CC Chapter Twenty-One Revised: Another ‘miracle’ rescue

by Christiaan Hart-Nibbrig

The bidding process for the construction of the convention center – like virtually every other aspect of the project – was a circus.

The process began on January 12th, 2006, when it was reported in the Intelligencer Journal that bids to demolish and stabilize the site apparently came in slightly (2%) under budget projections.

That the bids were opened at all came as a surprise to the three County-appointed members of the Lancaster County Convention Center Authority (LCCCA).

Laura Douglas, Deb Hall and Jack Craver said they were not informed of the January 4th public meeting at which the bids were opened and discussed by their fellow board members.

According to the three, they did not learn of the January 4th meeting until a week later.

“[LCCCA Executive Director] Dave Hixson never said anything about it,” said Laura Douglas.

“How can there be a ‘public’ meeting if the public, including board members, don’t even know about it?” Douglas said.

Douglas said she met with members of the LCCCA board on January 6th on unrelated issues, and nothing was said about the bid opening.

The three county-appointed board members learned about the LCCCA bid opening meeting when Hixson sent her the press release via e-mail.

“This is a very, very foolish way of doing things,” Douglas said.

On Monday, March 20th, LCCCA chairman Ted Darcus announced at the board’s monthly public board meeting that the Authority would be seeking 19 construction contracts for the convention center.

Once again, the three County-appointed board members complained about being left out of the process. Douglas, Hall, and Craver said they received incomplete information about the contracts just two days prior, on Saturday, March 18th.

There is not nearly enough time and not enough information to properly review these contracts before voting to send out the bids,” said Deb Hall.

Douglas, Hall, and Craver were notified of the impending board action, again by e-mail, on Saturday afternoon, March 18th. The email came from LCCCA executive assistant, Shelly Weikert. The e-mail included a preliminary meeting agenda and a list of the construction bids to be considered.

Douglas said the documents were missing nearly 140 pages of detailed information about the bids.

“It makes it look bad for the public. There may not be cause for concern, but I think to all appearances the public has a reason to be concerned,” Douglas said. “It’s just everything they [Darcus and Hixson] do seems to underscore public suspicion.”

Laura Douglas called the actions of executive director Hixson and chairman Darcus “high-handed.” “It’s the kind of secretive manipulation that has eroded public support for the project.”

“I’m not ready to vote,” said Jack Craver at the March 20th meeting.

Board member Deb Hall agreed.

“It’s more of the same thing with this board and its chairman, ‘We’re going to jam this thing through, no matter what,’ Hall said. “This is not the way to run a board funded by the taxpayers.”

All three county-appointed members abstained from the vote to release the bids. The resolution passed anyway, 4-0.

Chairman Darcus announced that the bids would be opened April 25th, 2006.

It was later amended that the construction bids would be opened in two phases: smaller contracts on May 9th; the rest, May 17th. The reason for the delay, according to sponsors, was that contractors were said to need more time to study the project.

The bids received for the May 9th opening came to a total of thirteen. These were for four contracts: pre-cast concrete, laundry service, food service, and fire protection.

The low bids tallied about $5 million, leaving approximately $90 million budgeted for the remaining contracts, to be opened on May 17th. (The Marriott Hotel construction cost was estimated to be $45 million at this point. Most of those funds came from Lancaster city bond guarantees.)

Among the May 9th low bidders was High Construction, which bid the only proposal for pre-cast concrete for $2,554,500.

Despite High Construction’s position as the Construction Manager for the project – a position for which the firm had been paid $52,500 per month for years – Penn Square Partners spokesperson Tom Smithgall said the High bid was not unethical or unlawful. (High Construction was also a subsidiary of High Associates, the general partner of Penn Square Partners.)

“It’s a public bid process, and it should be open to everyone,” Tom Smithgall said.

Along with High, others to receive contracts at the May 9th opening were:

  • Ashland Equipment for the food service equipment contract; one of seven for the contract, $1,278,610.
  • PAC Industries for the laundry services contract; only bidder, $393,675.
  • King’s Fire Protection for the fire protection contract, four bidders, $1,197,800

The final phase of bid openings took place at the Southern Market Center on Vine Street on May 17th.

On that day, when the envelopes for the 14 remaining bid packages were opened, project sponsors were disappointed to learn that the bids appeared to be $13.6 million over budget.

This pushed the construction budget to $102.6 million, instead of the projected $89 million, according to LCCCA executive director, David Hixson.

A week later, on May 24th, it was reported by the Intelligencer Journal that the bids actually put the project $25.4 million over budget. The overage was not discovered by a Lancaster Newspapers reporter, however, but by LCCCA board member Laura Douglas, who brought it to the newspapers’ attention, but was not attributed in the article.

Commissioners Shellenberger considered the huge deficit and urged the sponsors to “throw in the towel.”

On June 5th, the LCCCA board voted to send the May 17th contracts out for re-bid, hoping to come closer to the $89 million target number. The Authority set July 27th as the date for opening the new bids.

Days later, on June 8th, High Construction Company resigned as Construction Manager of the project in order to bid for the “General Trades” contract.

As Construction Manager of the project, High Real Estate had been involved in establishing the crucial bidding criteria with the project’s architects, Atlanta-based Cooper-Carry.  The firm was also chosen by Penn Square Partners.

“This is just another revenue source for them [High],” said board member Deb. Hall, after learning High would bid for the general trades contract.

On July 27th, the remaining of the construction bids were opened, with, surprise(!), High Construction ‘winning’ the “General Trades” contract. Others had refrained from bidding.

High’s bid alone – $37.1 million – was $15 million more than the previous General Trades bid from Wohlsen Construction, which bid $22 million on May 17th.  However, on the re-bid, reportedly five trades that had previously been bid as separate contracts were bundled together under General Trades. 

Mark Fitzgerald, executive vice president and chief operating officer Penn Square General Corp, later told the court this was  “to increase the participation in the project for smaller contractors that didn’t have the bonding capacity, and would also allow us to increase the [women’s and minority businesses] participation in the project.”   Wohlsen did not re-bid the project in July.

 Combined with the other re-opened bids, the project again found itself at least $20 million over budget.

With the news of the bid overage, as it did on earlier occasions, Penn Square Partners and Lancaster Newspapers immediately implied imminent death for the project.

“Bids doom center plans: Penn Square Partners says $20 million ‘gap too great,” lamented the Intelligencer Journal in its front page headline.

“It’s a sad day,” Jack Buckwalter, chairman of Lancaster Newspapers Inc., was quoted in his own newspaper. “One could say we are still going to try, but it is very unlikely at this juncture. Dale (High) and I said this afternoon there’s nothing we could have done differently.”

(In 2005, after Penn Square Partners TIF tax abatement plan was defeated by the School District of Lancaster, Buckwalter said: “We are very disappointed. …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.”)

Other sponsors were equally morose about the future of the project.

“This is going to be a major decision,” said LCCCA chairman, Ted Darcus. “We have to make that as a unified group.”

“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,said Penn Square Partners spokesman Tom Smithgall.

Project sponsors blamed County Commissioners Shellenberger and Henderson for the project’s financial problems.

“The actions of the county [commissioners] have poisoned the well, and they continue to threaten frivolous lawsuits to delay the project,” said Mark Fitzgerald, a vice president with Penn Square Partners. “They wanted to kill the project.”

Buckwalter indicated he spoke to members of the Steinman family, owners of Lancaster Newspapers, about the project’s apparent demise.

“They [the Steinman family] are extremely disappointed that this project, which would have been so beneficial to the community, cannot proceed,” Buckwalter said.

Lancaster Mayor Rick Gray, after his early vacillations, said he was disappointed the project appeared to be dead.   He now promised the city would try to find a new developer for the Watt & Shand building.

“I want to go nationwide and see what we can do,” the mayor said. “I want to hear everybody else’s ideas.”

Former Mayor Charlie Smithgall, present for the conception of the project on Penn Square (and instrumental in the first ‘miracle’ rescue), sounded like he was going to cry.

“That building [Watt & Shand] is the heart and soul of Lancaster County,” Smithgall said. “Penn Square Partners took it over to make it a better thing for the city, and … the abuse they have taken by uneducated people that don’t see the long-term benefits for the whole county was terrible.”

Even an Intelligencer Journal columnist, the veteran Jeff Hawkes, pronounced last rites over the project. “The project is too controversial and divisive to go forward,” Hawkes, a project supporter wrote. “This project is in need of a mercy killing.”

Commissioner Molly Henderson was gracious, but blunt.

“The risks outweighed, by far, any potential benefits here,” Henderson said after the overage was announced. “I have always been concerned about the taxpayer risk and the imbalance in the public-private partnership. The risk and the expense have been too great for the project.”

LCCCA chairman Ted Darcus was somberly philosophical. “This day shall pass,” said Darcus. “There’s something else that will arise.”

Reports of the convention center’s demise were greatly exaggerated… again.

The very next day, July 28th, the project, after being pronounced dead, the Lancaster New Era blared an optimistic headline:

“The search for $20M: Can they beat the clock?

A wide array of officials scrambles [sic] to make bid deadline

in effort to rescue Penn Square project.”

The article reported that Lancaster Mayor, Rick Gray, had called a meeting of “local and state officials” to try to find ways to fill the $20+ million hole. The “clock” referred to a deadline of August 15th to approve contracts, or the bid proposals would expire.

State Representative Mike Sturla was at the July 28th meeting, and said to the Lancaster New Era: “Telephone calls are flying back and forth by the hour. Schedules are out the window. We’re searching everywhere for the money.”

Two weeks later, on August 11th, 2006, Lancasterians picked up their morning Intelligencer Journal and saw, in headlines usually reserved for the beginnings or endings of wars, that the $20 million budget overage had been solved.

CENTER CLOSES FUND GAP: DEVELOPERS TO INCREASE THEIR STAKE”

In keeping with the life-or-death, resurrection imagery favored by project sponsors, the lede from the Intelligencer Journal’s Dave Pidgeon reads::

Lancaster city Mayor Rick Gray announced a plan Thursday to keep alive a hotel/convention center project by plugging a $20 million funding gap.”

According to both the Intelligencer Journal and the Lancaster New Era, the “plan” was to fill the $20 million hole by:

  • Lancaster Newspapers using $7 million of its own money to build a parking garage, plus loaning the Lancaster Parking Authority $3 million in an “interest-free” loan.
  • Penn Square Partners investing another $1million
  • Charging $2 million for “Naming Rights” to the center
  • Shaving off $5.25 million for “Value-engineering”
  • The Historic Preservation Trust giving $3 million to the center
  • Saving $1.5 million from favorable interest rates from a $14 million construction bond to be floated by RACL.

The “plan” announced by the Mayor was immediately met by howls of criticism from project opponents.

Commissioner Dick Shellenberger said, “It’s not right to count the garage as savings when it wasn’t in there in the first place.”

Lancaster First, the citizen organization started by Randy Carney, Ron Harper, Jr., and April Koppenhaver, said in a public statement at the time that the plan was “Smoke and mirrors”:

The Lancaster First statement read in part:

1) The $7 million in savings from the parking garage, now to be funded by Lancaster Newspapers, Inc., was never part of the original budget, and therefore can’t be counted as reducing the deficit.

“2) The $3 million pledged by the Historic Preservation Trust is raiding the money allocated to create an educational museum.

“3) The $5.25 million in ‘value engineering’ – which has been undertaken several times before – can only result in a substandard facility which will lack aesthetic and result in much higher operating and maintenance expenses.” (This would become apparent upon the completion of the project.)

“4) The $2 million for the ‘naming rights’ is sheer conjecture.”   (As of March, 2013, not a cent has been achieved, perhaps in part because of the contract by which S. Dale High, as an individual, is given certain naming rights preferences.)

Lancaster Newspapers did not note that some of the money used to ‘rescue’ the project meant that other worthy city projects would be denied funding. An important one was the Lancaster Public Library which served about 1400 persons daily.  It had been promised $3 million in state earmarked funds towards a renovation and expansion plan.  The funds were re-directed to paying convention center cost overruns.  As a result, the library cancelled its plans after having spending several hundred thousand dollars for design and preparation for a public fund raising campaign to supplement the $1.5 million pledged by a private party.

But libraries and other civic concerns were not the bother of project sponsors. With the budget gap ‘filled’ and a majority rubber stamp awaiting them at the LCCCA, the sponsors knew that this battle, perhaps the crucial one in this bitter war, was over.

XXX

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Updated: April 5, 2013 — 10:36 pm
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