EDITOR’S NOTE: This is a re-write of the thirty-third in the series.  It contains much more information and analysis.

(Forty-ninth  in a series)

By Christiaan Hart-Nibbrig

On December 17, 2004, on the front page, bylined by its lead convention center beat reporter, Dave Pidgeon, the Intelligencer Journal ran an article entitled: “City to Purchase Watt & Shand.”

In the article, Pidgeon quotes city officials and Penn Square Partners (PSP) president, Nevin Cooley, outlining in detail the Partners’ plan to sell the former Watt & Shand building to the city of Lancaster, through its Redevelopment Authority (RACL). By selling the building to RACL, leasing it back with a favorable option to buy in forty years, the Partners would remove it from the tax rolls (since a public entity would own it.)  Below are excerpts from the December 17, 2004, Intelligencer Journal article:

“According to the plan, Penn Square Partners would lease the hotel from the Redevelopment Authority while overseeing business operations of the upscale 300-room Marriot Hotel, proposed for a site next to the convention center.

“…After 20 years, Penn Square Partners, the Redevelopment Authority and the convention center authority would assume joint ownership and operation of the hotel.

“…If the Redevelopment Authority buys the properties, the city would receive a bond for $12 million – the projected income of sales taxes and personal income taxes over a 20-year period – via Act 23, Cooley said.

“… The Redevelopment Authority would then pursue a second bond worth $24 million, which local and regional banks have pledged to give it. Penn Square Partners would insure the bond, and the money would be used for construction.

“Each of the city’s debt payments toward its $36 million in bonds would be covered by Penn Square Partners hotel lease payments.”

Meanwhile, during the months of January, February, and the first weeks of March, 2005, the Partners and city officials, especially Mayor Charlie Smithgall, were aggressively pressuring the School District of Lancaster board members to pass a Tax Increment Financing (TIF) proposal that would take the building off the tax rolls, but would leave them with the title to the building.

A TIF is a designation that a particular area is “blighted” and, with the approval of the local school board, county commissioners, and city council, an applicant like PSP is qualified to pay an agreed upon amount to each of the three governmental bodies (the school board gets the biggest cut) in lieu of property taxes.  A TIF would also allow PSP to retain title ownership of the building.

Mike Winterstein, a member of the school board at the time, recalls the pressure put on his board to pass PSP’s TIF proposal, with the threat of no taxes if RACL owned the property versus some taxes if they approved the TIF.

During this period, Winterstein, recalls a conversation with Mayor Smithgall.  “Charlie was trying to get me to pass the TIF, but at one point he said, ‘Hey, if you don’t pass it the city will just buy the building and you will get nothing.’  It was like what we did didn’t matter.  They definitely had a “Plan B.’”

“They [Smithgall and Penn Square Partners] thought they could steamroller over us,” Winterstein told NewsLanc. “There was no doubt they thought we’d bow to their demands.”

Nevertheless, the school board, unlike the mayor, city council, and convention center authority board, rejected the Partners. In a stunning rebuke, the board, on March 15, 2005, voted 5-1 to turn down the Partners’ TIF proposal.

Here is where it gets strange.  Immediately after its defeat, the Partners and their prominent supporters, who had publicly given the impression that the TIF was absolutely vital to going forward with the project essentially, pronounced the project dead.

In their own words:

Nevin Cooley, President of Penn Square Partners:

“We made it clear that this is our best offer. There is nothing more that we can do. If I could have offered something different, I would have. …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.”

Senator Gib Armstrong:

“We made the best efforts we can. If the school board wants the downtown to sit the way it is, that’s their decision…If they want to keep the downtown like it is, fine. You can only do so much. It’s ironic that the people that would probably benefit the most – the school district – are the ones to kill it.”

Tom Baldridge, Chair of Lancaster Campaign, President of Lancaster Chamber of Commerce:

“I think this is a blow that will be particularly difficult to overcome.”

John M. Buckwalter, chairman of Lancaster Newspapers Inc., one of three companies which make up the Penn Square Partners:

“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.”

Ted Darcus, Chairman, Lancaster County Convention Center Authority

“They [school board] just killed this project.”

S. Dale High, CEO and President of High Industries, parent company of High Associates, General Partner of Penn Square Partners:

“We have listened, responded to and accommodated our community through the long seven-year period since we purchased the Watt & Shand Building, when no other buyer would have it.

Next, and most pointedly, he abruptly and unequivocally pulls out of the project. “We have stopped all work on our portion of this project, effective this morning,” he states.

High subsequently ordered the ‘Coming soon’ signs taken down from the former Watt & Shand building.

But what about the RACL purchase of the building, as previously reported on the front page of the Intel in December of 2004?

Here is where it gets even weirder.

After the school board rejected a ’sweetened’ TIF deal in late March, 2005, the Intelligencer Journal – the same Lancaster Newspaper that reported the earlier RACL buyout in December, 2004 – reported breathlessly on March 29, 2005, again on the front page, “City to buy W&S building: $6.8 million deal revives hotel plan”:

“Two state legislators [Rep. Mike Sturla and Sen. Armstrong] and city leaders spent Easter weekend forging the new plan, which they unveiled during a series of meetings Monday.

‘The entire project is too important to this city to let go,’ Lancaster Mayor Charlie Smithgall said. ‘I’m afraid someone (else) won’t do this project for another 10 years.’” [emphasis added]

Questions arise:

Question One:  What was the real purpose behind the Lancaster Newspapers publishing the December, 2004 article outlining the RACL purchase of the former Watt & Shand building?

Question Two:  Why did the sponsors — including Dale High — effectively pronounce the project dead after the TIF defeat, when they had already expressed support in December for the RACL buyout and used it privately as a caudle to sway school board members?

Question Three:  What made the Sponsors again reverse their direction and adopt the RACL plan, outlined in December?

Question Four:   Why did Lancaster Newspapers treat the March 28 plan as “new,” and just formed the previous weekend, when the details were published in its own paper just three months earlier?

NewsLanc, despite repeated attempts over the years, has not be able to receive comments from project sponsors to our questions.  So, after speaking with various sources, here is what we surmise from the puzzling series of events:

-   Lancaster Newspapers published the December, 2004 article as leverage for its lobbying efforts with the school board.

-     The Partners preferred the TIF over the RACL buyout, but could use RACL as a bludgeon to pressure the school board      into accepting its TIF proposal.  ‘Either take what we are offering, or we are going to take the RACL deal and you get nothing,’ is essentially the argument used by PSP to the school board.

-   High and his subordinates threw tantrums, and pronounced the project muerte, because he, and they, were rebuked.  High, the boss of bosses, was angry and personally affronted that the board rejected his proposal — after he made a personal and very public appeal to them — so he pitched a fit, took his ball, and went home.

-    High and the Partners changed their minds when they realized they still had an empty building, and had sunk several million dollars into architectural plans and other expenses related to it.  They decided to accept the RACL plan after all, which reimbursed every cent they had invested, gave them a cushy lease deal, and enabled them to own the building for a virtual song after the mortgage debt had been paid off.

-   The reason Lancaster Newspapers ran the March 28 article touting the miraculous last minute plan by Armstrong, Sturla, Smithgall and other sponsors was to allow the rich, powerful, and bruised, Dale High, who had publicly walked away from the project, to ’save face.’   High could re-coup his costs into the building, get hotel off the tax rolls, and still look like he was doing a mitzvah for his community.

Perhaps no other chapter in this long and often bizarre saga illustrates the sinister role the Lancaster Newspapers played.  Despite past decades of competent and solid local reporting serving its community (and also subsequent years), Lancaster Newspapers, undoubtedly influenced by its large stake in the project, used its immense power to propagandize and bias itself on behalf of the interests of the private sponsors of the project.

It is a stain on the proud Steinman name.  And it is a shame, not just for them but for the project and the greater Lancaster community.

###

Chapter Fifty: Miracle on South Queen Street

by

Christiaan A. Hart Nibbrig

It was disappointing to learn that a Chester County judge threw out the libel lawsuit filed by former Lancaster County Commissioner, Molly Henderson, against Lancaster Newspapers, and former Lancaster mayor, Arthur E. Morris.

My perspective on the Henderson saga is one of an ‘insider.’ I worked for Commissioner Henderson as campaign manager during the 2007 primary and general election campaigns. The suit was not discussed with me during or after the campaign; the focus being getting the commissioner re-elected.

Prior to working on the Henderson campaign, I worked for NewsLanc.com, mainly focusing on the then-white hot issue of the building (and financing) of the convention center and hotel project. What NewsLanc reported at the time was that there were a myriad of apparent problems regarding the project; from its fundamental feasibility, to the public financing, to, yes, the media coverage emanating from Lancaster Newspapers.

As a fifty-percent shareholder in the hotel portion of the project (which is linked in many ways to the ‘public’ convention center), Lancaster Newspapers had a unique and very sensitive role in its construction.

Lancaster Newspapers’ role was also a very powerful one, due to its monopoly status within the county. In publishing the morning and afternoon dailies, and the only Sunday paper, Lancaster Newspapers was reaching virtually every household in the county at this critical time in the project’s construction. This meant that the only news on the hotel and convention center project that the average Lancaster Countian received came from one of the sponsors of the project. To maintain its credibility as a news source, it was important for the reporting to be beyond reproach. Unfortunately, it was not.

As a Columbia-trained journalist, with years of professional experience, I felt something was very wrong with the newspaper coverage of the commissioners, particularly as it concerned Commissioner Henderson, who questioned the project.

One aspect of the sub-standard reporting was the inexplicable omission of so many critical elements of the project. For example, the sponsors repeated, and it was reported many times, that “feasibility” studies were performed on the project, when, in fact, none had been. Minimally professional journalistic coverage would have revealed this mis-characterization, and reported it to the public. But Lancaster Newspapers’ reporters and their editors said nothing.

Another example of bias by omission was that Lancaster Newspapers represented, in its three editions, that the larger Lancaster County public was mostly supportive of the project. According to a Fox43-TV poll, conducted by Opinion Dynamics, a firm of national repute, the overwhelming number of the Lancaster County public (78%) with an opinion opposed the project if financing relied on taxpayer financing, which it did. It took the publisher of NewsLanc, Robert E. Field, to pay for an advertisement to report the poll findings to the public!

[There are, literally, dozens of omissions and misrepresentations in convention center newspaper reports. Go to NewsLanc archives to read coverage during this period.]

Another important aspect of the deficient newspaper coverage as it concerned Henderson was the ’saturation’ coverage of the Conestoga View issue. If the convention center issue was white hot; Conestoga View, to Lancaster Newspapers, was molten.

Day after day, month after month, from the summer of 2005 until the fall of 2007, usually on the front pages, above the fold, was some damning story about how “the commissioners” shadily sold the formerly county-owned nursing home, Conestoga View.

Lancaster Newspapers treated the legal sale of a county-owned asset like the bombing of Pearl Harbor. Often, pictures of “the commissioners” accompanied the highly critical front-page “articles.”

For about a year, the Sunday News even published a “countdown,” a weekly subtraction tally until the ends of Commissioner Henderson and Shellenberger’s terms. (The third commissioner, Pete Shaub, resigned before his term ended.) In my decades of reading periodicals of all shapes, sizes, and in many places, I have never personally seen a newspaper stoop to such a biased gimmick.

This was overkill. Conestoga View, as a story, where Commissioner Henderson was concerned, at most, amounted to a single, and trivial, Sunshine Act violation. It certainly did not merit the thousands of column inches that were devoted to it.

According to the Grand Jury report into Conestoga View, upon which so much of the reporting was based, Commissioner Henderson attended exactly one informational meeting that may (or not) have violated the letter of the Sunshine Act. Yet to read the newspaper reports, one would have thought Molly Henderson was a serial killer. This coverage was reprehensibly biased against her, in my opinion.

Lancaster Newspapers also continually depicted the board of commissioners as “dysfunctional” and inept. Before working for Henderson, as a reporter for NewsLanc, I attended virtually every weekly commissioners’ meeting, and not a single time did I observe Henderson (or Shellenberger) act in any way but professionally. Without exception, I saw Henderson work diligently on county business in a professional and competent manner. This was a challenge with the often erratic and flat-out weird Shaub flying off his hinges, and blindly attacking her and/or Shellenberger.

The meetings that I sat through every week, sometimes twice a week, were not the meetings I read about in the Lancaster Newspapers later that day or the next morning. In all frankness, I remember thinking at the time that the “reporters” – Jack Brubaker, Dave Pidgeon, Bernie Harris, PJ O’Reilly, Daniel Burke, Judy Strasbaugh – should have been embarrassed by those stories, so little did they represent what happened at these meetings. I would have flunked all of them in a high school journalism course for the terrible “reporting.”

It is my view that Lancaster Newspapers vilified Molly Henderson (and Dick Shellenberger) because she, by openly questioning the convention center and hotel, represented an existential threat to a project in which they stood to make many millions of dollars.

This is essentially what Molly Henderson was trying to prove in her lawsuit. That is very difficult to show.

At Columbia, my entire journalism class (about 125 students) was required to take a class at the Columbia Law School in the First Amendment. It was here, in a class co-taught by a leading First Amendment Columbia law professor and a Pulitzer Prize-winning journalist, that I learned the parameters of this Constitutional cornerstone of our national culture. I became aware of the limits, expanse, and majesty of this magnificent and inspired part of our country’s law. I also learned that while freedom of speech and press and religion were great, there were limits.

Molly Henderson had the difficult task of showing that the Lancaster Newspapers went beyond the vast limits of First Amendment protection. She had to prove, based on The New York Times vs Sullivan precedent of 1964, that Lancaster Newspapers published the ‘articles’ with “actual malice”; that is, she needed to show that Lancaster Newspapers either had “knowledge of falsity” or “reckless disregard for the truth” in publishing its stories.

By printing ‘back-of-the-book’ retractions and corrections, Lancaster Newspapers covered themselves from the “reckless” clause of Sullivan. And it is nearly impossible to show that, prior to filing their “articles,” Brubaker, Pidgeon, et al, knew what they were handing to their editors was “false.” That is a pretty high bar to clear.

Henderson’s case was always going to be challenging, if not nearly impossible to make. That is as it should be. She got an early victory by having the case reviewed in Chester County, rather than Lancaster County, an implicit acknowledgment by the Court that Lancaster wasn’t going to hear the case impartially.

But Molly Henderson should have had her day in a Chester County court. It was there that she could have brought out the stacks and stacks of newspapers, the ones that wrongly and unfairly depicted her as less than what she was – an honest public servant.

It was in the volume of the biased articles, not the six or seven with obvious, overt lies, where Molly Henderson was libeled. This was new ground for the courts, evidently, and they didn’t want to touch it.

I am saddened today, not only for Molly Henderson, whom I watched and worked around every day for a long time, but for my county and country. Molly Henderson was not a good commissioner; she was a great one. She had the courage and conscience that we, as Americans, say we want in a politician. I saw this up close, from the front row.

And she was burned at the stake by her community, led by her hometown newspaper, and now by the courts. She was wronged.

I want to say, on the record, that it was an honor to work for her, and it is blessing to consider her a friend.

The people behind the downtown Lancaster taxpayer-financed hotel and convention center project have been EXTREMELY aggressive in bringing business to their facility.  Consequently, the project has not yet “failed miserably”.

But it has indeed failed.

In 2010, the convention center LOST just over $1,400,000 taxpayer dollars to bring in more than $1,300,000 in revenue.  This might not be so bad if it would have created an even greater amount of economic development, but where is it?

Since the project’s construction bonds were sold in March of 2007, many more businesses have closed or moved out of downtown Lancaster than have opened. The only direct benefit to taxpayers has been the construction of a new Subway restaurant across King Street from the hotel.  Other businesses may have benefited in some ways from the project, however many downtown Lancaster merchants complain that their business drops off substantially whenever a sizable convention is in town.  And the first and second blocks of East King Street – in the shadow of the hotel tower – are still an economic disaster area, with more vacancies than occupied properties.

Meanwhile, the School District of Lancaster is facing ever increasing deficits.  Because the Penn Square Partners refuses to pay real estate taxes on their “private” hotel (with their building owned by Lancaster City), property owners in Lancaster City and Township are now paying more than they would be had the Penn Square Partners kept their word.

This project has clearly failed to keep its promises to local taxpayers.

Editorial “Rendell has been good for Lancaster” states “During Rendell’s eight years in office, Lancaster County has received more than $636 million in funding.  That ranges from funding for Clipper Magazine Stadium and the Lancaster County Convention Center to farmland preservation to conservation to transportation improvements to funding for colleges.  Every township in the county has benefited in some way.”

WATCHDOG: First of all, without measuring how many tax dollars Lancaster has sent to the State,  it is difficult to reach a conclusion.

More accurate would have been a heading “Gib Armstrong has been good for Lancaster” except even that would not have been correct because the Convention Center Project may prove to be a proverbial ‘white elephant’ rather than a blessing.

Rendell was highly beholding to Armstrong for enactment of casino gambling and funding the expansion of the near billion dollar Philadelphia Convention Center expansion since Armstrong then served as Senate Appropriation Chair.  In turn, Armstrong was reputedly beholding to Dale High.

Although NewsLanc has it from a secondary source deemed credible, it has not substantiated that Armstrong, in reference to the development of the Convention Center Project, early on told a high city official “This one is pay back  for Dale.” True or not, it sure turned out that way!

February 16, 2007

Kathleen Smarilli, President.Wachovia Bank Central Pennsylvania Region

600 Penn Street, Reading, PA 19602    Tel: 717-234-2882

Re: Proposed Wachovia Letter of Credit for Lancaster County Convention Center

Dear Ms. Smarilli:

We three members of the Board of Directors of the Lancaster County Convention Center Authority currently make up a minority of three county appointees on the seven-member board. On September 15 will be joined by a fourth county appointee, shifting the majority from City to County appointees. We share with the others a desire to generate a suitable public facility to accommodate large gatherings; but we believe that must be done in a size, at a location and at an expense that would not violate our fiduciary responsibilities of ensuring its financial viability.

We want to share with you our extreme concern about actions taken by Wachovia in issuing a Commitment for a Letter of Credit to credit enhance $63,990,000 of “low floater,” tax exempt, bonds to finance, partially, the construction of a convention center in downtown Lancaster.

We are submitting (see below) excepts from the PKF Consultant’s Market Feasibility Study, Proposed Hotel / Convention Center Facility, Lancaster, Pa, May, 2006, in part modified to reflect debt service expenses for an additional $20 million as reported in the LCCCA Plan of Finance by GK Baum and Company & Susquehanna Capital Advisors, December 13 – 14, 2006. (Copies of the above referenced documents are enclosed herewith.)

As is evident from the calculations that follow this letter, there is expected to be an annual cash flow deficit of $1,744,220. Since the Center itself is projected to lose $1,405,000 before property taxes and debt service and the annual subsidy from the Hotel Room Rental Tax is prioritized for debt service and related reserves and is sufficient not to trigger the county guarantee, it follows that $1,744,200 of $2,264,000 in Operating and Fixed Expenses will go unpaid.

The Wachovia Commitment requires that the construction period interest be capitalized into the construction loan and that an additional debt service reserve fund be established to protect the bondholders, another year separately escrowed, so there is little risk of actual default during the five year of the Wachovia Letter of Credit.

However, technical default is actually likely within three years and, without these sources available for interest and principal payments, it is clear that no responsible lender would be willing to step into

From a lender’s standpoint, the Hotel Tax and the county guarantee does provide some protection, however unpopular and contested, to Wachovia. But it appears that Wachovia’s Commitment is predicated largely on the revenue from the Hotel Tax and the partial County guarantee rather than the inherent merits of the project. Why is Wachovia ignoring the project’s lack of feasibility? What are the business/banking ethics that speak to a situation like this one?

It also appears that Wachovia’s Commitment is predicated almost solely on the revenue from the Hotel Tax and the partial County guarantee rather than the inherent merits of the project. From solely a Lender’s perspective, that may somewhat protect Wachovia.

Since there will not be sufficient Convention Center revenue to cover most of its expenses, is Wachovia holding the continued operation of the convention center as hostage to some future board of county commissioners to provide additional financial aid? The LCCCA has no taxing power. It’s own financial advisor, Thomas Beckett, recently acknowledged in a public meeting that after five years the Authority might have “to go begging to the commissioners” for a bail out.

We note a similar situation concerning Wachovia’s proposed guarantee of Hotel bonds. The PKF Study for the stabilized year indicates only $124,000 in Net Operating Income After Reserve and Before Property Taxes and Debt Service. (Property taxes are likely.) Debt service on the $24 million in hotel bonds at 5% will amount to $1,925,822 per year, creating a short fall of at least $1,801,822. Debt service for the $13.6 million IFIP Bonds amounts to $1,091,299. State rebates for the IFIP Bonds revenues will not cover debt service if the corresponding sales tax revenues do not meet projections. The hotel Bonds debt service is guaranteed by the City and the IFIP Bonds annual debt service is partially guaranteed by the City.

We again have a situation whereby Wachovia is protected for a few years by line item interest payments in the construction loan and escrowed interest reserves. Later the City will be called upon to service $1,925,822 on the $24 million in hotel bonds and half of any shortfall of state contribution to debt service for the $13.6 million IFIP Bonds.

The hotel tax revenue projections by the LCCCA advisors are not based on any tourism or occupancy studies, but merely on speculation concerning the growth of the average room rate over six years. This, in a region where the tourism isn’t much commercial or high-income, but, instead, lower-income bus tourists and families from the Mid-Atlantic States. Another example of how the LCCCA projections have been massaged is the proposed budget which includes no funds for litigation despite significant ongoing litigation.

So what we are looking at for both the convention center and hotel are projects doomed to default. Wachovia must anticipate this. 2/25/2007 Page 3 of 6

Further, it’s likely that the LCCCA bonds will not be eligible for a federal income tax exemption due to the IRS’s 10% Rule, which allows only 10% of a tax exempt public project to be set aside for private use. About 30% of the convention center is shared space for use by the hotel. By state law, this situation disqualifies the convention center from receiving the $15 million state grant that remains on hold.

We are also told that there will be additional litigation, due to the PKF study and the cost-benefit ratio, if the Lancaster County Commissioners attempt to raise the hotel tax as may well be needed in the future. The commissioners would then have to have county taxpayers foot the bill – and if the commissioner don’t provide for that – the bonds would then go into default at some point.

I’m sure that you are well aware of the unresolved litigation with regard to both the county bond guarantee for the convention center and for Act 23 as it applies to the private lease-purchase of the hotel. It only takes one adverse court decision to doom the project. Equally important is that the LCCCA’s “balanced budget” required by Wachovia does not include any legal fees to cover this impending litigation.

As you know, conventions are booked many years in advance. At this point there are no commitments scheduled for the proposed center, therefore any kind of meaningful revenue stream from the rental of LCCCA convention space is a long way off, and is, in fact, very unlikely ever to occur. Therefore, the pro forma can get much worse.

When Fox 43 / Opinion Dynamics polled 500 Lancaster County residents in October, 2005, of those with an opinion, 78% said they opposed the county guarantee county guarantee of convention center bonds. Given subsequent heavy media coverage, we think a current poll would show close to 90% opposition. Is Wachovia knowingly going to force this financially compromised and unpopular project upon our citizenry just because Wachovia will earn huge fees and is protected by subsidies and guarantees?

In short, we cannot but presume that a department in your bank is knowingly and purposefully entering into unsound guarantees in full recognition that the convention center and hotel are not financially viable and in anticipation of default and further subsidy at a later date at the expense of the Lancaster City and County taxpayers. With all due respect to Wachovia, this is the stuff of Wall Street Journal articles about unethical banking practices – about banks that are motivated by fee income rather than being exercising a consistent social conscience. Worse, about banks who seek short-term fee income without regard to long-term financial risk.

We believe that Wachovia’s name will be damaged if the Convention Center and Hotel Project move forward because the public is becoming aware that the projects will require future bail outs to avoid closing their doors. Wachovia’s local reputation will be damaged as the projects under perform the Authority’s and Penn Square Partners projections over the years. And within five years Wachovia will be publicly disgraced when the PKF projections prove accurate. Wachovia will make calls on the County and City to make good their respective guarantees, the already overtaxed City taxpayers will strain under the yoke of still more taxes to meet City guarantees, and the LCCCA members will go “begging” to the county commissioners for a general tax increase to cover LCCCA operating deficits.

We are bringing these matters to your personal attention because we suspect that you as Regional President have a broader perspective of what make good business sense for Wachovia. We recognize that this transaction will result in substantial fee income for Wachovia but it is our hope that you share our concern for what obviously constitutes a poor investment for Lancaster County and Lancaster City. From a business standpoint, however, the short-term rewards could also be costly to the bank in achieving its long-term business objectives.

In short, it appears that your bank is knowingly and purposefully supporting two unsound municipal projects that are destined to fail. You must recognize that the convention center and hotel are not financially viable and that, no matter how secure Wachovia’s Letter of Credit is, Wachovia’s support of this entire project will precipitate a huge financial burden and economic blight on the Lancaster City and Count taxpayers for decades to come. The fallout from the collapse of this project and subsequent financial burden will land squarely on Wachovia’s ability to do business in this region.

We ask that you intercede in this matter and have Wachovia re-underwrite its financing commitment for the project. We can supply additional information for your consideration and, if you would care for one or more of us to meet with you, we would be pleased to do so.

If we can supply additional information or you would care for one or more of us to meet with you, we would be pleased to do so.

May we have your response in the near future. Thank you very much for your time and consideration.

Respectfully,

Jack Craver

Laura Douglas

Debra Hall

Enc: PKF Memorandum, May 17, 2006

LCCCA Plan of Finance, December 13-14, 2006CC: G. Kennedy Thompson, Chairman, President and CEO Wachovia Corporation 301 South College Street Suite 4000 One Wachovia Center Charlotte, North Carolina 28288-0013

Thomas Esser, Senior Vice President,

Wachovia Bank,

123 S. Broad Street,

Philadelphia, PA 19109

215-670-6579

CommunityAffairs@wachovia.com 123 S. Broad Street PA 4385 3rd Floor Philadelphia, PA 19109

Mary Eshet, Corporate Media Relations Manager

Wachovia Corporation

301 South College Street Suite 4000 One Wachovia Center Charlotte, North Carolina 28288-0013

Don Truslow, Chief Risk Officer

Wachovia Corporation 301 South College Street Suite 4000 One Wachovia Center Charlotte, North Carolina 28288-0013

Reggie Davis, Eastern Banking Group Executive Wachovia Corporation 301 South College Street Suite 4000 One Wachovia Center Charlotte, North Carolina 28288-0013

Dick Shellenberger, Chairman

Lancaster County Commissioners Office

50 N. Duke Street

Lancaster, PA 17608

Molly Henderson, Commissioner

Lancaster County Commissioners Office

50 N. Duke Street

Lancaster, PA 17608

Ed Rendell

Governor

225 Main Capitol Building

Harrisburg, PA 17129

Ted Darcus

Chairman

LCCCA

8 North Queen Street, Suite 1102

Lancaster, PA 17603

Dave Hixson

Executive Director

LCCCA

8 North Queen Street, Suite 1102

Lancaster, PA 17603 2/25/2007 Page 6 of 6

Proposed Convention Center: Representative Year of Operation

(Page II-11, PKF Consulting Market Feasibility Study, May, 2006)

It is recommended that persons and scholars seeking to expand their knowledge of this sordid chapter in Lancaster’s history visit Lancaster Post series about Convention Center, a valuable collection of documents and insightful and carefully researched articles by “Artie See”, often based upon his presence at LCCCA committee and board meetings.

Of paricular interest to scholars is the listing of contracts and documents pertaining to the conventionc center project.

(Forty-eighth in a series)

Different law firms represented the parties to the contracts among Penn Square Partners (PSP), the Redevelopment Authority of the County of Lancaster (RACL), and the Lancaster County Convention Center Authority (LCCCA), and it is not the intention of this article to question the integrity of the law firms.   However, consider that subsidiaries of the High Group had acted as convention center project developer and chief planner and strategist, as project manager, as fifty percent equitable owner of the Marriott Hotel, and as the major contractor for the construction.  The relationship among PSP, RACL, The City of Lancaster and the LCCCA was so intertwined that the parties were inclined to go along with requests by Penn Square Partners and its general partner’s principal S. Dale High.  Evidence of this is the agreements contained provisions which are virtually unprecedented among organizations dealings at arms’ length and devoted to the public’s interest.

Below are outstanding anomalies:

1)      Penn Square Partners was only fronting $11 million dollars, in a form that remains unclear,  towards the $72 plus cost of the hotel while the rest of the rest of the funding was either public funds or loans guaranteed by the RACL and the City of Lancaster.

2)      Despite only an investor in the Marriott Hotel, Penn Square Partners claimed half of any additional funds contributed to the state for the convention center portion of the project.

3)      Penn Square Partners was to receive 50% of the proceeds from naming rights to the convention center, even though their investment was strictly in the hotel

4)      Furthermore, LCCCA agreed to the shameless demand that S. Dale High as an individual should have certain first claims to acquiring the naming rights to the convention center, a provision that would discourage other bidder and prevent the auctioning of the rights to the highest bidder.

5)      A High Group subsidiary was awarded the food concessions contract at the convention center and was only required to pay 5% of revenue up to a threshold figure and 10% commission thereafter rather than standard industry practice ranging from 20% to more than 30%.

6)      Significant facilities to be utilized by the hotel were provided at the cost of the convention center.  According to Taxpayer Tragedy by ‘Artie See’ in the Lancaster Post, “..parts of the buildings that are being built and will be maintained by the LCCCA, such as the hotel kitchen and ballroom, for which the Penn Square Partners will pay $100 a year to use.”

“The ‘Declaration of Condominium’ agreement, dated March 27, 2007, includes the following excerpt from section 2.2(m):

‘Convention Center Unit’ means Unit number 1 to be owned by the LCCCA which will consist of the following areas of the Property and the Building currently constructed and to be constructed on the Property, as more specifically depicted on the Plats and Plans:

(i) All Interior areas on the Watt & Shand Meeting/Administration Level;

(ii) All Interior areas on the Watt & Shand Ballroom A Level, except the Hotel Business Center;

(iii) All Interior areas on the Watt & Shand Ballroom B Level;

(iv) Those Interior areas on the Watt & Shand Lobby Level identified as Kitchen (and notwithstanding anything to the contrary contained herein, including Kitchen equipment), Mechanical and Sound Control Room.

7)  Although the Project represented three distinctly different economic interests – PSP for the Marriott, LCCCA for the Convention Center, and the  common areas with divided ownership between PSP and LCCCA, the entire project was served by only a single electric meter, and with no provisions for submetering.  When queried by NewsLanc, they said this was on the instructions of High executive Tom Smithgall at the time that High was Project Manager.  When this was brought to Smithgall’s attention, he said he would have to ask around and never responded back to NewsLanc.

Studying the plans and agreements among the parties was a formidable task.  Chair Ted Darcus gave the LCCCA board members the documents less than two days before the meeting.  The City board members joined Darcus in voting down the county appointees’ request that the approval of plans be held over to either the next board meeting or an earlier special meeting to allow them to perform their due dilligence of review the material.

8)  The multi-story large break out area in front of the convention center exhibition center is continuous with the lobby of the Marriott with no provision for closing off the areas, thus requiring the wasting of huge amounts of energy at high cost to heat and aircondition the vast area despite the convention center only being in use a small fraction of the time.  This particular design flaw would seem to be a sign of questionable competence.

“This clearly means that the LCCCA will pay to build, own, and maintain areas which will also be used by the Penn Square Partners.”

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Chapter Forty-Nine: Puzzling Propaganda

The following article appeared in the Lancaster Post on September 5, 2008:  by Artie See

The taxpayer-financed hotel and convention center in downtown Lancaster, PA would have never been built had it not been for a series of questionable actions taken by local public officials. At no other time during the last half-century have so many Lancaster City and County “public servants” done so much to benefit so few.

In 2003, County Commissioners Paul Thibault and Ron Ford decided to not run for another term. As the political campaigns to replace them took shape, most of the candidates for County Commissioner questioned the wisdom of proceeding with the greatly-enlarged hotel and convention center proposal. As “lame ducks”, Thibault and Ford took desperate action late in the year to make certain no future County officials could ever kill the project: they enacted a County guarantee for a future $40 million convention center bond sale. To make certain their successors could never revoke their actions, Thibault and Ford authorized a $40 million bank loan from Citizens Bank, called it a “bond sale”, then deposited the balance (less hundreds of thousands of dollars in legal fees) into the same Citizens Bank. This action cost taxpayers $18,000 a month for over three years, the difference between interest paid and interest earned. The third County Commissioner at the time, Pete Shaub, voted against these actions; ever the opportunist, after his reelection he worked to support the project.

Just over a year later, the leadership of the Penn Square Partners announced that they could no longer afford to build their “private” hotel if they also had to pay the full amount of taxes that would be owed on the building. The Penn Square Partners proposed that their real estate taxes would be frozen at the 2003 rates on the vacant Watt & Shand building for 20 years, in exchange for a promise of additional payments in lieu of taxes IF their profit margin would ever exceed an unrealistic 12%. The elected board of the School District of Lancaster held several public hearings on this issue; during one held at Edward Hand Middle School, both Democratic State Rep. Mike Sturla and Republican Mayor Charlie Smithgall shouted threats at school board members. Several of the school board members later received messages that if they didn’t approve the PSP tax abatement, additional State funding for the SDoL would be denied.

On Tuesday, March 16, 2005, at McCaskey East High School, the Penn Square Partners presented a slightly improved offer to the SDoL, which was presented to the school board in a motion by one of its members – but it was never seconded, so it died. The school board then attempted to negotiate by approving a counter-proposal; this was immediately rejected by S. Dale High himself, who declared the project dead. Mr. High’s anger at being rejected was demonstrated when he ordered the signs on the inside of the Watt & Shand building’s windows to be scraped off the next day.

Lancaster mayor Charlie Smithgall, aided by Rep. Mike Sturla and Sen. Gib Armstrong, frantically worked for the next several days to come up with a way to give the Penn Square Partners exactly what they wanted. Their solution practically ripped the “private” out of the “private-public partnership”: Lancaster City, through its Redevelopment Authority, would purchase the Watt & Shand complex from the Penn Square Partners (which had bought it for $1.25 million) by turning $7 million in previous State loans into grants. The Redevelopment Authority of the City of Lancaster would then build the hotel, practically guaranteeing that the structure would be tax-exempt. The Penn Square Partners would then only need to pay $10 million (later increased to $11 million) in “equity” (what form was never made public) to furnish and equip the $75 million hotel building; they would also make payments on a $24 million construction mortgage over 20 years. The deal (as approved by City Council) promised nominal payments in lieu of taxes to the Redevelopment Authority of the City of Lancaster, which holds title to the hotel building.  (In 2010, RACL provided money received from the PSP to the Mayors’ Office Of Special Events, which supposedly helps to pay for police overtime; these funds do NOT appear anywhere in Lancaster City’s budget.)  As a result, an agency of the Lancaster City government built the hotel for the benefit of the Penn Square Partners, and the SDoL will receive no taxes from the site for decades.

Out of several other examples of questionable actions by government officials to support the hotel and convention center project, one more is noteworthy. When bids for constructing the project were opened in July of 2006, they were more than $20 million over budget. The Penn Square Partners publicly proclaimed the project dead, one of over a half-dozen times they had done so. After weeks of frantic negotiation, once again involving Rep. Mike Sturla and Sen. Gib Armstrong, Lancaster mayor Rick Gray announced the funding gap had been closed, and the project saved. But many of these savings have never materialized:

- The Penn Square Partners did increase their investment from $10 to $11 million in “equity”.

- $7 million was added to the LCCCA’s borrowing power when the Lancaster City Parking Authority agreed to build the project’s parking garage.

- An expected $1.5 million increase in the Act 23 construction bond turned out to be just over half a million dollars.

- Most of an expected $5.25 million in “value engineering” was nothing more than fiction.

- A $3 million easement for the Watt and Shand facade, which was to have been provided by the Historic Preservation Trust, has never been mentioned since.

- $2 million in naming rights for the convention center has never been pursued by the LCCCA, because contractual agreements require half of this amount be given to the PSP.

In other words, the project was “saved” with the equivalent of smoke and mirrors.

How did the LCCCA proceed without these additional funds? It simply borrowed more money.

(Forty-seventh in a series)

by Christiaan Hart-Nibbrig

“These municipal authorities are a ’shadow government.’ They have little accountability. They’re appointed, not elected. They wield an insane amount of power, and spend millions of taxpayer dollars. It is very troubling. It’s time to take a close look at them.”

– Pennsylvania State Representative Jesse White (D-46^th) in an interview with NewsLanc. White has sponsored three bills (HB 1715-1717) aimed at strengthening oversight of Pennsylvania’s public authorities.

After the Lancaster County Commissioners voted in early 2006 to hire the consulting firm of Pannell, Kerr, Forster (PKF) to conduct the first feasibility study on the by then $145 million convention center project, the firm’s lead consultant, David Arnold,  was surprised to learn that he would not be receiving any cooperation from the Lancaster County Convention Center Authority (LCCCA).

In declining to participate in the study – a study ordered by one of the two governmental bodies that birthed the LCCCA – the convention center authority offered a glimpse into the unusual power and autonomy of municipal public authorities.

Especially in Pennsylvania, where there are more than two thousand, municipal authorities play an enormous, but largely unobserved, role in providing and financing services and projects ostensibly in the interest of the general public.

These special governmental units, whose board members are usually appointed by one or more regional governments, address services and infrastructure development such as parking, toll bridges and roads, solid waste disposal, sanitary sewer, and water.

The Lancaster Area Sewer Authority (LASA) is an example of such a multi-municipal authority.

The LCCCA was established by joint resolutions passed by both the County and City of Lancaster in 1999. In one meeting, on September 14 of that year, Lancaster County Commissioners passed ordinances 44, 45, 46 establishing the LCCCA and imposed the hotel room rental tax, an excise tax dedicated to convention center development and the county’s tourism agency, respectively. Later that evening, the Lancaster City Council passed a resolution forming the LCCCA.

Although the resolutions at one point empowered a feasibility report, the thrust of the Paul Thibault led county commissioners’ resolutions was to direct the LCCCA to develop a convention center, not to evaluate the need for one.

The county room rental tax provided 80 percent of the five percent room tax levied on every hotel and motel across the 940 square mile county.  This single act provided a revenue stream of about three million dollars per year – $250,000 per month — to the seven-member authority board to administer the project as they saw fit. Moreover, so long as there was debt remaining on the project bonds (which was under the control of the LCCCA), the tax, by law, could not be reduced nor eliminated by the county commissioners.

To lock this in place, the outgoing Thibault board arrange for a bond for $40 million through a bank,  of which only a tiny portion of the funds were drawn down, and future county commissioners were effectively blocked from repealing the room sales tax.

In 2006, the four city-appointed members of the LCCCA board of directors (who serve part-time without compensation) consisted of a director of the local Boys Club; a journeyman electrician with the local power plant; a mid-level school administrator; and a co-owner of a heating oil supply company. What board members Willie Borden, Joseph Morales, and Dave Schwanger did not possess was any experience in the hospitality industry, nor in building and running multi-million dollar projects with complex financing agreements.  (ChairmanTed Darcus had been president of City Council.)

By sharp contrast, the three county appointees had relevant professional experience related to multi-million dollar businesses. But the county-appointed members were three, not four, of the LCCCA board . . and that one seat plurality made all the difference.

Municipal authorities are usually one of two general types: a financing authority, or an operating authority.

A financing authority is generally used as a funding mechanism to take advantage of the tax benefits for which an authority can often qualify as a non-profit, tax-exempt borrower. This type of authority usually functions as a borrowing conduit to finance projects and/or services.

An operating authority, like the LCCCA, is usually tasked with building and operating a specific project or service, with the expected revenues applied to the authority’s expenses and debt service. An operating authority still has the advantage of issuing tax-exempt bonds.

A difference between the LCCCA and most other operating municipal authorities is that the Lancaster center, according to the LCCCA’s own financial advisers, was not projected to generate enough revenue to cover its debt and operating costs.

Therefore, after operating costs and debt service payments, should the LCCCA find itself with an ongoing deficit despite the current hotel room tax supplement, the authority would eventually have to find another revenue source to meet its financial obligations. Such a shortfall would endanger the county tourism bureau’s twenty percent of the room tax, which the LCCCA could appropriate in order to make up all or part of its shortfall.

State law permitted the county commissioners to raise the current five percent to as much as seven percent.  The raising of the room tax, with its potential negative impact on attracting travelers and on earnings, concerned project critics.

The LCCCA did not hire a professional executive director until three years after the authority was established. It is rare for an authority, let alone one charged with building a projected $145 million capital projects, to not have a professional executive director running the day-to-day operations from almost the start.

Retired Jim Pickard served as a part-time volunteer executive director for the first critical years. The Authority effectively turned its planning, negotiations and decision making over to the law firm of Stevens & Lee, to various consultants, and to an affiliate of The High Companies which acted as developer for the convention center. Stevens & Lee, the LCCCA’s solicitor, was also the law firm of record of The High Companies, of which another affiliate was the general partner of Penn Square Partners.

It was not until the spring of 2002 that the LCCCA board hired its first professional executive director, Michael Carper. Carper, a highly qualified former president of a prominent local property management company (Horst), resigned within six months. He made no public comment regarding his resignation, other than to say he was pursuing other opportunities.

In September of 2003, ten months after Carper’s resignation and after spending several million additional dollars, the LCCCA hired David M. Hixson as its executive director on Pickard’s recommendation.

Hixson, who was then 37, had six months experience as  “principal adviser” in the state Department of Labor and Industry. Prior to that, Hixson spent the bulk of his professional life in the public relations offices of then-Congressman Tom Ridge, and Lt. Gov. Mark Schweiker.  At the time, few if any questioned why Hixson, a public relations flack, was being engaged to oversee a hundred million dollar project.

Hixson proved to be as dependent on Stevens and Lee  as Pickard.  Often during public meetings Hixson turned for advice from attorney Espenshade.  ChairmanTed Darcus would only permit comments or questions from the audience during a period allowed at the outset of meetings.  Furthermore, it was his practice not to permit board members to respond to questions.

A municipal authority like the Lancaster County Convention Center Authority is, or is supposed to be, an independent public governmental body. It is subject to the same open records and ‘Sunshine’ laws as elected government offices. Authorities must hold public meetings with adequate public notice, respond to right-to-know requests, and perform due diligence in their capacity as stewards of public funds.  But otherwise, an authority is accountable to no others including the entities that originally created it.

Therefore, their oversight falls squarely within the purview of a vigorous, independent press, the so-called ‘Fourth Estate,’

For most of the 20th Century, the three Lancaster newspapers – the morning Intelligencer Journal, afternoon Lancaster New Era, and Sunday News – provided Lancaster County with competent and, at times, distinguished local coverage. The editorial pages of each of paper were meant to operate quasi-independently, with the Intell taking a more Democrat, or progressive perspective, and the New Era leaning Republican and to the right.  The Sunday News was typically a weekly summary and analysis of the major events of the week, and was heavy on religion. Its editorial page was closer to the New Era’s.

But a change in the quality of reporting began to emerge in 1999, the year that the LCCCA was formed and when the newspapers’ parent company had become a major investor in Penn Square Partners.

Lancaster Newspapers was an equal equity partner with General Partner, High Associates.   However, Lancaster Newspapers did not report its percentage of ownership in the project until a court hearing in 2006, seven years after the project officially commenced.

On August 26, 1999, the newspaper coverage of a public meeting before the key September county commissioners’ room tax vote blared a banner headline:

“PENN SQUARE COMPLEX IS HAILED AS ‘EVERYTHING THE CITY NEEDS’;  STRONG PRAISE FROM CROWD OF NEARLY 300.”  The article began: “In a display that united old foes and bridged city-county and Republican- Democrat differences, county leaders have embraced plans for a $75 million downtown hotel and convention center with almost religious zeal.”

Only buried deep in the article were the objections of the hotel and motel owners who would be funding the “complex.”

Weeks later, after the tax was passed, which came with banner headlines and front-page stories, the pro-project reporting and omissions continued. For example, none of the Lancaster papers reported that the representations of sponsors that the project had feasibility studies performed were incorrect!  They were only market studies which do not deal with profits and losses. (The first feasibility study was actually conducted in the spring of 2006, and it concluded the project should be “downsized” or another use of the Watt and Shand site found.)

The selection of city-appointed LCCCA board members, seemingly chosen for compliance, despite inexperience, was never discussed, let alone challenged.

Lancaster Newspapers did not report on the role of Stevens & Lee representing the county and LCCCA, while also being the registered lobbyist for The High Companies. This potential conflict-of-interest where Stevens and Lee had represented or was representing both the private and public parties to the transaction was not a subject of concern to the Lancaster Newspapers.

In attacking the questions raised by the county commissioners, the Lancaster Newspapers editorialized that the majority of people supported the County Commissioners guaranteeing convention center bond debt.  The salient determination of the Fox 43 county poll that 78 percent with an opinion opposed county guarantees for the project debt was not included in reports in any of the three Lancaster Newspapers. (Robert Field, who underwrote the cost of the survey, took out a half-page advertisement in the morning and afternoon newspapers to publish the entire report and show the vast public opposition.)

The newspapers reporting claims that there was “No Plan ‘B’” if the school board turned down the tax abatement proposal while its management knew a ‘Plan B’ by which the City of Lancaster would own the hotel for twenty years had already been developed months earlier and was waiting in the wings.

Lancaster Newspapers also accepted without analysis the LCCCA’s bid overage representation in the spring of 2006. The amount of the overage was understated by $12 million!  The Sunday News ran a correction article after LCCCA board member Laura Douglas’ revelation.

When the Executive Director of Common Cause, Barry Kauffman, wrote a letter to Pennsylvania Governor Edward G. Rendell, urging the Governor to direct the Auditor General to investigate the LCCCA, it merited only a single sentence that was  awkwardly buried in the fifteenth paragraph of a barely related article.

The millions of dollars of taxpayer money that went to private consultants and massive legal bills, and the subsequent one-sided agreements between the authority and the private hotel partners, were reported only superficially.

In a letter to a Lancaster Newspapers reporter, Robert Field wrote: “Instead of running a newspaper, Lancaster Newspapers have become a propaganda rag.” Field, who had recently launched NewsLanc, publicly called for the newspapers to engage an ombudsman to examine and evaluate the fairness of newspaper reporting.

Later, the newspapers were to play major role in suggesting the project was in deep trouble and, at one point was dead, a possible deception which implications will be examined later in this series.

Thus Ted Darcus and his three allied city appointees on the board went unfettered by Fourth Estate scrutiny and resulting public opinion.

###

Chapter Forty-Eight: THE FOG OF WAR; PART TWO

(Forty-sixth in a series)

by Christiaan A. Hart Nibbrig

The Lancaster County Convention Center and Hotel project was originally conceived as a $75 million project ($45 million private and $30 million public). The final cost of construction: nearly $180 million.The final cost estimates do not include a new parking garage, or interior work that will be done to any of the historic properties adjacent to the development. All but $11 million of funding is either taxpayer dollars, or guaranteed by the taxpayers.

1992

FebruaryThe 115 year-old landmark and historic Watt & Shand department store is sold to the York-based Bon-Ton Stores, Inc. Three years later the downtown store is closed.

1993

June

The Lancaster Alliance is formed. The non-profit Alliance is comprised of twelve prominent business leaders. The group includes S. Dale High, Jack M. Buckwalter, and Rufus A. Fulton, who would later form a small private partnership, Penn Square Partners, that would build a Marriott Hotel on Penn Square. High, Buckwalter, and Fulton, along with retired CEO of Armstrong Industries, William Adams, form the “executive committee” of the Alliance.

1994

December

The Pennsylvania Third Class Convention Center Act is signed into law by Governor Robert P. Casey. The law allows counties to impose a room rental tax to build convention centers. The bill was written by the Reading-based Stevens & Lee law firm, which was also the registered lobbyist of High Industries, the General Partner of Penn Square Partners. Stevens & Lee was also the long-time solicitor of record for Lancaster County, in this capacity for more than a decade. (By 1999, Stevens & Lee could list among its many clients, Berks County (Pa.) and the Berks County Convention Center; and Luzerne County (Pa.) and the Luzerne County Convention Center.

1995

February

Bon Ton executives encourage Harrisburg Area Community College (HACC) to move into the former Watt & Shand building. The move is supported by Democrat mayor Janice Stork and several business leaders, including Lancaster Newspapers’ CEO, Jack Buckwalter.

March

Bon Ton, Inc. closes downtown Penn Square store. The historical landmark Watt & Shand building will sit vacant for more the next decade.

Paul R. Thibault upsets incumbent county commissioner James Huber in the March 17 Republican primary, virtually assuring election in November in overwhelmingly Republican Lancaster County.

November

Paul R. Thibault is elected Lancaster County Commissioner. Thibault, Connecticute born, raised in Canada, was not endorsed by the county Republican party. He did have the endorsement and substantial financial backing of the Lancaster Alliance. Thibault becomes chairman of commissioners’ board upon election.

1996

July

HACC trustees vote to purchase the Watt & Shand building. HACC counts on more than $8 million in state funding.

Lancaster Campaign, a private subidiary of the Lancaster Alliance, is formed. Thomas Baldridge is named Executive Director. The campaign’s stated purpose to improve Lancaster business and culture.

November

Former Lancaster mayor Art Morris criticizes the HACC plan. “I have a number of concerns, but a significant one is the tax base of this city,” Morris says. The ex-mayor makes no such objections when the property is later taken off the tax rolls.

The HACC plans call for razing slightly over 25 percent of the total space to make room for 90 parking spaces, an unloading area outside a day care center, and an outdoor play area. The Watt & Shand facade would be preserved.

The college plans to move from its campus at Burle Industries to the downtown site in the fall of 1998, using 75,000 square feet, with long-term plans to double that usage. The county plans to move in at about the same time, leasing 30,000 square feet for five years.

1997

March

HACC application denied by state department of education on March 27, killing the move of the community college downtown.

July

Lancaster Campaign hires LDR, International to “create a diagnosis and prescription for revitalizing Lancaster.” The LDR study is headed by Bert Winterbottom.

November

Lancaster pharmacist, Republican Charlie Smithgall, is elected mayor. Smithgall was an outspoken and vigorous opponent to the HACC plan.

1998

January

Smithgall takes office on January 4. Former Pennsylvania Commerce Secretary, James O. Pickard, is named special economic advisor to the mayor. Pickard takes no salary, but says one of his primary aims is “finding a use” for the Watt & Shand building.

On January 12, Lancaster city officials announce the city will buy the Watt & Shand building. “We’re in serious negotiations. I’m very optimistic,” Smithgall’s economic advisor James Pickard is quoted in Lancaster Newspapers.

A spokesman for Bon-Ton confirms that a sale appears imminent. “I’d say the discussions are focused on legal issues,” the spokesman says. “I don’t think there are any impediments out there.”

Pickard says the cost of the building will be “substantially under the $2 million.” Pickard says private investors will lend that money interest-free to the city to make the purchase. The city’s action forestalls a public auction of the building, a move that officials like Smithgall fear could put ownership of the building into the hands of an out-of-town speculator.

Pickard says he expects the city will sign an agreement to buy the building within a week, and will settle on the property by the end of February. He says he hopes to see the building in the hands of a private developer within six months.

The partnership of Penn Square Partners is formed. High Associates is the General Partner, with Lancaster Newspapers and Fulton Financial limited partners. It is announced the the Partners are negotiating to buy the Watt & Shand building.

February

Watt & Shand building is purchased by Penn Square Partners from the Bon-Ton for $1.25 million on Feb. 17. “We’re looking at all the options,’ says Dale High, president and CEO of High Industries Inc., parent company of the real estate group. “We see it as a mixed-use building.” [emphasis aded]

The LDR Plan, aka, “the Winterbottom Study,’ is released. It suggests: “Build on the visual impact of the ‘New Lancaster Square West’ to create an opportunity site on Lancaster Square East for a small, state-of-the-art conference center of approximately 40,000 – 50,000 square feet. Work with the new owners of the Hotel Brunswick to assure the hotel’s linkage with the conference center, and that its redevelopment includes not only interior renovation, but an external, architectural enhancement of the building façade – an entirely new image. All of this will create a major ‘people place’ for Lancaster and establish the city as an important visitor destination.” “With upgrading of the [Brunswick] hotel,” wrote Winterbottom on page 52 of the report, “there is the opportunity to create a small, state-of-the-art conference center and additional hotel space.” Winterbottom’s cost estimate for his “state-of-the art-conference center“: between $6-$7 million.

The Pinnacle study, also commissioned by the Lancaster Campaign, recommends the Lancaster Square location for the center. Lancaster Newspapers fails to push for release of that study. The results are never released.

1999

February

Pennsylvania Governor Tom Ridge, who took office in 1995, signs $750 million Stadium Bill, allowing money for the project to flow to Lancaster. House Appropriations chairman, John Barley, a Lancaster Republican, plays a key role in the passage of the bill. The $15 million in state grants to get the project started is seen as reward for Barley’s role in the Stadium Bill’s passage.

March

The Lancaster Campaign funds another study of the project. The Ernst & Young, “Market Study, Cash Flow Estimates, and Economic Impact Analysis.” The study is released to the Campaign in July.

June

In anticipation of a room rental tax, the Greater Lancaster Hotel and Motel Association (GLHMA) conducts a survey of 58 hotels listed with the county’s Pennsylvania Dutch Convention & Visitor’s Bureau (PDCVB). Of the 58 establishments, 54 vote against the tax-dependent project; three abstain pending more information. There is only one supporter among the hotels contacted —the Hampton Inn, owned by High Hotels, a subsidiary of High Industries, a partner in the project.

July

The Ernst & Young report is released, and is used by the sponsors’ to justify the “feasibility” of the project. “It is important to note,” the Executive Summary states, “that this does not take into account the estimated costs associated with the development of each Scenario, the financial feasibility or the anticipated returns”. [Emphasis added.]

August

The release of the Ernst & Young “Market Study” of 1999 is also handled very differently from the Winterbottom study, which was highly publicized and freely disseminated. The Lancaster Campaign’s Chairman, Tom Baldrige, promisedsthe GLHMA members a complete copy of the report would be available to them.

In a letter to Allan Erselius, Executive Director of the PDCVB, August 12, 1999—four weeks after receiving the completed Ernst & Young report—the Campaign’s Baldrige rescinded his offer to the hoteliers to release the complete Ernst & Young study.

“At the most recent meeting with hoteliers,” Baldrige writes, “I assured them that they would get copies of the complete Ernst & Young study as a means to further their due diligence on the project. Unfortunately—and with much apology—I have been informed by Ernst & Young that I am not permitted to share the complete report.”

The full report, which was finished in mid July, 1999, was not released publicly until after the County Commissioners passed the Hotel and Motel Room Sales Tax on September 15.

Ernst & Young also said in its report: “We also believe that the county commissioners should impose a room tax on hotels throughout the county to help pay to build the convention center and to promote tourism in both the city and county.”

September

In three separate resolutions, numbers 44, 45, & 46, on September 15, the three Lancaster County Board of Commissioners, under the Third Class County Convention Center Act of 1994, voted unanimously to establish the Lancaster County Convention Center Authority, impose two taxes: a 3.1% hotel/motel room tax and a 1.9% excise tax. Twenty percent of the room tax, and the excise tax would go to the Lancaster Dutch Convention & Visitors Bureau. The rest would go to the Convention Center Authority. The taxes would be levied solely on the hotel and motel owners of Lancaster County. The taxes would commence January 01, 2000.

October

In Harrisburg, on October 19, Armstrong introduced an amendment to House Bill 148, originally intended to authorize county appropriations for Flag Day observance, and used that pretext to re-enact the Convention Center Act with a single change. Armstrong changed only the scope of the Convention Center Act. This was known afterward as the “Armstrong Amendment. Here is the original language of the 1994 Convention Center Act:

“This Act shall not apply to a county which has an existing convention center which covers an area of more than 40,000 square feet.”

This is Armstrong’s 1999 change:

“This subdivision shall not apply to a county which has an existing convention center owned by, leased by or operated by an existing authority or the Commonwealth with covers an area of more than 40,000 square feet.” [underline added]

By amending the scope of the Act, Armstrong rendered the principal legal challenge on Section 13102 invalid.

There was not a single word of the change – to a law that directly impacted the people and economy of Lancaster County – published in any of the Lancaster Newspapers until after the bill passed the Senate (October 20, 1999) and the House (October 26).

November 5

Standing before nearly 500 cheering people, including the leading Lancaster political and business establishment, on South Queen Street, Gov. Tom Ridge Thursday made a very public display of support for a proposed downtown convention center in Lancaster with an oversized $15 million check.

2000

January 01, 2000. Room rental and excise taxes take effect.

February

Political activist and independent journalist, Ron Harper, Jr. launches website, 5thestate.com. Harper combines facility with digital technology; rabbinical knowledge of the Pennsylvania and U.S. Constitutions; and the physical energy of a hyperactive humming bird, to wreak a most unique kind of civic havoc in Lancaster

March

Oblenders’ property sold to the Convention Center Authority for $625,000.
On March 24, a group of 37 hospitality establishments, large and small, across Lancaster County engage the Harrisburg-based law firm of Mette, Evans, and file a civil lawsuit in the Court of Common Pleas in downtown Lancaster. The suit asks for declaratory and injunctive relief on a total of eight counts of alleged federal and state violations of Constitutional rights.

The hotel and motel owners argue:

“The County Ordinances, the City Ordinance and the Armstrong Amendment, facially and as applied to the Plaintiffs, constitute arbitrary, capricious, irrational and unreasonable regulations and legislation which violates Plaintiffs’ substantive due process rights as secured by the Fourteenth Amendment to the Constitution of the United States…”.

The hotel and motel owners argue that the tax imposed “a substantial burden on the Plaintiffs without a corresponding benefit or with a disproportionately low benefit from the tax revenues.” (The lawsuit is heard first in December, 2000.)

July

The LCCCA-appointed “Tourism Task Force,” recommends the board expand the size of the convention center from 61,000 square feet to at least 100,000 square feet.

“We strongly recommend the authority employ further research to study why the convention center should be initially designed and built to be no less than 100,000 net square feet of exhibit space,” says Bradley Clark, chairman of the task force and member of the LCCCA board of directors at the July meeting.

In addition to Clark, a commercial realtor, the task force members include three representatives from the hotel industry; two restaurant executives, a theater director, a Lancaster Alliance director, and two members of the county visitors’ bureau board of directors.

At its monthly meeting on July 27, the Lancaster County Convention Center Authority approves an operating budget that includes a $750,000 reserve fund for litigation defense. “The $750,000 is an opening number,” Pickard says.

August

At the August LCCCA meeting, the board commissions PricewaterhouseCoopers (Pricewaterhouse), an international hospitality consulting firm, to examine the viability of a larger convention center facility, and essentially re-size and update the Ernst & Young market analysis of 1998. The cost of the new study: $77,000.

As it did with the Ernst & Young report, Lancaster Newspapers reports that Pricewaterhouse was conducting a “feasibility study.” This is misleading. Pricewaterhouse never claims it to be more than a market study, nor did it perform a genuine feasibility study.

Both the Ernst & Young and Pricewaterhouse reports recommended a single or “common” manager for the hotel and convention center.

At the LCCCA meeting on November 8, 2000, representatives from Pricewaterhouse deliver their findings to the board and the public. .

The Pricewaterhouse consultants estimate construction costs for the larger facility could reach $35 million, which could support a facility as large as 114,000 square feet – nearly double the original projected size.

The increase in cost, from the previous high estimate of $30 million, would fall directly on the taxpayers, particularly the county hotel owners.

December

On December 5, 2000, a Lancaster County judge rules that hoteliers can’t use some evidence they had hoped to introduce during their trial. Judge Louis J. Farina decides three key areas of questioning are off limits to attorneys representing the now 11 hoteliers suing Lancaster city, the county and Lancaster County Convention Center over the legitimacy of a hotel room tax.

Farina upholds a request from the county’s attorneys that forbids hoteliers’ attorneys from raising three issues during the trial. They are a 1998 convention center study completed by Boston-based Pinnacle Advisory Group; the political process by which the 5 percent hotel room tax was passed by county commissioners in September 1999; and evidence fueling “conspiracy theories” that the convention center project was inappropriately orchestrated by Lancaster community leaders.

2001

January

The LCCCA mails approximately 20 requests-for-proposals to potential managers of the convention center. By March, the board winnows the number to five firms, and by May, 2001, three companies make the ’short list’ as finalists: Spectacor Management Group, Global Spectrum; and Interstate Hotels.

All three firms are based in Pennsylvania, and experienced managing large and small conference and convention centers nationally. Spectacor, headquartered in Philadelphia, has the most experience with convention centers, managing more than 90% of the public convention space in the country, including several of the largest facilities in Pennsylvania. Global Spectrum, also based in Philadelphia, manages the Philadelphia Convention Center, among other large centers. Interstate, a Pittsburgh-based company, has a long partnership with Marriott Hotels, and also manages many large conference centers, and several convention centers across the country.

February

State Sen. Gibson E. Armstrong leads a delegation of city leaders and businessmen to Washington, D.C., Thursday requesting up to $25 million in federal funds to revitalize downtown Lancaster. “If we can bring home $23 million from the state for revitalization of downtown Lancaster in the last two years, there’s no reason why we shouldn’t be able to get something from the federal government,” Armstrong is quoted in Lancaster Newspapers. “We pay federal taxes, I just want our fair share.”

May

The Redevelopmen Authority for the city of Lancaster (RACL) votes unanimously on May 22 to nullify the Stevens/Smith easements held by the Trust. The Intelligencer Journal reports:

“Nullifying the easements on the historic properties is valid, as long as the convention center authority buys the Swan Hotel,” said Thomas Weber, chairman of the redevelopment authority.”

The Authority now could do what it pleased with the properties, and it did.

In May, and again in August, 2001, the Greater Lancaster Hotel and Motel Association (GLHMA), sends a letter to Pickard and the LCCCA board urging a separate manager for the convention center, distinct from the still-unnamed hotel operator.

“The bottom line is that we opposed a common manager, period,” says Rodney Gleiberman, General Manager of the Continental Inn and GLHMA member, today. “We were not opposing this common manager, or that common manager. We opposed all common managers based upon the inherent conflict-of-interest, and what we knew would be another item to tip the scales in favor of the hotel competing against us on an uneven playing field.”

July

On July 24, 2001, Penn Square Partners, announces that Marriott has been selected as the hotel ‘flag’ under which its hotel will be built, and that Interstate will manage the hotel.

The next day, July 25, Nevin Cooley, High Industries executive and Penn Square Partners President, urges the LCCCA board to select Interstate as joint manager of both the “private” hotel and “public” convention center.

This is when the battle explodes. The fight is staged on the front pages of Lancaster Newspapers, which finds itself with a hot news story in the usually slow ‘dog days’ of August.

August

On August 15, the Tourism Task Force comes back with its recommendation regarding the single manager question. By a vote of 7-2, the Task Force recommends that Spectacor manage the convention center. The two Task Force members to dissent and vote for Interstate are Jack Howell, director of the Lancaster Alliance, and Deirdre Simmons, a director of the Fulton Theatre, who admitted not to have read or reviewed any of the proposals.

The next day, August 16, a group of prominent hoteliers wrote a letter to Chairman Pickard, among other suggestions, stating: “We experienced SMG’s proposal first hand and found their presentation compelling.  We left the meeting optimistic that SMG’s expertise in operating similar Convention Centers coupled with Interstate’s proven track record in successful hotel management will provide the Penn Square Project the best management team possible.”

On August 17, the Intelligencer Journal published an article, “WILLOW VALLEY WEIGHS IN ON MANAGER BID,” describing how the management of the Willow Valley Resort, which had been in lockstep with the Partners and the Authority until this point, recommended Spectacor and separate management.

In a letter to the Authority board urging a single manager, signed by all three Penn Square Partners – High, Lancaster Newspapers, and Fulton – the Partners write: “Despite the naysayers, Penn Square Partners persisted by investing substantial time, effort and money to promote this vision for a better Lancaster. The opponents chose to litigate and undermine the collaborative efforts proposed by Penn Square Partners and the authority. Their sole goal was to delay, postpone and destroy the project and the corresponding benefits to the community.”

August 22, three top hospitality industry experts, each with decades of experience, speake on behalf of separate management for the public convention center. One of the experts, Robert Butera, president and CEO of Philadelphia’s Pennsylvania Convention Center, questioned whether, in fact, common management was a condition Marriott placed on Penn Square Partners.

September

On September 12 , 2001, the Lancaster County Convention Center Authority holds its scheduled meeting less than 24 hours after the 9/11 terrorist attacks.  Banks, schools, libraries – the entire country is closed; its people in collective shock the day after the attacks. But the convention center authority is open for business the very next morning.

Pickard decides the LCCCA could not delay, by even a single day, the vote on which company would manage a convention center in downtown Lancaster, Pennsylvania.

The chambers at the Southern Market Center were unusually crowded, especially for a morning meeting. Approximately two-thirds of the audience members were in favor of Interstate managing the convention center.

S. Dale High speaks at the meeting, saying: “As we saw with the Twin Towers yesterday, these things can be taken away very quickly.”
2002

January

Lancaster Judge Louis Farina, after having gutted the hoteliers’ case with a number of devastating preliminary rulings the previous summer, decides against the hoteliers on all counts.

The bottom line rulings: the hoteliers did not prove that the “burden” of the room tax outweighed the “benefit” from spillover business the center would generate; the room tax was Constitutional; and the ‘Armstrong Amendment’ of 1999 was not “special legislation,” and would therefore stand.

It was a clear and decisive win for the sponsors, but far from the final battle of this increasingly nasty civic conflict. Within days, the same 11 hotel owners filed an appeal with the Commonwealth Court.

On January 24, in a 6-1 ‘en banc’ (full, seven-judge panel) written ruling, the Commonwealth Court remanded the case back to the Common Pleas Court in Lancaster and back to Farina. The appellate court decision was sharply critical of Farina’s judgment, writing, at one point, “This doesn’t make sense.” The Commonwealth Court essentially told Farina, ‘Get it right this time.’

The LCCCA respondsby hiring renowned and politically well-connected Philadelphia lawyer, Richard A. Sprague, to petition to have the case heard not at the county level, but elevated to the State Supreme Court. Sprague, whose long career includes defending the rich and high profile, including basketball superstar Allen Iverson on gun charges, was and is a “power lawyer” of tremendous clout in the legal community throughout the state. (Sprague later hired retired State Supreme Court chief Justice, Stephen Zapella, to review the Stevens & Lee legal bills. Zapella ruled in Sprague’s favor when the convention center case came before him.)

March

Michael Carper, a former banker and property manager with hotel executive experience, is as the LCCCA’s first professional Executive Director. Carper quits suddenly after just six months on the job. The circumstances of Carper’s departure are sealed in the confidential termination agreement between Carper and the Authority.

April

Pricewaterhouse 2002 “Update Draft,” submitted to LCCCA. Study is later withdrawn by the consulting firm due to changes in size, scope, and cost of project.

In an April 20, 2002 published Letter to the Editor of the Sunday News, Lancaster businessman, Chris Kunzler publicly raises the issue that a government guaranteed bond will be necessary to finance the convention center:

“The convention center alone is expected to cost $55 million, with $15 million supposedly coming from the state. The hotel tax is generating approximately $3 million a year. This $3 million in tax revenue will not come close to servicing the debt on a $40-million bond issue. Let’s not forget the ongoing operating losses of the convention center and the money being spent to promote it. Who will guarantee this bond? And when the project fails, where will the funding come from then? Taxes? Who will be responsible for the losses—the community, with additional taxes?”

May

Attorneys for the Authority – Sprague and Scott Spencer of the Stevens & Lee firm — and those representing the hotel owners – Christopher Conner and Kathy Simpson from Mette, Evans — submit written briefs before the State Supreme Court. The LCCCA submits 50 pages of argument and 92 pages of supporting documents.

September

In an application dated September 13, 2002, James Pickard, then chairman of the Convention Center Authority, had represented the following to the State on an application for a $15 million grant: “Please see the attached Market and Economic Analyses for the Proposed Lancaster County Convention Center prepared by PricewaterhouseCoopers, LLC.  This report represents the results of the market and economic feasibility for the project and includes a recommended building program and utilization estimates as well as a financial and economic impact analysis.” In a signed, official application

December

In a rare joint press conference, on December 6, 2002, the top Lancaster county and city officials, along with Chairman Pickard, express their collective outrage at the hoteliers, and their intention to counter sue them under the Dragonetti Act, which addresses the issue of filing frivolous lawsuits.

2003
May

Republicans Dick Shellenberger and incumbent commisssioner Pete Shaub, and Democrats Molly Henderson and Bill Saylor win their parties respective primary elections. Shellenberger and Shaub are virtually assured of election in November due to the heavy Republican majority in the county. The Democrats traditionally have a two person race for the remaining seat on the board of county commissioners.

June

Attorney Jim Clymer files to runs for County Commissioner. Clymer, the national chairman of the Constitution Party, runs on a platform of shrinking government. He is also strongly opposed to the convention center project.

Clymer is a low-key, but skilled campaigner and attracts significant media coverage. The Sunday News runs a front page article with the headline, “Clymer Calls Election Tune: Constitution Party candidate defines issues in commissioners’ race; now both major parties fear he stands a chance.”

Clymer forces all of the candidates to take a position of the expected vote for a county bond guaranty. The convention center is the major issue of campaign.

July

David M. Hixson is hired as Executive Director of the LCCCA. Hixson is recommended by Jim Pickard. He is to oversee the authority’s day-to-day activities and manage all phases of the project – contracts, construction, personnel, bill paying – from the Authority’s position.

The round-faced, bespectacled, 37 year-old Hixson isn’t a particularly articulate or dynamic speaker. Hixson has no experience in either the hospitality or convention center industries. Most of his former positions were as a press spokesperson. He had a supervisory position with the department of labor and industry in the Ridge administration before coming to the authority.

July/August

Shaub and Shellenberger begin to meet with Lancaster County solicitor, John Espenshade, a Stevens & Lee partner, to discuss selling the county-owned Conestoga View nursing home. Because Shellenberger is not yet elected, the meetings are not Sunshine law violations.

October

On October 16, 2003— without a request from the LCCCA— County Commissioner Chairman Paul Thibault and the board votes to hire bond counsel to explore a county guaranty.

Six days later on the 22nd of October, the commissioners hold a public meeting to discuss the bond guaranty.

On October 29 the $40 million county guaranty is passed (2-1, Shaub votes no) in the form of County Ordinance 73,

November

Shellenberger, Shaub, Henderson are elected county commissioners on November 6.

December

The C.H. Johnson study is released. The study is another market study commissioned by the sponsors.

2004

January

County Commisssioners Shellenberger, Shaub, and Henderson take office on January 8.

On January 12, the 63 year-old Ted Darcus, a former high school basketball star, is voted by his fellow board members chairman of the Convention Center Authority board.

Darcus seems to take meeting management tips from his predecessor on the board, Jim Pickard, who ran the LCCCA meetings with an authoritarian, imperious iron gavel. As with Pickard, under Darcus questions from the public – during public meetings – go unanswered. Darcus, the executive director of the Boys & Girls Club of Lancaster, could be a rude and belligerent chairman. He has a habit of intentionally looking down at his desk when a member of the public was speaking, often pretending to read or write while citizens tries to make their points. Questions from board members are openly discouraged.

March

Gary Heinke is hired as Chief Services Officer for the county, and he begins work on March 29, 2004. Weeks later, his job responsibility are expanded to include supervising five new departments, and overseeing Conestoga View

July

The amendment commonly known as ‘Act 23.’ is passed in the PA legislature. The principal author of the Act 23 amendment [12 Pa.C.S. §3406(b)(11)] is Sen. David Brightbill, a Lancaster County Republican.  Brightbill’s amendment adds language allowing “convention centers” and “hotel establishments” to fall within the Infrastructure and Facilities Improvement Program (IFIP) funding guidelines. (Brightbill goes on to work for the Stevens & Lee law firm, counsel for the Convention Center Authority, after leaving the legislature in 2007. Sen. Gibson Armstrong was also a co-sponsor of Act 23.)

The IFIP was orginally intended as a state financial assistance program in which the Pennsylvania Department of Community and Economic Development (“DCED”) provides multi-year grants to eligible applicants. Grant recipients through this program sell bonds to finance qualifying “infrastructure and facilities” expenses, and then uses grant funds from DCED to pay debt service on the IFIP bonds.

December

December 17, 2004, the Intelligencer Journal publishes an article (“City to buy Watt & Shand”) outlining a plan by which the city of Lancaster, via RACL, would purchase the landmark building from Penn Square Partners.

The article, by Dave Pidgeon, describes an agreement whereby the 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 Tax Increment Financing (TIF) proposal the sponsors were pitching to the School District of Lancaster, the RACL plan would totally exempt the hotel from property taxes. With city ownership of the building, RACL could now apply for state loans or bonds on two issues of $24 million and $12 million, totaling $36 million. The bonds for the $12 million issue would be funneled through the Department of Community and Economic Development under the IFIP, and Act 23 amendment.

The plan 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.)

2005

January

With the support of Democrat Henderson, Shellenberger takes over as chairman of commissioners board. This move estranges Shellenberger and Shaub, growing increasingly bitter as the year goes on.

January/February

The private sponsors lobby school board members to adopt their TIF issue proposal. In a letter to the president of the school district, Patrice Dixson, Penn Square Partners President Nevin D. Cooley bases his argument on a market study, which he incorrectly, and repeatedly, characterizes as a “feasibility” study. It was later certified that the study was, in fact, a market study, not the much more comprehensive ‘feasibility’ study which projects revenues and expenses, profits or losses.

March

Commissioners Shellenberger and Henderson send “57 Questions” to PSP, RACL, and the LCCCA. Penn Square Partners and RACL answer none of the questions. The LCCCA answers fewer than half.

Intelligencer Journal publishes March 12 poll, three days before the School Board TIF vote, the results show 93% of respondents oppose the plan.

On March 15, at McCaskey High School, in a 7-1 vote (one abstention), the School Board of Lancaster refuses to back the private sponsors’ TIF proposal.

After the vote, the sponsors and the newspapers suggest the TIF defeat is fatal to the project. “Supporters of a downtown Lancaster hotel and convention center on Thursday pulled the plug on a tax relief plan they said was needed to support the project. And the center project remains barely alive today,” read a New Era article days after the vote.

The fight over the TIF activates two citizens, Randolph Carney, and April Koppenhaver. Both would often attend the public meetings. Carney also carefully monitored the many complicated financial documents and agreements that were generated from the project. He posts many of the documents on a website he runs, LancasterFirst.org. [writer's note: Carney's collection of documents and his analysis have been used in the convention center series.]

April

April 12 City council votes to apply for $36 million in Act 23 funding.

April 20 Lancaster City Controller R.B. Campbell is presented with documents related to the financing of the Act 23 grants.

April 22 Controller Campbell sends letter to Mayor Smithgall stating that he would not execute the documents in question until he had received comfort in the form of an independent review by counsel of the Controller’s choosing to investigate the issues raised by the county solicitor’s memorandum.

April 22 the Mayor sues the Controller to compel him to sign the documents.

April 25 the Controller is ordered to appear in common pleas court, judge enters a preliminary “Mandamus” order requiring the Controller to execute the documents and, in the alternative, allowing the Mayor to sign as attorney-in-fact.

April 27 The April 25 court order made permanent

In early May, Campbell files appeal with Pennsylvania Commonwealth Court. The County files an amicus brief on behalf of Campbell. Campbell loses appeal on September 14, 2005.

Writing that “the project today is very different today than what we studied,” the lead Pricewaterhouse consultant withdraws the firm’s name from study it performed.

Local businessman and philanthropist, Robert E. Field, becomes interested in the project. Field is concerned that the popular support for the project depicted in the media was not a true reflections of the general sentiment of the county. As an experienced hotelier (though with none in the area), he had explored buying the Brunswick, and was not persuaded the market could support the hotel.

Field personally meets with Rufus Fulton, CEO of Fulton Bank, to discuss the project. Fulton referred Field to Jack Buckwalter, Chairman of Lancaster Newspapers, who in turn suggested that Field meet with developer S. Dale High, who was the general partner in Penn Square Partners. The meetings leave Field dubious of the project’s viability.

July

At a regular commissioners’ meeting on July 6, the county commissioners’ vote unanimously to enter into an agreement to sell Conestoga View. The decision to sell the facility ignites a summer-long firestorm of criticism on the pages of all three Lancaster newspapers.

September

On September 1, 2005, the three county-appointed board members are: Judy Ware, John Fry, and Garth Sprecher. Ware, a former art teacher and, with husband Paul Ware, a philanthropist whose four-year term was coming to an end on September 15, 2005. During her time on the board, Ware is regarded as an enthusiastic supporter of the project. Although Ware and the sponsors of the project want her to be re-appointed to the authority board, Shellenberger and Henderson replace her when her term expires.

Ware’s replacement on the LCCCA board is Laura Clampitt Douglas, a tough, smart, sophisticated businesswoman who doesn’t suffer fools. At Douglas’ first LCCCA board meeting, she peppers the chairman, Ted Darcus, and executive director, Dave Hixson, with questions and comments on bills the board was paying.

John Fry, president of Franklin & Marshall College, a private, liberal arts college located in the northwest section of Lancaster city, was appointed to replace Jim Pickard on the LCCCA board in 2003. Pickard’s second term had begun only a month earlier.

With two documents – the minutes of a commissioners’ meeting and a letter confirming the minutes – Chairman Shellenberger brings county treasurer and fellow Republican Craig Ebersole to meet with Fry and show him the letter and minutes indicating his term was expiring. The next day Fry submits his resignation to the county commissioners.

“I don’t believe in serving on boards where I am not wanted,” Fry wrote in a letter to Shellenberger. “For reasons that are not clear to me, you have requested that I immediately submit my resignation as a member of the Authority.”

Shellenberger and Henderson appoint Deb Hall, president of the Ephrata Chamber of Commerce, to the LCCCA board. Like Douglas, Hall is intelligent and tough-minded. If anything, she has a harder edge than Douglas, and she, too, questions about the project.

Six days before the final vote to close the Conestoga View sale, on September 22, 2005, Senator Gib Armstrong and Lancaster Mayor Charlie Smithgall publicly call for Commissioner Shellenberger’s resignation.

“The guy is out of control,” Armstrong was quoted on the front page of the Lancaster New Era. Armstrong, citing Shellenberger’s alleged pressuring of John Fry to resign from the LCCCA board and the handling of Conestoga View as the reason for asking for Shellenberger’s resignation.

The sale of Conestoga View was voted on September 28, 2005. Commissioners Shellenberger and Henderson vote to sell the facility; Shaub dissents. The coverage of the sale continues to be overwhelming critical of “the commissioners.”

October

LCCCA board member, businessman, Garth Sprecher, one of only two original board members still serving on the LCCCA board announces he is resigning from the board on October 15. “Don’t read anything into this,” Sprecher says at his last LCCCA meeting. “I’m just tired.”

Sprecher’s seat is temporarily filled by Timothy Lease, a general manager of a large Mountville motel. Lease resigns suddenly after less than a week due to personal issues. He is replaced weeks later by another Shellenberger and Henderson pick, Jack Craver. Craver is a former hotel executive with decades of experience in the hospitality industry, including management of the world renowned Plaza Hotel in New York City.

Heinke, Shellenberger’s friend hired as Chief Services Officer for the county in 2004, was first mentioned as a target of investigation on October 24.  In a New Era article, “Who is Gary Heinke?” questions are raised by Art Morris about Heinke’s background and credentials listed on his resume.

On that same day, October 24, the commissioners announced they are ordering an investigation into Heinke’s hiring. The head of the county’s human resources department, Thomas Myers, is to lead the investigation.

The next day, October 25, Heinke tells the commissioners the information on his resume is accurate.

Later that day, the 25^th, an article published by the New Era (“A question of credentials”) uncovered several glaring misrepresentations on Heinke’s resume. It is also revealed that Gary Heinke not only received advice from Shellenberger, Shaub, and solicitor John Espenshade prior to his hiring, but he also substantially lied about his work experience and educational credentials.

On October 28, Gary Heinke resigns as Chief Services Officer.

November

November 6. Democrat Rick Gray defeats Smithgall to become Lancaster’s new mayor.

On November 10, the day the Myers Report is to be released, Lancaster County District Attorney, Donald Totaro, announces his office is beginning a grand jury investigation. Totaro, who hasn’t read the Myers-Hoffman Report at the announcement, and blankets the fifth floor with more than 80 subpoenas, including all three Lancaster County Commissioners.

Fox 43 -TV in York, along with Opinion Dynamics, sponsor a public opinion survey regarding the convention center project. The study is underwritten by Robert Field. The questions are developed by Fox 43 and Opinion Dynamics, which perform surveys for the Fox network among many other national clients.  The startling revelation is that 78% of those with an opinion disapproved of the county guaranteeing any portion of the convention center bond issue.

Field, very dissatisfied with how the newspapers report the principal findings of the survey, pays several thousand dollars for a half-page advertisement in the morning and afternoon newspapers for the publication of the entire report, word for word.

December

Robert Field commissions real estate consultant Mark A. Kenney, M.A.I., to certify whether the studies performed on the project were, as had been represented, “feasibility” studies.

Kenny’s report concludes his report dated December 22, 2005:

“In conclusion, my review of the five reports discussed above indicates that they are meant to be market or marketing studies, and neither are represented as feasibility studies nor include sufficient information or analysis to be considered feasibility studies.”

Robert Field launches the website, NewsLanc.com.

2006

January

Lancaster County Convention Center Authority (LCCCA) board members Laura Douglas, Deb Hall, Jack Craver hold public meeting at Farm & Home Center on January 4. Meeting is attended by mostly project opponents. Mayor Rick Gray, who took office only the day before, appears at the meeting and denounces opponents and supports the project. The meeting, and Gray’s remarks, are well-covered in the local print media.

Also on January 4, County Commissioner Molly Henderson sends letter to LCCCA and Mayor-elect Gray making four proposals regarding project:

Gray appears at the January 11 county commissioners meeting and tells commissioners if they want a feasibility study they should pay for it themselves. Commissioners consider offer but do not act immediately. Gray soon backs away from call for study, and adds conditions for its performance. He also attacks Commissioner Shellenberger for his own conditions to the study. Exactly one week after he publicly denounced opponents of the project and spoke in favor of it, newly elected Lancaster City Mayor Rick Gray crashed the county commissioners meeting.

In a joint letter to Shellenberger and Gray dated January 11 (copying all three Lancaster newspapers) Robert Field offers $50,000 to subsidize a feasibility study on the project. saying he would subsidize the cost of the feasibility study in the amount of $50,000. Field writes: “I applaud Mayor Gray’s suggestion that the Commissioners order and pay for a feasibility study and his commitment that, if the project is not feasible, to end his support for the $137 million downtown revitalization initiative. …. Should funding be an obstacle, I am prepared to contribute $50,000 toward the cost of a comprehensive feasibility study of the convention center and hotel, …”

At their January 18 meeting, the County Commissioners vote 3-0 to contact Pricewaterhouse about performing complete feasibility on project. Ten days later, on January 28, Pricewaterhouse declines to conduct the feasibility study. No public explanation is given.

On January 31, the final sale is completed for RACL ownership of Watt & Shand from Penn Square Partners.  The city agency pays $7.25 million.  The original purchase price in 1998 was $1.25 million. Story is not reported until February 9 by Lancaster Newspapers.

Also on January 31, the Historic Preservation Trust gives approval to develop historic Thaddeus Stevens interactive museum on site of Stevens’ former home and office.

February

NewsLanc discovers and reports on February 2 that the project hasn’t gotten necessary “Highway Occupancy Permit” from the PA Dept. of Transportation (PennDOT). The private partners petitioned for a waiver for Traffic Impact Study, but PennDOT rejected the partners waiver request.

At their February 8 meeting, the County Commissioners Shellenberger and Henderson vote to solicit “Requests for Proposals” to perform first comprehensive feasibility study on project. Shaub dissents.

On February 15, the Lancaster County Commissioners vote to hire Pannell, Kerr, Forster (PKF) Consulting to perform feasibility study. PKF is preeminent in hospitality consulting. The cost of the study is projected to be $115,000. Robert Field ups his contribution to $65,000.

February 22. Lancaster County Commissioners file lawsuit challenging ACT 23 funding of project.

February 22. Former county commissioner Paul Thibault criticizes selection of PKF, saying the consulting firm is biased because it served as expert witness in hotelier litigation.

February 22. LCCCA board member Jack Craver writes letter to editor calling for full comprehensive feasibility study.

February 23. LCCCA chairman Ted Darcus wants “gag” order imposed after Craver’s letter is published. “We can’t have people doing their own thing,” says Darcus.

February 23. LCCCA executive director Dave Hixson announces his board will not cooperate in any way with PKF study. Penn Square Partners president Nevin Cooley says the same, as does the city agency, RACL, that purchased the Watt & Shand building.

February 24. LCCCA purchases laundry property on East King Street, adjacent to the project site.

February 25. County commissioner Pete Shaub publicly criticizes selection of PKF to perform feasibility study.

February 28. County challenge to ACT 23 funding is heard in Commonwealth Court. County is represented by special counsel, Howard Kelin.

March

March 1 County commissioner chairman Dick Shellenberger rejects offer from LCCCA chairman Ted Darcus that offered the LCCCA taking county debt if commissioners would drop lawsuit and kill feasibility study. Shellenberger declines, saying, “I am not interested in horse trading.”

March 4 Asbestos and hazardous debris is removed from Watt & Shand building in preparation for demolition.

March 5 Robert Field has Sunday News opinion item published: “Why subsidize a feasibility study?” Field writes: “Having determined that we were on the cusp of spending $140 million (most of it financed by the public) on a project that had not been subject to a professional economic feasibility evaluation I believed it imperative that a genuine feasibility study be undertaken.”

March 13 Penn Square Partners releases self-perfomed “study” showing ‘worst case’ scenario impact on city and county taxpayers. The study says that if county overnight stays declined by an unthinkable 29%, and no one used either the hotel or convention center, that the taxpayer cost would be, at most, $24.39 per city taxpayer, and $2.46 for county taxpayers. The “study” is given prominent placement on the front page of the Local News section.

March 20 LCCCA seeks 19 construction contracts for project. Board members Douglas, Hall, Craver protest receiving documents related to bid process only days before the vote. “It’s more of ‘we’ll ram this through, regardless,’” said Deb Hall.

March 21 State Senate passes amendment to Act 23 legislation by gutting another bill and inserting the Act 23 reforms, which directly benefit project and renders Commissioners lawsuit moot. The move is orchestrated and moved through the Senate by then Senate Appropriations chairman, Gib Armstrong. This is the second time Armstrong has ’strong-armed’ legislation directly benefitting the project. The bill goes to the House and is met with sharp criticism by the entire Lancaster County Republican delegation, who complain about the secretive “heavy-handed tactics” of Armstrong.

April

April 6 Armstrong’s bill is withdrawn from a House vote due to heavy protest from Lancaster

April 13 LCCCA board tables motion introduced by Laura Douglas to cap spending on project. There are no effective restraints on the cost of $140 million project.

April 25 Redevelopment Authority for the city of Lancaster (RACL) announces floating an additional $2 million bond, making city exposure $14 million.

April 26 State House passes Armstrong’s amendment, 146 to 41. All Lancaster County Republicans vote against the bill that directly benefits project and renders county lawsuit moot.

May

May5 The PKF “Executive Summary” is released. Among its conclusions are that the project will lose $1.3 million per year and that project sponsors should consider “downsizing” or “find an alternate use for the site.” The report is immediately excoriated by project supporters.

May5 It is reported in Lancaster Newspapers that the preliminary demolition of Oblender’s building was conducted without a city demolition permit. Demolition is temporarily halted. This is a rare public embarrassment for project sponsors.

May7 LCCCA announces that the construction bids will be opened in two phases: smaller contracts May 9; the rest May 17. The reason for the delay is that contractors are said to need more time to study project.

May9 First construction bids unsealed by LCCCA. Thirteen bids are received for four contracts: pre-cast concrete, laundry service, food service, fire protection.

May10 County Commissioners Henderson and Shellenberger vote to petition the state Department of Community and Economic Development to review the county’s 2003 $40 million bond guaranty. Commissioner Pete Shaub votes against the motion, and publicly charges his fellow commissioners with violating the Sunshine Law: “Commissioner Henderson and Commissioner Shellenberger, you continually violate the Sunshine law.”

May12 Pa. Governor Edward Rendell signs Act 23 bill, as amended by Sen. Armstrong. This codifies the RACL/PSP tax issue on the hotel tax issue. Penn Square Partners will not pay property taxes although it will be the “primary user” of the hotel. It is a major victory for project sponsors.

May17 LCCCA opens remaining construction bids. The low bids immediately put the project $13.6 million over budget, from $89 million to $102.6 million.

May24 The Intelligencer Journal reports that the LCCCA bids actually put the project $25.4 million over budget. Sponsors are urged by commissioners Shellenberger and Henderson to abandon the project; sponsors vow not to “throw in the towel.”

May24 At its regular public meeting, Commissioners Shellenberger and Henderson vote to revoke the $40 million county bond if the LCCCA re-markets bonds to get tax exempt variable or fixed rates. The motion, introduced by Henderson, and is made despite objections from county solicitor Howard Kelin, directs that the county guaranty is revoked if there is a change in the tax status of the bond. The resolution, like many introduced by Henderson, was clearly drafted by a sophisticated legal mind. Her husband, Alex, an experienced attorney is thought to be the drafter of these motions.

May24 At the same meeting as the Henderson resolution, Shellenberger and Henderson refer to a “Plan B” alternate use for the site. Marilyn Berger, a high end real estate broker; Lehr Jackson, an eminent developer; and William Roberts, a re-storer of historic properties were negotiating to purchase the former Watt & Shand property to convert to condos and shops. The Berger-Jackson-Roberts alliance is not disclosed at this point.

May31 At a special commissioners’ meeting in East Donegal Township, Commissioner Henderson publicly questions whether the geographic area from which the hotel and motel room rental tax was drawn is legal. “[I]t is time for the county commissioners to reconsider whether or not the entire county is the appropriate area for the bed tax,” she said at the meeting.

June

June1 Demolition resumes after sponsors acquire permit. Large portions of the home and business of Thaddeus Stevens are razed. The budget gap is still not filled.

June 8 LCCCA board member, Deb Hall, introduces a motion to have a “legal audit” of legal fees paid by the Authority. The motion does not pass.

June 8 High Construction Company resigns as “Construction Manager” of the project in order to bid for the lucrative “General Trades” contract. As Construction Manager, High Real Estate was involved in setting bidding criteria, giving the company a distinct competitive advantage when it bid for the contract.

June 13 LCCCA board votes 4-3 to sue Lancaster County Commissioners Shellenberger and Henderson. They are joined in the suit by Penn Square Partners and RACL. An affidavit submitted by the LCCCA financial advisor said the two commissioners were creating “immediate, imminent, and irrevocable” harm to the project.

July

July 12. Madenspacher hearings begin. The LCCCA, city, and Penn Square Partners, have sued county commissioners Shellenberger and Henderson, arguing they are threatening the project with attempts to revoke bond guaranty.

July 12 Horst Hotels, LLC and Ephrata Motels Partners sue RACL, LCCCA, and Penn Square Partners, arguing the room tax is unconstitutional.

July 17. Madenspacher hearings end.

July 25. Madenspacher issues temporary injunctions against Commissioners Shellenberger and Henderson, enjoing them from tampering in any way with the county guaranty or county financing of the project.

July 27. The last of the construction bids is opened, with High Construction – another subsidiary of the majority partner in PSP – the only bidder. Combined with bids opened previously, the project at least $20 million over budget. Penn Square Partners immediately declares: “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.” Another headline: “Bids doom center plans: Penn Square Partners says $20 million ‘gap too great.’” The project is practically pronounced dead.

August

August 4. The county’s lawsuit challenging the Act 23 funding is defeated in Commonwealth Court, which holds Act 23 does not violate the uniformity clause of the state constitution.

October

October 13. Four-foot high Watt & Shand letters are removed from the building.

October 24. Madenspacher issue permanent injunction against Commissioners Shellenberger and Henderson, preventing them from revoking the county’s guaranty of the project.

October 31 Shellenberger and Henderson again vote to appeal a legal defeat. They vote to appeal the Madenspacher decision in Commonwealth Court.

November

November 8. Lancaster County commissioners Shellenberger and Henderson write a letter to M&T Bank demanding that project developers have construction financing in place before floating the construction bond. County special counsel, Howard Kelin, gives the bank a November 15 deadline.

November 16. The LCCCA financial advisor, Thomas Beckett, announces at its meeting that the cost of the project has grown $10.1 million, bringing the total now to $165.5 million, according to Lancaster newspapers.

November 22. The State Supreme Court rejects county appeal without hearing the case. They also decline to hear a companion suit filed by city resident April Koppenhaver, who is suing regarding the city Act 23 financing.

December

December 13. At a LCCCA finance committee meeting, financial adviser Beckett again announces the project will cost an additional $5 million, bringing the total now to $170.5 million.

December 14. After a 13-month grand jury investigation, Commissioners Dick Shellenberger and Pete Shaub plead guilty to two violations of the state’s Sunshine Law related to the sale of Conestoga View. Commissioner Molly Henderson pleads guilty to one Sunshine Law violation. Shellenberger and Shaub are fined $200; Henderson, $100.

December 14. At the regular LCCCA meeting, the board votes 4-3 along city/county lines to increase borrowing limit from $47 million to $64 million. The board also votes to authorize its advisers to negotiate bond interest rates.

December 15. Lancaster president judge Louis J. Farina orders the grand jury report sealed for a minimum of 20 days to allow those criticized in the report time to respond. The date for release is given as January 8, 2006.

December 26. Commissioner Pete Shaub announces he will resign his office, effective February 4, 2007, with eleven months remaining in his term. Shaub says he will return to the construction industry.

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Chapter Forty-seven: An Authority unchecked and unchallenged