NEWS AND COMMENTARY ON LANCASTER ISSUES THAT MATTER
Commissioner candidate Jere Swarr
warns of looming county debt
When Jere Swarr, a Republican candidate for county commissioner, looks at the county budget he sees one thing: "Debt load."
"The county has a $50 million renovation on the courthouse, and then there is the debt from the convention center," says Swarr. "It will take too much of the budget to service all the debt."
Key to county economics, according to Swarr, a 48-year-old Rapho Township businessman and former farmer, is the proposed $175 million publicly financed convention center project.
"Look, I like the City. We go down to First Friday. It is in the county's interest that the City is healthy, that all townships and boroughs are healthy. But this project is too risky," Swarr says. "The risk to reward ratio is all out of whack, in my opinion. We're putting the taxpayers at too much risk. There are other ways to help the City other than [the County] guaranteeing $40 million."
With characteristic bluntness Swarr offers his opinion on the spending of the Lancaster County Convention Center Authority.
"We haven't got a lot for our $17 million," he says. "Can you imagine how much farmland we could have preserved for that much money?"
Swarr views the embattled current board of commissioners with mixed emotions.
"They've certainly made some mistakes," he says carefully, "but I think the newspapers have gone a little overboard. They are clearly picking on Molly [Henderson] and Dick [Shellenberger], and I do think they're treating Shellenberger unfairly. It seems that Shaub's whole mission is to take Shellenberger down, and the newspaper reports it."
Who is Daniel Logan and why did
the Convention Center Authority
Pay him $700,000?
Ed Grose of the Philadelphia Hotel Association, who previously had reported on Dec. 12 that "I did send out an email and no one had heard of Mr. Logan," has subsequently communicated that Daniel Logan "did in fact serve as the Chair of our Marketing Committee in the late '80s and everyone who knew Mr. Logan spoke very highly of him."
More than one month ago, NewsLanc.Com received a tip that a consulting firm engaged by the Lancaster County Convention Center Authority may have engaged in impropriety. In light of the Authority’s past record of secrecy and questionable payments to lawyers and consultants, NewsLanc.com began an investigation by first requesting, via the PA Right-to-Know law, all invoices paid to Growth Business Development.
The amount paid to the consultant, Daniel Logan, President of Growth Business Development, came to well more than $700,000 and there appeared to be very little substantive work product to show for the huge amount of money.
NewsLanc.com made repeated attempts to contact Mr. Logan via the telephone at the Authority and by phone at his business address in Medford, NJ. Additionally, we asked LCCCA staff directly to ask Mr. Logan to, minimally, return our phone calls. There was no response from Logan. NewsLanc.com then sought Mr. Logan out at his place of business and, when finally confronted, Mr. Logan stated, "I was told not to speak with you."
Earlier this week NewsLanc.com reported "After multiple phone inquiries over several days, Andrew Tod, an executive with GF Management, Inc., confirmed that Mr. Logan worked there as 'a director of operations' and 'oversaw several of our properties and did a good job for us.'"
NewsLanc.com will continue its investigation into the propriety of how $17 million of taxpayers' money has been spent to date by the Convention Center Authority.
Charlie Smithgall's legacy...
a 60% increase in City budget
When Mayor Smithgall first came into office, the annual City budget was a little over $24 million dollars. Eight years later, the Smithgall administration bequeathed Mayor Rick Gray and the City of Lancaster with a first year budget of slightly over $39 million dollars!
That is an average annual increase of almost 8% during a period when inflation hovered at under 3%.
Reserves were depleted and increases in real estate and other forms of taxes were required to offset the added spending, undermining efforts to revitalize the community.
Furthermore, due to its guarantees of debt, the City faces as much as an additional $3 million annual budget increase if the hotel / convention center hotel is built and it performs as poorly at the PKF Consultants feasibility study predicts.
Authority Shoots Craps with Center Bonds
Wachovia Bank is not offering to lend the Convention Center Authority money, but rather to provide a Letter of Credit, a form of bond guarantee.
The Letter of Credit is only for 5 years. However, the bond terms will be about 37 years. If the project performs well, the Letter of Credit would likely be renewed at the end of the 5th year.
But if the project does as poorly as predicted by the PKF Feasibility study, it is unlikely that a new Letter of Credit would be available.
The loan would cease to be rated double or triple "A" and instead likely become "junk bonds" with a high default interest rate that would greatly increase the cost of servicing the bonds.
Much higher interest rates would require some sort of bail out at taxpayers' expense, or for the project to sit idle for lack of funds for operations.
In short, the five year Wachovia credit enhancement may serve to jump start the project, but this short term gambit greatly increases long term taxpayer risk.
Project sponsor's misrepresentations unchallenged
by monopoly newspapers
Last week NewsLanc.com revealed that, contrary to a public letter by Nevin Cooley, President, Penn Square General Corp., photographs taken during the demolition of the former Watt & Shand building indicate that the building was supported by steel beams and steel columns. (Photo posted at: www.newslanc.com/steelphoto.asp).
Another recent example of Mr. Cooley's veracity-challenged statements is his public letter of Aug. 10, 2006 in which he triumphantly proclaimed that the project leaders had closed the funding gap and
"[T]hey have done so, with no increased public debt-service and no increased public risk."
However, according to the New Era of Nov. 16, 2006: "[Convention Center Authority] board members approved preliminary plans to sell another $19 million in [additional] bonds. Originally, the board intended to sell only $14 million in additional bonds."
This is the same Mr. Cooley who two years ago assured a public official five times in a letter that feasibility studies had been performed that turned out merely to be market studies.
Do we see a pattern?
Convention Center sponsors mislead officials and public about Watt & Shand structure
Photographs taken during the demolition of the former Watt & Shand building indicate that the building was supported by steel beams and steel columns. (Photo posted at www.newslanc.com/steelphoto.asp).
This revelation is in direct contradiction to a statement made by Nevin Cooley, President of Penn Square Partners, and David Hixson, Executive Director of the Lancaster County Convention Center Authority, in a letter to the editor of the Intelligencer Journal on December 20, 2005. In that letter, Cooley and Hixson wrote:
"May we repeat? Behind the [Watt & Shand] façade stands a collection of wood-framed buildings that are completely unacceptable for use in any modern commercial project. They cannot be 'renovated.' Not for this project, not for any other project." (Letter posted at www.newslanc.com/pspwood.pdf)
After reviewing the photographs, April Koppenhaver, Co-founder, Lancaster First said:
"For some time I have publicly asserted that the Watt & Shand structure was sound and suitable for renovation and reuse.
"It is a Lancaster tragedy that the truth only becomes apparent as a result of the landmark building's demolition.
"I urge District Attorney Donald Totaro to open an investigation into this and other incidents of false information being provided by the sponsors of the convention center project."
Center Sponsors' litigation backfires
In his recent court decision, Judge Joseph Madenspacher opined that the poorly worded Loan Indenture is to be interpreted as containing the language of the enabling Ordinance, thus incorporating usual and vital safeguards.
Thus a letter sent earlier this week from the County Commissioners to M & T Bank, trustee under the Loan Indenture, alerts the bank to the requirement that project developers have complete financing for construction in place before the trustee approves disbursement of any construction funds.
According to the Nov. 9 Intelligencer Journal, Convention Center Authority counsel John Fenningham commented, "Shame on the commissioners for continuing to try to have an adverse impact on the project, especially when they lost in the courtroom on these issues."
Shame on Mr. Fenningham for not acknowledging that the commissioners only "lost" on a single narrow issue and prevailed on all the others, and the interpretation by the judge that sufficient funds must be available at the outset to pay all of the construction bills may well be the final undoing of the project.
Editorial: Is a casino planned
for Convention Center/Hotel?
Almost everyone "in the know" has heard the rumors about an understanding with the Rendell administration that a casino will be part of the convention center/hotel project. Economically, if not morally, it certainly makes sense.
We ask: why would there be support for a project that, according to national experts, is likely to be an abject failure, costing city and county taxpayers tens of millions of dollars? Why would such knowledgeable public officials and business leaders from Senator Gibson Armstrong, to Representative Mike Sturla, to Governor Rendell and the sponsors of the project (High, Lancaster Newspapers, Fulton Bank) support such a dubious project unless there was an understanding that an immensely profitable casino license was in the wings?
There has long been speculation that convention center support was the political price Rendell paid to Armstrong for Armstrong not derailing the casino licensing legislation.
Within 48 hours of taking office, Lancaster city Mayor Rick Gray, who had expressed some misgivings about the project while campaigning, became a fervent supporter of the project. Once elected, was he told something he hadn’t known?
At a recent County Commissioners' meeting, Commissioner Pete Shaub went ballistic when asked by a NewsLanc.com reporter if he had heard rumors about plans for casino gambling for the project. He impugned the reporter's integrity for simply asking the question. When pressed, he said he was not aware of such plans in a barely audible voice.
Commissioners Dick Shellenberger and Molly Henderson acknowledged hearing talk of a casino, but said they knew nothing beyond the rumors. Did Shaub, the lone commissioner behind the project, "protest too much?"
Jack Buckwalter, Chairman of Lancaster Newspapers, Inc., termed the rumors "ridiculous," but referred a NewsLanc.com reporter to Nevin Cooley, a High Industries official and President of Penn Square Partners, the General Partner of the project. Buckwalter said Lancaster Newspapers is only a limited partner and that comments about the rumors should come from High.
Nevin Cooley has not returned phone calls from NewsLanc.com.
A casino would be a boon for the otherwise doomed hotel. It would lure suburbanites downtown and be a financial gold mine. It also would help attract business to the convention center.
If plans for including gambling in the project were discussed by officials, such secret talks would be a flagrant violation of the "Sunshine Law."
A large portion of the Lancaster County community opposes gambling. If rumors have a basis, shouldn't the public have an opportunity to have a say now; not later, when the project is underway and the sponsors "discover" that bookings are disappointing, and a casino is represented as the only practical way to avoid disaster?
City and Eight Municipalities Laud
Officials from Lancaster City and eight other municipalities gathered at the Nov. 1 County Commissioners' meeting to praise the commissioners for providing leadership and matching grants to make urban areas more livable and thus deter urban sprawl.
Delegates from the City, Columbia Borough, Rapho Township, East Donegal, Mt. Joy, Mountville, Elizabeth Township, Denver and Millersville credited the county for making projects possible in their respective municipalities through the county's "stewardship" and matching grants, along with state and local contributions for $6 million in projects.
The grants make possible improvements for parks, pathways, parking areas, and the revitalization of Lancaster Square.
Given the length to which each local official went to praise the commissioners, the impression on bystanders was that the municipalities were seizing the opportunity, in the face of so much vitriolic criticism from the monopoly Lancaster newspapers, to display confidence in the effectiveness of Lancaster county government.
Editorial: Judge Sends Mixed Messages
Although Judge Joseph Madenspacher ruled in favor of convention center supporters on the narrow issue of the validity of the $40 million county bond guarantee, he importantly restored safeguards enacted by past commissioners but not incorporated into actual loan documents.
Furthermore, evidence that expenses from operations are not likely to be covered by revenues prompted Madenspacher to comment that future commissioners may face a "Hobson's choice,: the decision to either allow the project to be without sufficient funds to operate and thus sit idle (hardly likely), or to raise taxes (far more probable).
Concerns about safeguards and feasibility have long been the crux of Commissioners Dick Shellenberger's and Molly Henderson's opposition to the project.
Hopefully, law enforcement authorities will compare court testimony with supporters' misleading representations to public officials over the past five years.
Clyde Horst: Lancaster Newspapers
"has created a county-wide
fear of intimidation and retribution."
In a letter to the County Commissioners telling why he withdrew a lawsuit against the convention center/hotel project, veteran Lancaster County businessman and civic leader Clyde W. Horst sharply criticized Lancaster Newspapers for attacking opponents of the $160 million publicly funded project.
"[T]he Lancaster Newspapers' 44 percent interest in the proposed hotel project," Horst wrote, "has created a bias in its coverage of the convention center project and those who are opposed. The Lancaster Newspapers attack any individual or organization opposed to the proposed project and, as a result, it has created a county-wide fear of intimidation and retribution."
Horst explained that Horst Hotels Company and Ephrata Motel Partners withdrew the suit because:
"Neither of us have the resources to resist [the counter] suit funded by the hotel tax. The reality is that the legal system is being manipulated, at public expense, to deny the rights of those who dare disagree with the Lancaster County Convention Center Authority."
The multi-generation Horst Group has long been a regional leader in the realms of construction, property management and insurance.
Horst resigned earlier from the board of directors of the parent company of the Fulton Bank, a co-sponsor of the convention center / hotel project.
Much Fantasy, Few Facts
In an astounding display of erroneous news coverage and spin, the New Era on Oct. 28, 2006, and the Sunday News on Oct. 29 'reported': "Judge Joseph Madenspacher …imposed a permanent injunction preventing the commissioners from reducing a countywide hotel-room tax that supports the project." (When pressed by NewsLanc.com, a spokesperson for the New Era acknowledged their error).
The Sunday News stretched fantasy even further by stating that the judge had ruled that "construction can begin on the $155 million convention center and hotel proposed for downtown." This was not even an issue in the proceedings.
Madenspacher's only ruling was narrowly focused on the validity of the County's guarantee of $20 million of the $40 million bond guaranty. Not only did the judge not rule on the issue of "reducing a countywide hotel-room tax that supports the project" but he did not even entertain the various other requests initially made by the Sponsors and the Convention Center Authority.
Madenspacher also interpreted the documents to require that the Convention Center Authority certify that it has sufficient funds available to build the project before receiving bond proceeds. This could prove to be a huge set back for the project.
Testimony by both sides indicated there would not be sufficient revenue to both pay debt service and maintain operations. Madenspacher opined that the county may face a "Hobson's choice"; raise taxes to cover the deficit or allow the center to sit idle.
County Asked to Approve Another $14 Million for Convention Center
Convention center / Hotel project planners are proposing to increase the Convention Center/Hotel Tax Revenue Bonds from $40 million to $54 million.
After months of claiming that the county taxpayers' risks will not increase, the sponsors now propose to increase the Convention Center Authority bond by $14 million. The bond is funded by County hotel taxes and partially guaranteed by the County.
The budget gap results from High Construction's construction bid exceeding partner High Associates' estimate by $37 million!
District Attorney rejects request to
investigate $6 million
in LCCCA billings
In a letter to Convention Center Authority board member Laura Douglas, County District Attorney Donald Totaro rejected a request by Douglas and fellow board members Jack Craver and Deb Hall to investigate the Authority's payments to the law firm of Stevens & Lee.
The only information provided in over 200 invoices from the law firm was "For professional services rendered."
Totaro stated Douglas, Craver and Hall made no specific charges of criminality as the basis of their request and claimed "the FBI in Harrisburg has looked into this situation, and they have not found any evidence of criminal activity."
Douglas, in an interview with NewsLanc.com, responded: "Until [Authority] Chairman Darcus will permit board discussion of means to verify the legitimacy of the over $6 million in Stevens & Lee billings to date, there is no way to generate specific allegations of criminal misconduct, even if that is the case.
"We have no reason to believe that the FBI has sought and reviewed the Stevens & Lee billings. So I hope that Mr. Totaro is not using the FBI as an excuse for inaction."
Court testimony: $40 Million trust indenture violated county ordinance
by omitting taxpayer protections
Court testimony asserted that attorney Peter Edelman of Stevens & Lee, who represented the Lancaster County Convention Center Authority (LCCCA), omitted pivotal taxpayer protections required by the county enabling Ordinance 73 when he drafted the Trust Indenture for $40 million in bonds.
Contrary to Ordinance 73, the Trust Indenture does not:
• require the Authority to provide proof of "sufficient funds" to complete the project,
Since the Authority has no taxing capability, a funding gap estimated as much as $27 million and deficits of millions per year would have to be met either by additional taxes and / or borrowings guaranteed by city and county taxpayers.
• "certify" the accuracy of the budget,
• require the Authority to certify sufficient funding to complete the project when the Authority requests the Trustee to disburse funds on deposit in the construction fund.
Court testimony reveals $27 million
Convention Center-Hotel funding gap
From the sworn testimony from officials of the Convention Center project and others who recently testified in court, $27 million is still needed to close the funding gap of the controversial downtown project.
Specific reported shortfalls include:
• The Historic Preservation Trust has not approved $1.9 million in construction costs;
• Trade contractors have not approved value engineering proposals in the amount of $2,750,693;
• $2.1 million attributable to a proposed amendment to the project's general conditions of contract;
• $7 million shortfall in debt service capabilities;
• $13.6 million from the Infrastructure and Facility Improvement Program, which is presently being litigated.
$7 Million 'Swiped' from Parking
Authority to Help Close Gap
WGAL.com - Commissioners: Convention Center Will Lead to Raised Taxes
Former Mayor Calls LCCCA
Convention Center Board Members
Urge District Attorney to Investigate
Authority Legal Bills
Researchers Reveal "Extremely Serious" Vulnerabilities in E-Voting Machines
County Decides to Purchase
Controversial Voting Machines
Lancaster Historic Preservation Trust Denies Giving $3 Million
to Bridge Convention Center Funding Gap
'Day of Infamy':
August 11, 2006
Two Polls, Same Result
Electronic Votes Need Paper Trail
An Unbridgeable Gap
Preliminary Injunction Decision
Despite litigation, lack of funds and
$25 million cost overrun,
construction to begin?
At long last, each sponsor's share
of project is disclosed:
"According to testimony by Mark Fitzgerald, a Penn Square Partners executive:
• Penn Square Limited, which is owned by Lancaster Newspapers, owns 44 percent;
• Penn Square General Corp., which is owned by High Real Estate Group, owns 44 percent;
• And Fulton Bank owns 12 percent."
Lancaster New Era, July 13, 2006
David Hixson Comes Clean!
What's the Risk in the Hotel-
Convention Center Project?
Large Turnouts at Commissioners' Meetings
in Ephrata and East Hempfield
Most Oppose Convention Center Project
Commissioners Invite Public Comment on the Convention Center Project
Legal Agreement Shows Convention Center Authority is not authorized to demolish the Thaddeus Stevens properties until financing is secured and all governmental
approvals are obtained.
Group Forms to Save Thaddeus Stevens' Historic Sites
Authority Board Members Request Legal Audit of Stevens & Lee Billings
Read Letter to David Hixson and Ted Darcus here
The 1965 Destruction of North Queen Street:
A Look into Lancaster's Future?
Lancaster County Board of Commissioners Will Not Guarantee Construction Funds for Convention Center
After bid openings, Convention Center comes in more than $24 million over budget!
Construction bids for the proposed downtown hotel and convention
center now show the project to be nearly 30 percent past original cost
estimates. Link here for full details.
PKF Feasibility Study:
"[O]ur findings lead us to conclude that the potential economic benefits
are not likely to be sufficient to justify the risks involved, including the potential need
to raise the hotel tax to fund operating deficits after several years should the reserves become
depleted. We therefore recommend that, prior to proceeding further with this project, the parties
involved consider exploring a downsizing of the project or an alternate use for the site."
Common Cause urges Governor to investigate LCCCA
Pennsylvania Historical and Museum Commission critical of
Hotel/Convention Center demolition plans
From a review by the Commission:
"Given the extent of development and demolition, it is our opinion that the project as proposed
does not meet the Secretary of the Interior's Standards for Rehabilitation & Guidelines for
Rehabilitating Historic Buildings and therefore will adversely affect the Lancaster Historic District."
Former Councilman Luis Mendoza asks
Penn Square Partners
and the LCCCA board not cooperate
with PKF Feasibility Study
Robert Field Radio Interview:
"[W]hatever the [PKF] report showed, I would go along
with. I would be delighted if it was positive or even lukewarm. But now that it's negative there's no
way I could support it. But there's another aspect here, ... and that is how the $17 million
has been spent by the Lancaster County Convention Center Authority. I mean, even three of their board
members have expressed great concern..."
Intelligencer Journal columnist Jeff Hawkes on the PKF feasibility study:
"I'm confident PKF will provide an eminently reasonable and trustworthy opinion...Why project supporters aren’t
cooperating with the consultant is beyond me."
Feb. 28, 2006
LCCCA Board Member Jack Craver explains why
a feasibility study is needed
Commissioners award feasibility study contract to PKF
The Lancaster County Commissioners passed a resolution Feb. 15 that awarded nationally renowned consulting firm,
Parnell Kerr Forster (PKF) a contract to conduct a feasibility study on the convention center / hotel project,
thus allowing for the first comprehensive feasibility study done on the $137.8 million taxpayer-guaranteed
Convention Center Authority pays law firm over
$6 Million without normal due diligence.
The Lancaster County Convention Center Authority paid more than $6.2 million to Stevens & Lee, its primary legal counsel, from May 2000 to January 2006, an average of $94,000 per month.
PricewaterhouseCoopers in their own words: Hardly a vote of confidence
Why Did Pricewaterhouse Turn Down
Feasibility Report Assignment?
A Citizen Comments.
Former Lancaster Mayor Art Morris in Sunday News, Jan. 22, 2006:
"If I were in the position of the city or the Authority, I would not want demolition to begin until project bids have been received. Neither would I want to proceed until an updated pro forma has been completed containing revenue and expense projections for the project."
Commissioner Henderson calls for County, City, Authority to pay for
Also calls for suspension of demolition permits, 'Swaption,' and sale of Watt & Shand until study is done and all costs are known.
Commissioners Urged to Request Attorney General Investigation of Authority; Also Asked to Suspend Demolition Permit and Co-Sponsor Genuine Feasibility Study
Revelation of no feasibility study
LCCCA Board Members call for moratorium on Convention Center
construction until cost are final.
Also announce Public "County Meetings."
PricewaterhouseCoopers asks that name be taken off LCCCA website
LCCCA Board Members alarmed at decision-making process
Fox-43 Poll shows 4 out of 5 county residents with an opinion oppose bond guarantees for Hotel/Convention Center
Study shows Convention Centers bad business nationwide
Citizens speak out against
Stevens & Lee: project lawyers bill
over $5 million