows that publicly owned convention centers almost never generate the promised economic development. In fact, these centers and attached hotels usually become a huge drain on local taxpayers. Even the Penn Square Partners, in public presentations, estimated the utilization of the proposed convention center in Lancaster to be 52 days a year.

In March of 2005, a local organization called The Lancaster Group conducted a study of 25,808 people in eleven locations around Lancaster City and County, asking them whether they support or oppose this project. More than 89% of those polled do not want to see this project built.

In early 2005, the Penn Square Partners sought additional public funds to assist in the building of the "private" hotel under both the Tax Increment Financing law, and Sen. Gib Armstrong's "Act 23". For the very first time, public hearings were held, and the floodgates of public opposition opened. Public input had been severely restricted from the very beginning; now it could no longer be avoided. When the Penn Square Partners demanded that the School District of Lancaster provide tax abatement for the hotel project for 20 years, the School Board attempted to negotiate better terms. The Penn Square Partners' reaction was to declare the project dead, and remove all of the signs and window coverings from the Watt & Shand building; these were never replaced. Consequently, City and State officials scrambled to provide additional funding.

In an effort to avoid the consequences of dealing with the public and other local governmental bodies, in early 2006 the Redevelopment Authority of the City of Lancaster purchased the Watt & Shand building from the Penn Square Partners for $6.8 million dollars (this for a building which the PSP had bought for $1.25 million). Since "Act 23" clearly spelled out that real estate taxes MUST be paid by the private beneficiary of TIF funds, State Senator Gib Armstrong had the law changed, so Lancaster City taxpayers will be forced to pay school and County taxes on the "private" hotel.

The City of Lancaster has also passed a series of ordinances guaranteeing construction loans for the hotel project. One guarantee is for $12 million (possibly to be increased to $14 million), based on projections that the project will generate at least $1 million a year in State sales and income taxes, which the State has promised to return in the form of TIF grants. The other guarantee is for part of a $24 million construction loan, payments for which are to be covered by "lease" payments from the Penn Square Partners. If either the TIF grants do not reach $1 million a year for 20 years, or if the Penn Square Partners' "lease" payments would ever fall short, Lancaster City taxpayers would be forced to pay the difference. Should the Penn Square Partners default on their payments, Lancaster City taxpayers would own a hotel building. Other cities in the US have already been in this position, and not one has been able to sell their hotel building for enough money to pay off its construction loans.

The current plan is for the Penn Square Partners to provide $11 million in "equity" and $1 million in "interest income" for furnishing and operating the hotel, $24 million in "lease payments" over 20 years to the RACL, then after 20 years purchasing the hotel building from the RACL for $2.25 million.

This project was originally conceived as a $45 million private and $30 million public project. Currently the cost is estimated at over $170 million, NOT including a new parking garage. All but $11 million of this money is either taxpayer dollars, or is guaranteed by the taxpayers.

In early 2006, the Lancaster County Commissioners commissioned PKF International to make the first real feasibility study of the proposed hotel and convention center project as currently configured. The results of this study cast serious doubt on the viability of the project. PKF's conclusions read in part, "We therefore recommend that, prior to proceeding further with this project, the parties involved consider exploring a downsizing of the project or an alternate use for the site."

In May 2006, Lancaster County Commissioners Molly Henderson and Dick Shellenberger took action to limit the amount of LCCCA borrowing that could be guaranteed by County taxpayers. The Commissioners also held meetings to study if the "hotel tax" is being collected from areas that will not benefit from it, the end result of which could be reduced funding for the LCCCA. The response of the LCCCA, PSP, and RACL was to sue the County Commissioners; in their lawsuits they actually requested the Court to block the County Commissioners from making any negative statements about the project.

In late October 2006, Judge Joseph Madenspacher issued a restraining order which prevents the Lancaster County Commissioners from cancelling the County bond guarantees. Interestingly, Judge Madenspacher did not address the five other issues raised in the lawsuits which were initiated by the LCCCA, the PSP, and the RACL.

Meanwhile, in late July 2006, the last of the construction bids was opened, with High Construction - a subsidiary of the majority partner in PSP - the only bidder. Combined with bids opened previously, this left the project at least $20 million over budget. The Penn Square Partners immediately declared that "It is unlikely that we can organize any combination of resources and strategies that will allow us to move forward with the project as currently designed."

Under pressure from project proponents, in early August 2006 Lancaster Mayor Rick Gray introduced a plan to deal with the $20 million funding gap by shifting funds between accounts, demanding over $5 million in concessions from contractors, and soliciting $3 million in donations to purchase an "easement" for the facade of the Watt & Shand building. But by December of 2006, this plan had been proven to be nothing more than "smoke and mirrors", when most of the projected savings failed to materialize. As a result, the LCCCA board was forced to increase their borrowing from $42 to $64 million, bringing the total projected cost of the project to approximately $170 million.

In an unprecedented display of arrogance, the LCCCA began construction of the project's foundations at the beginning of 2007, even though construction funding was not yet available (and would not be for months). The LCCCA was forced to borrow several million dollars from the Penn Square Partners to pay for this work being done. This is the equivalent of starting the foundation of a new home before your mortgage was approved by the bank.

The LCCCA's bond sale through Wachovia Bank, originally scheduled for mid-January 2007, was delayed until mid-February, then delayed again until mid-March. Finally, the bonds were sold at the end of March 2007, but only because Wachovia has provided a costly 5-year "letter of credit" guarantee for the bonds. Moody's credit rating for the convention center bonds were based solely on the creditworthiness of Wachovia Bank, with no mention of the LCCCA's credit rating. This proves that the project by itself is too risky to achieve an investment grade rating.

The $64 million Wachovia bond sale agreement has placed yet another potential burden on local taxpayers: Wachovia now has a lien against any and all proceeds from the "hotel tax" until construction bonds are paid in full, which is currently expected to be in the year 2047. In addition, Wachovia has the right to make whatever management changes it sees fit to protect its investment in the project. In other words, Wachovia now has final say in the project, NOT the LCCCA.

Providing yet another surprise, Fulton Bank pulled out of the Penn Square Partners on the same day the Wachovia bonds were sold. This leaves Lancaster Newspapers and High each with 50% ownership of the Penn Square Partners. The local newspapers reported that Fulton Bank left the Penn Square Partners so it could loan them nearly $14 million dollars, to be repaid with Act 23 funds, and guaranteed by Lancaster City taxpayers. This is difficult to believe, especially since High - one of the Penn Square Partners - is still general contractor for the entire project. In reality, Fulton Bank had been reducing their investment in the Penn Square Partners for several years, and clearly no longer wanted to be involved with such a controversial and risky endeavor.

To date, no one has provided any information whatsoever that shows the revenue projections being made about this project are accurate. If the assumptions being used to support this project are based on faulty information, every other assumption being made about this project is called into question.

This drama is still unfolding. In any case, the real losers are the taxpayers, who are being forced to pay for and guarantee all but a small portion of this risky endeavor.