In response to a comment made on LancasterOnline TalkBackon
November 21, 2008, regarding State Sen. Gib Armstrong and his hotel and convention center project: “It depends which taxpayers you’re talking about. Lancaster City and County taxpayers aren’t paying ANYTHING unless and until it fails, operationally, isn’t that right? So the public burden so far is on Pennsylvania*taxpayers.”
Lancaster City taxpayers are already paying for the hotel and convention center in higher taxes and reduced services, as resources like police patrols have been shifted away from other parts of the city in an attempt to “clean up” the neighborhoods near the project.
Note that neither the hotel nor convention center need to “fail” before Lancaster City or County taxpayers will need to subsidize their operation. When revenue from the “hotel tax” falls short of the operational subsidies required to keep the convention center open, Lancaster County taxpayers will be stuck with the bill. And there are many ways County taxpayers could be forced to pay additional money toward the convention center bond sale; for example, it was announced at the LCCCA Finance Committee this past Monday evening that some weeks ago, the spread between the “swaption” rate and the actual weekly interest rate paid on the bonds exceeded the agreed-upon boundaries of the “interest rate swap”; this forced the LCCCA to spend thousands of dollars more on bond payments than had been budgeted.
Don’t imagine for one minute that the “hotel tax” is paid only by visitors to Lancaster County. Hotel rates are set by competition; no more can be charged than what the market will bear. A significant portion of “hotel tax” revenue comes directly out of the profits of Lancaster County businesses.
As for the hotel, Lancaster City taxpayers could be on the hook sooner rather than later. Remember that the State has turned down the Penn Square Partners’ demand for an additional $2.8 million in taxpayer subsidies. Nevin Cooley of High is on the record as stating that the PSP will not spend one penny more than $11 million on the project; if PSP stands firm, where will the additional money come from to complete the project? Do you believe for one minute that Mayor Rick Gray will stand idly by while an incomplete hotel stands vacant at Penn Square?
Another risk to Lancaster City taxpayers is that the PSP will not earn enough profit from future operations of the hotel IN THEIR OWN EYES to make payments on their $24 million mortgage. PSP could very well threaten to close the hotel unless they receive additional taxpayer subsidies. And remember, the PSP’s $24 million is currently in the form of a 5-year construction loan; what happens if there is a problem converting it into a mortgage?
Don’t forget that the hotel will not pay any real estate taxes at all for at least 20years, in violation of one of the original promises make about the project. Lancaster City and School District of Lancaster (including Lancaster Township) property owners are already paying significantly higher real estate taxes due to S. Dale High’s demand that his “private” hotel be tax-exempt.
This project has already cost Lancaster City, Lancaster Township, and Lancaster County taxpayers a significant amount of money. The only question that remains is how much more will it cost all of us to keep the hotel and convention center in operation.
