CC Chapter Twelve Revised: New County Chair and TIF Time Warp

By Christiaan Hart-Nibbrig

Lancaster County Commissioner Chairman Pete Shaub was not only making himself a nuisance to convention center project sponsors, he was also vexing those who worked with and around him.

Throughout 2004, Shaub clashed often with fellow Commissioners Dick Shellenberger and Molly Henderson on both policy and personal matters.  He often ranted publicly at either of his colleagues during regular commissioners’ meetings.

Shaub had a long-running feud with County Planning Director, Ronald Bailey.  Bailey, a respected architect of the county’s “Smart Growth” plan, resigned late in the year due to conflicts with Shaub.

“Shaub just badgered and badgered that man [Bailey],” said Commissioner Henderson. “That was a real loss for the county.”

Fellow Republicans were increasingly concerned about the combative ex-Marine who kept a sword mounted behind his desk.

“For the good of the county, he should resign,” said Jere Swarr, a Rapho Township supervisor and Republican committeeman.

On December 12th, the Lancaster Sunday News ran a long feature on Shaub’s behavior.  The article, “A Bully in a China Shop,” painted a picture of Shaub as an unstable, abusive boss and colleague.

Traditionally, a change in chairmanship of the board of commissioners occurs after a full, four-year term.  But tradition was broken on December 18, 2004, when Commissioner Dick Shellenberger announced he would take over as chairman of the Lancaster County Board of Commissioners.

Shellenberger made his announcement at a Saturday press conference at the Farm & Home Center just outside of Lancaster, not the county courthouse.  Shellenberger was supported at the news conference by several Republican committee members, including LCCCA Chairman, Ted Darcus.

Shaub was notified of the change at a meeting Friday, the 17th, at the courthouse. After being informed he was being demoted, Shaub abruptly left the meeting.  He was not at the Saturday press conference.

“I think it fair to state that I have not always agreed with the leadership style used by Commissioner Shaub over the course of 2004,” said Shellenberger at the Farm & Home Center, adding he wanted to help the county heal from the “rancor and incivility” that marked the first year of their term.

Regarding Shaub, chairman-elect Shellenberger took the high road: “The record is there for all to see, and I absolutely refuse to engage in the politics of personal destruction. Let me further state that Commissioner Shaub is to be commended for aggressively tackling many issues which are important to Lancaster County.”

Commissioner Molly Henderson had to support the change, and she did.  Henderson, who didn’t attend the press conference, was quoted in a Sunday News article on December 19th, “I have spoken previously about my support for Commissioner Shellenberger to become chairman. I have voiced repeatedly to the board of commissioners my opposition to any prearranged [four-year] rotation,” she said.
“I think it’s important that the community get a sense of calm right now,” Henderson said.

That was not going to happen.

During the first frigid weeks of 2005, Nevin D. Cooley, president of Penn Square Partners, was quietly going around town meeting with Lancaster’s elected officials.  He met with the county commissioners, the mayor and city council, and the nine members of the School Board of Lancaster.

Cooley wanted to discuss a financing proposal for the hotel his Penn Square Partners was supposed to build next to the convention center.

Nevin Cooley was the man to pitch the plan. Cooley had been Dale High’s right-hand and principal spokesman for more than a decade.  From the project’s earliest incarnations, 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 Tax Increment Financing (TIF).

TIF is a device used in many states whereby theoretical future real estate tax increases from a redevelopment project are borrowed to finance the project. Usually, the projects are in distressed or underdeveloped parts of an area.

With a TIF, local taxing bodies within the jurisdiction of the project must all consent to adopt a TIF plan. The taxing bodies in the convention center and hotel project were the Lancaster County Commissioners, the Lancaster City Council, and the School District of Lancaster.

The proposed Penn Square Partners TIF called for the School District of Lancaster to re-direct 90% of the real estate taxes it was to receive from the hotel to pay down hotel mortgage bonds. Full tax payments would be available to the school district in 20 years when the mortgage bonds would be paid off.  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 at the time.  Winterstein had been elected in 1997.  A conservative Republican businessman, Winterstein owned several 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,” said 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 the School 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,” said 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!”

The TIF issue also concerned the Lancaster County Board of Commissioners, now chaired by Commissioner Dick Shellenberger.

Unlike Shaub who, despite his grandstanding, was a staunch supporter of the convention center project, Dick Shellenberger was more questioning of the project’s viability.  Democrat Commissioner Molly Henderson, too, had her own concerns regarding its feasibility.

If the School Board passed the TIF, then the County Commissioners and City Council would also have to vote on it. Shellenberger said that he didn’t sufficiently understand the TIF proposal. He asked for details.

In February, a month before the School District would vote on the TIF, Commissioners Shellenberger and Henderson submitted “57 Questions” to Penn Square Partners, LCCCA, and RACL. The questions concerned the TIF and many other areas of financing and feasibility of the project, including potential tax payer risk, and the legality of the tax itself.

The commissioners did not get the cooperation they sought from the sponsors.

“They [the sponsors] would not provide answers to our questions,” 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, as expected, was very supportive of the TIF, along with the project’s most ardent supporter, Lancaster Mayor Charlie Smithgall.  The Partners could count on support in the city.

The Partners tried to sweeten the pot.  According to a Lancaster New Era article on February 16th, 2005, “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 Dale High later said had been increased to $150,000.

In a letter to the president of the school board, Patrice Dixson, Cooley said he based the Penn Square Partners proposal on yet another market study, this one done in 2003, which he incorrectly, and repeatedly characterized as a “feasibility” study.

“It should be noted that the HVS feasibility study was used by Penn Square Partners as a starting point for our creation of our current financial projections,” Cooley wrote to Dixson.

As with the debate about which company would manage the convention center, the battle lines on the TIF issue were clearly drawn.

On the side of Penn Square Partners were all three Lancaster Newspapers, controlled by CEO and, through a wholly owned subsidiary, Penn Square Partner,  Jack Buckwalter.  The papers all editorialized in favor of the TIF.

Members of the Lancaster Alliance — of which all three Penn Square Partners were founders — showed up at meetings urging adoption the Penn Square Partners plan.  Joining them, were Mayor Smithgall and members of the city council.

Opponents were, again, members of Greater Lancaster Hotel and Motel Association, plus ‘in-your-face’ activist Ron Harper, as well as a growing miscellany of citizens.

Public sentiment strongly opposed the Penn Square Partners’ TIF proposal.  According to an Intelligencer Journalpoll’ three days before the scheduled School Board vote, 93% of respondents opposed the plan.

In the week prior to the School Board vote, on March 10th, a special public meeting was held at the Edward Hand Middle School in Lancaster.

Dale High and Nevin Cooley and other associates pitched their proposal before more than three hundred people.

Wearing a gray suit and speaking in a monotone with a forced, clenched-jaw smile, High recapped his past achievements and connections to Lancaster.   Ron Harper, Jr., was there to record High’s comments.

High began the prepared portion of his remarks by comparing himself with Thaddeus Stevens.

“Like Thaddeus Stevens, whose former home sits on the site of this project,” said High, “I have a passion for public education.”

Of Dale High’s 15-minute presentation, less than two minutes was devoted to discussion of the TIF.  The bulk of High’s comments glorified his and his partners’ contributions to the school district and community and attacked opponents.  As rhetoric, it was classic argumentum ad verecundiam, an ‘appeal to authority,’ and the school district wasn’t buying it.

On March 15th, in a near-unanimous 7-1 vote (one abstention), the School Board of Lancaster resoundingly rejected the Penn Square Partners’ TIF proposal.

To read Lancaster Newspapers’ reports immediately after the TIF vote, one would have thought the defeat buried the convention center and hotel 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 the lead of a New Era article the day after the vote.

Said Jack Buckwalter: “We are very disappointed. Over the past seven years, we have made our best efforts to bring the Watt & Shand building back to life. It appears that we cannot proceed under the conditions as set by the school board. So the project very well at this juncture could die.”

Dale High released a written published statement two days after the ‘Ides of March’ school board vote. “We have stopped all work on our portion of the project, effectively immediately,” the High statement read.  High Construction was the “master developer” for the project.

High immediately instructed his construction company to remove all signs from the Watt & Shand building.

“We made it clear that this is our best offer,” said Nevin Cooley following the School Board vote.“There is nothing more that we can do. If I could have offered something different, I would have. We can’t go forward and the community and the taxing authority will continue to have a building that is empty and deteriorating and not generating anything in new taxes. . . . There is no ‘Plan B.”

But that was not true. There was indeed a “Plan B.” The sponsors had it ready to go, and it was something the newspapers had already reported.

Three months earlier, in a front page story on December 17th , 2004, the Intelligencer Journal published an article (“City to buy Watt & Shand”) outlining a plan by which the city of Lancaster, via one of its municipal authorities, would purchase the landmark building from Penn Square Partners.

The article, by Intell staff reporter Dave Pidgeon, described an agreement whereby the Redevelopment Authority for the City of Lancaster (RACL) would buy the former Watt & Shand building from Penn Square Partners, then lease it back to the Partners, who would then have an option to re-purchase the building in 20 years.

Unlike the TIF proposal to the School District of Lancaster, the RACL plan would completely exempt the hotel from property taxes, and would no longer come with an offer by PSP to contribute annually to the School District in lieu of property taxes.

The plan described in the December, 2004, Intell article would also allow the City of Lancaster, through RACL, to apply for an annual grant through the state’s Department of Community and Economic Development (DCED).

The DCED would then rebate to Penn Square Partners an anticipated million dollars of annual state sales tax generated directly or indirectly by the hotel. (Eventually the rebate was pledged to service a $14 million loan from Fulton Bank.)

During the twelve days following the school board vote on March 15th, the project was described in ‘life-support’ terms. Its ‘survival’ is a study in media manipulation and deception on the part of project sponsors.

On March 22nd , Rep. Mike Sturla said to the New Era, after a revised TIF proposal to the school board was made and rejected, “We’ve unloaded our tool box. This is the end.”

Three days later, the Intelligencer Journal headline virtually pronounced the project dead.

“Disarray hits Penn Sq. plans/Leaders halt tax deal negotiations

The Intell article struck an ominous tone.

“Plans to build a luxury hotel and convention center on Penn Square suffered another blow Thursday night, when hotel developer Penn Square Partners ended attempts to obtain property tax breaks for the project.

The partnership had said it needed millions in property tax abatements from City Council, county commissioners and the School District of Lancaster board to build the 300-room Marriott Hotel.

The collapse of negotiations concerning the tax deals places the status of the hotel and adjoining convention center in doubt.

“ ‘We’re out of time,’ said state Sen. Gibson Armstrong, one of the chief proponents of the project. ‘It’s impossible to pull everything together.’

The next day, Good Friday, March 26th, the Intelligencer Journal reported that a $22 million funding gap may doom the project.

“A $22 million funding gap that first surfaced in early 2004 continues to threaten the proposed downtown hotel/convention center,” the article began.

Nevertheless, on Monday March 28, 2005, one day after Easter Sunday, Lancaster County citizens read that the project proclaimed to be “dead” only days before had been miraculously resurrected.

HOTEL PLAN RESCUED, exclaimed the Lancaster New Era headline.

The article began, breathlessly:

Skip the school board.

Forget the county commissioners’ 57 questions.

The Lancaster City Redevelopment Authority this

morning unveiled a new way to finance – and keep alive –

a proposed 300-room convention center hotel on Penn Square.”

As it turned out, what the sponsors “unveiled” was not “a new way to finance — and keep alivethe hotel.

The “new” plan was, in fact, a “Plan ‘B’ ” that Cooley said did not exist.  And the terms of the new plan were even more favorable to Penn Square Partners than what were presented to the School District of Lancaster.

In the “new” financing scheme, not only would the SDL receive zero real estate taxes whatever for twenty-years, but the offer of “$150,000″ in annual payment that Dale High for Penn Square Partners had “agreed to guarantee” was now gone.

The “new” plan also happened to be the exact one that one of Jack Buckwalter’s newspapers reported in detail three months prior.

It was as if the editors of Lancaster Newspapers expected their readers to pass through a time warp, and forget that the December, 2004,  Plan ‘B’ article ever existed.