Lancaster County Convention Center Authority March 20, 2006 Meeting

Statement, Molly S. Henderson, Lancaster County Commissioner

In December 2003, based on promises and representations made by the Lancaster County Convention Center Authority, the prior Board of Commissioners for Lancaster County approved a County guarantee of part of the Authority's bond debt.

The future of the County's guarantee, though, is called into question by recent revelations and developments concerning the convention center proposal:

(1) The Authority told the previous Board of Commissioners in December 2003 that an independent feasibility study performed by PricewaterhouseCoopers supported the viability of the project. When the current Board of Commissioners was asked to approve the TIF last March, we reviewed the PricewaterhouseCoopers study and identified several major flaws. More recently, in November 2005, a professional appraiser evaluated the PwC study and explained that it is not a true feasibility study, but rather is merely a market study performed in 2000 and updated in 2002.

(2) Also in November 2005, PricewaterhouseCoopers acknowledged through emails to an Authority member that its prior studies are not reliable for the current project in light of significant changes to the project, the convention center industry and the market. Rob Canton of PwC admitted it is "the equivalent of using a study of a 500 room Marriott to evaluate a 300-room Hampton." PwC went so far to demand that the Authority remove from its website all references to PwC's prior studies.

(3) The Authority represented to the previous Board of Commissioners in December 2003 that the Authority would issue $40 million in bonds. The Authority's budget approved in February 2006, though, calls for the hotel construction bonds to be in excess of $42.5 million, with additional bonds in excess of $3.5 million, for a total bond issue of $46 million. The Authority apparently hopes to accomplish this increase in the amount of its debt through an interest rate swap. The 2003 Bond Indenture approved by the County, however, did not contemplate such a swap. Only when the convention center was ready for construction and fully financed was the existing variable rate taxable Bond held by Citizens Bank to be remarketed to the public as fixed rate tax-exempt Bonds.

(4) The Authority's financial consultant assured the County in December 2003 that the County Hotel tax proceeds would first be applied to debt service on the County-guaranteed debt before being applied to any other Authority operating expenses. The current Board of Commissioners has pointed out, though, that the language of the Bond Indenture approved in 2003 does not include such a requirement. This critical omission from the 2003 documents essentially makes the County's guaranty a "piggy bank" to fund Authority spending and operating losses. Last month, the Chairman of the Authority responded by saying he will not support correcting the document to fulfill the promise made to County taxpayers in 2003 unless the current Board ceases its opposition to current project financing and does not fund a full feasibility study of the project.

Because of the lack of a true feasibility study, changes in project program and cost, increased bond indebtedness through a risky swap and failure to require the Authority to use the hotel tax to first pay its debt service, the Lancaster County Board of Commissioners voted to obtain an independent feasibility study from PKF Consulting. The study is expected to be completed in April 2006.

Also, because the circumstances I have discussed are inconsistent with promises and representations made to the County in 2003, a serious question has arisen whether the County's original Guaranty from 2003 will apply if the Authority attempts to remarket its bonds in 2006.

Clearly, this is not the same project to which the former Board adhered the County's guarantee in 2003. Where Authority refuses to correct 2003 documents to keep its promise that the Authority will use Hotel Room tax revenues to first pay its debt service before paying its operating losses;

and where the Authority engages in bond swaps not contemplated in the 2003 documents;

and where the Authority changes the project and its costs to the degree it is has done so since 2003;

and where the Authority refuses to cooperate with a true feasibility study notwithstanding shortcomings in the PwC studies and admissions by PwC that its prior studies are not reliable;

...then why would the Authority expect the County's guarantee from 2003 to transfer to new bonds in 2006 notwithstanding such failures of representations and promises?

Lancaster First applauds Molly Henderson for ignoring LCCCA Chairman Ted Darcus' rude attempt to silence her during her statement.