Is the convention center project feasible? Delay seizes defeat from jaws of victory

(Forty-third in a series)

by Christiaan Hart-Nibbrig

In conclusion, my review of the five reports discussed above indicates that they are meant to be market or marketing studies, and neither are represented as feasibility studies nor include sufficient information or analysis to be considered feasibility studies.” – Mark A. Kenney, MAI, real estate consultant, December 22, 2005 on the five studies misrepresented by project sponsors as “feasibility studies.”

From the time the hotel and convention center project was introduced, the sponsors of the project consistently referred to the “feasibility” studies that they said supported building it. Beginning with the Ernst & Young “Market Study” of 1999, two studies by PricewaterhouseCoopers, one in 2000 and a 2002 “Update Draft,” a 2003 HVS “Market Study, ” and finally the C.H. Johnson “Memorandum Draft,” the sponsors publicly referred to them as “feasibility” studies by name.

In lobbying for the Tax Increment Financing (TIF) plan in February of 2005, Nevin D. Cooley, President of Penn Square Partners and the High Real Estate Group, wrote to Patrice Dixson, Lancaster School Board president, and four times referred to the “HVS Feasibility Study.”

In a signed, official application for a $15 million state grant for the project, then-chairman and executive director of the Lancaster County Convention Center Authority (LCCCA), James Pickard, referenced the Pricewaterhouse study, which, he wrote, reflected the “economic feasibility” of the project.

The problem with these characterizations was that none of these studies were, in fact, “feasibility” studies, but rather market studies, and the difference between the two types of reports is considered substantial.

The absence of a true feasibility study on the project was uncovered by NewsLanc publisher, Robert E. Field. One day in early December, 2005, Field noticed a stack of reports on his desk. They were all of the reports for the project. “I still have no idea how I acquired those reports,” says Field today.

Field took the documents home and read them all closely. He was stunned.

I couldn’t believe it,” said Field, who had decades of experience as a real estate developer of hotels and apartment buildings. “These weren’t feasibility studies. I had several feasibility studies done for hotels we built. The convention center studies contained none of the analysis one would find in a feasibility study.”

Field returned to his office and confirmed his impressions by reviewing the feasibility studies he commissioned, and comparing them to the convention center reports.

On December 15, 2005, Field spoke via telephone with Lancaster Newspapers chairman, Jack Buckwalter, and made him aware of his findings and urging him to undertake an actual feasibility study.

Buckwalter’s dismissal of Field’s concerns prompted Field to contact Mark A. Kenney, MAI, a certified real estate appraiser and consultant. Field asked Kenney to review all the convention center reports and make a professional determination certifying what kind of reports they were.

Kenney concluded that all of the reports were not feasibility studies, but the more narrowly focused and less comprehensive marketing studies.

Kenney’s report is dated December 22, 2005:

In conclusion, my review of the five reports discussed above indicates that they are meant to be market or marketing studies, and neither are represented as feasibility studies nor include sufficient information or analysis to be considered feasibility studies.”

In a recent interview with NewsLanc, Kenney spoke about the two types of studies. “The difference between a market or marketing study and a feasibility study may not be known to the general public and used interchangeably,” Kenney said. “But people in the real estate business surely know the difference between the terms. You use a feasibility study to examine all the financials – taxes, investment, income, expenses, insurance, financing costs, everything – to determine if the project should be built. A market study doesn’t include all of that, and focuses, as the name suggests, on the marketing aspect of the proposed project.”

Field was by then a veteran political activist, who had served as Sen. Arlen Specter’s finance chairman in his first (and successful) Senatorial bid in 1980, and who was by 2005 an established leader in the national and international drug policy and harm reduction reform movements.

Field wrote to out-going mayor Charlie Smithgall, Mayor-elect Rick Gray, LCCCA Chairman Ted Darcus, Rep. Mike Sturla, Sen. Armstrong, the president of the school board, president of city council urging each to support a full feasibility study be performed on the project.

Even Carrie Steinman Nunan, an heir to the Steinman empire, received a letter from Field urging a full feasibility study.

In a December 29, 2005 letter to New Era editor, Ernie Schreiber, Field wrote: “Something very positive you could immediately do is to write an editorial calling for the County, City, and Authority to jointly commission a genuine feasibility study….”

Field went before the county commissioners, as well as the LCCCA board.

It is sorry commentary on the local monopoly print media that a private citizen should have to … expose the false characterizations of pivotal studies pertaining to the Convention Center and Hotel project,” he said to both boards in prepared remarks.

The issue of having an actual feasibility study done on the project got an unexpected boost on January 11, 2006. Exactly one week after he publicly denounced opponents of the project and spoke in favor of it, newly elected Lancaster City Mayor Rick Gray crashed the county commissioners meeting.

Standing in the back of the room, still wearing his overcoat, the burly, bow-tied Gray told the commissioners, who supported Field’s call for a feasibility study, that if they wanted a feasibility study done they should have Pricewaterhouse update its earlier studies, and the commissioners should pay for the cost of it.

The commissioners did not immediately embrace the Mayor’s proposal. Instead, they thanked the mayor for his proposal and said they would consider it. Gray then turned and left the meeting without ever sitting down.

Within 90 minutes of Gray’s offer, Field received that news from this writer, who was covering the commissioners’ meeting. Field immediately spun around in his chair in his office and wrote a joint letter to Shellenberger and Gray (copying all three Lancaster newspapers) saying he would subsidize the cost of the feasibility study in the amount of $50,000.

I applaud Mayor Gray’s suggestion that the Commissioners order and pay for a feasibility study and his commitment that, if the project is not feasible, to end his support for the $137 million downtown revitalization initiative. ….

Should funding be an obstacle, I am prepared to contribute $50,000 toward the cost of a comprehensive feasibility study of the convention center and hotel, …”

Mayor Gray seemed to back away from his position almost immediately. When Commissioner Shellenberger announced on January 14 that another firm should perform the study because of a statement made by one of the Pricewaterhouse consultants distancing the firm from its earlier studies, Gray blasted Shellenberger calling the move “wasteful” and “unnecessary.”

The county commissioners capitulated to Mayor Gray’s insistence that Pricewaterhouse conduct the study. At its January 18, 2006 public meeting, the commissioners voted to authorize special counsel, Howard Kelin, to contact Pricewaterhouse about conducting a full feasibility study for the now $137 million project. One week later, Kelin wrote a letter to the firm about re-engaging it for the new study.

But Gray still objected. In addition to Pricewaterhouse doing the study, and imposing a hard 60-deadline from January, 11, 2006, Gray, in a letter to Shellenberger dated January 20, insisted Pricewaterhouse “evaluate the changed project on the same basis as the earlier project was evaluated.” The last caveat would ensure that a market, not a feasibility, study would be performed.

The debate as to whether Pricewaterhouse should write a full feasibility study on the hotel and convention project was killed when the firm declined to participate in the study on January 28. There was no public explanation given for turning down the work.

On February 9, 2006 – four full weeks after Mayor Gray’s proposal and Field’s $50,000 subsidy offer – the Lancaster County Commissioners still had not commissioned a full feasibility study.

The commissioners Shellenberger and Henderson were receiving other pressures regarding who would conduct the study. The Uptown Economic Development Corporation (UEDC) is an organization comprised primarily of local black business and community leaders. In a letter to Shellenberger dated January 19, 2006, Rev. Roland Forbes, chairman of the UEDC, wrote:

Recent revelations surrounding the absence of an actual feasibility study have only added to our anxiety. We applaud the efforts of Mayor Gray and you are making to address this glaring due diligence omission. However, total reliance on Price Waterhouse Coopers to review its earlier reports will not instill the project with the public confidence it needs. What is required immediately is an independent peer assessment.”

Forbes continued to recommend that an Orlando-based firm, ZHA, perform the feasibility study because, he wrote, “ZHA … has no vested interest in this deal.”

At the commissioners’ weekly meeting on February 9, at which several members of the city’s Uptown Economic Development Corporation (UEDC) spoke in favor of a full feasibility study, the commissioners voted to send out Requests for Proposals for a full feasibility study.

“Some of us conclude that there has been a rush to judgment,” said UEDC member, Rev. Earl Harris, to the commissioners, invoking the Johnny Cochran phrase, and perhaps sending a coded message with respect to selecting a firm.

What happened next was a strenuous debate between Shellenberger and Henderson, who spoke separately with Field, on who should be selected to perform the study.

The commissioners were, in mid-February 2006, politically damaged by extensive Conestoga View and now grand jury coverage in Lancaster newspapers.  They were now torn between the UEDC recommendation of ZHA, and Field’s opinion that the international hospitality consultancy of Pannell, Kerr, Forster (PKF) should be selected.

“It was vital that a top firm conduct the study,” says Field today. “It had to be a firm whose credentials and reputation could not be questioned. PKF was one of the few who could meet the highest standard.”

The commissioners were eventually persuaded to choose PKF. On February 16, 2006, Commissioners Shellenberger and Henderson voted to hire PKF to perform the feasibility study (Shaub dissented). The cost: $115,000.

Field immediately raised his pledge to $65,000.  “This is something that needs to be done, and which will ultimately bring this community together,” he told the Intelligencer Journal.

In choosing PKF, the county was selecting one of the industry’s top firms in hotel consultancy, with a track record with some of the largest hotels and convention centers in the United States and the world.

PKF consultants sought  the cooperation of the principals. And in late February, 2006, any assistance from the sponsors was not to be assumed.  In fact, efforts were underway to discredit the company by accusing it of bias.


Chapter Forty-four: The Fog of War, Part I