Imagine the following:
LCCCA Chair Kevin Fry to Wells-Fargo Sr. Vice President: We would like you to lower the high fees and excessive interest rates that will come into effect in April and render the Convention Center even more insolvent.
Sr. Vice President to Fry: Who is “we”? County Commission Chair Scott Martin made a proposal back in August for mutual sacrifice among the Tourist Bureau, the LCCCA, the City, Penn Square Partners and Wells-Fargo. None of the other parties have been supportive of the Martin Plan. Why should Wells-Fargo?
We don’t know if such a conversation has or will take place, but what else could Wells Fargo say without the various parties and the community getting behind Martin’s brave and wise proposal?
Martin’s proposal of last August consists of the following:
1) PDCVB: They agree to live without the 20% of the bed tax that they are currently living without and are unlikely to get back. If future tax proceeds got really good (unlikely), there might be certain triggers that would kick in and get them some money.
2) LCCCA: Reduce expenses $35K/year.
3) City: Throws in $100K annually OR guarantees some portion of the remaining debt.
4) PSP: Increases F&B royalty from 5% to 12%.
5) Well Fargo: Reduce letter of credit fee by 60 basis points [0.006] from 1/1/’13 for the term of the agreement (presumably his 5-year agreement).
NET PROCEEDS: $1.7 million annually.
Not mentioned by Martin is any action by the County Commissioners. Ultimately they would have to play the major role if any meaningful reduction in fees and interest are to be negotiated.
The County currently guarantees half of the debt on the Convention Center. No one is suggesting that the Convention Center by abandoned. Just about everyone recognizes that debt problems must be overcome. The commissioners hold the trump card of offering to guarantee the entire debt.
Just as one can readily imagine a conversation between Fry and the senior vice president above, one can recognize that Wells Fargo is only going to offer much lower market rates for fees and interest if the bank knows that its loan is fully secured by the county. With a full county guarantee, the reduction in interest and fees should be even greater than Martin has suggested.
Penn Square Partners, indirectly the Lancaster Newspapers, Inc. and the Dale High Group, needs to become realistic and agree to give back the one-sided business terms agreed to by the prior LCCCA board, perhaps the county’s greatest scandal of the century
And if Dale High opposes renegotiations, then The Lancaster Newspapers should make good on Executive Editor Ernest Schreiber’s pledge “More than ever, local people need credible news and information about their community,” and editorialize in support of the Martin Plan.
The City of Lancaster should leap at coming up with a hundred thousand dollars a year versus the likelihood of the Marriott, which it owns through RACL and leases to PSP with an option for PSP to buy at a nominal price, becoming another Brunswick.
The LCCCA can reduce its expenses by the specified $35,000 a year.
And the Tourist Bureau should revert to its original endorsement of the Martin Plan, recently withdrawn allegedly to strengthen its negotiating position.
Full county guarantee of the debt is the only incentive that will likely move Wells Fargo. Significant debt reduction would go a long ways towards making the Convention Center solvent, at least for the near future. (In the long run, it may require millions of dollars in county subsidies as maintenance cost rise and renovations and improvements are required to remain competitive.)
The parties must promptly accept the Martin Plan. If not, as we editorialized last November, the “Commissioners should practice ‘benign neglect.’”
Once the parties accept, that might set the stage for a second Martin Proposal.
Procrastination in resolving matter costs the Convention Center future business. Who would book a major meeting for 2014 or 2015 without assurance the Center will then be solvent and in full operation? If we think the situation is critical now, consider the losses if events don’t take place in 2014 and 2015.
