How a last minute obscure insertion into the 2016 omnibus tax bill gave Penn Square Partners a $3.4M gift

Through Pennsylvania’s Right to Know law, NewsLanc has obtained correspondence among the City, Penn Square Partners, High Realty, government authorities, and pertinent others pertaining to Penn Square Partner’s CRIZ application for the proposed Marriott Tower addition.

1998:  “Penn Square Partners, headed by the High Real Estate Group, announced this morning that it has signed papers to acquire the vacant, four-story building for $1.25 million.” 

The reference is to the former Watts and Shand building that was to become the site of the Marriott Hotel and Lancaster Convention Center.

(Originally Fulton Bank was a third partner but they withdrew at a later date.  Penn Square Partners currently consists of High Real Estate Group as general partner with a 50% interest and LNP as limited partner with a 50% interest.)

2009:   “The  Lancaster Marriott at Penn Square,a seamlessly integrated facility that opened in June of 2009, is a cultural and economic centerpiece of vibrant Downtown Lancaster and the surrounding Lancaster County.”  –From the Lancaster County Convention Center web site.

2013:   The City Revitalization and Improvement Zone (CRIZ) Program was created by Act 52 of 2013.  “The focus of the program is to provide opportunity to spur new growth, helping to revive downtowns and create jobs for the residents in the regions.”  “Bonds will be issued by the contracting authority. Various State and Local Tax Revenues created in the zone will be then used to pay off the bonds.”   (Emphasis added) –  From the Pennsylvania State Government

May 29, 2014 “The CRIZ is a game changer.”  “Based on a successful program in Allentown, CRIZ allows a city, via a designated authority to issue bonds to help pay for new construction and jobs on vacant or idle land, then channel state and local tax money (except real estate taxes) generated by the new development into paying for it.”  … From  the Lancaster Newspaper (LNP)

Spring, 2016  Joint meeting of Commerce Committee and the Urban Affairs Committee  was held to discuss modifications to the CRIZ Act.  Among other changes, a request was made by Lancaster and other counties that rebates of new state taxes generated by  a new development should be applied solely to that property rather than to the CRIZ Zone in general.

July 7, 2017 Tom Smithgall, Senior Vice President of High Real Estate Groupto Randy Patterson of the City of Lancaster:  “We need to get the full CRIZ enacted / revised or the other conversation becomes a bit moot. We can then have a meaningful conversation about taxation.”   This is the first recorded indication that the applicant and City’s representatives were aware of the insertion to come days later.

July 13, 2016   The Omnibus Amendments to the Tax Reform Code of 1971 is enacted. It includes the following wordage that was inserted just a few days earlier:

 “(c)  Recalculation.–The department shall not recalculate the baseline of a zone designated prior to the effective date of this subsection to include the hotel occupancy tax imposed under Part V of Article II.”

The almost impenetrable doublespeak resulted in an extra $3,400,000 gift of CRIZ  (taxpayer money) to Penn Square Partners (PSP) by treating tax revenue from the long existing 299 room Marriott as though it came from future development,

Moreover,   PSP has  expressed the intention of seeking $2,000,000 more in 2020 for renovation to the existing299 room  Marriott Hotel, all made possible by the last minute insertion into the Omnibus bill.

Who inserted the deceptive last minute language? A legislative source suggested the question should be asked of Lloyd Smucker, then State Senator and now Congressman .

2016 was a pivotal election year for the City and County of Lancaster.   The retirement of long term Congressmen Joe Pitts opened opportunities for State Senator Lloyd Smucker who aspired to Pitt’s Congressional seat and for County Commissioner Scott Martin who sought Smucker’s state senate seat.  Smucker faced formidable challengers in the Republican primary.   Favorable LNP news coverage and editorial comment helped Smucker to win the Republican nomination and the general election.

(Congressman Smucker’s staff twice declined for him to be interviewed on the matter.)

A draft of the $5,600,000 initial request was being processed prior to the July 13, 2016 change in the CRIZ Act.  It was later decided among Penn Square Partners,  the City and Authority representatives not to alter the application for the time being.  It was decided to first obtain approval of the $5.600,000 and then seek the added  $3,400,000 as an amendment.

PSP asked to have yet an additional $2,000,000 included for remodeling of the Marriott Hotel in 2020.  That request for 2020 was deemed simply premature.