by Christiaan Hart-Nibbrig
“We don’t have a ‘Plan B’.” — Nevin D. Cooley, President, Penn Square Partners, on March 15th, 2005, after the Lancaster School Board rejected the Tax Increment Financing (TIF) proposal his partnership submitted. In fact, they did and would soon announce it.
To listen to the reaction of the sponsors of the hotel and convention center after the school board rejected their tax abatement scheme, one would have thought the project suffered a mortal blow. The words were downright funereal in tone.
The next day, Jack Buckwalter Lancaster Newspapers chairman – and co-equal investor with High Industries in Penn Square Partners – was quoted in one of his papers after the school board vote:
“We are very disappointed. Over the past seven years, we have made our best efforts to bring the Watt & Shand building back to life. It appears that we cannot proceed under the conditions as set by the school board. So the project very well at this juncture could die.”
Dale High released a written published statement two days after the ‘Ides of March’ school board vote. “We have stopped all work on our portion of the project, effectively immediately.”
High immediately instructed his construction company to remove all signs from the Watt & Shand building promoting the project coming soon.
“We made it clear that this is our best offer,” said Nevin Cooley following the meeting. “There is nothing more that we can do. If I could have offered something different, I would have.”
Cooley continued, “We can’t go forward and the community and the taxing authority will continue to have a building that is empty and deteriorating and not generating anything in new taxes.”
“They just killed this project,” said Ted Darcus, Chairman of the LCCCA board on March 16, of the school board.
A clearly disgusted State Senator Gibson E. Armstrong, a key supporter of the project in Harrisburg, was sharply critical of the school board: “It’s ironic that the people that would probably benefit the most – the school district – are the ones to kill it.”.
But the project wasn’t dead at all. In fact, a ‘Plan B’ by which the City of Lancaster would own the hotel for twenty years had already been developed months earlier, was waiting in the wings, and they knew all about it.
The idea of the city of Lancaster actually owning the former Watt & Shand building was first introduced in 1998, following the election of Charlie Smithgall to his first term as mayor.
In 1997, Smithgall, a Republican, had vigorously campaigned against a proposal for the Harrisburg Area Community College (HACC) to open a satellite campus in downtown Lancaster in the vacant Watt & Shand (now Bon Ton) building.
Smithgall’s principal objection the HACC plan, he said then, was that the building would be taken off the tax rolls. “The tax base of the city is a concern of mine,” he said during the campaign. The provincial Smithgall was also concerned about an outsider buying the building.
“I didn’t want some absentee landlord who didn’t care about the city owning the Watt & Shand,” Smithgall recently told NewsLanc.
As an alternative, Smithgall supported a proposal from local businessman, Rob Ecklin, to purchase the building from the Bon Ton Company for $1.25 million. The HACC deal was killed at the state level, and Ecklin’s offer was rejected by Bon Ton.
After the November election, in the first week of taking office in January 1998, Smithgall explored having the city of Lancaster buy the building from Bon Ton, then leasing the space to local (and tax generating) retail businesses.
The initial plan for a Lancaster city purchase of the old department store was quickly taken out of consideration when the powerful business consortium of Penn Square Partners was formed in February, 1998. Nevin Cooley said the partners bought the building: “with one, and only one, purpose: to save this [the Watt & Shand] building.” (click here to see Cooley’s remarks, filmed by Ron Harper, Jr. ). The partners initially saw the building as a mixed-use (residential / retail) facility.
Since the inception of the hotel and convention center project in 1999, one of the major selling points for project sponsors was that it would be a “private-public” partnership. Originally planned as a $75 million joined hotel and convention center complex, the “private” partners were to absorb 53% ($40 million) of the investment for the construction and operation of a Marriott Hotel, with the “public,” i.e., the taxpayers, paying the remaining 47% ($35 million) for the convention center.
Until this point, and as the combined cost now reached $129 million, the partners had been primarily concerned with the contracts dealing with the convention center, including the “common space” agreements, which usually redounded to the Partners’ benefit. The Partners had been very aggressive and successful working with the LCCCA in obtaining increased subsidies for themselves, and now were focused on the hotel’s funding. The cost of the hotel was now estimated to be $75 million.
The ‘fatal’ defeat the partners pretended to suffer at the hands of the school board was, literally, a public charade, and a poorly executed one, at that.
When Cooley said Penn Square Partners had no “Plan B,” he was being disingenuous at best; blatantly lying at worst. Cooley, Armstrong, and Smithgall et al. were well aware that something else was firmly in place as they proclaimed the ‘death’ of the project.
Months earlier, in a front page story on December 17, 2004, the Intelligencer Journal published an article (“City to buy Watt & Shand”) outlining a plan by which the city of Lancaster, via one of its agencies, would purchase the landmark building from Penn Square Partners.
The article, by Dave Pidgeon, describes an agreement whereby the Redevelopment Authority for the city of Lancaster (RACL) would buy the building from Penn Square Partners, then lease it back to the Partners, who would then have an option to re-purchase the building in 20 years.
No purchase price for the building was mentioned in the December article.
Unlike the TIF proposal to the SD of L, the RACL plan would totally exempt the hotel from property taxes and would no longer come with an offer by PSP to contribute annually to the SD of L in lieu of property taxes.
It would also allow the City of Lancaster, through RACL, to apply for an annual grant through the state’s Department of Community and Economic Development (DCED), which rebates to PSP an anticipated million dollars of annual state sales tax generated directly or indirectly by the convention center project. (Eventually the rebate was pledged to service a $14 million loan from Fulton Bank.)
Mike Winterstein, a school board member who would soon vote on the TIF, remembers Mayor Charlie Smithgall lobbying him during weeks before school board vote: “I recall the meeting very well,” Winterstein told NewsLanc recently, “Smithgall is trying to get us to pass their TIF and he says, ‘Well, if you don’t do it, we’ll just take it off the tax rolls.‘ I couldn’t believe it.”
During the twelve days following the school board vote in 2005, the project was described in moribund terms. Its miraculous ‘resurrection’ is a study in media manipulation and deception.
On March 22, Assemblyman Mike Sturla, another ally of the project in Harrisburg said to the New Era after a new TIF proposal to the school board was made: “We’ve unloaded our tool box. This is the end.”
Three days later, March 25, the Intelligencer Journal virtually pronounced the project muerte. “Disarray hits Penn Sq. plans/Leaders halt tax deal negotiations,” the headline read. The article struck a midnight tone.
“Plans to build a luxury hotel and convention center on Penn Square suffered another blow Thursday night, when hotel developer Penn Square Partners ended attempts to obtain property tax breaks for the project.
“The partnership had said it needed millions in property tax abatements from City Council, county commissioners and the School District of Lancaster board to build the 300-room Marriott Hotel.
“The collapse of negotiations concerning the tax deals places the status of the hotel and adjoining convention center in doubt.
“‘We’re out of time,’ said state Sen. Gibson Armstrong, one of the chief proponents of the project. “‘It’s impossible to pull everything together.'”
The next day, on Good Friday, March 26, the Intelligencer Journal reported that a $22 million funding gap may doom the project. “A $22 million funding gap that first surfaced in early 2004 continues to threaten the proposed downtown hotel/convention center,” the article began.
Nevertheless, on Monday March 28, 2005, one day after Easter Sunday, Lancaster County citizens read that the project proclaimed to be “dead” only days before had miraculously been resurrected!
“Hotel plan rescued,” exclaimed the Lancaster New Era in its headline. “The death-defying Penn Square project is back on the fast track thanks to a revamped proposal. Construction expected to start in June,” read the subhead.
The lead reads like a breathless schoolgirl on prom night:
“Skip the school board. Forget the county commissioners’ 57 questions.
The Lancaster City Redevelopment Authority this morning unveiled a new way to finance – and keep alive – a proposed 300-room convention center hotel on Penn Square.
As we have seen, what the sponsors “unveiled” was not “a new way to finance — and keep alive” the hotel. Rather a “Plan ‘B’” that was far more favorable to PSP than what they had presented to the SD of L. Not only would the SD of L receive no real estate taxes whatsoever for twenty-years, but the offer of “$150,000” in annual payment that Dale High for PSP had “agreed to guarantee” was now gone.
This opened them up to a new wave of opposition.