LETTER: Convention Center insolvent. Shellenbeger and Henderson proven correct

The Lancaster County Convention Center Authority will soon be unable to meet its debt service obligations, and recently held a high level meeting between the sponsors of the project to discuss how to resolve the shortfall.

On November 29, 2011,  in an unpublicized meeting, Lancaster County Commissioner Scott Martin, Lancaster Mayor Rick Gray, Representatives from Wells Fargo Bank, Chris Barrett, Director of Pennsylvania Dutch Convention Visitors Bureau (PDCVB), Nevin D. Cooley, President of Penn Square Partners, Mark Moosic, of Interstate Hotels, the manager of both the hotel and convention center,  the Lancaster County solicitor, and a few members of the Lancaster County Convention Center Authority(LCCCA) board of directors convened at a commissoners’ conference room.

Only one county commissioner was in the conference room at the Duke Street County Courthouse, thus the meeting was not in violation of the state open meetings law, or Sunshine Act.

According to a source present at the meeting, who does not wish to be identified, the shortfall of approximately $800,000 per year is caused by two principal factors:  1) The annual expenses for the facility, projected to be about $1,000,000, are annually said to be upwards of $1,400,000.  The increase was attributed to a spike in energy costs, the source said; and 2) lower than projected hotel room tax revenue. $4,200,000 was projected, and  only $3,800,000 is coming to the LCCCA. This gap is expected to widen.

Alternatives are limited.  The 5% hotel room rental tax is actually two taxes; a 3.9% room rental tax and an 1.1% excise tax.  The LCCCA receives about 80% of the room tax; with the other 20 % going to the PDCVB.  The tourist bureau funds are supposed to be used to market the convention center.  So, by county ordinance, the LCCCA will likely first take the money currently going to the PDCVB.

But, according to the NewsLanc source, that still won’t cover the shortfall.  He said that a raising of the hotel room tax, or the imposition of another tax were also options.

A striking aspect of the current predicament is that in 2006, Lancaster County Commissioners Dick Shellenberger and Molly Henderson, who by then had been castigated mercilessly by sponsors Lancaster Newspapers, publicly went on the record predicting exactly an $800,000 shortfall.

Here is how the Shellenberger/Henderson prediction was reported in the Intelligencer Journal on September 27, 2006:

“Center won’t pay bills, county says   Charge: Borrowing plan will cause $800,000 annual shortfall
by: Dave Pidgeon Intelligencer Journal Staff

“Developers of a hotel/convention center won’t have enough revenue to cover its debt and operating expenses after it’s built, two Lancaster County commissioners opposed to the project said Tuesday. Commissioners Molly Henderson and Dick Shellenberger said project revenue for the Lancaster County Convention Center Authority would leave it at least $800,000 short every year.

“The problem is caused by the authority looking to borrow $14 million more than originally planned, they said, and could mean either tax hikes or stripping the Pennsylvania Dutch Convention & Visitors Bureau of money from the countywide hotel room rental tax to make up the shortfall. …”

“… To cover the estimated shortfall, the commissioners predict the authority would request any of three potentially contentious actions: Hiking the countywide hotel room rental tax from 3.9 percent to 5 percent. Tapping the county’s general fund. Stripping funding from the Pennsylvania Dutch Convention & Visitors Bureau, a marketing tool for county tourism including the proposed convention center, of its funding. The bureau receives 20 percent of the hotel tax, while the authority takes the other 80 percent. Under the 1999 county ordinance that created the tax, if the authority fails to meet its debt obligation, the entire hotel tax would go to the authority. As for hiking the hotel tax, Shellenberger said ‘Not under my watch.'” ….

If a tax hike is inevitable, it will happen under the “watch” of the current board of county commissioners.  And they have some explaining to do.  Each — Martin, Dennis Stuckey, and Craig Lehman — said during the 2007 county commissioners’ campaign – on tape – that they would not raise the hotel room tax.

The source said other meetings are scheduled with the other two county commissioners independently.

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Updated: December 9, 2011 — 11:28 am

3 Comments

  1. Funny how this has NEVER been in the papers!!!! I guess LNP is more concerned about pigeon poop than ripping off the taxpayers. What a DISGRACE!!!!!! …

  2. I was wrong. I was certain that the CC that was projected to lose $1M/year would lose closer to $3-$4M per year, a 300 to 400% increase. I claimed that while the backers were focused entirely on the hotel tax (revenue side of the equation) and did not want to talk about expenses and that would be their downfall. I was wrong again.

    As it turns out, both sides of the equation are out of balance. The hotel tax is not keeping up and the CC is running 40% over budget (expenses) instead of 400%. Either way, the project will be every bit a financial disaster, LONGTERM, for the county that the naysayers said it would be. Smart idea running the only 2 people in office who questioned this project out.

    Hey Rick, hows that reversal of your campaign promise to look into this project working out?

  3. Remember all of the promotional pieces – like “What’s The Risk” – which were issued to reassure the public by the people who were promoting the convention center project? Although they spelled out what could happen if there were not enough money to pay off the project’s construction loans, none of them paid any attention at all to the potential costs of supporting a facility which would be unable to make ends meet.

    This omission is the fatal flaw behind the reasoning which was extensively used to justify the expenditure of nearly $150 million taxpayer dollars.

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