By Christiaan Hart-Nibbrig
The phantom budget gap closure of 2006
“Reports of my death have been greatly exaggerated.” – Mark Twain
In an article published January 12, 2006, “Bids for center work come in low at disputed meeting,” the Intelligencer Journal reported:
“Bids to demolish and stabilize the site of a proposed hotel/convention center in downtown Lancaster apparently came in under budget, according to project developers.
“But at least three members of the public board overseeing the project said they were not informed of last week’s public meeting at which the bids reportedly were opened and discussed.”
On March 20, 2005, LCCCA chairman Ted Darcus announced at the board’s monthly meeting that it was seeking 19 construction contracts for the project. Board members Douglas, Hall, and Craver protested at the time about receiving documents related to bid process only days before the vote. “It’s more of ‘we’ll ram this through, regardless,” Deb Hall said to reporters.
Three weeks later, at its April board meeting, the LCCCA board tabled a motion introduced by Laura Douglas to cap spending on the project. Now, there were no effective spending constraints on the cost of building the, at least, $140 million project.
In the first week of May, 2005, demolition began on some of the buildings on the projected site, including the landmark Oblender’s Furniture store. It came to light after several days that not only had demolition begun before the construction bids came in and financing completed, but that the contractor did not have a demolition permit to do the work.
“A contractor jumped the gun a little bit,” chuckled Tom Smithgall, a High Associates Vice-President and spokesman for Penn Square Partners.
(Rick Atwater, a co-owner, of Oblender’s, who was pressured unwillingly to sell his family business wasn’t laughing. “I got a raw deal,” Atwater told NewsLanc. “It wasn’t right.”)
The LCCCA announced on May 7 that construction bids would be opened in two phases: smaller contracts on May 9; the rest, May 17. The reason for the delay, according to sponsors, was that contractors were said to need more time to study the project.
The May 9 construction bids unsealed by the LCCCA came to a total of thirteen bids, received for four contracts: pre-cast concrete, laundry service, food service, and fire protection. The low bids tallied about $55 million, leaving approximately $90 million for the remaining contracts to be opened on May 17, 2005.
Among the May 9 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, PSP’s Tom Smithgall said the bid was not unethical or unlawful, even though High Construction is a subsidiary of High Associates.
“It’s a public bid process, and it should be open to everyone,” Tom Smithgall said at the time.
Along with High, others to receive contracts at the May 9 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 17. On that day, when the envelopes for the 13 remaining bid packages were opened, project sponsors were disappointed that the bids appeared to be $13.6 million over budget, bringing the construction budget to $102.6 million, instead of the projected $89 million, according to then-LCCCA executive director, David Hixon.
A week later, on May 24, it was reported by the Intelligencer Journal that the bids actually put the project $25.4 million over budget. The overage discrepancy was not discovered by a Lancaster Newspaper reporter, but by LCCCA board member, Laura Douglas, who brought it to the newspapers’ attention, but was not attributed in the article.
Commissioners Shellenberger and Henderson considered the huge deficit, and urged the sponsors to “throw in the towel.”
In the first week of June, 2005 the LCCCA decided to send out the May 17 contracts for re-bid, hoping to come closer to the $89 million target number. The Authority set July 27 as the date for opening the new bids.
Days later, on June 8, High Construction Company resigned as “Construction Manager” of the project in order to bid for the lucrative “General Trades” contract.
As Construction Manager of the project, High Real Estate was involved in establishing the bidding criteria with the project’s architects, Atlanta-based, Cooper-Carry, (chosen by Penn Square Partners).
On July 27, the last of the construction bids were opened, with High Construction – another subsidiary of the majority partner in PSP – the only bidder for the largest, “General Trades,” contract.
Combined with bids opened previously, the project found itself again at least $20 million over budget. High’s bid alone was $15 million more than the previous General Trades bid from Wohlsen Construction, which bid $22 million on May 17, but did not re-bid the project in July.
Again, as it did on earlier occasions, Penn Square Partners immediately implied the death of the project.
“Bids doom center plans: Penn Square Partners says $20 million ‘gap too great,” lamented Lancaster Newspapers in its front page headline.
“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 PSP spokesman Tom Smithgall.
“It’s a sad day,” said John M. Buckwalter, chairman of Lancaster Newspapers. “One could say we are still going to try, but it is very unlikely at this juncture,”
Even the Intelligencer Journal, through veteran columnist, 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. “
With a nod to Mark Twain, reports of the convention center project’s demise were greatly exaggerated… once again.
The very next day, July 28, 2005, the project, after being pronounced dead, Lancaster Newspapers 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 15 to approve contracts, or the bid proposals would expire.
State Representative Mike Sturla was at the July 28 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 11, 2005, Lancasterians picked up their morning Intelligencer Journal and saw, in headlines usually reserved for the beginnings or ends of major wars, that the $20 million budget overage had been met.
“CENTER CLOSES FUND GAP: DEVELOPERS TO INCREASE THEIR STAKE”
In keeping with the life-or-death imagery favored by project sponsors, Intell reporter Dave Pidgeon begins the article of resurrection:
“Lancaster city Mayor Rick Gray announced a plan Thursday to keep alive a hotel/convention center project by plugging a $20 million funding gap.” ( Was there a significance that Gray was chosen to make the announcement rather than a representative of Penn Square Partners lest there later be charges of fraud?)
According to the Intell and the 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 will give $3 million it purchases historic easements
- Saving $1.5 million from favorable interest rates from a $14 million construction bond to be floated by RACL. The RACL bond is backed by $1.1 in state grants.
The “plan” announced by the Mayor was immediately derided by 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, an organization of few dozen citizens watch-dogging the project, said in a public statement at the time that the plan was “Smoke and mirrors:..
“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.”
4) The $2 million for the “naming rights” was sheer conjecture and, to date, 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.
5) The second round of “value engineering”, which can better be described as dismemberment, likely resulted in the missing escalators between the convention center and the Marriott lobby, the gutting of the electric system so that the entire project is only served a single meter without the benefit of sub-meters to separate cost of operations of the two facilities and measure efficiency, possibly the reduction in air condition capacity, and the choice of floor finish in the Marriott’s restaurant.
Not mentioned by sponsors or the Lancaster Newspapers was the re-allocation of $3 million earmarked for the renovation and expansion of the Lancaster Public Library in order to partially cover cost overruns of the convention center project. The funds were pivotal for the library project to move ahead. Strenuous efforts by staff and volunteers for over a year and plans costing $400,000 went for naught. Over fifteen hundred Lancastrians visit the outdated and worn Duke Street facility that has not had a major upgrade since the1950s. How many Lancastrians visit the Convention Center each day?
With the majority rubber stamp awaiting them at the LCCCA, the sponsors knew that this battle, perhaps the crucial one in the war, was over. And they won through sleight of hand . . . again.