At the time that the City majority on the Lancaster County Convention Center Board recklessly sought to overcome a $20 million deficit in funding in order to get construction underway, they entered into a SWAPS deal which limited how high the variable future interest rates would be and thus maximized how much could be borrowed. The downside was that it meant that Convention Center would not fully benefit from a drop in interest rates.
It was a horrendously bad move, because interest rates fell precipitously and the owners of the SWAP, now Wells Fargo Bank, has been the beneficiary.
A year ago it would have cost the County over $22 million to ‘unwind’ the SWAP arrangement; today, since interests rates have moved up a bit, the price tag would be about $15 million. Chair Scott Martin and the other county commissioners are not about to pay to rescind the SWAP arrangement. They want Wells Fargo to modify it as part of the negotiation. Wells Fargo now claims it didn’t understand.
The other thing that Wells Fargo would like but Martin so far has not agreed to is a full county guarantee of annual payments of debt service beyond the seven year term for a lower interest rate now under negotiation. If the county were to guarantee the payments for the remaining decades of the debt, the Convention Center Authority and the county would be at the mercy of Wells Fargo from the eighth year on.
What an irony. The very interest who feathered its nests with millions in development fees and construction contracts, a partner who used its newspapers to bludgeon those who opposed the project, and the bank that engaged in reckless lending, now seek to gorge themselves on still more of the public money.
The public needs to keep its eye on both the Wells Fargo renegotiation and the so call “side deal” with Penn Square Partners.
And if no proper arrangements are forthcoming, then let’s take the convention center into bankruptcy and let a federal judge from out of town (Reading likely) finally straighten out the mess and see that , at long last, some justice takes place.
Are there any downsides for Lancaster County taxpayers if the Convention Center goes bankrupt??? If not, or if they are minimal compared to keeping it afloat; than let the bankruptcy begin!!!
It should be obvious to everyone that a total rework of the one-sided agreements (and any proposed side agreements) need to be modified (by outside professionals familiar with these type of agreements), if this venture is to have any hope of long-term viability. If it takes a bankruptcy hearing to accomplish that….so be it.
This financial albatross does NOT need to continue just for the sake of lining the pockets of PSP.
In hindsight, Fulton Bank was very prudent to drop out of PSP early on. They maintained their integrity, and have continued to be a respected member of the community. That’s more than can be said for LNP and High Industries.