Without the significant lowering of interest rates envisioned by the Martin Plan, the Convention Center will continue on the road to bankruptcy. Payment of debt service has priority over all other outlays. There won’t be enough money left over for proper promotion, maintenance and, even if there is a reduction in interest, major maintenance projects and renovations.
(Even with the Martin Plan, there will not be enough money for major renovations. Hence the CRIZ legislation to pump about $5 million for future renovation into the convention center project.)
A decade ago a Fox 43 sponsored poll of Lancaster County by a reputable national service determined that 78% of those with an opinion disapproved of the county guaranteeing any portion of the convention center bond issue.
Today, it would be hard to find hardly anyone, including most of the original advocates and the local establishment, who has confidence in the financial viability of the convention center and does not regret earlier support.
The Martin Plan calls for an expanded county guarantee of the debt service for the seven year term of the loan modification agreement in exchange for concessions by bond owner Wells Fargo, Penn Square Partners, the city, and the tourist bureau. The unresolved issues relate to Wells Fargo and Penn Square Partners
Wells Fargo inherited dirty hands when they took over Wachovia Bank during the sharp recession of 2008. A year earlier, all the other solicited banks and insurance companies had turned down guaranteeing the bond issue due to the obvious risk of future default. But Wachovia, for reason that were hard to discern, provided the bond guarantee which saved the project. And they did that in the face of a feasibility study by the foremost authority on such matters, PKF, which concluded that the project should either be scaled back or another use found for the site.
At the time, a high official of a major bank explained at length to NewsLanc how Wachovia’s loan defied banking standards. Wachovia didn’t seem to care. We assumed there was a quid pro quo for benefits on the state level.
Wells Fargo now has a ‘performing, non-performing” loan on their books for which they are required to set aside a 10% reserve as a loss. If they don’t reduce the interest rates to enable a million dollar savings per year in exchange for a full county guarantee of debt service during the next seven years, they may soon have a ‘non-performing’ loan and ultimately experience a far greater loss.
Even the best of salespersons won’t be able to book convention center events for 2015, 2016, and 2017 when it is clear that there will not be sufficient funds to properly operate and maintain the facility.
Failure to accept the Martin Plan is for Wells Fargo to turn its back on the only solution to salvage its investment.
Failure to accept the Martin Plan is for Penn Square Partners to turn its back on the only solution they have to keep the adjoining Marriott Hotel from falling into a financial black hole.
As for Mayor Rick Gray, he had better start studying hotel management. Once Penn Square Partners starts hemorrhaging losses due to the lack of convention center event, they likely will give up its lease on the hotel owned by the city. Then Gray will get a chance to operate a hotel.
Commission Chair Scott Martin bravely took on the convention center ‘tar baby’ at great risk to his future career. However, even if the center closes, the hotel sales tax will more than pay the portion of the debt service the county had previously guaranteed. So Martin can walk away with his head held high.
Almost since its inception, the convention center project has injected poison into the leadership and governance of the county. The public has been subject to lies, misrepresentations, likely misdemeanors if not felonies, a witch trial of the former courageous county commissioners, disregard of its wishes, cancellation of worthy projects because of diversion of funds to the convention center, and most recently a CRIZ program that steals tax revenue from our children to benefit current private interests.
Enough is enough. Let’s put the convention center on a sound financial footing for the next seven years and work to restore public probity and comity. Let those who contributed to the problems contribute to the solutions.
After all, whether we like how it came about or not, it is our convention center.
Well spoken….this should be sent priority mail to Penn Square Partners….doubtful, however, if they take the time to even read it.
EDITOR: As large a concerns is Wells Fargo Bank. As they say “Fools rush in where angels fear to tread.”
Bankruptcy is the only way to break the iron-clad “agreements” which created this mess in the first place.
Chapter 9 would most likely lead to a court-ordered restructuring which would provide some serious relief for the Convention Center and substantial benefits for taxpayers.
I read “Crunch time for saving the Convention Center” with great interest. It has been, in my opinion, a project that should have never taken place. I have had that view from the beginning. It was mishandled financially and, yes, I believe misconstrued to much of the public.
Even to inject a hotel tax on other establishments to help fund a convention center to help pay for this, when taking business away from those entities, was simply wrong in my view.
I believe that amounts to politicians having too great of power over certain entities, in this case tax dollars at the top of the list.
If anything a hotel tax should be there for such things as helping to pay the cost of tourism advertising or even road improvements to help those visiting to get around.
But you make your point we now have a convention center, how do we handle it from here is the big question? Those partners that were so adamant about this being done should be held to the fire, as I see it!
The tax payers of this County should be off the hook for this one, as enough is enough. But who makes those calls, who would be stepping up to the plate?
I am very interested in being kept up to date on this matter. I have been involved in the Lancaster Train station renovations over the past several years and it was equally mishandled and highly over priced, and yes I believe very misconstrued to those of us that were to be kept in the know.
Perhaps its time for some leadership accountability at numerous levels.