(Fifth in a series)

A constant refrain coming from supporters of the convention center project, including Sen. Armstrong, Rep. Barley, Mayor Smithgall, Commissioner Terry Kauffman – was that the project would especially help the local hospitality industry and needed its support. They were unsuccessful in persuading those said to benefit from the great idea.

On September 10, 1999, less than one week before the Lancaster County Board of Commissioners was to vote whether to impose the room tax (and an additional excise tax) on County hotel and motel owners, the Commissioners’ Board was formally notified in writing that such an action violated Pennsylvania law, and, if passed, could result in a lawsuit against the county.

“The [Convention Center] Act is not applicable to Lancaster,” warned Christopher C. Conner, an attorney with the Harrisburg-based law firm of Mette, Evans, & Woodside, on behalf of the Lancaster Host Hotel and Conference Center.

Conner seemed to have a sound legal argument. Section 13102(c) (1) of the Act is unambiguous. It reads:

“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.”

The plaintiff Host Hotel, located just five miles from the proposed site, had 72,000 square feet of convention center space. Additionally, noted Conner, privately-owned Franklin & Marshall College also maintained a facility of more than 50,000 square feet which was also used for convention center purposes.

“It is clear from the Act,” wrote Conner to the County Commissioners, “that the legislature did not intend that public financing and the imposition of a hotel room rental tax be used to construct a convention center that would compete with an existing convention center of more than 40,000 square feet.”

Conner’s warning had no effect, and the commissioners unanimously enacted the taxes and established a convention center authority to spend them on September 15, 1999.

On September 15, 1999, in three separate resolutions, numbers 44, 45, & 46, the three Lancaster County Board of Commissioners – Republicans Paul Thibault and Terry Kauffman, and Democrat, Ron Ford — voted unanimously to establish a convention center “authority,” and to impose two taxes: a 3.1% hotel/motel room tax and a 1.9% excise tax.   Both taxes would be levied solely on the hotel and motel owners of Lancaster County. The tax would commence January 01, 2000.

The close relationship between Republican Pennsylvania Governor, Tom Ridge, and the senior Republican members of the Lancaster County legislative delegation, was evident from the inception of the Lancaster Convention Center and Hotel project.

In exchange for support of his $500 million Stadium bill, Ridge doled out $150 million from the Capital budget to dole out to helpful allies in the legislature. The Governor was especially grateful for the support of the Lancaster delegation, led by House Appropriations Chairman, John Barley, and Sen. Gibson “Gib” Armstrong, and promised a $15 million state grant for a convention center in downtown Lancaster.

Senator Armstrong was a particularly fervent backer of the convention center project, and a personal friend and active political supporter of Lancaster Mayor Charlie Smithgall, perhaps the biggest supporter of the project.

In Harrisburg, on October 19, 1999, Armstrong introduced an amendment to House Bill 148, originally intended to authorize county appropriations for Flag Day observance, and used that pretext to reenact 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.” [emphasis 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).

Bias can be revealed by what is not published, as well as what is published. Lancaster Newspapers’ biased coverage is again demonstrated in this case by its not reporting what the senior Senator in its district was doing in Harrisburg. One of the basic functions of the ‘Fourth Estate’  is to monitor the elected representatives of the people. As journalists, the editors of Lancaster Newspapers utterly failed its readership in not reporting Armstrong’s activity. It would be one of many such examples.

The Governor signed the revised law on November 3, 1999, and on November 5, with cameras flashing, Gov. Tom Ridge was in Penn Square handing over (and posing next to) an oversized $15 million check to Armstrong, Mayor Smithgall, Baldridge, and the rest of the project’s sponsors and supporters.

The Armstrong Amendment still raises the temperature among some local hotel operators. “There was no coverage of what Armstrong was doing, because it was done in secret,” fumed Rodney Gleiberman, of the Continental Inn. “While Armstrong, and other backers were characterizing us [hotel and motel owners] as ’selfish’ and criticizing us for getting ready to file a ‘frivolous lawsuit,’ he was busy in Harrisburg. Gib changed the law, and basically deflated our best argument, and one not previously litigated, and legitimized our case at the same time as neutralizing it.”

The hotel and motel owners were wounded, but not conceding.

On March 24, 2000, a group of 37 of them representing different hospitality establishments, large and small, across Lancaster County’s vast 940 square miles, engaged Mette Evans and filed a civil lawsuit in the Court of Common Pleas in downtown Lancaster.

The suit petitioned for declaratory and injunctive relief on a total of eight counts of alleged federal and state violations of Constitutional rights.

With respect to federal Constitutional violations, the hotel and motel owners argue in their suit:

“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 argued 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 was heard first in December of 2000. It would not be the last battle in the courtroom.

###

Chapter Six: The Authority

(Fourth in a series)

“PENN SQUARE COMPLEX IS HAILED AS ‘EVERYTHING THE CITY NEEDS’

STRONG PRAISE FROM CROWD OF NEARLY 300″

– Lancaster New Era, front page, banner headline, August 26, 1999, two weeks before County Commissioners vote on room tax to fund “complex”

After the Stadium Bill became law, in February 1999, Lancaster Newspapers’ role in the convention center and hotel project started to seep into its reporting, and bias began to show.

Dale High, Chairman and President of High Industries, had always enjoyed positive coverage from all three major Lancaster Newspapers. But now, as a Penn Square Partner, the items written about him during the year 1999 started to read more like press releases from High’s personal public relations firm rather than credible newspaper reports.

The flavor of the aggrandizement is suggested from some of the Lancaster Newspapers’ headlines from 1999:

“PA. CHAMBER NAMES HIGH TOP BUSINESS LEADER OF ‘99″ (Lancaster New Era);

“DALE HIGH HONORED AS TOP ENTREPRENEUR OF ‘99″ (Intelligencer Journal)

“LOCAL BUSINESSMAN IS TOPS AMONG U.S. ENTREPRENEURS” (Lancaster New Era)

“THE NEW ERA RED ROSE IS PRESENTED TO S. DALE HIGH” (Lancaster New Era)

A typically fawning profile of Dale High, “The High Road,” was found in the Sunday News, September 26, 1999. It begins:

“Inside the office building, prominent business executive S. Dale High sits scanning papers on a table.

“Outside, a flock of Canada geese glides prettily past High’s picture window. ‘The whole squadron,’ High remarks later as he walks outdoors to the lush park that he incorporated into the Greenfield Corporate Center.

“The sturdy office complex at his back symbolizes the vibrant Lancaster County he would like to preserve for his three children, two stepchildren and eight grandchildren. …”

The convention center and hotel project presented an ethical dilemma for Lancaster Newspapers. The 100 year old company was a major partner in what would become one of the largest capital projects in the region’s history. Given the vested economic interest of Lancaster Newspapers both as a neighbor to the project for across Queen Street and as a partner in the proposed hotel, and the multi-millions of taxpayers’ dollars involved,  public questioning of the impartiality of LNP seems inevitable.

One might have thought that the top editors at LNP would have strained to soothe those concerns by vigorously investigating the project’s viability, or perhaps even hiring an outside ombudsman to review potential conflicts of ethics and professional standards.

This did not happen.

By 1999, judging by the editorial content of all three papers, evidence suggests they had decided to take a proactive role in promoting it.

There are several specific examples in 1999 of biased coverage. Here are some of them:

In addition to the over-the-top headlines (“Everything the City Needs” is one of many), there were full-color, front page, artist’s renderings of the proposed project. These lovely, airbrushed images, with smiling citizens under blue skies, were splayed on the front pages of Lancaster Newspapers before the room tax was passed. These illustrations were equivalent to front-page advertisements for the project.

The reporting was unacceptably weak. For example, many of the organizations said to be supporting the project, like the Lancaster Alliance, Lancaster Campaign, Chamber of Commerce, Downtown Investment District, Economic Development Company of Lancaster, in fact were joined by  the same board members, and many of those were tied to sponsors of the project or sponsors themselves.

High; Fulton; Buckwalter were principals in the project and sat on the boards of directors of several of these organizations. Other board members were indirectly linked to the sponsors, like John O. Shirk, a partner at the Barley Snyder law firm, the principal solicitor used by Lancaster Newspapers. Those connections merited mention, but there was nothing from LNP on this.

Lancaster Newspapers, at minimum, should have disclosed the extent of its  ownership interest in the project from the outset of its involvement. It was not until a court case in 2006 that LNP finally revealed its stake in the project (44% then; 50% today). The company’s downtown real estate, property values which would be affected by the project, should also have been fully disclosed. They were not.

There was virtually no journalistic due-diligence in reporting on the studies commissioned by the Lancaster Campaign, funded by the Lancaster Alliance, twenty-five percent of whose founding members made up Penn Square Partners.

The terms “feasibility study”, and “four-star hotel” were never properly defined on the pages of Lancaster Newspapers. In fact, LNP reporters, and sponsors of the project, repeatedly referred to all the market studies at some point as “feasibility” studies although they were only market studies. Negative input was downplayed or ignored.  This created an inaccurate picture of what the studies actually were and their concerns.

Perhaps the most egregious early example of Lancaster Newspapers’ bias was its handling of the Ernst & Young market report on the project.

In February, 1999, the Lancaster Campaign commissioned the international consulting giant, Ernst & Young, to undertake a market study of the project. The cost of the study: $60,000. The Ernst & Young “Market Study, Cash Flow Estimates, and Economic Impact Analysis,” released to the Campaign in July of 1999, was treated as the justification of the project.

The first striking thing about the Ernst & Young study is that it isn’t a feasibility study at all. In the world of real estate appraisal, “Market” and “Feasibility” studies are distinctly different reports. Ernst & Young intentionally called its report a “Market” study because it was not the much more substantial and comprehensive “Feasibility” study, which includes, among projects of profits and losses, a market study. The so called “cash flow estimates” were industry wide, not based on the specific Lancaster project.

To underscore this, Ernst & Young themselves stated in its final Executive Summary:

“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.]

The second noteworthy aspect of the Ernst & Young study is the secrecy with which the report was released. Unlike the Winterbottom study of the year before, which held several public meetings that included organizations and everyday citizens, the methodology of the Ernst & Young report was limited primarily to discussions with certain government officials, and a few carefully selected representatives from the hospitality industry. The community and some government officials were conspicuously left out of the process.

A reading of the report suggests why it was kept secret. While Ernst & Young conclude that a 61,000 square foot convention center and a 281-room adjoining hotel is the “most appropriate” of the four “scenarios” it analyzed, the report was far from conclusive in recommending going ahead the center and hotel project.

Moreover, the Ernst & Young study lists 23 “Critical Success Factors” for the project. The report names only three “Competitive Strengths” for the Lancaster project (costs to attendees; event costs; road access from major feeder markets).

There were a total of seven “Competitive Weaknesses,” (air access; cultural and entertainment attractions; population; industry concentration; historical demand for lodging/meeting facilities; market image; other quality of life issues.) It seems Ernst & Young thought Lancaster had more going against it than for it.

But one wouldn’t know that from reading Lancaster Newspapers. The articles published by LNP on the Ernst & Young read as if its reporters and editors had not seen the study.

Additionally, there was no pressure from LNP to release the Ernst & Young study prior to the Commissioners’ vote in September, 1999. LNP Chairman, Jack Buckwalter, was a founding member of the Alliance, the organization that paid for the report. Buckwalter should have publicly insisted the report be published in all three papers.

Finally, Lancaster Newspapers ought to have reported that Ernst & Young, who was being paid to conduct a market study commissioned, in part, by Dale High, had named High “National Entrepreneur of the Year” and “1999 Master Developer of the Year.” Ernst & Young was hardly an arms-length consultant in this study.

It was also in 1999 that Lancaster Newspapers began to report of opponents of the project derisively. The first charged with trying to “kill” the project were Lancaster County hotel and motel owners.

The news articles depicted Lancaster County citizens who would be hit first and most directly by the tax as litigious whiners, not wronged taxpayers unfairly forced to pay for its competition.

An article published one week after the room tax was passed in the Lancaster New Era, on September 22, 1999, (“F&M President Blasts Hotel Operators”), begins:

“Franklin & Marshall College President Richard Kneedler has lashed out at county hotel and motel operators who may include the college’s Alumni Sports and Fitness Center in a legal challenge they’re considering against a planned downtown convention center.

“In a letter to members of the Lancaster Hotel & Motel Association, Kneedler made it clear that the college and its trustees are “strong supporters” of plans to build a $30 million convention center just south of Penn Square.

“’This is of major importance to the City of Lancaster and the County of Lancaster,’ Kneedler said of the convention center and an adjacent $45 million hotel planned for the former Watt & Shand building. ‘For a few hotel managers to try to block or stalemate this project is very unfortunate.’”

Later in the article, Kneedler, after citing the number of hotel rooms the college generates, is quoted in his letter to the hoteliers in what seems a veiled threat:

“Please contact your association and tell it that angry words, false statements, and threats of lawsuits do not further discussion, will never help our community and will only provoke adverse reactions that everyone will regret,” Kneedler wrote.

In the same New Era report, it is written that the Lancaster Republican officials would boycott a county GOP event scheduled for the Lancaster Host Hotel if the Host Hotel joined the threatened lawsuit over the room tax.

Lancaster Newspapers continued the tactic of demonizing those who questioned the project. This approach intensified as more opponents, some quite respected and able, entered the fray over the convention center project.

—————————————

The Ernst & Young study was completed in July, 1999, and submitted to the Lancaster Campaign on July 19^th.  For weeks, members of the Greater Lancaster Hotel & Motel Association (GLHMA), had been asking the Campaign’s Chairman, Tom Baldrige, to provide complete copies of the document. Baldrige, after promising the hoteliers they could review it, withdrew his “overpromise” of the full report in early August.

The hoteliers, instead, were given the Executive Summary of the report and, after reading it, immediately issued a sharp rebuke of its findings. In a GLHMA “Resolution 08-99″, dated August 19, 1999, the hoteliers affirmed:

“…based on the information provided to date from the partial Ernst & Young report, the GLHMA is opposed to the proposed Penn Square Conference Center, further, that upon review of such partial report and such limited information, the new business said to utilize such facility cannot be substantiated…”

Rodney Gleiberman, General Manager of the Continental Inn, and a present and past member of GLHMA, says, “When Ernst & Young did its study, they did not speak with one current customer, tour operator, or local lodging operator to gauge what effect the room tax might have,” said Gleiberman. “In my opinion, their conclusions were not only incomplete, but irresponsible, as well.”

Others were interested in seeing the complete Ernst & Young report before the County Commissioners were scheduled to vote on imposing the room tax at their September 15, 1999 board meeting. In a letter to the Lancaster County Commissioners, dated September 07, 1999, Allan Erselius, Executive Director of the Pennsylvania Dutch Convention and Visitors’ Bureau (PDCVB), urges release of the full report:

“The Ernst & Young Feasibility Study [sic] is the basis from which we are to make our decision, yet the full report has been seen by only a select few. We would encourage you to release the full report to our Board of Directors and key hoteliers in order to gain their expertise in developing a well-rounded marketing plan.”

Luis A. Mendoza was Lancaster City Councilman in 1999. He, too, was stonewalled. “I made several requests to [Lancaster Campaign Chairman] Tom Baldrige, asking for a copy of the study,” said Mendoza, a Republican. “I was the only one on Council asking to see it, and I never got to see it before the county voted on the tax, and before we voted on whether to set up the Authority.”

Whether the editors and reporters at the Intelligencer-Journal, Lancaster New Era, or Sunday News themselves read the Ernst & Young study is not clear, but their support of the project and the enabling taxation of Lancaster County business was unequivocal.  In an editorial on the day of the vote on the tax, the morning Intell wrote:

“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.”

###

Chapter Five: Uncivil War

The following exchange between a viewer who closely monitored the evolution of the Convention Center Project and investigative reporter Jim Sneddon both sheds light on the forces driving the project and the depth of Sneddon’s research.

The issue contended is at what point in time was the future sale of the Watt & Shand building from Penn Square Partners to Redevelopment Agency of the City of Lancaster (RACL) under consideration. (Later in the series, NewsLanc will address the propriety of the sale price.)

LETTER re LCCCA series:

From Sneddon’s report: “A number of things were happening at this time. Significant progress had been made in 2004 to get the Convention Center moving toward construction. Among items that remained, however, was a revision of the contract between Penn Square Partners and the Authority because of the new role of the Redevelopment Authority of the City of Lancaster as the owner of the land and new hotel. That was necessary in order to gain additional state funds and grants for the project.”

RACL wasn’t even mentioned as a potential owner of the Watt & Shand property until March 28, 2005. Title to the property was transferred on January 31, 2006.

The reason for RACL owning the property, building the hotel, and “leasing” it back to Penn Square Partners in exchange for payments on a $24 million bond over 20 years is because of S. Dale High’s demand that the hotel not be obligated for paying ANY property taxes for at least 20 years. I have no evidence that the hotel received any additional state funds or grants because of RACL’s ownership of the building.

RESPONSE by reporter Jim Sneddon:

While I stand in awe of and recognize [the letter writer's] expertise and long history with this project, I have to disagree with him. I do not write that these things happened, but they were “items that remained.”

What has transpired repeatedly with these folks is that they hold non-public meetings and little discussion of those meetings occur in the public Authority meetings. And that discussion is often not until they have all of their ducks in a row, allowing the board to unanimously approve things with little or no discussion.

I cannot find the March 28, 2005 reference, but I can assure you that RACL discussions were happening far earlier than this date. Note that I write:
“Among items that remained, however, was a revision of the contract between Penn Square Partners and the Authority because of the new role of the RACL as the owner of the land and the new hotel. That was necessary in order to gain additional state funds and grants for the project.”

First there are snippets of public references of Chris Cicconi of Stevens & Lee meeting for years with Penn Square Partners over various kinds of negotiations and agreements.

As early as the June 2, 2004 Authority meeting, Cicconi states:
“…that the main issues remaining, including additional state funding, the transfer of Watt & Shand to RACL … shared space costs and over runs, implementation of PSP financing plan, taxability of new public funds as well as others. …”

I believe there were ongoing meetings and negotiations about this during the summer, if not earlier. At the August 11, 2004 meeting we find:
Tom Smithgall states in his report that there were “lots of meetings held and more ongoing.” They traveled to Atlanta for some of those meetings.
David Hixson states “…we continue to work on a business deal and structure for the convention center hotel project.”

Then on August 27, 2004 Jones Lang LaSalle and Kauffman & Canoles are hired. Obviously there had to be significant prior discussion about this with Penn Square Partners because they initiated the discussion to hire these two firms and share the $30,000 cost. Why did they do this? I suspect Penn Square Partners [PSP] wanted to nail down some things before they went public with them.

Hixson states: “The thought process was to bring business advisors on board to help us to strengthen the mutual operations between the two parties and also some of the processes that we have associated with our partnership.”

We do know from expense documents that the “secret” meetings with the consultants occurred between Sept. 1 and 4 and it appears they took place at Franklin and Marshall. There is nothing stated publicly about these meetings. The scheduled October 2004 meeting of the board did not occur. Then there was a report, given to someone, on Oct. 25, but as I wrote in my story there is no evidence of any “legal, public meeting” of the board.

We do find out, however, in the Nov. 11, 2004 meeting that there have been numerous meetings with PSP and others. Some of those meetings related to additional state funding grants through the newly passed ACT 23 and the need to find additional funding for the hotel side of the project.

Hixson states: “As for the $22 million funding gap, in mid-August, after the state budget was approved and after we had begun schematic designs, Sen. Armstrong convened a meeting in the Mayor’s conference room and that meeting was attended by Sen. Armstrong, Rep. Sturla, Mayor Smithgall, the County Commissioners and representatives from the Governor’s office as well as representatives from both PSP and the Authority. Armstrong and Sturla encouraged the two owners to look at that process by utilizing a tool that was part of the Economic Stimulus Package approved last spring, and specifically it was SB 10 which now ACT 23.” (Any discussion of ACT 23 funds would have had to focus on RACL owning the property and hotel.)

Armstrong then spoke of the other $12 million needed: “I can assure you that I have these commitments as of today … we have identified $6 million from the Governor and I have two commitments for $3 million each.”

Then at the Dec. 16, 2004 meeting there is the first public mention of RACL being involved. Hixson tells the board: “Look at the critical partners that we have here. Up front I could call these the contractual partners, the Authority, PSP and now some of you will hear for the first time our proposal to include RACL in this project to make this project a reality. Under this structure the ownership of the hotel tower will lie with RACL and that includes the Watt & Shand. As required by ACT 23, RACL owns the building in title only.” (Various other topics in relation to this are discussed.)

Then the board unanimously approves this motion:

“Authorize the Executive Director to negotiate modifications to the existing contracts with PSP and High Associates and enter into any new contracts required to implement the core deal structure …” ( I can assure you there have also been behind the scenes meetings and discussions before this ever became public before the Board.)

Nevin Cooley states at the same meeting: “In the spring of this year we came before the county commissioners and explained that we had a $22 million gap in our total funding plan and that we were going to be seeking additional state support in the form of grants. … this creative use of RACL allows our community to access $22 million of additional state funding. It took a lot of time and meetings to get to that point.”

Some of the confusion between myself and [the letter writer] is that ACT 23 funds, which amount to state sales taxes collected at the hotel and personal income taxes by the employees are to be retuned in the form of “grants.”

I hope this explains the background of my writing. As is the case with having to condense things that happened over several years, it is impossible to provide this kind of background in an article of approximately 1,000 words.

(Third in a series)

When Governor Tom Ridge signed the Stadium Bill in the first days of February, 1999—adding half a billion dollars to the Pennsylvania state capital budget—Lancaster County was virtually promised a $15 million check to build a downtown convention center.

“I figure, if we get that $15 million egg, somebody will sit on it,” Mayor Charlie Smithgall said to the Lancaster New Era.

Almost immediately, the project began to change significantly.

The comity, civic high-mindedness, and community involvement that had marked the project’s early planning under Winterbottom vanished, replaced by a lack of transparency, ‘old boy’ patronage, and an apparent absence of due diligence on basic questions of feasibility. The question of feasibility, never properly answered, would define the next tortured decade of the Lancaster County Convention Center and Hotel project.

The first and most obvious change was the physical location of the proposed center. The Winterbottom Report recommended a “conference center” located in Lancaster Square on North Queen Street, adjacent to the Brunswick Hotel, which Winterbottom suggested be extensively renovated.

The Brunswick was (and is) a bland, even drab, brick building built in the early 1970s. At its construction, it was operated under a Hilton flag. The ‘new’ Brunswick replaced its namesake predecessor, another Beaux-Arts gem designed by C. Emlen Urban, that was razed in the botched Lancaster Square re-vitalization.

The existing Brunswick did have a couple of clear advantages over other downtown sites: it was already built, and there was an adjacent, multi-level parking garage owned by the Parking Authority. Renovation would cost less than razing a city block and building anew. Lancaster Square and the Brunswick could handle a “small conference center,” as prescribed by Winterbottom and a fully renovated Brunswick, perhaps converted to a major flag, offering a conference center would bring vitality to the almost moribund Lancaster Square.

After Ridge signed the Stadium bill, in February, 1999, the only site discussed publicly was the Penn Square location of the former Watt & Shand building, across Kind Street from the Fulton Bank and  Queen Street from the Lancaster Newspapers’ office buildings. No public explanation was given at the time for the switch.

“We were the prime location [for a convention center];” the Brunswick’s marketing manager said to the New Era after the switch, “for whatever reason the winds had shifted to Penn Square.”

Years later, in 2009, Smithgall said of the move:

“I tried so many times to speak to the [Philadelphia-based corporate] owners of the Brunswick,” said Smithgall. “I tried to call them directly and I told their guy here, [G&F Management executive, Daniel] Logan that I was trying to reach the owners, and no one called me back. Finally, it was time to move on.” We will hear more of Logan later in the series.

The cost of the convention center also changed dramatically with the move to Penn Square. Winterbottom’s estimate was $6 million for a center at the Brunswick site. Now, the cost grew five times, to $30 million, plus another $45 million for the “Four-Star,” “Luxury” hotel that would now be built by Penn Square Partners.

In order to receive the $15 million from the state for construction of the convention center, the county had to match, dollar-for-dollar, the Commonwealth grant.

The legislative mechanism several other Pennsylvania counties used to get the matching funds was the levying of a countywide hotel and motel room rental tax. This levy – enacted by the county commissioners, collected by the county treasurer, and administered by a public convention center authority – allowed a tax on each hotel and motel room rentals up to statutory limit of 5.0 %. The tax revenue would be pledged to pay back money borrowed to build the center.

The enabling state legislation was  the Pennsylvania Third-Class County Convention Center Act of 1994, written and championed by the law firm of Stevens & Lee.

Until this point, early 1999, the senior Lancaster County state legislative representatives – House Appropriations Chairman, Rep. John E. Barley, and Sen. Gibson E. Armstrong – strongly supported the convention center concept, but both gave similar caveats for their support.

“I wouldn’t be interested in doing this [implementing a hotel room tax] unless I had the support of the affected community—the hotel people,” Rep. Barley said to the Lancaster New Era.

Sen.Armstrong echoed his colleague. “The hoteliers have to support it,” said the senator.

Republican County Commissioner, Terry L. Kauffman, seemed to be reading from the same memo: “It can’t compete with existing businesses. It has to help them.”

The problem was that the “existing businesses”—Lancaster County’s hotel and motel owners—didn’t think the convention center and hotel project would help them at all.

Rodney Gleiberman is currently, and was in 1999, the general manager of the 165-room Continental Inn on Lincoln Highway East in suburban Lancaster, near the popular outlet malls and the Dutch Wonderland amusement park. His father, Michael Gleiberman, with whom he co-owns the Continental, has developed more hotel rooms in Lancaster County than anyone.

“If I felt that this project offered any upside to my business, I would support it,” said Gleiberman. “The reality is that this hospitality project has zero un-interested support from within the local hospitality industry, as it is not grounded in a complete and thorough feasibility study, any reasonable anecdotal nationwide track record, or the slightest bit of common sense.”

Gleiberman wasn’t the only hotelier to hold this view. He is one of dozens of hotel and motel owners that form the membership of the Greater Lancaster Hotel & Motel Association (GLHMA). The organization’s businesses represent more than half of the total rooms available in the county.

In the summer of 1999, before the tax was voted on by the Lancaster County Commissioners, GLHMA conducted a survey of 58 hotels listed with the county’s Pennsylvania Dutch Convention & Visitors Bureau (PDCVB). Of the 58 establishments, 54 voted against the project, three abstained pending more information. There was only one supporter among the hotels contacted—the Hampton Inn, owned by High Hotels, a subsidiary of High Industries, a partner in the hotel portion of the project.

Peter Chicarrine, part of the executive management of the 280-room Eden Hotel and Resort and GLHMA member, said to the New Era. “Before we spend $30 million for a facility and another $45 million for a hotel, I think we should get the facts, and nobody has done that.”

Another GLHMA member, Tom Zeager, owner of an historic inn in Strasburg, was more blunt. “I think this will be a white elephant on the backs of the taxpayers. I don’t think it will work.”

###

Chapter Four: Full Court Press: Lancaster Newspapers takes sides

(Second in a series)

The “small local group of owners” mentioned in the Winterbottom report, negotiating to buy the historic Watt & Shand/Bon Ton building “at a fair price,” were headed by three of the twelve founding and executive committee members of the Lancaster Alliance – S. Dale High; Jack M. Buckwalter; and Rufus A. Fulton, Jr.

The powerful triumvirate – all three respectively the Presidents and CEOs of the county’s largest industrial business, High Industries; its monopoly publisher, Lancaster Newspapers, Inc.; and richest local bank, Fulton Financial Corp. – was about to form a new company, Penn Square Partners, a limited partnership with the High affiliate as general partner and subsidiaries of the Newspapers, Inc. and Bank as limited partners. . . and it would be the start of something really big.

The close relationship between LDR International Corp, the Lancaster Alliance and Lancaster Campaign is noted by Winterbottom on page two in the acknowledgments section of the study, called an “Economic Development Action Agenda,” and released in early February, 1998:

“Our particular thanks go to [Lancaster Alliance board member] Lou Varljen who chaired the Project Coordinating Committee, Tom Baldrige, Executive Director of The Lancaster Alliance, Mary Barnard, Director of The Lancaster Campaign, and Tina Schmucker, Administrative Assistant to the two organizations. Their day-to-day guidance and direction, and enthusiastic participation throughout the process, made this a labor of love.”

Winterbottom did not identify the High, Buckwalter, Fulton group by name as prospective buyers in his report. The details of the transference of ownership of the building had not been finalized at the time of the release of his study, but a de facto deal was clearly in place. The question of which “local group” would get the Watt & Shand building seemed a decision already made, or the ‘fix’ was in, depending on how one looked at it.

The sale of the Watt & Shand building was a complicated business arrangement from the outset. After the collapse of the HACC proposal, the Bon-Ton company leadership made it clear they wanted to divest of the site, now vacant for three years. Bon-Ton said they were going to put the structure up for sale at a national public auction, something newly-elected Mayor Charlie Smithgall said he strongly opposed.

Immediately after taking office in the first week of January 1998, a month prior to the public release of the Winterbottom report, Mayor Charlie Smithgall stated he wanted the city to buy the historic Watt & Shand building in order to re-sell it to a local developer, to keep it on the tax rolls, but out of the hands of out-of-town investors.

Smithgall promptly appointed James O. Pickard as “Economic Development Director.” Pickard’s top priority was finding a private buyer for the vacant Watt & Shand building. Pickard, a successful businessman, part of the local Republican political establishment and a former Pennsylvania state Commerce Secretary, would take no salary for his job.

On January 12, 1998, a week after Smithgall’s inauguration, Pickard announced the city of Lancaster was, itself, negotiating with Bon-Ton to buy the building. Here is how the prospective sale was reported in the Lancaster New Era (”Sale of Bon-Ton to city expected within a week”) on that date:

“In what could be a pivotal step in the revitalization of downtown Lancaster, city officials said today they expect to sign an agreement to buy the Bon-Ton department store on Penn Square this week.”

Pickard spoke about the process in selecting a private developer to whom to re-sell the building in the same article: “We want a completely open process,” he said, speaking on behalf of the mayor, adding: “This is the single most important thing we can do in the next four years.”

Smithgall indicated the city intended to hold the building for a short period until it could be re-sold to a private local concern. Assurances of impartiality from the Smithgall administration in selecting the developer appear to conflict with the new mayor’s close and established relationship to one set of prospective developers; the ones associated with the Lancaster Alliance, Penn Square Partners.

Winterbottom said as much when he pointed to Smithgall’s deep involvement in his study paid for by the Alliance:

“Finally, Lancaster’s new Mayor, Charlie Smithgall, was an active citizen participant in the process several months before his election as Mayor, and well before his inauguration in January. …”

Given the new mayor’s intensive pre- and post-election participation in the Winterbottom report, it is possible that the gregarious, deal-making, politically shrewd Smithgall may have been inclined to tilt the playing field, i.e. the Watt & Shand building sale, in favor of his friends – and political supporters – from the Lancaster Alliance. They were also a known quantity.

If so, was the city’s purchase an arrangement to conceal from Bon Ton the interest of perhaps the three wealthiest entities in the region in its property?

On February 17, 1998, Bon-Ton sold the downtown historic structure, known as the Watt & Shand building, directly to Penn Square Partners for $1.25 million.

In covering the sale to the Intelligencer Journal of January 18, 1998 reported,

“’We’re looking at all the options,’ said S. Dale High, president and CEO of High Industries Inc., parent company of the real estate group.

‘We see it as a mixed-use building.’

Downtown merchants and others have suggested a variety of museums, giant-screen and foreign film theaters, heritage-oriented shops, a visitor’s center and restaurants.

High said his organization intends to carry out a full market analysis to find the right combination of uses that will succeed in the building.

‘We’re not going to rush and do something shortsighted,’ he said. ‘We want something with long-term value for the community.’”

If one put together a ‘dream team’ of Lancaster County businesses to form a business alliance in Lancaster County, Penn Square Partners would be that team.

High Real Estate, a subsidiary of High Industries, was the designated “General Partner” of “Penn Square General Corp.” –  the legal name of the partnership. Lancaster Newspapers, Inc. and Fulton Financial Corp. were limited partners, with Fulton taking a smaller investment share.

At the time the new Penn Square Partnership was formed, in February, 1998, S. Dale High had been head of the High companies since 1977.

Sanford H. High, Dale’s father, founded the company, then called High Welding Co., in 1931 with Sanford’s brother, Benjamin. It became High Steel, and subsequently High Industries became the name of the parent company.

Dale, as he was known, was the youngest of Sanford’s three sons. Calvin was ten years Dale’s senior and Donald between them in age.

Dale was the only one of the three boys to graduate from college; (Calvin left after one year; there is no record of Donald attending any college). Dale graduated from Elizabethtown College in 1963, with a degree in business administration. Calvin worked alongside his father in the executive branch of the business, and was president of the steel company for a few years in the early 1970s. Donald took a quieter, more modest career path, and operated a crane for 50 years.

When Dale came to work for the family company in 1963, High Steel had 60 employees and gross revenues of about $1 million per year. By 1997, annual revenues were approaching half a billion dollars, the corporation had dramatically diversified its services, and personnel had grown to nearly 3,000. Dale was largely responsible for that growth.

From the inception of the company in 1931, until the time Dale, at age 35, took it over in 1977, High companies owned no hotels. From 1988 to 1998, with Dale leading the company, High’s new hotel division built or purchased eight hotels.  And a hotel seems to be what Dale had in mind for Penn Square from the start.

John H. “Jack” Buckwalter, like his father, Isaac Z. “Izzy” Buckwalter, was a lifer with the company, owned for more than a century by the Steinman family.

Jack was a city boy and, after graduating from McCaskey High School, stayed home and took a degree from Franklin & Marshall College, before earning an MBA at Harvard. He followed his father into the newspaper business and, according to a puff piece written about him in 1996 in the Intelligencer Journal, Buckwalter rode to and from work with dad for a period of seven years.

In December 1988, 52 year-old Jack M. Buckwalter was named President and CEO of Lancaster Newspapers, Inc. At the time of his big promotion, Buckwalter held the same position as his father before he retired, executive vice president. Now, Jack was in charge of the whole thing – the three broadsheets; the popular farming tabloid; the Spanish paper, everything.

Rufus A. Fulton, Jr. (no relation to the bank’s namesake founder) had spent his professional life, about 30 years, with Fulton Bank before ascending to President and CEO in 1993. Fulton, like Buckwalter, started at the lower rungs of the company ladder; in his case, as an entry level trust officer trainee, and climbed to the top of the bank’s management hierarchy.

Fulton, like Buckwalter, was an early supporter of the HACC plan before it was killed. Both Rufus and Jack were also close social friends, who often lunched together at the exclusive, members-only Hamilton Club.

By early 1998, it was clear that HACC was definitely not coming downtown. Charlie Smithgall and the majority Republican, anti-HACC city council assured that. Now, the three partners – led by High – had to figure out something to do with the building they just bought.

On February 19, 1998, two days after it was announced that Penn Square Partners had purchased the Watt & Shand Building, a public presentation of Lancaster Campaign’s vision for downtown was held at the Armstrong World Industries headquarters on Liberty Street in Lancaster. The auditorium was reportedly filled with “hundreds of people,” according to the Intelligencer Journal.

At that meeting, Bert Winterbottom spoke: “If the renovation to the Brunswick is significant,” he was quoted in the Intell article, “and if you can create that conference center, I predict that within five or six years you’ll have a second hotel.”

At this point, in early months 1998, they were still calling it a “conference center”, perhaps in part at that time because at that time there was state funding for conference centers, and still locating it at the Brunswick in Lancaster Square. Both of those things were about to change.

###

Chapter Three: Helping Hands in Harrisburg

by Jim Sneddon

Below are the list of Convention Center Authority Board Members during the events that NewsLanc will be describing through a series of special reports over the next few months. The plan is to publish the series every two weeks rather than once a month as originally announced.

The concern is to avoid providing so much information at one time as to make it difficult to fully read and absorb, yet not to allow so much time to pass that memories of past disclosures fade.

NewsLanc will run concurrent radio ‘informationals’ on local stations.

Please ponder the significance of Jim Sneddon’s observation in the last line. At the time NewsLanc described the four City appointees as “seeing no evil, hearing no evil, and speaking no evil.”

From the 01/08/03 meeting:

James Pickard (chairman)
Willie Borden (treasurer)
Christina Hausner (secretary)
Garth Sprecher (1st vice chairman)
Judy Ware (2nd vice chairman)
Frank Taylor (assistant secretary)
Paul Wright (assistant treasurer)

From the 02/02/03 meeting:

Christina Hausner submits her resignation
David Schwanger is appointed (assistant secretary)
Taylor moves up to be secretary

From the September 2003 meeting:

Pickard submits letter of resignation. No new members are added at this meeting, but Ted Darcus is present in the audience and Garth Sprecher is named temporary chairman

From the 11/24/03 meeting:

Ted Darcus joins the board – replaces Pickard
John Fry joins the board – replaces Wright

From the 1/14/04 meeting:

Darcus is named chairman
Borden (still treasurer)
Sprecher
Ware
Taylor
Schwanger
Fry

From the 10/13/05 meeting:

New appointees are:

Laura Douglas
Debra Hall
Joseph Morales

They replace Ware, Taylor and Fry

Remaining members are:

Darcus
Borden
Sprecher
Schwanger

From the 11/9/05 meeting

Jack Craver replaces Sprecher

The board remains the same throughout 2006

Darcus (chairman)
Borden (treasurer)
Morales (1st vice chairman)
Schwanger (secretary)

During disputed votes, the above four always vote together.

(First in a series)

The origin of the Lancaster County Convention Center begins with an obscure law called the “Pennsylvania Third-Class County Convention Center Authority Act.” The law was passed by the legislature, and signed by Governor Robert Casey on December 27, 1994.

The Act permitted local county governments of third-class counties (those with populations between 210,000-500,000) to create “Authorities,” taxpayer-subsidized bodies empowered to build and administer convention centers, and to fund the projects through a hotel and motel room rental tax.

Lancaster County, with a population of just under the half million at the time – with scores of hotels and motels, was a “Third-Class” county, and thus eligible to tap new revenue using the room tax for tourist promotion and convention center purposes.

The Convention Center Act was sponsored by house member, Rep. Thomas Caltagirone, a Republican from Berks County. The real authors – the ones who conceived and drafted the bill and the ones who would benefit from its largesse for more than a decade — were attorneys at the law firm of Stevens & Lee, a powerful Reading-based corporation. Dealing in most forms of commercial law, Stevens & Lee is also an influential lobbyist in state government. The firm represented, in 1994, a number of leading corporate interests and was solicitor of record for several local governments, including Pennsylvania counties Berks, Luzerne, and Lancaster.

According to many political observers, the Convention Center Act was later utilized in a trade-off involving a very expensive stadium bill for Philadelphia and Pittsburgh that came a few years later, one strongly supported by Democrat Casey’s successor, Republican Governor Tom Ridge.

The stadium initiative, passed in a lame duck, post-election session at the end of 1998, proposed to spend $600 million public dollars to build four new sports stadia: two in Pittsburgh; two in Philadelphia. The incentive for legislators outside of those specific counties and their immediate suburbs to fund this bill was that they would receive economic development grants that would flow to projects in their communities throughout the state.

At the time, Lancaster County had two very influential senior legislators in Harrisburg: Representative John Barley and Senator Gibson “Gib” Armstrong. Barley was the chairman of the House Appropriations Committee, and Armstrong chaired the Senate Banking Committee. Together, Barley and Armstrong, both Republicans, had been in the legislature for decades.

It has been suggested that Barley and/or Armstrong made a deal with Governor Tom Ridge, also a Republican, that Lancaster be rewarded with state money for a downtown convention center, in exchange for political support for funding the Philadelphia and Pittsburgh stadia bill. Both Barley and Armstrong were closely connected to prominent citizens (all major political contributors and volunteers), who were negotiating to  purchase the large and centrally located, historic landmark Watt & Shand building, which they believed could be developed into a hotel and an adjoining convention center.

By 1995, downtown Lancaster city was several decades removed from its sparkling prime of the post-war 1940s and ’50s. As the second millennium approached, the city still had not recovered from the wholesale demolition of its historic downtown retail district on the 100 block of North Queen Street during the 1970s, its subsequent failed re-development, and the flight of customers and stores to suburban shopping centers and the Park City Mall.

The mishandled, but well-intentioned, “revitalization” of Lancaster Square no doubt scarred the community and leadership alike. For years, this area was known to locals as “our hole in the ground,” a concrete jungle of abandoned buildings and empty spaces. Lancaster Square was a constant ugly reminder of the failed efforts of administrations past. Ultimately, after much transparent public debate and with misgivings by some leaders that the projects would be feasible, a Hilton Hotel (the current Brunswick) and a Hess Department Store had been constructed as end pieces of the 100 block of North Queen Street.

The Hess Department Store closed within two years and was adapted for the manufacturing of fuses. It now stands empty.

There was not sufficient downtown business to support the Hilton, the prestigious franchise was canceled, and for decades the hotel, under different flags but now called the Brunswick,  depended largely on the patronage of groups of federal government trainees bused to Lancaster from Washington D.C.

While Lancaster County can boast a substantial tourist economy, most tourists stays at scores of suburban motels and usually spend their money at the popular suburban and ex-urban outlet malls. They often seek out “Pennsylvania Dutch” cooking, tour rural roads to view the Amish, and are entertained at large, family oriented theme theaters, one of special note being Sight and Sound, a large Christian-themed live performance venue located several miles away from downtown Lancaster.

It was 1995 when the historic Watt & Shand department store building on Penn Square closed its doors forever. By that time it was the “Bon-Ton” store, the Shand family having sold the business the year before.

Bon-Ton, with a flagship in York, had wanted only the nearby Park City mall location of the Watt & Shand, but both stores were included in the deal. Bon-Ton agreed to keep the downtown store open for a short, agreed-upon time; when that time expired, the downtown location was vacated and closed for business.

The Watt & Shand Building was no ordinary retail office space. Designed by the eminent local architect, C. Emlen Urban, the Watt & Shand anchored downtown retail since 1898. Its towering columns and ornate facade was a distinguished example of the Beaux-Arts style often used by Urban.

The four-story building, with its design, size, and central location, was also a cultural touchstone for generations of Lancastrians. When it closed, combined with the continuing problems with Lancaster Square, many felt the city’s heart had stopped.

The building languished, unoccupied, for more than two years. Mayor Janice Stork, a Democrat, with the help of the Economic Development Company of Lancaster, negotiated for the acquisition of the building from Bon-Ton for use by the Harrisburg Area Community College (HACC). The Economic Development Company of Lancaster was a small non-profit group of powerful downtown Lancaster business leaders that included Lancaster Newspapers, Inc. Chairman, Jack Buckwalter. HACC  wanted to locate a satellite campus in the building.

The state education department rejected a six million dollar funding request from HACC. There were also public objections to the college taking over the building.  Some maintained that parking would be problematic.   Some noted that HACC would be exempt from real estate tax, depriving the City and the School District of Lancaster of needed revenue.  Perhaps some did not relish attracting minorities to the downtown areas, especially in the evenings.

Among those who were strongly raising these objections to the HACC plan were Arthur E. “Art” Morris, former two-term Republican mayor (and later chairman of the Lancaster County Convention Center Authority board), and Republican mayoral candidate Charlie Smithgall, a colorful, local pharmacist.

Despite much talk and effort by community leaders, two years after closing for business, the majestic Watt & Shand remained empty and dark over Penn Square.

Local business and political leaders concluded that something substantial, strategic, and coordinated must be done to resuscitate the faltering heart of the downtown Lancaster economy.

Back in June of 1993, a dozen powerful local business leaders, including S. Dale High, President and CEO of High Industries; Jack M. Buckwalter, Chairman of the monopoly Lancaster Newspapers; Rufus A. Fulton, Jr., Chairman of Fulton Bank; and nine others of similar stature, started a business and civic organization named the Lancaster Alliance.

In a few years, these three men – ‘Dale,’ ‘Jack,’ and ‘Rufus’ – would form an  alliance, but for now they were part of the Lancaster Alliance’s founding board of directors.

This is how the Lancaster New Era reporter (now retired editor) Ernie Schreiber began his front-page report on the formation of the Alliance on June 27, 1993:

“The chief executives of 12 of Lancaster County’s largest corporations have launched a new organization, the Lancaster Alliance, to help improve the economy and social conditions of Lancaster City.”

In 1996, the Alliance funded and provided advisory services to a subsidiary organization, the Lancaster Campaign, that had a small paid staff to implement its vision for the city revitalization and development.

During that mayorality campaign season of 1997, when the HACC proposal was still a front-page political issue, the Lancaster Alliance through the Lancaster Campaign commissioned a study about how to revitalize the city. They hired LDR International Corp., a renowned urban planning firm based in Columbia, Maryland.

In an excited July 1, 1997, front page Lancaster New Era article (”Design doctor hired to revive city”), Bernard Harris and Steve Tranpnell wrote:

“The doctor is in.

The Lancaster Campaign hired urban designer Bert Winterbottom today to create a diagnosis and prescription for revitalizing Lancaster. Like any doctor, he plans to ask the patient about symptoms and future needs. He will interview government and business leaders and hold forums where everyone – city and county residents – can offer their ideas.”

Winterbottom and his staff took several months to perform research. They held multiple public meetings, did polls and surveys, and came up with a well publicized report, released in February of 1998.

It is a remarkable document in many aspects, including the vast the scope of the plan. The Winterbottom Report, as it was called, examined and made recommendations for the revitalization of three separate sections of the city: Downtown (Lancaster Square & Penn Square); North Prince Street; and South Duke Street.

The report included a comprehensive plan that addressed such issues as streetscape enhancements, landscaping, lanes and alley rehabilitation, sidewalks, and public park improvement, new lighting, and street furnishings.

Among the proposals coming from the study was the recommendation for a “conference center,” to be located downtown, at the site of the Brunswick Hotel in the Lancaster Square section of the city. “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.”

This is apparently the moment in time when the convention center  idea was publicly expressed for what has evolved into the current $186 million plus Convention Center/ Marriott Hotel project for downtown Lancaster.

Winterbottom’s cost estimate for his “state-of-the art-conference center” was but $6-$7 million!

This is what Winterbottom’s report said on page 55 of the Watt & Shand building:

“The Watt and Shand Building at Penn Square is the heart and soul of Downtown, Lancaster City, and the County. It is already a special place and one of great beauty, charm, interest and vitality. The challenge is to further reinforce this special place and to bring about the meaningful redevelopment of the Watt and Shand Building.”

The report goes on to recommend:

“Provide the necessary private and public support to ensure redevelopment of the Watt and Shand Building, by a private developer, as a viable mixed-use development. Re-use of the Watt and Shand Building would reinforce and support other downtown activity by providing employment and ground-level retail activity.”

Later in the same section on the Watt & Shand site, Winterbottom makes a somewhat vague reference to what was about to become the new alliance of the Fulton Bank and an affiliates of the High companies and the Lancaster Newspapers, Inc:

“As this report is being written, the ownership of the Watt and Shand Building is being transferred from the current out-of-town owners to a small local group of owners at a fair price. [emphasis added] … Local private and public leadership must be prepared to support this project with their influence and their financial resources. This will not be an easy project. . . . While outright sale and development of the property is most desirable, the owners and the community must also be prepared to consider a variety of partnership arrangements that may involve other local investors, the City, the County and the State.“ [emphasis added]

It seemed that old Bert Winterbottom knew something before many in the community did.  Winterbottom died shortly after his report was released.

###

Chapter Two: THE DREAM TEAM: PENN SQUARE PARTNERS