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Why We Will NEVER Support the Hotel and Convention Center Project
It has been said that it is time for compromise between supporters and opponents of the proposed hotel and convention center project.
It has been said that it is time to put aside our differences, and work together to support the project, to minimize the risk to local taxpayers.
We do not agree.
The actions of two mayors of Lancaster City, Lancaster City Council, previous Lancaster County Commissioners, and the unelected board of the Lancaster County Convention Center Authority, have intentionally slammed the door on "compromise". Their actions combined have committed to this project at least $165 million taxpayer dollars and guarantees plus interest over 40 years, out of an estimated $177.6 million cost.
The lure of "easy money" has seduced local business, political, and civic leaders into pursuing an increasingly risky gamble. Yet not a single one of these individuals can look someone in the eye and explain with verifiable facts and figures why this outrageously expensive project is such a good investment of taxpayer dollars.
A few - but not all - of our concerns are:
There has been no accountability of any kind to local taxpayers. Millions of dollars have been spent without adequate explanation. Particularly troublesome have been the exorbitant sums spent on legal fees and consultants without detailed invoices. Until mid-2007, many of the repeated "Freedom of Information" and "Right to Know" requests were ignored or refused. Even members of the LCCCA board were kept in the dark until the day before they were expected to vote on the expenditure of even more taxpayer dollars, and many other expenditures were never been explained to them at all.
The original project was widely publicized as the best way to save the historic Watt & Shand building, which was added to the National Register of Historic Places. Today, all that remains of the Watt & Shand building is its shell.
The original project was widely publicized as a "private-public partnership". Today, only or $11 million in "equity" (whatever that means) of the currently anticipated $177.6 million cost of the project has come from private sources. The claim of an additional "private" investment is supposed to come from future profits to be earned from the taxpayer-owned and financed hotel.
The original project was widely publicized as a way to provide additional tax revenue for the cash-strapped School District of Lancaster. Today, the City of Lancaster has legal ownership of the Watt & Shand site, so the Penn Square Partners can avoid paying real estate taxes on their "private" hotel building for at least 20 years. Meanwhile, the leaders of Lancaster City have waived well over a million dollars in badly-needed fees that should have been collected from this project.
No substantial justification for the project has ever been presented to the public. The LCCCA has repeatedly pointed to a marketing report of the original $75 million incarnation of the project from the year 2000 (which has since been discredited by its authors); in fact, the LCCCA and Penn Square Partners web sites still misquote figures from this report. However, in 2003 the project was redesigned "to reduce construction budget costs both for LCCCA and PSP", according to the Penn Square Partners' web site; this resulted in a much larger and far more expensive project than was originally presented to the public. In spite of this, project promoters have never presented to the public facts and figures that would show how this vastly expanded project can make any kind of economic sense.
State laws have been repeatedly rewritten to support this specific project, without any concern for the long-term consequences. These include substantial cutbacks of prevailing wage laws, the infamous Act 23 (which provides State grants based on anticipated tax collections), and the ability of local governments to force taxpayers to pay all real estate taxes on projects specifically designed to benefit private business.
On multiple occasions, the Penn Square Partners have threatened to kill the project unless their demands were met. In each case, the LCCCA caved in. This is not negotiating, this is coercion and intimidation.
Multiple lawsuits have been brought against the project by various parties, all concerning various aspects of the project financing. The LCCCA publicly claims victory in court over all of these, but in most of these cases what really happened is the LCCCA threatened to draw out legal actions using taxpayer dollars until the private parties were driven into bankruptcy. This is not legal victory, this is coercion and intimidation.
The local newspapers - whose owners stand to reap 50% of the profit from the proposed taxpayer-owned and financed hotel - have consistently attacked those who dare raise questions about this project, while basically ignoring their concerns. This is not reporting, this is coercion and intimidation.
Compromise means all parties involved in an issue must be willing to give up something. Yet all the calls for "compromise" from the people behind this project include no concessions on their part. This is not compromise, this is coercion.
Public support for any expenditure of taxpayer dollars requires openness, honesty, accountability, and public involvement. Tne creation of this project has never involved any of these. The result of this has been, and always will be, division and discontent. No matter what happens from this day forward, this project will remain a source of shame for generations to come.
Why The Convention Center Project is Already a Failure
The hotel and convention center project in downtown Lancaster, PA has been a failure on many levels. Worst of all, this project has been a failure of government of the people, by the people, and for the people. Nothing that can happen now or into the future can change this. Some examples of these failures include:
No competing bids were seriously considered for the sale of the Watt & Shand building in 1998.
In 1998, the "Lancaster Campaign" commissioned a major study of the potential of downtown Lancaster. The "LDR International/Winterbottom" report clearly recommended the adaptive reuse of the Watt & Shand building, along with a modest "conference center" located in the east side of Lancaster Square in the 100 block of N. Queen St. This current project has violated both of these recommendations.
All of the newspaper articles and press releases from 1999 repeatedly promised that one of the primary purposes of this project was to save the Watt & Shand building, while saving taxpayer dollars by claiming historic tax credits. Now the Watt & Shand building has been demolished, and the tax credits along with it.
The proposed "private" hotel was widely publicized as a way to provide badly-needed real estate tax revenue to the School District of Lancaster. However, in early 2005, Penn Square Partners decided they needed 20 years of tax abatement to help fund their project. When the SDoL refused, PSP first declared the project dead, then sold the Watt & Shand property to the Redevelopment Authority of the City of Lancaster in an attempt to avoid having to pay ANY property taxes at all for at least 20 years.
State laws have been repeatedly re-written by State Senator Gib Armstrong and State Representative Mike Sturla to specifically benefit this particular project. Among the worst of these is a law that requires Lancaster City residents to pay real estate taxes on the City-owned "private" hotel.
The Penn Square Partners are providing no more than $11 million in up-front "equity" (which has never been defined to the public) to furnish the City-owned hotel building. Over the next 20 years, they plan to pay the RACL a total of $24 million in "lease" payments, out of future profits they plan to earn from the City-owned hotel building. At the end of 20 years, the PSP has the option of purchasing the City-owned hotel building for a relatively nominal fee. This is a VERY good deal for the PSP, since the total cost of constructing the hotel (before interest) is estimated to be well over $72 million.
In creating this project, the Lancaster County Convention Center Authority consistently followed a pattern of secrecy. It took a Sunshine Act lawsuit by a local activist to force the LCCCA to allow public comment at board meetings. Many LCCCA officials looked away during the brief "public comment" period near the beginning of their board meetings, in an open display of contempt for the public they were appointed to serve.
Nor did the LCCCA readily release most of its financial information to the public. For example, millions of dollars in legal and consultant fees have never been explained.
The LCCCA's former legal counsel received about $7 million (the exact figure has never been released to the public) for negotiations with the Penn Square Partners, at the same time this very same law firm was retained by High Associates (the "general" partner in PSP) for other issues, including government lobbying.
In 2003, the project was completely redesigned. According to the Penn Square Partners' web site, "Architects are directed to re-design the project to reduce construction budget costs both for LCCCA and PSP". What really happened was, the project was greatly increased in size, with the LCCCA assuming responsibility for all of the "shared space" the PSP would have had to otherwise pay to build. This redesign pushed the total estimated cost of the project from $75 million up to $129 million, a figure that was quoted until the plans were completed in 2006. Construction bids have pushed the current estimated cost of the project to $177.6 million, excluding certain interest costs.
In 2007, foundation construction began nearly THREE MONTHS before project financing was in place. This is the equivalent of building the foundation of a home before the mortgage is approved by the bank. How many of us could possibly get away with that?
No party promoting this project has ever provided any study or other explanation to justify the economics behind the 2003 redesign. How can the expenditure of this many taxpayer dollars be justified without facts and figures to show that it could make economic sense?
The cost of this project to the public is currently estimated to be $177.6 million in taxpayer dollars and guarantees, plus certain interest costs (as of May 2009). What kind of economic development will be required to justify this massive expenditure of taxpayer dollars? Where would this economic development take place, and what form would it take? What kind of return on investment can the taxpayers expect for their hard-earned money?
No matter whether this project is "successful" or not, it will always be a reminder of what happens when a few "special interests" get away with manipulating local government for their own benefit. Not only has downtown Lancaster lost yet another big part of its history, the rest of us will end up paying for this project in one way or another for the rest of our lives.
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