by Christiaan Hart-Nibbrig
“It wasn’t my money we were talking about. It was the people’s money, and I owed it to them to understand it before voting on it.”
— Dick Shellenberger, chairman Lancaster County Commissioners, explaining his request for details of the Tax Increment Financing proposal before his board would take a vote.
During the frigid first weeks of the winter of 2005, Nevin D. Cooley, president of Penn Square Partners (PSP), was quietly going around town meeting with Lancaster’s elected officials, paying particular attention to the board members and solicitors for the School District of Lancaster (SDoL). Cooley wanted to discuss a financing proposal for the $75 million hotel his partnership was supposed to build.
For years, the sponsors of the project had touted the tax revenue its “privately-owned” Marriott Hotel would bring to city tax coffers.
Now, during those frozen early days of 2005, PSP turned its attention to the funding of the hotel, and Nevin Cooley was the man to pitch it. Cooley, a University of Maryland-educated native of Lancaster County, had been Dale High’s right-hand and principal spokesman for more than a decade. The bearded Cooley was most often the face and voice of Penn Square Partners. Cooley’s proposal to the county, city and school board officials was a complex scheme called a Tax Increment Financing (TIF) plan.
Tax Increment Financing (TIF) is a device used in many states whereby theoretical future gains in taxes from a project are anticipated to finance a new project. Relevant local tax bodies must consent.
The proposed TIF called for the SD of L to re-direct 90% of the school real estate taxes to pay down the hotel mortgage bonds. Full tax payments would be available to the school district in 20 years when the mortgage bonds would be paid off, according to the PSP plan. If certain return on investment (12%) was exceeded during the TIF period, the Partners tax payment would increase.
Mike Winterstein was the self-described economic development “point-person” for the school board, to which he was elected in 1997. A conservative Republican businessman, Winterstein had many properties around the city, and found himself increasingly involved in city politics.
“I remember meeting with Nevin Cooley along with [fellow board member] Dan Desmond, who was also involved in economic policy matters,” says Winterstein. “Desmond said we wanted to have the partners pay 50% of the taxes. I wanted it all to be taxable. My feeling was that the schools needed money, and that economic growth would only come with taxable economic growth. I wanted the hotel to be entirely taxed as a private business.”
Winterstein and Desmond went back to their board and explained the proposal. The board was not supportive of the TIF plan.
“Although we were Democrats and Republicans on that board, we really shared the same vision about the tax revenue,” says Winterstein, “We needed all of it. We saw the tax revenue as the cornerstone of economic development. We simply weren’t buying the Penn Square Partners’ plan. They wanted a 90/10 split in their favor!”
“Also,” continued Winterstein, “Cooley was using this market study that didn’t reflect the project we were discussing. I was through with his spewing nonsense.” [Editor’s note: The convention center size had increased from 61,000 sq. ft. to more than 100,000 sq. ft. since the time of the market study.]
In a letter to the president of the school district, Patrice Dixson, Cooley based his argument on a market study, which he incorrectly, and repeatedly, characterized as a “feasibility” study. It was later certified that the study was, in fact, a market study, not the much more comprehensive ‘feasibility’ study which projects revenues and expenses, profits or losses.
Another prominent businessman who attended one of the TIF pitches recalled:
“[Lancaster Newspapers CEO] Jack Buckwalter came to the meeting, and they gave a superficial power point presentation,” says the businessman who spoke on condition of anonymity. “What they were saying didn’t answer a lot of questions, so we asked for more details. And, as usual, they never provided anything in writing.”
Like the campaign around the Interstate Hotel management vote, sides on the TIF issue were vocal and clearly drawn:
On the side of the partners, Lancaster Newspapers editorialized in favor of the TIF. The Lancaster Alliance—of which all three Penn Square Partners were founding members—showed up at meetings urging its adoption.
Opponents were, predictably, the Greater Lancaster Hotel and Motel Association (GLHMA) plus ‘in-your-face’ activist Ron Harper, and a growing miscellany of citizens. But the issue also caught the attention of the Lancaster County Board of Commissioners.
The three-person Commissioners’ board had taken office a year earlier. In January, Dick Shellenberger had replaced Pete Shaub as chairman. Unlike Shaub, who was a staunch supporter of the convention center project, Dick Shellenberger was more questioning of its viability.
Shellenberger was the leading vote getter in the 2003 election, and was the only endorsed Republican candidate in the field. Born and raised Mennonite in Mount Joy, Shellenberger’s first 18 years were the life of a farmer’s son.
“I was up at 5am every day, milked the cows, went to school, came home, did my chores,” says Shellenberger today. “I didn’t play sports or anything like that. We worked every day. But I liked farm work.”
Dick Shellenberger was a fiscal and socially conservative commissioner who campaigned on a platform of smaller government. The commissioner’s job was Shellenberger’s first elected office. He said that he didn’t sufficiently understand the TIF proposal. (If the School Board passed the TIF, then the County would also have to vote on it.)
Shellenberger asked for details. “They would not provide them,” said Shellenberger. “It wasn’t my money we were talking about, it was the people’s money, and I had to understand how it was going to be spent.”
The Republican-dominated City Council, led by outspoken project supporter, Council president Stephen Diamantoni, was very supportive of the TIF, along with perhaps the project’s most ardent supporter, Mayor Charlie Smithgall.
According to a New Era report of February 16, “Penn Square Partners would also give the school board a 2-year binding agreement that would pay the district a lump sum of $100,000 a year in lieu of taxes”, which S. Dale High later said had been increased to $150,000.
Public sentiment opposed the TIF. According to an Intelligencer Journal poll published March 12, three days before the School Board vote, 93% of respondents opposed the plan.
A few days before the SD of L board took official action, a special public meeting was held at the Edward Hand Middle School. Dale High and Nevin Cooley and other associates detailed the proposal before several hundred people. Wearing a gray suit and speaking in a flat monotone, High recapped his past achievements, an appeal to authority. Of his twelve minute presentation, less than two minutes was devoted to discussion of the TIF. The bulk of his remarks attacked opponents and promoted the ‘blue-sky’ projections of his partnership. (His address was captured on video by Ron Harper, Jr. can be viewed here.)
The vote itself on March 15 at McCaskey High School was a strong rejection of the Partners’ plan. In a 7-1 vote (one abstention), the School Board refused to back the TIF.
After the vote, the sponsors and the newspapers suggested the defeat was fatal to the project. “Supporters of a downtown Lancaster hotel and convention center on Thursday pulled the plug on a tax relief plan they said was needed to support the project. And the center project remains barely alive today,” read a New Era article days after the vote.
But it was not, and there was a ‘Plan B’ that the sponsors had ready to go, and it was something the newspapers hadn’t reported. Penn Square Partners weren’t going to wait long to unveil it.